SG Finans AS We support. You succeed

2009 Annual Report SG Finans AS We support. You succeed. ANNUAL REPORT 2009 innledning xx Lysaker (head office) The pictures on the cover page...
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2009

Annual Report

SG Finans AS

We support. You succeed.

ANNUAL REPORT 2009 innledning

xx

Lysaker (head office)

The pictures on the cover page are from the company’s staff conference which took place January 2010. At the conference the employees of the year are selected by vote. The voting is based on the company values; Sales and relations, enthusiasm, team spirit and know how. Also at the conference there is a voting for the 4 best sellers.

Contents

5 8

5

SUMMARY

5

customer satisfaction

6

KEY FIGURES

7

REPORT OF THE BOARD OF DIRECTO RS

8

THE COMPANY

8

ACTIVITIES

8 COMPANY DEVELOPMENT 8

MARKET CONDITIONS

9

FINANCIAL RESULTS

10 RISK MANAGEMENT 10 ORGANISATION 11

FUTURE PROSPECTS

12 ORGANISATION

12

12 SG FINANS AS 12 VISion and valu es 12 BRANDS AND IMAGE

13 SG Equipment finance

13 14

14 O RGANISATION 17 SG FINANs NORWAY 18 SG FINANs DENMARK 19 SG FINANs SWEDEN

21

21 ANNUAL ACCOUNTS 21 PROFIT AND LOSS ACCOUNT 22 BALANCE SHEET 24 CASH FLOW STATEMENT 25 STATEMENT OF CHANGES IN EQUITY 26 NOTES 45 AUDITO R´S REPORT 45 CONTROL COMMITTEE ’S STATEMENT

46 EMPLOYEE REPRESENTATIVES AND MANAGEMENT

47 ADDRESSES

“In a difficult and unpredictable period we concentrate our efforts in maintaining the good relationship we have with our customers. Not at least we will behave as an predictable and reliable financial partner for Scandinavian businesses who believe in the future”. Carsten Thorne CEO SG Finans AS

45

ANNUAL REPORT 2009 SUMMARY

Customer satisfaction It is during times as those we experienced in 2009 that we must live up to our business concept of satisfying Scandinavian customers needs for equipment, liquidity and administrative services. Customer satisfaction in this respect is an important condition for us in reaching our current and future targets. 2009 was characterized by a shortage of capital and liquidity,

Customer satisfaction – an important premise

in addition to a reduced willingness to invest in a difficult

Our last KTI (Customer Satisfaction Survey 2009) shows

market for Scandinavian enterprises. The consequence for

that we have a very good standing in the market. We also

us was an increase in credit losses. This has also had

recognise the importance of standing side by side with loyal

serious consequences for a large number of customers and

customers and cooperative partners during a difficult period

cooperative partners we have worked with over a long time.

for many. I have the backing of all our employees when I say

In contrast to continued high private consumption,

that in the future we will not only contribute good financial

especially in Norway, enterprises’ demand for credit has led

concepts, but we will also offer our knowledge, enthusiasm

to a strong fall in new sales volume compared to 2008. At

and team spirit. To the benefit of all.

the same time it is a pleasure to be able to announce that we have, in this situation, managed to maintain and actually

I thank our customers and cooperative partners for the faith

increase the company's market share.

they have shown in us, and also give credit to our staff and representatives for their efforts in 2009.

“We are looking for those who believe in the future" We also expect 2010 to be characterized by difficulties for businesses in every Scandinavian country. As result of this, we will probably see a large number of bankruptcies and credit losses for the second year in a row. For us, this means stricter following-up of exposed accounts, while we continue to maintain the very good relationships we have with our customers and cooperative partners. In a difficult and unpredictable market we will concentrate on maintaining the good relationships we have with our customers. Not least, we will in this regard show that we are a predictable and reliable partner for business customers that have faith in the future.

Carsten Thorne

Key figures

Amounts in NOK thousands

2009

2008

Profit & Loss Net operating income Operating expenses

1 144 530

930 691

-440 142

-436 164

Operating profit before losses

704 388

494 527

Losses on loans

-460 080

-103 909

Net profit before tax

244 307

390 618

16 530 316

17 624 509

Loans outstanding NORWAY Equipment Transport

3 979 228

4 158 471

Factoring

1 724 358

2 432 296

Øvrig

2 834 473

2 553 023

25 068 375

26 768 299

Equipment Denmark

2 144 056

2 622 457

Equipment Sweden

3 357 335

3 387 083

Sum Danmark/Sverige

5 501 392

6 009 540

Total loans

30 569 767

32 777 839

Risk weighted assets

Total Norway SWEDEN/DENMARK

24 293 548

26 841 418

Total regulatory capital

2 896 818

2 717 756

Capital adequacy ratio

11,20 %

9,64 %

67

Annual Report 2009 DIRECTORS‘ REPORT

Report of The Board of Directors At the start of 2009 the uncertainty was high and the signals indicated that it would still be difficult times for Scandinavian businesses in large parts of the year. The financial crisis culminated in many ways in the autumn of 2008, and we could expect that the ripple effects of the crisis in the world economy would result in continued lack of capital and liquidity, reduced willingness to invest and an increasing number of bankruptcies. Governments introduced measures to dampen the effects of the crisis and to stimulate further growth, while central banks were cutting interest rates down to historical low levels at unforeseen pace. Still the year has been marked by an ever-increasing number of bankruptcies, and for SG Finans this has unfortunately hit also a large number of large and smaller customers we have been working with for many years. An increasing number of bankruptcies in the portfolio has

increase in pricing of credit risk, which also resulted in

naturally also resulted in a significant increase of

increased funding costs for banks and a strong change in the

repossessed assets and credit losses for the company.

pricing of credit and liquidity to businesses, the businesses

In this period it has been important to have a solid owner,

preparedness to invest and their demand for new credit was

backing the activities with continued access to liquidity in

strongly dampened. The new business volume was thus

order to ensure that we maintain and further expand our

strongly reduced from 2008. The company maintains its

position as an important and stable collaboration partner

market leading position and wins market shares within

for Scandinavian businesses. With this basis, SG Finans

financing of high-tech equipment as well as in Sweden and

launched in the second half of 2009 a campaign with the

Denmark. Reduced new business volumes and increased

message “We are looking for those who believe in the

credit losses also resulted in a falling trend in funded assets

future!”

in the second part of 2009. In total the volume of funded

In many ways 2009 has marked the continuation of international

assets fell with 6,7 % from the start of the year. The branch

turbulence, after a period of increased uncertainty for the future

in Sweden was able to maintain its position, with good

development. In the beginning of the year the Central Bank of

growth in new business volumes and funded assets. In the

Norway cut dramatically lead interest rates. This resulted in a

period we have also observed a change in the competition

6 % drop in the Norwegian money market rates over a

as several international institutions have reduced their

6 months period from autumn 2008 to spring 2009.

activities or phased out their business in the Scandinavian market. Access to capital and liquidity has not been a

The financial crisis and increased uncertainty has resulted in

constraint for SG Finans, and the company has continued its

a significant reduction in the willingness to take risk and thus

strategy to develop and maintain long-term relationships to

an increase in the pricing of risk. Further to a general strong

customers and partners in the local market.

In 2009 we have seen the results of a number of internal

COMPANY DEVELOPMENT

projects for the continued development of the company. SG

2009 has been an eventful year largely marked by the

Finans has implemented a new factoring system, developed

financial situation of Scandinavian businesses. After several

new solutions to cover our customers’ requirements and

years of continuous growth in total loans as well as number

needs, and carried a number of internal improvements

of financed contracts, the development turned in 2009 and

related to new regulatory requirements. A milestone was

total loans fell by 6,7% during the year. A direct cause for

reached when the company presented to Finanstilsynet its

this is the reduction in business investments, and therefore

application to use internal models for the calculation of the

lower demand for capital equipment in most sectors. The

regulatory capital requirement for operational risk and for

company established new financing for a total of NOK 9,2

segments of the credit portfolio.

billion, which is a reduction of 18% compared to 2008. This

In spite of tight labour market conditions with increasing

must still be considered satisfactory in a market where the

competition for highly skilled staff, the organisation has

demand has decreased by more than 25%. Within some

managed the situation in an effective manner. A strong

segments, and particularly the financing of high-tech

focus on sales and market activities characterises the

equipment, the company has achieved good growth. We

organisation, and thanks to our skilled and motivated

see that financing of high-tech equipment now represents

employees in addition to the good relations with our

about 20% of new financing. Furthermore, we have

customers and partners, the company has also delivered in

managed to maintain the new business volumes in Sweden

2009 a good result. (All the following figures are for SG

at the same level as in 2008, in spite of a general drop in

Finans AS).

the market. SG Finans maintains its position as the market leader of equipment finance in Norway. The company is

The company’s operating profit before tax came to MNOK

also market leader in ordinary factoring. It is our objective to

244,3. Total loans at year-end amounted to NOK 30,6 billion

continually develop products and systems within the areas

which represents a reduction in loans of 6,7 %.

of factoring and equipment leasing.

THE COMPANY

As an important part of the company's focus on relationship-

SG Finans AS is a wholly owned company of the Société

strengthening activities, a number of market initiatives and

Générale Group. The company is part of the SG Equipment

events were carried out in 2009. The primary objective of

Finance business line which is Europe’s leading player for

these activities has been to strengthen relations with the

equipment leasing. Factoring is an important focus area.

company's most important customers and partners. A goal

Société Générale is a leading financial group in the euro

for the future is to continue to develop the company’s

zone. The head office is located in Paris. At year-end the

Scandinavian corporate culture and further strengthen its

group had 163.000 employees.

brands, i.e. SG Equipment Finance and SG Factoring.

ACTIVITIES

MARKET CONDITIONS

With a local presence and a European network, SG Finans

For several years the Norwegian finance companies have

AS aims to satisfy the requirements of Scandinavian trade

enjoyed favourable growth as a result of the strong

and industry for capital-intensive equipment, liquidity and

development in the Norwegian economy. The development

administrative services. The company is a Scandinavian

turned in 2009 further to the change in the business cycle.

finance company, and its business is carried out through a

This has also impacted SG Finans. Scarcity of capital and

broad, Scandinavian distribution network with 16 regional

increasing prices on liquidity have lead to changes in the

and sales offices in Norway, 5 offices in Sweden and 2 in

pricing of credit. The general economic outlook for 2010

Denmark. The company's head office is located in Lysaker.

indicates a further dampening of overall economic growth,

At the end of the year the company had 358 employees.

albeit not to the same extent as in 2009.

The activities of SG Finans do not pollute the external

SG Finans enjoys a very strong market position for its

environment; however, some leasing objects may cause

products in the Norwegian market. Based on figures provided

pollution when they are used.

89

Annual Report 2009 DIRECTORS‘ REPORT

by the Association of Norwegian Finance Houses as at 31.12.

future losses must still be assessed as larger than normal.

2009, the company's market shares are as follows:

The Board asses that the write-downs for credit losses

• Equipment leasing

31,7 %

represent a satisfactory estimate of expected losses in the

• Factoring (turnover)

40,0 %

portfolio by year end 2009. Going into 2010 most indicators

SG Finans thereby retains its position as a market leader in

predict that we must expect still high credit losses in the

Norway within both product areas. The company has also

current year.

strengthened its position in Sweden and Denmark with increased market shares. The company is thus one of

Assets that are repossessed as a result of defaulted leasing

Scandinavia’s leading finance companies.

and loan contracts amounted at year end to MNOK 246,6

FINANCIAL RESULTS

94,5 during the year. Turnover during the year for

For 2009 the operating profit before taxes for SG Finans AS

repossessed assets amounts to MNOK 700,1, which is an

was MNOK 244,3 compared to MNOK 390,6 in 2008.

increase from 2008 when the turnover was MNOK 455,0.

from in total 795 contracts. This is an increase of MNOK

The company’s total income was in 2009 MNOK 1.144,5

Net loans outstanding has fallen from NOK 32,8 billion to

compared to MNOK 930,7 in 2008. The increase in income

NOK 30,6 billion. This is a decrease of 6,7 % during the

is mainly linked to increased interest margin on loans. The

year. The branches in Sweden and Denmark represented 18

operating expenses amounted to MNOK 440,1 compared

% of the net loans outstanding at year end.

to MNOK 436,2 the previous year. Staff expenses represent approximately 59 % of the total expenses in

The company’s equity was MNOK 2.923,7 including the

2009, which is at the same level as previous year. Further

result of the year at end 2009. Regulatory capital for the

to the change from a defined benefit to a defined

calculation of the capital coverage amounted to MNOK

contribution retirement scheme for employees in Norway,

2.896,8 as of 31.12.09 including the result of the year. The

the company has recognised an accounting income of

capital coverage by the year end 2009 was 11,20 %. The

MNOK 35,4.

company has presented in 2009 its application to the regulator to use internal models for the calculation of the

In 2009 the company, as the market in general, has

regulatory capital requirement for credit risk for a number of

experienced again a large increase in bankruptcies, after an

clients segments as well as the advanced method for the

increase which started in 2008 from a comparably low level

calculation of the regulatory capital requirement for

in 2007. As a result of this the total cost of risk increased to

operational risk. The application is not yet finally assessed

MNOK 460,1 compared to MNOK 103,9 in 2008. This

by the regulator, and the capital requirement and capital

represents 1,58 % of average loans outstanding, up from

coverage for 2009 is calculated based on the Basel II capital

0,37 % of average loans outstanding in 2008.

directive’s using the standard method for credit risk and the basic indicator approach for operational risk. Total risk-

Total write-downs for credit risk was at year end MNOK

weighted assets was MNOK 24.293,6 at the end of 2009,

371,6, corresponding to 1,22 % of total loans outstanding.

and the regulatory capital requirement for credit risk was

This is an increase of MNOK 207,6 during the year. In

MNOK 1.943,5. The regulatory capital requirement for

comparison, at the end of 2008, total write-downs for

operational risk was MNOK 125,6. The company does not

credit risk represented MNOK 164,0 or 0,5 % of total loans

take market risk and the regulatory capital requirement for

outstanding. Gross doubtful loans were MNOK 984,1

market risk was zero. The total capital requirement was

compared to MNOK 928,1 the previous year. This

therefore MNOK 2.069,1. The capital coverage is

represents 3,2 % of total loans outstanding, which is an

satisfactory compared to regulatory minimum requirements

increase from 2,8 % in 2008. Because of the magnitude of

and the company’s internal requirements and guidelines for

the financial crisis and the consequences for the

solidity and capital adequacy. As part of the company’s

Scandinavian business sector, the uncertainty in relation to

capital management procedures, stress testing of all

relevant risks is performed and the change in the capital

As part of the company’s policy and procedures for capital

requirement under various stress scenarios is evaluated.

management, the company regularly performs assessment

The capital adequacy is considered satisfactory also

of the capital situation and capital adequacy in given stress

considering the results of the performed stress tests.

tests for various scenarios and relevant types of risk. This has

Disposable equity after performed stress tests and

been carried out in accordance with the regulatory

additional capital requirement (pillar 2 requirements) is

requirements for internal processes for the assessment of

MNOK 643,0 inclusive net result of the year, compared to

capital adequacy (Internal Capital Adequacy Assessment

MNOK 277,9 at the end of 2008.

Process or ICAAP). The analysis demonstrates that the company’s capital adequacy and solidity is satisfactory in

The net income after tax is MNOK 170,2 for the company.

respect of expected future growth and also following the

This is proposed transferred to other equity.

stress tests that have been performed.

The Board considers that the financial statements give a

In 2007 and 2008 the company has implemented the

true and fair view of the company’s financial position. Other

central elements in Société Générale group’s methods and

than what is stated in the accounts there have not been any

procedures for operational risk management. As a part of

events after balance-sheet date that may have any

this, the company has implemented monitoring and

significant impact on the financial statements. Based on the

reporting of key risk indicators for operational risk and

results of the year, the Board concludes that there are

scenario analysis of different stress scenarios, in addition to

grounds for continuing operations, and this forms the basis

the existing event and loss reporting and the group’s

for the preparation of the financial statements for 2009.

framework for self-assessment of risks and controls. SG Finans thus complies with the Société Générale group’s

RISK MANAGEMENT

requirements for the use of the advanced measurement

The company’s principles for risk management have been

approach (AMA according to the Basel II capital directive)

presented in more detail in note 18 Risk management.

for the calculation of the capital requirement for operational risk. The company has in 2009 applied for the approval

Since the second half of 2007 capital markets have been

from regulatory authorities to use the AMA method in the

marked by financial crisis, lack of confidence and a sharp

calculation of capital adequacy and reporting to regulatory

reduction in liquidity in the interbank market followed by an

authorities and the public.

increase in funding costs and general increase in credit spreads. In 2009 interbank markets have still been volatile

As part of Société Générale group, the company has

with large changes in lead interest rates from the

worked in line with the group’s principles and framework

Scandinavia central banks. SG Finans gets its funding from

for internal control and corporate governance. Assessments

the parent company and we have in the entire period

are made of relevant risks and the efficiency of internal

maintained a close contact with our parent. In total we can

controls. The results of these assessments are considered

conclude that the company at all times has had access to

satisfactory.

satisfactory levels of funding and liquidity, in spite of the general financial crisis and the extraordinary turbulence in

ORGANISATION

the markets. A central element in the company’s

At the end of the year the company had 358 employees,

management of the financial crisis has been the possibility

whereof 295 in the Norwegian operations, 34 in Sweden and

to incorporate increased cost of funding in the pricing of

29 in Denmark. During the year there have been some

financing to clients.

changes in the company management. Anders Holmgren has

The company is subject to internal and external capital

been nominated as new head of the branch in Sweden, Sverre

adequacy requirements. The internal guidelines compel the

Edin took over the responsibility of the ICT function and

company always to comply with the internal requirements

Armand Taillandier replaced Odd Sørensen as head of risk. The

which are stricter than the regulatory minimum requirements.

Board welcomes all new employees joining SG Finans in 2009.

10 11

Annual Report 2009 DIRECTORS‘ REPORT

SG Finans focuses on ensuring that its employees

follow up of doubtful exposures. In the meantime it is

experience equal opportunities, and work designed to

important for SG Finans, in these times of economic slow-

achieve this has been incorporated into the company’s

down, to continue to maintain and develop the good relations

strategy plan. Furthermore, the company has established

with customers and the collaboration with partners. The

functions and procedures to prevent any form of

organisation is well prepared to meet the challenges. The

discrimination. This includes the Remuneration and

company has employees with a high degree of competence

Recruitment Committee and the Work Environment

and experience and the organisation has both the capacity and

Committee, whose members are equally staff

will for adjustment and change.

representatives and company management, anonymous whistle-blower protection procedures for employees, periodic staff appraisal reviews as well as staff satisfaction surveys where any potential discrimination shall be identified and avoided. As a result of the extremely tight labour market and the strong demand for employees with expertise in the finance sector, the year 2009 has also been marked by a relatively high turn-over, although somewhat lower than previous years. The rate of absence due to illness has increased somewhat compared to 2008 but is still at an acceptable level with in total 4.131 absence days. This represents 4,8 % absence. The Board is not aware of any personal injuries occurred at work during 2009. The working environment at SG Finans is considered to be good. This was also confirmed in the company’s staff satisfaction survey. The company has

Lysaker 2 March 2010

a Work Environment Committee and a Cooperation Committee. Legally required meetings have been held. Various cultural and expertise-building measures were implemented in 2009, both at local (regional and branch) and central level. Emphasis has also been placed on continuing to build up a common Scandinavian culture while

Jean-Marc Mignerey

simultaneously promoting the advantages of being a part of

Styrets formann

one of Europe’s largest banking groups to the company’s employees. Being part of Société Générale group is also actively marketed in recruitment of new staff. Jacques Bensen

Gérard Pignatel

Tommy Pedersen

Kjell Vegard Opheim

Christine B. Meyer

Carsten Thorne

FUTURE PROSPECTS The world economy has improved significantly in 2009 compared to 2008. Still we must expect that the economic slow-down we are currently in will continue throughout 2010. We must expect still a high number of bankruptcies and credit losses. For SG Finans the development in 2010 will largely follow the same development as the rest of the business. 2010 will therefore be a challenging year, and the changed economic cycle demands a strong cost control and tight

Administrerende direktør

Organisation 2009 SG Finans AS – a Scandinavian player in the Société Générale Group SG Finans AS is a wholly owned company in the Société

• sales and relationships

Générale Group. The company operates through 15 regional

• knowledge

and sales offices in Norway, five offices in Sweden and two

• enthusiasm and team spirit

in Denmark. It has a total of 358 employees and its head office is in L ysaker, near Oslo.

Brands and image The core activities in Norway, Sweden and Denmark are

It is part of the SG Equipment Finance business area, which

equipment finance (mainly leasing) and factoring (for the

is Europe’s leading player in equipment leasing. Société

time being only in Norway). The product areas are marketed

Générale is among the leading suppliers of financial

under the SG Equipment Finance and SG Factoring brands.

services in the Eurozone. The group has 165 000 employees

SG Equipment Finance is used as the logo at company level.

and is represented in 82 countries.

This is in line with the image for the combined leasing and factoring activities in the other finance companies in the

Vision and values

Société Générale Group, which are also marketed under the

SG Finans wants to be seen as a leading Nordic player who

SG Equipment Finance brand.

creates value through teamwork and knowledge. This vision is based on the following core values:

CEO

Carsten Thorne Group coordinator Kjell Brevik

Credit Armand Taillandier

HR/Personal

Credit Adviser Odd Sørensen

Maria Ulla Internal Auditing

Finance

Carl Gunnar Lunde

Hans Einar Herzog IT

Sverre Edin

Region Oslo/Akershus og South

Arne Hodnefjell

Sales and Development Equipment

Sales and Development Factoring

Sweden

Finn Mathisen

Jan Juliussen

Anders Holmgren

Region East

Denmark

Finn Kristiansen

Lars Rasmussen

Region West

Espen Brochmann Region North

Stig-Are Eriksen

12 13

annual report 2009 SG Equipment finance

SG Equipment Finance 2009 SG Equipment Finance, European market leader, operating in 25 countries worldwide, proves its resilience in the current economic conditions. In 2009, the leasing market fell by 35% in the equipment

In a year 2010 with little visibility, we will continue to

leasing sector, according to Leaseurope estimates. In this

demonstrate that our business model can prosper even in

context, SG Equipment Finance gained market shares and

difficult economic conditions. We will continue to focus on

succeeded in offsetting the adverse consequences of the

our vendors and clients, develop our core business and

economic slowdown and the growing rate of defaults, by

assets and provide value – added services.

offering new services to its clients and improving operational efficiency.

• 23 Billion Euros End Managed Assets • 2800 Employees

SG Equipment Finance originated new business worth €

• No. 1 in Europe in Equipment & Vendor Finance

8,5 Billion in 2009 which is well spread across a wide range

• 8.5 Billion Euros New Business Volume

of products. The volume of managed assets had grown to

• 140 000 Customers

over € 23 Billion by the end of 2009. Thanks to the sustained

• More than 100 branches

development of our Vendor business, new key Vendor partnerships and the robust growth of our activity in emerging countries like Brazil and China, we have proved our resilience in a changing economic environment. Besides, our latest acquisition, PEMA offers a great opportunity to our clients to gain flexibility and reduce fixed costs in a still fragile economic recovery. In a context of scarce funding, our position as a subsidiary of Société Générale Group is giving us a clear competitive advantage. Société Générale bank ranks 10th in Europe in terms of market capitalisation as of December 31st 2009, posted a Net Income of EUR 0.68 Billion for the financial year 2009 with a solid Tier one ratio (Basel II) of 10.7% and Core Tier One of 8.4%. Société Générale is one of the market's leading providers of specialised financial services. It has established specialised financial services in 47 countries worldwide - with a workforce of about 30 000 people. As a core business of Société Générale, SG Equipment Finance benefits from the Group’s support to implement its strategy and support its customers.

SG Finans AS – Organisation and management The business activities of SG Finans are organized into regions (Norway) and branch offices (Sweden and Denmark). Key corporate sections which support the distribution of the company’s products and services are: Credit, Finance and IT – together with the Departments of Sales- & Business Development Equipment (SOFE), and Sales- & Business Development Factoring (SOFF).

Carsten Thorne

Hans Einar Herzog

CEO

Finance

Lysaker

Lysaker



Armand Taillandier

Odd Sørensen

Credit

Credit Adviser

Lysaker

Lysaker

Sverre Edin IT Lysaker

14 15

annual report 2009 Organisation

Finn Mathisen

Jan Juliussen

SOFE

SOFF

Lysaker

Lysaker



Arne Hodnefjell

Stig-Are Eriksen

Espen Brochmann

Region South and Oslo/

Region North

Region West

Akershus, Lysaker/Kr.sand

Trondheim

Bergen

Finn Kristiansen

Lars Rasmussen

Anders Holmgren

Region East

Copenhagen

Stockholm

Hamar

Denmark

Sweden

Den Norske Opera, Oslo

annual report 2009 SG EQUIPMENT FINANCE in norway

16 17

SG Finans – Norway The fabulous growth in the Norwegian businesses more or less died out in 2008 and difficulties escalated for most branches throughout 2009. A large number of companies, large as well as small, found out overnight that they had to shut down or, in the best case scenario, start downsizing, with serious effects on employees and various partners. As an important financial partner for a broad range of Norwegian companies, SG Finans Norway was also affected by these difficult times. The result is, therefore, severely marked by loss. Despite this, the Norwegian company has maintained its position as market leader in both leasing and factoring. The Norwegian operations constitute the backbone of SG

There are ongoing processes of improvement and efficiency

Finans AS. Prospects are somewhat more optimistic for

taking place in several important areas of the company.

2010, although Norwegian business and industry cannot yet

These are operational and IT related, or processes linked

claim a clean bill of health. There is, therefore, good reason

with provision of credit and risk management.

to assume that we will experience bankruptcies and credit losses far above the norm for the second year in a row. Awareness directed at cost-reduction measures will

Leasing market leader in a difficult year

continue to be on the agenda, at the same time as

New sales in 2009 were at the same level as the previous

relationships with the company's customer groups must be

year. This means that the company has maintained its market

further reinforced.

leading position of 31.7% in a difficult year. ICT is showing strong progress, while such traditional industries, such as

Norway's competition situation is virtually unchanged from

construction and transport, have struggled heavily in 2009.

2008. This applies to both of our main products, leasing and

The same trend is expected to continue in 2010.

factoring. If the Norwegian activities are the backbone of SG Finans,

Factoring in a market-leading position

the current regional structure represents the underlying

Standard factoring is the company's main product. Its

reason for the close and good relationships that have been

market share of 40% makes the company the market

established with Norwegian companies. Maintenance of

leader. We are registering increased interest and demand

this structure is significant for our continued success. The

for the product. In 2009, the company developed a

regional results for 2009 also show that value creation in

competitive new factoring system.

Norway is distributed fairly evenly across the entire country.

SG Finans Denmark Among the Scandinavian countries, Denmark was hardest hit by the financial crisis. Because of increasing provisions for losses, the operating profit was not satisfactory. By increasing sales efforts and competitiveness, market share was increased in 2009. The financial crisis of 2009 has negatively impacted financial

increased our market share in a difficult market.

markets and we have experienced a sharp decline in

Liquidity became a scarce and expensive factor in 2009. The

business investment financing activity in Denmark. Strong

markets experienced several banks that could not provide

decline in businesses’ turnover, decreased production and

liquidity and which demanded very large increases in

scarce liquidity has led to a record number of bankruptcies

charges. Because of Societe Generale’s strong ownership of

and bankrupt-threatened companies in Denmark.

SG Finans, we have been fully able to offer liquidity and at competitive prices.

The difficult conditions for the business community have naturally fuelled a greater need for financial flexibility, and

Our customers and partners are experiencing falling

we have helped companies through periods of difficult

demand and thus less need for leasing, but in relation to the

adjustments and changes where this has been necessary.

companies' levels of activity and the overall financing structure, the share of leasing is expected to increase. Our

Despite our broad differentiation within sectors, geography

level of activity in the current market also creates future

and equipment types, as well as a predominantly strong

potential.

customer composition, we have observed a sharply increasing need for provisions for losses. The leasing market

It is expected that 2010 will be

for business equipment, e.g. cars has fallen in 2009 by

another difficult year. As a

approx. 35 %.

financing company with considerable expertise in

Our ambition is to be known as the most attractive leasing

finance, and a company that is

company by our customers, partners and employees, so we

independent from the other

place a lot of importance on feedback from these interested

Danish players and banks, we

parties. Our customer and employee satisfaction surveys

have a solid basis for the

have confirmed that SG Finans Denmark has an extremely

continued expansion and

high level of customer and employee satisfaction, which is a

development of SG Finans

strong basis for further growth and development.

Denmark.

Despite this period of downturn in the Danish economy and business community, we have set a target for continued growth. We create value by working with our customers and partners, providing specialised leasing solutions, flexibility and superior service. On this basis, we have proportionally increased our sales efforts in the leasing market, and

Lars Rasmussen

annual report 2009 SG EQUIPMENT FINANCE In denmark and sweden

18 19

SG Finans Sweden Although 2009 was a challenging year, it provided excellent opportunities for us to strengthen our position in the market. Increased credit losses and a lack of liquidity in the credit market were key factors in our work in 2009. Our secure stakeholders have enabled us to offer both access to liquidity and competitive terms over the year, which has consolidated our position in the market. New sales on the total finance company market fell by 17%

our commitment to a local presence, skilled staff and high

over the first three quarters of 2009 compared with 2008.

quality.

Despite a much lower rate of investment, we succeeded in maintaining our new sales volume from 2008, thus

Considering the foundations

increasing our market share from 4.1% to 5.04%. Over the

that have been laid over the

third quarter of 2009, our market share of the total finance

years, we are cautiously

company market amounted to 7.4%, compared with 5% for

optimistic about 2010. A

the third quarter of 2008.

growing willingness to invest and lower credit losses ought

During the year, we established a number of new

to enable us to continue

partnerships with both national and international suppliers.

consolidating our market position.

Just as in the market at large, we were affected by increased credit losses. A sharper focus on and consolidation of this part of the business process means that we now have a good grip on this issue. The division of our sales organisation into three regions, which took place in late 2008, has proven a great success. Through our regional presence, we have managed to combine closeness to our partners and clients with the strength of belonging to one of Europe’s leading finance companies, bringing the benefits of a global network and considerable expertise in many areas. Staff turnover remains low, as in previous years, and there has been a strong focus on the professional development of employees and managers. This year’s supplier and client surveys produced excellent results once again, cementing

Anders Holmgren

Lysaker (head office)

20 21

annual report 2009 annual accounts

Profit and loss account 2009

Amounts in NOK thousand

Interest and similar income

Notes

31.12.09

31.12.08

Total interest and similar income

3

1 865 856

2 453 970

Total interest and similar expenses

3

-891 302

-1 717 602

974 554

736 368

Net interest margin Total commission and fees income

4

196 956

185 990

Total commission and fees expenses

4

-103 517

-98 431

93 438

87 559

-3 999

-2 265

Net fees income Net gain on financial instruments at fair value

5

Net change in value and gains on foreign currency

1 626

977

78 912

108 053

1 144 530

930 691

6,7

-257 673

-260 960

6

-182 469

-175 204

704 388

494 527

-460 080

-103 909

244 307

390 618

-74 102

-105 112

170 205

285 506

-383

3 600

169 822

289 106

Equity holder of the parent

169 822

289 106

Total allocations

169 822

289 106

Income on other activity

4,13

Net banking income Payroll, fees and other staff costs Other operating expenses Gross operating proft Net cost of risk

8

Operating profit Taxes Profit for the year

9

Other compregensive income Exchange differences on translation of foreign operations Other comprehensive income for the year. Total comprehensive income of the year Attributable to:

Balance sheet

Amounts in NOK thousand

Assets

Notes

Cash and deposits with central banks

31.12.09

31.12.08

5

7

Deposits with financial institutions

14,22,23

271 041

529 336

Loans to financial institutions

22,23,26

2 834 473

2 553 023

10,15

0

0

2 702 031

2 786 702

Financial derivatives Loans to customers Repayment loans Factoring receivables Factoring loans Financial lease agreements

11

Total loans before allowances

152 900

531 210

1 508 560

1 838 857

23 371 803

25 068 046

27 735 294

30 224 816

8,20

(371 631)

(163 961)

19,22,23,24

27 363 663

30 060 855

Repossessed assets

21

246 589

152 101

Shares and primary capital certificates

13

216

55

Other intangible assets

12

26 880

36 120

Machinery, tools and equipment, means of transport

12

Allowances on doubtful loans Net loans to customers

9 249

9 195

Other assets

5 278

27 883

Prepayments and accrued income

7 280

8 088

30 764 673

33 376 663

Total assets

22 23

annual report 2009 annual accounts

Amounts in NOK thousand

Liabilities Loans and deposits from financial institutions with agreed maturity Deposits from and debt to customers with termination rights

Notes

31.12.09

31.12.08

16,22,23,24

26 343 771

28 882 187

24

305 445

394 300

10,15

134 302

150 116

Retention of margin and other customer accounts

24

22 762

15 746

Other liabilities

17

542 456

741 045

Financial derivatives

Accruals and deferred income

85 578

76 504

Pension liabilites

7

41 378

68 082

Deferred tax

9

365 283

294 807

27 840 976

30 622 787

Share capital

945 436

945 436

Share premium account

240 639

240 639

1 737 623

1 567 801

Total liabilities Equity

Other equity including profit for the year 25

Total equity Total liabilities and equity

2 923 698

2 753 876

30 764 673

33 376 663

58 867

57 380

Contingent liabilities Guarantee liabilities

28,29

Lysaker 2 March 2010

Jean-Marc Mignerey Styrets formann

Jacques Bensen

Gérard Pignatel

Christine B. Meyer

Tommy Pedersen

Kjell Vegard Opheim

Carsten Thorne Administrerende direktør

Cash flow statement

Amounts in NOK thousand

2009

2008

Operations Interest income Interest costs

1 716 617

2 378 646

-503 909

-1 311 635

Other receipts

275 868

269 412

Operating expenses

-537 668

-546 210

Receipts on previous losses Paid taxes Net cash flow from operations

17 996

8 365

0

-2 277

968 904

796 301

-7 642 298

-11 024 726

Proceeds from sale og leasing

2 158 588

2 065 947

Decrease in loans ( net )

7 444 119

4 770 601

-72 427

-86 707

-29

1

1 887 953

-4 274 884

( Increase) in tangible assets

-6 310

-23 045

Decrease of fixed assets

9 033

464

Net cash flow from investment activity

2 723

-22 581

-88 855

28 271

New investments leasing

( Increase ) in other receivables ( Increase ) in advance payments Net cash flow from current financial activity

Increase (decrease) in deposits from customers Increase (decrease) in equity Increase (decrease) in loans from credit institutions

-383

3 599

-2 815 034

3 265 710

-184 819

356 102

-28 786

-204 965

-3 117 877

3 448 717

Net cash flow

-258 297

-52 447

Cash at the 1st of January

529 343

581 790

Cash at the 31st of December

271 046

529 343

Increase (decrease) in debt Accrued costs Net cash flow from long term financial activity

Reconciliation cash, 31st of December 5

7

Deposits with financial institutions

271 041

529 336

Cash at the 31st of December

271 046

529 343

Cash and deposits with central banks

24 25

annual report 2009 annual accounts

Statement of changes in equity

Amounts in NOK thousand

SG FINANS AS Total equity 01.01.08

Share capital

Share premium a/c

Other equity

Total

945 436

240 639

1 278 695

2 464 770

289 106

289 106

Profit for the year Total equity 31.12.08

945 436

240 639

1 567 801

2 753 876

Total equity 01.01.09

945 436

240 639

1 567 801

2 753 876

169 822

169 822

1 737 623

2 923 698

Profit for the year Total equity 31.12.09

945 436

240 639

Notes to the accounts Accounting principles

Note 1

p. 26

Important accounting estimates and discretionary evaluation

Note 2

p. 27

Net interest income

Note 3

p. 28

Net fees and income on other activity

Note 4

p. 28

Net gains on financial instruments at fair value

Note 5

p. 28

Operating expenses

Note 6

p. 28

Pensions

Note 7

p. 29

Losses and allowances recognised in the Profit and Loss accounts

Note 8

p. 30

Taxes

Note 9

p. 31

Information on fair value

Note 10

p. 31

Leasing (financial leasing assets)

Note 11

p. 32

Tangible fixed assets and intangible assets

Note 12

p. 33

Share ownership

Note 13

p. 33

Restricted deposits

Note 14

p. 34

Financial derivatives

Note 15

p. 34

Funding / interest expenses

Note 16

p. 35

Other liabilities

Note 17

p. 35

Note 18

p. 36

Risk classification

Note 19

p. 36

Doubtful loans

Note 20

p. 37

Repossessed assets

Note 21

p. 37

Note 22

p. 38

Note 23

p. 39

Note 24

p. 39

Ownership

Note 25

p. 40

Information on related parties and remunerations

Note 26

p. 40

Capital adequacy

Note 27

p. 42

Guarantee liabilities and loan commitments

Note 28

p. 42

Contingencies

Note 29

p. 42

Number of employees

Note 30

p. 42

New standards

Note 31

p. 43

Income statement

Balance sheet

Information on risk Risk management Credit risk

Interest rate sensitivity Interest risk and interest rate adjustment period Liquidity risk Liquidity risk, remaining maturity on balance sheet items Currency risk Net position per currency Additional information

annual report 2009 annual accounts – notes

26 27

Notes 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES SG Finans AS is a Scandinavian finance company, and its business is carried out through a broad, Scandinavian distribution network with 16 regional and sales offices in Norway, 5 offices in Sweden and 2 in Denmark.SG Finans AS forms part of Société Générale SA, a group listed on the stock exchange with headoffice in Paris, France. The Group consolidated financial statement is prepared by Société Générale SA, and is available on www.socgen.com The company is a limited company incorporated and domiciled in Norway. Its registrered office is in Strandveien 18, Lysaker. The financial statements for the year ended 31 December 2009 were authorised for issue by board of directors and annual shareholders meeting on 02 March 2010 The basis of preparation of the financial statements SG Finans AS financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), which have been approved by the E.U. The financial statements are set up on an historic cost basis, with the exception of the specific recognition criteria for financial instruments as described below. Branches and subsidiary company The financial statements show the figures for SG Finans AS (“the company”), i.e. the business operations in Norway and the branches in Denmark and Sweden. The financial statements are presented in Norwegian Kroner and all values are rounded to the nearest thousand Kroner, except when otherwise indicated. The branches in Denmark and Sweden are subject to a separate accounting treatment. The branch accounts are included in the company's accounts and notes. When translating foreign currency the mid-rate in effect as at 31.12 is used for all balance sheet items. Revenues and expenses are translated at the rate of exchange in effect at the time of the transaction. . The subsidiary DC Service AB has been exempted from consolidation as the company’s profit before taxes and balance both represent less than 0.1% of the profit and balance for SG Finans AS, as well as the criteria’s in IAS 27.10 are met .See note 13. Comparable figures Comparable figures are prepared for profit and loss, balance, cash flow statement and notes. The use of estimates The preparation of financial statements in accordance with IFRS includes assessments, estimates and assumptions that affect both which accounting principle is applied and the reported amounts for assets, liabilities, revenues and expenses. The actual amounts can vary from estimated figures. Estimates and underlying assumptions are reviewed and assessed on an ongoing basis. Changes in accounting estimates are applied in the period in which the estimates are changed, and in all future periods which are affected. Note 2 provide further information on significant estimates and assumptions. Assets and liabilities in foreign currencies Monies in foreign currencies in the balance sheet are translated at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the exchange rate in effect at the time of the transaction. Non-current and current liabilities are valued at face value. Accrual accounting for interest income, sales gains, commissions and fees Interests are carried at amortised cost in accordance with the effective interest rate method. Commissions received and paid, fees and other related amounts are included in the calculation of the effective interest rate. The expected maturity of the contracts is used as the basis for calculating the effective interest rate for loans, whereas the contractually fixed maturities in the agreements are used for financial leases. When contracts are terminated during the period, the outstanding balance is posted to the income statement as revenue or expense. Loans, loans that are in default or at risk of default and individual/group write-downs Loans are valued at amortised cost with the exception of loans that are at risk of default or in default where there are objective indications of impairment in value.

Objective evidence of impairment for credit risk on loans includes significant financial problems at the debtor, defaulted payments or other material breaches of contract, instances where it is considered probable that the debtor will initiate debt settlement negotiations or other specific circumstances that have occurred. Write-downs will be made if objective evidence of a decline in value can be identified. If there is objective evidence that an impairment in value has occurred, the loss is measured as the difference between the asset’s value in the balance sheet and the net present value of estimated future cash flows (excluding future credit losses which have not occurred), discounted with the financial asset’s original effective interest rate (i.e. the effective interest rate calculated at inception). The asset’s balance sheet is reduced using a separate provision account. The loss amount is included in the Profit and Loss statement. Loans are defined as being in default when the delay in payment exceeds 90 days and the delay is not due to accidental circumstances at the customer. If a customer has several contracts, but only one is in default, the entire customer engagement is reported as being in default. Loans that are at risk of default are not necessarily in default, however the customer’s financial standing and the value of the securities indicate a risk of default. The recovery of loans in default takes place with a new assessment when the applicable payment plans have been followed for a period of time and the loan is no longer deemed to be at risk of default. Write-downs for credit losses are made for loans on an individual basis. In accordance with the group’s guidelines and documentation requirements for write-downs on group’s of assets, we have not written down groups of loans. Losses that have been incurred but not reported (IBNR write-downs) have not been written down. When the company collects assets for realisation of a security interest or sells leased objects, and this is due to customer default, the lease object is classified as a repossessed asset and temporarily valued at the assumed net realisable value. Actual losses on realisation are recorded to losses on loans in the income statement. Financial assets When financial assets and liabilities are first entered into the accounts, they are classified in one of the following categories for the purposes of assessing value: • Loans and receivables, • Fair value with changes in value through profit or loss (“trading”), • Other liabilities.

Loans and receivables This category includes financial leases and loans that are not listed in an active market and are not defined as assets valued at fair value with changes in value recognised in the income statement. The classification also includes loan factoring, receivables factoring and loans to the parent company. This group is carried at amortised cost. Fair value with changes in value recognised in the income statement The classification includes derivates that cannot be classified as hedging instruments. Interest income and expenses are recorded directly into the accounts. See separate note on hedging. Other financial obligations The classification includes borrowings from the parent company and is recorded at amortised cost. Hedging, foreign currency and interest rate instruments Hedging the interest rate risk from fixed interest rate contracts is implemented through swap contracts where we pay fixed and receive variable interest. This enables us to hedge our financial risk against changes in interest rates, and the loans outstanding match the funding.

In compliance with IAS 39 changes in the market value of the fixed interest rate portfolio to fair value are measured and presented as part of the loan and market value of the hedging instruments for accounting purposes in line with financial derivatives. The net difference is recorded in “Net gains on financial instruments at fair value”.The connection is verified in the form of quarterly tests of the effectiveness of the hedge. A hedging efficiency of 80-125% is expected.

Intangible assets Capitalised software is recorded as an intangible asset and depreciated using the straight line method based on the estimated lifetime, 3-7 years, from when the software is operational. Capitalisation occurs when the circumstances in accordance with IAS 38 have been met. The costs associated with maintaining the economic value of IT systems are expensed directly.

The hedge accounting is discontinued if it does not meet the abovementioned hedge requirements, the hedging instrument expires or is terminated, exercised or sold, or the company chooses to discontinue hedge accounting.

Property, plant and equipment Property, plant and equipment are stated at cost less an adjustment for straight-line depreciation, based on the estimated lifetime, 3-10 years, from when the assset is operational, see note 12.

Interest rate swaps that do not qualify as hedging instruments are classified as trading and presented in the balance sheet in the line item for financial derivates and changes in value are included in “Net gains on financial instruments at fair value”. Currency risk is managed by borrowing in the same currency and with the same maturity as assets in the foreign currency. The net result from the contracts in foreign currencies is exchanged into NOK or other local currency on realisation. Valuation of financial instruments Financial instruments are included in the balance sheet at fair value at the date of trade. On subsequent measurement the value in the accounts of financial instruments as defined above is set to either fair value or amortised cost. Refer to Note 10 for further information about fair value. Leasing SG Finans’ leasing activities comprise financial lease agreements. Financial leasing is classified as leasing and for accounting purposes is treated as loans. Contracts with residual value are written off to the residual value over the duration of the contract. The interest component of the lease payments is recorded as interest income in accordance with the principles described in the point for loans, while the principal component reduces the lease loan. Revenue from lease payment is recorded in accordance with the annuity principle. For tax purposes, the leasing objects are depreciated using the declining balance method.

2. IMPORTANT ACCOUNTING ESTIMATES AND DISCRETIONARY EVALUATIONS The preparation of annual financial statements in conformity with generally accepted accounting principles requires that on occasion management must make estimates and assumptions. Estimates and discretionary evaluations are regularly assessed and are based on historic experience and other factors, including the expectations of future events that are considered to be probable under the current circumstances. The company prepares estimates and makes presumptions and assumptions connected to the future. The accounting estimates that are based on this will seldom be entirely in accordance with the final outcome. Some accounting principles are considered to be especially important to enlighten the company’s financial position because they require the management to make difficult or subjective assessments and determine estimates that are, for the most part, uncertain at the time the estimates are made. Further information on these types of assessments and estimates is provided below. Loan write-downs When evaluating the need for write-downs the most important assessment is related to estimating the most probable future cash flows from the customer. In principle, all cash flows from the loan shall be identified, and an evaluation must be made as to which cash flows are deferred. With the large number of loans which are subject to assessment, these types of calculations must be made based on approximations and experience.

Direct marginal revenues and costs when first calculated and the expected gains on sale are included in net interest income. Other leasing gains on sale are posted under other revenues.

For further information about the procedure used for the write-downs, refer to Note 1 Accounting principles.

Factoring Factoring is recorded in accordance with the net method, i.e. the loan to the user of the factoring service is recorded in the balance sheet. This loan is classified as loan factoring. If SG Finans has assumed the credit risk for the receivables then this loan is classified as receivables factoring. Retention of margin and other customer accounts is classified as such when prepayment to customer is lower than factoring receivables.

Expected sales gain As part of the equipment leasing activity, SG Finans may obtain sales gains from disposal of leased assets. Based on historic observations, tendencies and development in the second-hand market, estimated sales gains from disposal of leased assets further to the contract coming to end of term are included in interest income, see also note 1.

Pension obligations Pensions are recorded in accordance with IAS 19 – Employee Benefits. A distinction is made between insured and uninsured schemes. From 31st of December 2009, the benefit plan in Norway is replaced with a defined contribution schemes. The Swedish and Danish branches only operate defined contribution schemes. The pension calculations are undertaken by actuaries on the basis of assumptions that can change in the future. Actuarial gains and losses as a consequence of changes in assumptions or differences between expected and actual returns on pension plan assets are not directly recognised in the balance sheet, instead they are accrued over the expected contribution time of total participants’ if the total amount exceeds 10% of the greater of total pension obligations or pension funds in the previous year. Refer to note 7.

Repossessed assets Assets which are repossessed further to the clients’ default, are transferred as to Repossessed Assets based on expected market value, hence reflecting expected impairment of the objects.

Deferred taxes Deferred taxes / tax benefit is calculated based on temporary differences between the accounting and tax values at the end of the financial year. Tax rate of 28% is used in the calculations. Deferred tax are recognised at their nominal value and classified as long-term liabilities in the balance sheet. Equity securities Equities held are securities in the subsidiary company DC Service AB, refer to Note 13. The cost method is used in the company accounts. Provisions Provisions are recorded when the company has an obligation (legally or self-imposed) relating to a prior event, it is probable (more probable than not) that a financial settlement will take place as a result of the obligation and the actual amount can be reliably measured. Refer to Note 17.

Pension obligations The present value of pension obligations is calculated by an external actuary (Watson Wyatt), which bases its assessments on demographic assumptions about the population. A number of actuarial and financial parameters are used in the calculations. The most important financial parameter is the discount rate which is determined based on the interest rate on government bonds with an obligatory duration margin at the balance sheet date, and an addition to take account of the relevant maturity of the obligations. The expected return on pension plan assets is determined based on how the plan assets are invested and from historical returns. Other fundamental assumptions for the pension plan obligations are the annual rate of salary increase, the annual regulation of pensions, the expected G regulation (a base amount annually approved by the Norwegian parliament) and the withdrawal propensity in respect of the early retirement scheme. These are based on the recommendations from The Norwegian Accounting Standards Board (NASB) and the management’s expectations. Refer to note 7 and note 1. Contingencies Within the scope of its ordinary operations SG Finans AS will be regularly involved in legal disputes. Any effects on the financial statements are assessed on a case by case basis. Refer to Note 30.

annual report 2009 annual accounts – notes

3. NET INTEREST MARGIN

Interest income fra financial institutions, valued at amortised cost Interest income from customers financial leases and loans, valued at amortised cost

28 29 Amounts in NOK thousand

2009

2008

127 777

123 576

1 737 837

2 330 219

Other interest income

242

175

Total interest income

1 865 856

2 453 970

Interest expenses to financial institutions, valued at amortised cost

876 933

1 692 326

Interest expenses on deposits and debt to customers, valued at amortised cost

9 706

17 687

Other interest expenses

4 663

7 589

Total interest expenses

891 302

1 717 602

Net interest margin

974 554

736 368

4. NET FEES AND INCOME ON OTHER ACTIVITY

Commission and fees income from loans and similar to customers Other commission and fees income Commission and fees expenses from loans and similar to customers

Amounts in NOK thousand

2009

2008

196 928

185 966

27

24

(101 871)

(96 416)

Other commission and fees expenses

(1 646)

(2 015)

Net commission and fees income

93 438

87 559

Sales gains

58 123

72 185

Income from extension of leasing contracts

16 268

14 442

4 521

21 426

78 912

108 053

Other income Total income other activity 5. NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE

NetNet gains on financial derivatives, trading Change in fair value on financial derivatives, hedging Change in fair value on hedged fixed interest loans Net gains on financial instruments at fair value through P&L 6. OPERATING EXPENSES

Payroll Pensions Social security costs

Amounts in NOK thousand

2009

2008

(16)

(1 323)

16 826

(124 768)

(20 809)

123 826

(3 999)

(2 265)

Amounts in NOK thousand

2009

2008

200 080

185 652

7 354

25 421

50 239

49 887

257 673

260 960

Administrative expenses

94 208

110 335

Rent and other operating expenses on leased property

20 098

19 882

Other operating expenses

53 026

34 703

Total payroll, fees and other staff costs

Ordinary depreciation

15 137

10 283

Total other operating expenses

182 469

175 204

Total operating expenses

440 142

436 164

Employee share ownership program Employees were offered to participate in the global employee share ownership program of Société Générale SA. SG Finans contributed to the purchase, limited to 1.000 Euro for each employee. Expenditure for this contribution has been classified as payroll, fees and other staff costs. Amounts in NOK thousand

Fees paid to Ernst & Young AS and cooperating companies are made up as follows (excl VAT): Statutory audit

2009

2008*

922

1023

Other attestation services

0

0

Tax advice

0

185

Other non-audit services Total *Deloitte AS

0

126

922

1334

7. PENSIONS SG Finans is obligated to follow the Act on Mandatory company

salary in excess of 12 G (G = National Insurance basic amount), which

pensions. The company's pension scheme follows the requirement as

are unfunded.The economic assumptions used in the collective scheme

included in the Act.

are specified below. Contribution to the AFP plan are included in the column ""unfunded"".

The defined benefit scheme for employees in Norway is from 31st of December 2009 replaced with a defined contribution scheme with

The branches of SG Finans AS, in Sweden and Denmark, have defined

Storebrand, which will issue the paid-up policy (fripolise). Employees in

contribution plans. The defined contribution plans cover full-time employees

Norway can also apply for an early retirement pension (AFP) at 62 years

and contributions comprise between 4,5 % and 11 % of salaries. As at 31

of age. The agreement also covers invalidity pension, spouse's pension

December 2009, 63 members were covered by the plans.

and children's pension. There are also pension obligations to individual employees over and above the ordinary collective agreement. This

The contributions recognised as expenses equalled TNOK 7.190 and

applies to employees with a lower retirement age and employees with

TNOK 4.018 in 2009 and 2008 respectively. Percentage

Economic assumptions:

2009

2008

Discount rate:

4,40 %

4,23 %

Expected return on assets

5,00 %

5,00 %

Growth in salary

2,93 %

4,00 %

Inflation

2,50 %

2,50 %

G - regulation

3,73 %

3,75 %

Growth in current pensions

3,00 %

3,00 %

0%

0%

Withdrawal tendency AFP

Amounts in NOK thousand

Funded

Unfunded

Total 2009

Funded

Unfunded

Total 2008

Present value of pensions earned during the year

21 212

4 116

25 327

13 160

2 802

15 962

Interest cost of accrued pension liabilities

10 652

1 890

12 542

8 730

1 944

10 674

Expected return on plan assets

-5 296

0

-5 296

-5 444

0

-5 444

0

0

0

0

0

0

2 722

272

2 994

0

211

211

29 290

6 278

35 567

16 446

4 957

21 404

Pensions costs:

Plan change, curtailments Difference between actual and estimated values Net pension costs

Pension cost for 2009 amount to TNOK 35.567 from the defined benefit plan and TNOK 7.109 from the contribution plan, in total TNOK 42.757. The equivalent for 2008 is TNOK 21.403 and TNOK 4.018 respectively, in total TNOK 25.421.The effect of the settlement of the defined benefit plan is a gain of TNOK 35.403, hence the net pension cost for 2009 is TNOK 7.354. Amounts in NOK thousand

Pension liabilities in balance sheet:

Funded

Unfunded

Total 2009

Funded

Unfunded

PPlan assets at market value

135 706

0

135 706

106 291

0

106 291

Estimated pension liabilities

244 877

47 098

291 975

215 299

44 951

260 250

Net pension liability

109 171

47 098

156 269

109 008

44 951

153 959

Actuarial gains -)/losses

-73 768

-6 206

-79 974

-76 490

-8 875

-85 365

0

-512

-512

0

-512

-512

-35 403

0

-35 403

0

0

0

-0

40 380

40 380

32 517

35 565

68 082

Plan change, curtailment Settlement Recognised pension liability

Total 2008

Amounts in NOK thousand

Pension liability:

2009

2008

2007

2006

Opening balance

260 735

174 026

175 749

158 855

Total service cost

25 327

15 962

13 388

13 911

Interest cost

12 542

10 674

8 624

7 606

Payments from plan assets

-4 087

-3 676

-7 551

-2 665

Settlement, curtailment

-135 706

0

-8 763

2 262

Actuarial gains/l(loss)

-110 573

63 748

-7 428

-4 221

48 238

260 735

174 019

175 749

Ending balance

30 31

annual report 2009 annual accounts – notes

7. PENSIONS (cont) Plan assets: Opening balance Expected return on plan assets Employee contributions Payment from plan assets

Amounts in NOK thousand

2009

2008

2007

2006

106 291

109 165

114 455

67 599

5 296

5 444

5 224

3 369

24 118

17 748

16 362

18 900 0

0

0

-7 551

-135 706

0

-12 435

0

Actuarial gain/(loss)

0

-26 066

-6 888

24 587

Ending balance

0

106 291

109 165

114 455

Settlement, curtailment

Amounts in NOK thousand

Historical disclosure information: Gross pension liability:

2009

2008

2007

2006

48 238

260 735

174 019

175 749

0

106 291

109 165

114 455

48 238

154 444

64 853

61 294

0

-26 066

-6 888

24 587

Experience adjustment expressed as percentage of plan

0,0 %

2,2 %

-1,5 %

-3,1 %

liability

0,0 %

24,5 %

7,2 %

-24,3 %

Plan assets, fair value Net pension liability: Actuarial gain/(loss)

Percentage

2009

2008

2007

Cash

0%

12 %

8%

6%

Equity

0%

6%

30 %

26 %

Bond

0%

61 %

45 %

53 %

Real estate

0%

17 %

15 %

13 %

Other

0%

4%

3%

2%

Total

0%

100 %

100 %

100 %

Plan asset information:

2006

Percentage

2009

2008

2007

2006

Booked

4,80 %

2,20 %

11,80 %

7,50 %

Value adjusted

5,50 %

0,50 %

9,50 %

8,10 %

Return on asset:

The expected return on assets is based on activa allocation and estimates from the insurance company based on long term expectations.

8. LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS ACCOUNTS Allowances on doubtful loans Allowances on doubtful loans as of 01.01 - Exchange rate adjustments (opening balance) -

Actual losses that are covered by previous allowances

- Reclassification of previous allowances

Amounts in NOK thousand

2009

2008

163 961

163 202

6 472

(6 641)

68 687

46 745

48 387

73 589

+ Allowances on doubtful loans in the period

331 216

114 452

= Allowances on doubtful loans 31.12

371 631

163 961

371 631

163 961

Losses on loans Write-downs for loan losses as at 31.12 + Exchange rate adjustment (opening balance)

11 487

(6 641)

- Write-downs for loan losses as at 01.01

163 961

163 202

+ Total actual losses

258 919

118 156

- Income on actual losses = Losses on loans

17 996

8 365

460 080

103 909

9. TAXES Taxes payable are made up as follows: Profit on ordinary activities before tax expense Permanent differences Change in temporary differences Basis for taxes payable

Amounts in NOK

2009

2008

244 307 413

390 617 974

20 173 748

(7 461 795)

261 516 496)

(691 863 779)

2 964 665

(308 707 600)

Tax 28%

-

-

Taxes payable on profit for the year

-

-

0

0

The tax expense for the year is made up as follows: Taxes payable on profit for the year Too much allocated prior years

47 541

0

Gross change in deferred tax

74 054 725

105 111 832

Total tax expense for the year

74 102 266

105 111 832

Spesification of basis for deferred tax/deferred tax assets Differences to be offset: Financial leasing assets Gain and loss account

31.12.2009

31.12.2008

2 120 940 557

1 920 833 125

36 747 779

19 483 435

(41 378 086)

(68 081 925)

Financial instruments

9 608 594

(3 635 789)

Accounting allowances

7 696 499

3 500 000

2 133 615 343

1 872 098 846

Net pension liability

Total basis, change in temporary differences Loss carried forward

(822 030 459)

(825 164 840)

Total temporary differences

1 311 584 883

1 046 934 006

Differences not included in the calculation of deferred tax Deferred tax (+) / Deferred tax asset (-)

(1 960 597)

1 665 317

365 283 170

294 806 839

At the end of 2009 recorded net deferred tax liability for the company amounted to TNOK 365.283 compared with TNOK 294.807 in 2008. Tall i hele kroner

Reconciliation from nominal to actual tax rate: Net profit before taxes Expected income tax with nominal tax rates (28%)

2009

2008

244 307 413

390 617 974

68 406 076

109 373 033

5 648 649

(2 089 303)

The tax effect of following items ; Not deductible costs Other entries related to allowances previous years Tax expense Effective tax rate

47 541

(2 171 899)

74 102 266

105 111 831

30,3 %

26,9 %

10. INFORMATION ON FAIR VALUE Method to calculate fair value of financial instruments Regarding financial instruments recorded at fair value, see description in note 1 Accounting Principles. Lending (loans and financial leasing) to and receivables on customers The pricing of lending (loans and financial leasing) is based on market prices. Stipulated prices include additions to cover credit risk. The value of impaired engagements is determined by discounting expected future cash flows. We therefore assess that the recorded value is a fair estimate of fair value for loans and receivables valued at amortised cost. Loans from financial institutions and deposits from customers Fair value is determined to be equal recorded value for loans from financial institutions and deposits from customers valued at amortised cost.

32 33

annual report 2009 annual accounts – notes

10. INFORMATION ON FAIR VALUE (cont)

Amounts in NOK thousand

31.12.09

31.12.08

Bokført Amortisert kost

Virkelig verdi

Bokført Amortisert kost

Virkelig verdi

Financial assets 5

5

5

7

7

7

271 041

271 041

271 041

529 336

529 336

529 336

2 815 240

2 815 240

2 815 240

2 553 023

2 553 023

2 553 023

0

0

0

0

0

0

Net loans to customers

27 382 896

27 257 624

27 382 896

30 060 855

29 910 298

30 060 855

Total assets

30 469 182

30 343 910

30 469 182

33 143 221

32 992 663

33 143 221

Loans and deposits from financial institutions with agreed maturity

26 343 771

26 343 771

26 343 771

28 882 187

28 882 187

28 882 187

Deposits from and debt to customers with termination rights

305 445

305 445

305 445

394 300

394 300

394 300

Financial derivatives

134 302

0

134 302

150 116

0

150 116

22 762

22 762

22 762

0

0

0

26 806 281

26 671 978

26 806 281

29 426 603

29 276 487

29 426 603

Cash and deposits with central banks Deposits with financial institutions Loans to financial institutions Financial derivatives

Financial liabilities

Retention of margin and other customer accounts Total liabilities

From January 1st 2009, the revision in IFRS related to determining and disclosing the fair value of financial instruments has been implemented. SG Finans uses the following hierarchy: 1) Quoted (unajusted) prices in active markeds for identical assets or liabilities (level 1) 2) Other techniques for which all inputs whcih have a significant effect on the recorded fair value are observable, either directly or indirectly (level 2) 3) Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data (level 3)" Amounts in NOK thousand

31.12.09

31.12.08

Nivå 1

Nivå 2

Nivå 3

Nivå 1

Nivå 2

Nivå 3

Net loans to customers

0

2 937 179

0

0

2 902 271

0

Total assets

0

2 937 179

0

0

2 902 271

0

Financial derivatives

134 302

0

0

150 116

0

0

Total liabilities

134 302

0

0

150 116

0

0

Financial assets

Financial liabilities

11. LEASING (FINANCIAL LEASING ASSETS)

Amounts in NOK thousand

31.12.2009

31.12.2008

Purchase costs 01.01

38 771 409

33 963 137

Exchange rate difference (opening balance)

(1 024 844)

904 845

7 642 298

11 024 726

Inflow during the year Outflow during the year

6 389 993

7 121 299

Purchase costs 31.12

38 998 870

38 771 409

Accumulated ordinary depreciation 01.01

12 612 841

11 370 534

Exchange rate difference 01.01

(318 620)

300 242

Ordinary depreciation during the year

6 337 100

5 912 107

Reversed depreciation sold assets

4 177 400

4 970 041

Accumulated depreciation 31.12

14 453 921

12 612 841

Book value leasing assets 31.12

24 544 946

26 158 565

Customer receivables

(1 279 158)

(1 208 342)

106 016

117 823

23 371 803

25 068 046

Other accruals Book value in the balance sheet 31.12

11. LEASING (FINANCIAL LEASING ASSETS) (CONT) Customer receivables is ordinary leasing receivable and advansement on leasing rent. Establishing fee constitute other accruals. Amounts in NOK thousand

OveOverview of future minimum finance lease rental:

31.12.2009

IWithin 1 year

31.12.2008

6 364 723

7 119 462

1 to 5 years

20 154 957

22 544 961

Future minimum finance lease rental

26 519 680

29 664 423

Average interest Present value of minimum lease payments Unearned finance income

6,34 %

8,14 %

23 254 469

25 086 898

3 265 211

4 577 525

Unearned finance income consist of interest, fees and future estimated sales gain. The company uses standard leasing agreements prepared in cooperation with the Association of Scandinavian Finance Houses, and similar in Denmark and Sweden. The company offers leasing of a broad range of equipment to Norwegian businesses and public sector entities where the material leasing arrangements consist of equipment that fall within: Industry: Construction machinery, production machinery, graphic machinery, forestry machinery, fish farming installations, furnishing etc. Technology: ICT-equipment, copy machines, office machines, medical equipment etc. Transport: Vans, trailers, buses, tractors, farming equipment, trucks, mobile cranes, automobiles, containers, helicopters, airplanes, ships etc. 12. TANGIBLE FIXED ASSETS AND INTANGIBLE ASSETS

Amounts in NOK thousand

Machines, fixtures,

Machines, fixtures,

transportation equipment

Intangible assets

transportation equipment

Intangible assets

31.12.09

31.12.09

31.12.08

31.12.08

25 600

79 656

20 225

62 160

Change in value - opening balance

(663)

(50)

752

61

Purchases

3 948

2 362

5 610

17 435

Purchase costs 01.01

(585)

-

(988)

-

Purchase costs 31.12

28 299

81 968

25 600

79 656

Accumulated ordinary depreciation 01.01

35 613

Sales

16 405

43 536

13 888

Change in value - opening balance

(577)

(50)

619

61

Ordinary depreciation of the year

3 535

11 602

2 421

7 862 -

Change in value - during the year Reversed sold Accumulated depreciation 31.12. Book value 31.12.

(10)

-

64

(302)

-

(587)

-

19 051

55 088

16 405

43 536

9 249

26 880

9 195

36 120

13. SHARE OWNERSHIP SG Finans AS owns 100% of the shares in DC Service AB. The company is not consolidated, see note 1. All issued shares have equal voting rights and the same right to receive dividend. The headoffice is  Solna Torg 3, Solna, Sverige. There has been no activity in DC Service AB in 2009. Amounts in NOK thousand

DC Service AB Total share capital - SEK thousand

31.12.2009

31.12.2008

100

100

1 000

1 000

100 %

100 %

90

90

Book value in NOK thousands

216

55

Equity

202

26

12

67

Number of shares (nominal value SEK 100) Ownership Share capital in NOK thousands

Total comprehensive income

34 35

annual report 2009 annual accounts – notes

14. RESTRICTED DEPOSITS Deposits with financial institutions include restricted deposits for withholding tax of NOK 8.698.886. 15. FINANCIAL DERIVATIVES Financial derivatives are contracts stipulating financial values in the form of interest rate terms for fixed periods of time. Derivatives used by SG Finans AS include interest rate swaps (IRS) and forward rate agreements (FRA). Financial derivatives are used to manage interest rate risk from the company's ordinary operations. The table below shows nominal values as well as positive and negative market values of the interest rate swaps. The company does not have any outstanding forward rate agreements at year end. Amounts in NOK thousand

31.12.09

31.12.08

Nominal

Positive

Negative

Nominal

Positive

Negative

values total

market value

market value

values total

market value0

market value

Interest rate swaps NOK

1 470 629

0

96 128

1 471 148

0

126 529

Interest rate swaps DKK

877 033

0

31 528

1 143 681

0

22 451

Interest rate swaps SEK

162 609

0

1 346

82 309

0

1 136

Currency swaps

690 800

0

5 301

0

0 0

TOTAL

3 201 071

0

134 302

2 697 138

150 116

At year end 2009, the company had one interest rate swap in NOK, and two in DKK which were classified as held for trading. Nominal value on these were TNOK 51.849 and the negative market value was TNOK 3.630 . Year end 2008 the nominal value was TNOK 52.289 and the negative market value was TNOK 400.

Specification of financial derivatives in nominal values – 2009 1 month

Amounts in NOK thousand

from 1 from 3 months

from 1 year

month

to 1 year

to 5 years

> 5 år.

No maturity

TOTAL

Maturity profile, fixed rate loans - NOK

0

74 491

354 920

757 858

468 796

1 656 065

Maturity profile, fixed rate loans - DKK

0

63 723

166 701

620 557

103 268

954 249

Maturity profile, fixed rate loans - SEK

0

17 547

56 002

127 911

133

201 593

Maturity profile, fixed rate loans

0

0

690 800

0

0

690 800

Sum fixed rate loans

0

155 761

1 268 423

1 506 326

572 197

3 502 707

0

6 655

277 365

720 320

466 289

1 470 629

Maturity profile, interest rate swaps - NOK

0

7 640

164 601

605 897

98 895

877 033

Maturity profile, interest rate swaps - DKK

0

0

48 540

114 069

0

162 609

Maturity profile, interest rate swaps - SEK

0

0

690 800

0

0

690 800

Sum swaps

0

14 295

1 181 306

1 440 286

565 184

3 201 071

Net position

0

141 466

87 117

66 040

7 013

301 636

Maturity profile, currency rate swaps

In order to measure the company's interest risk, the effect of a parallel change of 1% (100bp) over the whole interest curve is measured on the company's unsecured interest positions. As at 31.12.2009 the company's interest sensitivity was corresponding to TNOK 2.060 impact on operating result before tax, with an impact of TNOK 1.483 on equity and net income.

15. FINANCIAL DERIVATIVES (cont) Specification of financial derivatives in nominal values – 2008 1 month

Amounts in NOK thousand

from 1 from 3 months month

from 1 year

to 1 year

to 5 years

> 5 år.

No maturity

TOTAL

Maturity profile, fixed rate loans - NOK

21 689

43 377

98 513

871 726

488 861

1 524 166

Maturity profile, fixed rate loans - DKK

11 041

22 081

197 863

721 498

178 331

1 130 814

Maturity profile, fixed rate loans - SEK

5 062

10 124

40 409

40 719

221

96 535

37 792

75 582

336 785

1 633 943

667 413

2 751 515

0

50 434

79 084

855 274

486 356

1 471 148

0

69 166

185 467

714 503

174 545

1 143 681

0

8 140

36 180

37 989

0

82 309

0

127 740

300 731

1 607 766

660 901

2 697 138

37 792

-52 158

36 054

26 177

6 512

54 377

Maturity profile, fixed rate loans Sum fixed rate loans

Maturity profile, interest rate swaps - NOK Maturity profile, interest rate swaps - DKK Maturity profile, interest rate swaps - SEK Maturity profile, currency rate swaps Sum swaps

In order to measure the company's interest risk, the effect of a parallel change of 1% (100bp) over the whole interest curve is measured on the company's unsecured interest positions. As at 31.12.2008 the company's interest sensitivity was corresponding to TNOK 1.184 impact on operating result before tax, with an impact of TNOK 853 on equity and net income.

16. FUNDING/INTEREST EXPENSES Funding from Société Générale SG Finans AS' total interest expenses to Société Générale amounted to TNOK 751.188 in 2009. Interest expenses are distributed on the following currencies (all figures in currency): Amounts in NOK thousand (valuta)

Amounts in NOK thousand (valuta)

2009

Currency

Interest

Average

expense

interest rate

2008 End balance

Average balance

Interest

Average

expense

interest rate

CAD

357

4,60 %

0

7 745

Currency

End balance

Average balance

CHF

37

0,68 %

8 658

5 475

CHF

142

2,90 %

3 623

4 893

DKK

53 409

2,91 %

1 756 321

1 837 700

DKK

90 284

5,09 %

1 855 054

1 772 257

EUR

1 819

1,70 %

106 492

106 938

EUR

5 578

4,96 %

88 249

112 446

GBP

74

1,61 %

4 732

4 584

GBP

278

5,97 %

5 166

4 660

JPY

4 975

1,46 %

0

341 339

JPY

6 662

1,08 %

913 316

619 026

NOK

612 084

3,05 %

19 354 395

20 061 857

NOK

1 298 156

6,54 %

20 399 498

19 836 563

SEK

46 177

1,35 %

3 636 489

3 425 612

SEK

152 578

5,18 %

3 241 839

2 945 848

USD

3 143

1,43 %

180 238

219 080

USD

9 087

3,69 %

251 929

246 029

17. OTHER LIABILITIES

Amounts in NOK thousand

31.12.2009

31.12.2008

234 077

254 001

Excise duty

97 945

89 387

Other liabilites

21 550

11 723

Prepayment from customers

188 883

385 934

Sum other liabilities

542 456

741 045

Accounts payable

Payments received not yet allocated to a contract on the balance sheet date are included in prepayment from customers.

36 37

annual report 2009 annual accounts – notes

18. RISK MANAGEMENT Credit risk In the business of financing assets (equipment leasing) and receivables (factoring) credit risk is the most important risk for the company. Effectively managing credit risk is therefore very important. The company has implemented a credit policy, organising procedures and regulations as well as models which address this need. SG Finans has developed classification models for risk assessment and management of business credits, which provide a good view of the risk profile of the portfolio. The classification builds on debtor solidity and market value assessments of the assets. Of greatest importance is that the provided credit is secured by direct ownership (leasing) or security (loans). The value development of the financed objects is therefore critical in assessing and controlling the risk profile of the portfolio, and knowledge about the object’s second-hand value, liquidity and markets is therefore fundamental for the credit quality and total loss in the portfolio. In those cases where a customer defaults on the payment terms in the leasing contract, SG Finans may have to terminate the contract and repossess the asset. The company works to ensure rapid sale of repossessed assets in order to hold the total quantity of assets in storage at an acceptable level. Operational risk The company has implemented the Société Générale group’s procedures for identification, assessment and reporting of losses caused by operational risk events. Reported events are used in calculating and allocating capital requirements from the group to cover operational risk. Furthermore the company has established monitoring and reporting of a number of key risk indicators for operational risk. The company also performs scenario analysis and stress testing of operational risk scenarios. Selfassessment of risks and controls is a central element in the identification and management of operational risk. Observed losses caused by failures in internal routines, system failures, internal/ external fraud and other operational events are very limited. Of the observed events, attempts of external fraud and execution errors are the most common. We assess that the existing control measures are satisfactory for uncovering and preventing this type of fraud and errors. Financial risk management The company is subject to the group’s guidelines for financial risk management (defined as interest rates, currency, liquidity and funding) as well as guidelines from the Board incorporated into the company's finance policy and liquidity policy. Management and control of financial risk are carried out centrally in the finance division, the “treasury” at the company’s headquarters. The treasury attends to the needs for financing, financial risk management, together with banking relations for the whole company i.e. the operations in all the countries. The treasury is organised as a service centre whose main purpose is to facilitate financing and hold the financial risk within defined limits. The boundaries for financial risk are relatively limited and adjusted to the size and needs of the operation. The financial risk is reported to the company’s assets and liabilities committee (ALCO) and the group’s unit for monitoring and control of financial risk. ALCO has responsibility for the limits, measurement principles and monitoring of financial risk (interest rates, currency, funding and liquidity), managing assets and liabilities, capital requirements and capital structure. Interest rate risk management We have continued the company policy to macro hedge fixed interest rate contracts, with the objective of ensuring that the economic and accounting effects of changes in interest rate markets are held at a limited level. Our economic risk at the end of the year was almost fully hedged against changes in interest rates and loans outstanding matches the funding. Due to small differences in the maturity profile between fixed interest rate contracts and hedging swaps, a small number of swaps do not meet the hedge accounting requirements. These interest rate swaps are classified as for trading purposes and the change in market value is posted directly to the income statement. The efficiency of new hedges is tested prospectively prior to entering new hedging contracts and thereafter on a quarterly basis for existing hedging relationships. The efficiency is measured based on accumulated changes in the market value for hedging instruments and hedged contracts using the “dollaroffset” method. Please refer to the notes for a closer description of accounting effects and interest rate sensitivity. Currency risk management Currency risk is managed by borrowing in the same currency and with the same maturity as assets in the foreign currency. The net result from contracts in foreign currencies is exchanged into NOK or other local currency on realisation. Moreover, the result from the branches in Sweden and Denmark is exchanged into Norwegian Kroner. As a general rule, the company does not use currency contracts for hedging

purposes, but can use short-term forward contracts to lock the exchange rate for a known quantity of cash flows in connection with financing new objects or receivables. Liquidity management / funding The company's funding is entirely provided by the Société Générale group. Funding from the group is based on a frame agreement for funding as well as funding limits according to our funding needs over time, based on budgeted and expected growth. Planning and managing liquidity and funding thus occur in close collaboration with the group unit for financing of subsidiaries and operating businesses. Since the second half of 2007 capital markets have been marked by financial crisis, lack of confidence and a sharp reduction in liquidity in the interbank market followed by an increase in funding costs and general increase in credit spreads. Interbank markets were very volatile in 2008, with a peak in turbulence in September / October further to the collapse of Lehman Brothers. In the spring and throughout 2009 we have experienced a general improvement in the markets. SG Finans gets its funding from the parent company and we have in the entire period maintained a close contact with our parent. In total we can conclude that the company at all times has had access to satisfactory levels of funding and liquidity, in spite of the general financial crisis and the extraordinary turbulence in the market marking 2008 and the first part of 2009. A central element in the management of the financial crisis has been the possibility to incorporate increased cost of funding in the pricing of financing to clients. Solidity / Capital Adequacy / Capital Management The company's policy for capital management defines the applicable principles and guidelines for capital planning and management. Moreover, the company is subject to the group's guidelines for capital management. The internal guidelines compel the company always to comply with the internal requirements which are stricter than the local regulatory minimum requirements. A central part of the policy for capital management is regular assessment of the capital situation and capital adequacy under stress tests for various scenarios and relevant types of risk. This has been carried out in accordance with the regulatory requirements for internal processes for the assessment of capital adequacy (Internal Capital Adequacy Assessment Process or ICAAP). The analysis demonstrates that the company’s capital adequacy and solidity is satisfactory in respect of expected future growth and also following the stress tests that have been carried out. At the end of 2009 the company had not issued other subordinated debt or other forms of tier 2 capital. Corporate Governance / Internal control As part of the Société Générale group, the company has continued the development of its principles and framework for internal control and corporate governance to the standards of the group. The main risks and the efficiency of internal controls are assessed on a regular basis. The results of these assessments are satisfactory.

19. RISIK classification The company uses a risk classification system for customers and exposures. The classification is based on objective criteria and consists of two parameters, the customer's creditworthiness and the object's security coverage. Counterparty classification is based on available financial information, as well as other information. The combination of these parameters determines how the exposure is classified. The company is working on adjustments to its models for calculating credit risk (probability of default), loss given default and other parameters that are decisive in estimating the risk of an exposure and the level of capital needed to cover future expected and unexpected losses. Exposures are classified in categories in accordance with capital adequacy regulations for banks and finance houses. The company therefore classifies customers into categories based on the customer's nature, size, exposure size and type. Low (0,03%), medium/low (0,0894%), medium (3,8774%), high (17,1134%) are the classes used along with non-performing and unclassified. The values in bracket present the cut-off probability of default for the class. Maximal credit exposure is calculated based on net loan to customer (not considering third-party guarantees), contingent liabilities like guarantees, loan commitments, and positive market value on derivatives or fixed interest loans. SG Finans AS has collateral through right of ownership for leased objects. Other loans and factoring are generally secured by pledge, notification or third-party guarantees.

19. RISK CLASSIFICATION (cont)

Amounts in NOK thousand

Low

Medium/low

Medium

High

Doubtful

Unclassified

Total

2 838 846

16 498 924

4 459 032

1 094 859

984 058

1 859 575

27 735 294

10,24 %

59,49 %

16,08 %

3,95 %

3,55 %

6,70 %

100,00 %

31.12.09 Gross loans Percentage share 2009 Maturity analysis – age of loans

Amounts in NOK thousand

Past due, days outstanding Not past due

1-29

30-59

60-89

90-179

> 180

> 1 year

SUM TOTAL

23 869 576

612 872

1 679 539

439 883

358 067

339 188

64 540

27 363 663

87,23 %

2,24 %

6,14 %

1,61 %

1,31 %

1,24 %

0,24 %

100,0 %

Loans Percentage rate

Amounts in NOK thousand

Past due, non-doubtful Loans

1-29

30-59

60-89

90-179

> 180

> 1 year

SUM TOTAL

476 723

1 641 516

364 743

99 414

36 200

27 931

2 646 526

Amounts in NOK thousand

Low

Medium/low

4 122 665

16 560 177

13,64 %

54,79 %

31.12.08 Gross loans

Medium

High

Doubtful

Unclassified

Total

1 000 441

928 106

3 542 144

30 224 816

3,31 %

3,07 %

11,72 %

100,00 %

4 071 283 Percentage share 2008

Forfallsanalyse – aldersfordeling på utlån:

Amounts in NOK thousand

Past due, days outstanding Not past due

1-29

30-59

60-89

90-179

> 180

> 1 year

SUM TOTAL

27 220 012

760 687

792 328

522 691

505 953

221 714

37 469

30 060 855

90,55 %

2,53 %

2,64 %

1,74 %

1,68 %

0,74 %

0,12 %

100,0 %

Loans Percentage rate

Amounts in NOK thousand

Past due, non-doubtful Loans

1-29

30-59

60-89

90-179

> 180

> 1 year

SUM TOTAL

740 910

761 430

451 912

223 982

62 939

5 177

2 246 351

Amounts in NOK thousand

Credit exposure:

31.12.2009

31.12.2008

Net loans to customers

27 363 663

30 060 855

Positive marketvalue derivatives

0

0

Guarantee liabilities and loan commitments

353 184

307 755

Sum maksimal kreditteksponering 31.12

27 716 847

30 368 610

20. DOUBTFUL LOANS

Amounts in NOK thousand

31.12.2009

31.12.2008

Gross doubtful loans

984 058

928 106

– Write-downs on impaired assets

371 631

163 961

Net doubtful loans

612 427

764 145

Please also refer to note 8 and note 21. Gross doubtful loans are total engagements for customers were one or more of the contracts are considered to be doubtful, see notes 1 and 2. Gross doubtful loans are mainly engagements in default, see notes 8 and 19. 21. REPOSSESSED ASSETS Repossessed assets at 31.12.2009 amounted to TNOK 246.589 against TNOK 152.100 in 2008, consisting of 795 contracts against 529 contracts at end 2008. This is an increase of TNOK 94.489 during the year, from TNOK 99.600 in 2008. The turnover from disposal of repossessed assets amounted to TNOK 700.116 compared to TNOK 455.000 in 2008. Repossessed assets consist of 10% high tech, 45% industrial and 45% transport equipment. SG Finans has an objective of quickly realizing repossessed assets, and maintaining stock at a reasonable level. The company does not use repossessed assets, but sells the objects to third-parties. In 2009 the number of repossessed assets has increased substantially due to an increased number of nonperforming loans. SG Finans AS has in general obtained acceptable prices for repossesed assets in 2009, even though the second hand market is difficult due to a downswing in the macroeconomics. This applies especially to certain types of equipment, although prices are in general down.

38 39

annual report 2009 annual accounts – notes

22. INTEREST RISK AND INTEREST RATE ADJUSTMENT PERIOD Interest rate risk arise from loan and leasing engagements were SG Finans receives fixed interest rate payments from the client. The interest rate can be fixed for different maturities, and in order to manage interest rate exposure, SG Finans AS applies different methods for interest rate hedging. See notes 1 and 18 for a description of hedging. Amounts in NOK thousand

from 1 month from 3 months

2009:

from 1 year

No agreed

1 month

to 3 months

to 1 year

to 5 years

> 5 år.

271 046

0

0

0

0

271 046

Loans to financial institutions

0

163 344

176 704

1 100 085

1 375 107

2 815 240

Financial derivatives

0

0

0

0

0

0

Loans to customers

24 570 989

155 761

577 623

1 506 326

572 197

27 382 896

5 934 035

81 270

222 703

748 468

103 402

7 089 878

295 491

0

0

0

0

25 137 526

319 105

754 327

2 606 411

1 947 304

Debt to banks

9 250 923

16 897 107

146 806

48 935

0

26 343 771

- hereof foreign currency

2 747 341

3 981 706

146 806

48 935

0

6 924 788

Period until next interest rate adjustment Receivables, bank

- hereof foreign currency Other assets Total assets 31.12.2009

fixed rate

Total

295 491 0

30 764 673

Customer deposits

305 445

305 445

Financial derivatives

134 302

134 302

Retention of margin

22 762

22 762

1 034 695

1 034 695

Other liabilities

2 923 698

2 923 698

48 935

0

2 923 698

30 764 673

Equity Total liabilities and equity 31.12.2009

10 748 127

16 897 107

Total balance sheet items

146 806

14 389 399

-16 578 002

607 521

2 557 476

1 947 304

-2 923 698

0

Interest rate swaps - nominal values

0

-14 295

-490 507

-1 440 287

-565 182

0

-2 510 271

- hereof foreign currency

0

-7 640

-213 141

-719 967

-98 895

0

-1 039 643

Guarantees - given

-58 867

Guarantees - received

39 329

Total balance sheet and off-balance sheet items

14 389 399

-16 592 297

117 014

1 117 189

1 382 122

-2 943 236

Amounts in NOK thousand

from 1 month from 3 months

2008: Period until next interest rate adjustment Receivables, bank

from 1 year

No agreed

1 month

to 3 months

to 1 year

to 5 years

> 5 år.

529 336

0

0

0

0

529 336 2 553 023

fixed rate

Total

6 469

139 886

177 015

990 956

1 238 697

Financial derivatives

0

0

0

0

0

0

Loans to customers

27 309 341

113 374

336 785

1 633 942

667 413

30 060 855

7 369 332

48 307

238 272

762 217

178 552

8 596 680

233 449

0

0

0

0

233 449

Total assets 31.12.2008

28 078 595

253 260

513 800

2 624 898

1 906 110

33 376 663

Debt to banks

13 190 585

15 625 110

3 500

17 498

45 494

28 882 187

2 766 423

5 727 039

3 500

17 498

45 494

8 559 954

Loans to financial institutions

- hereof foreign currency Other assets

- hereof foreign currency Customer deposits

394 300

394 300

Financial derivatives

150 116

150 116

Retention of margin

15 746

15 746

1 180 438

1 180 438

Other liabilities

2 753 876

2 753 876

17 498

45 494

2 753 876

33 376 663

510 300

2 607 400

1 860 616

-2 753 876

0

-300 732

-1 607 765

-660 901

0

-2 697 139

-752 492

-174 545

0

-1 225 991

Equity Total liabilities and equity 31.12.2008

14 931 185

15 625 110

3 500

Total balance sheet items

13 147 410

-15 371 850

Interest rate swaps - nominal values

0

-127 741

- hereof foreign currency

0

-77 307

-221 647

Guarantees - given

-57 380

Guarantees - received

84 980

Total balance sheet and off-balance sheet items

13 147 410

-15 499 591

209 568

999 635

1 199 715

-2 726 276

23. LIQUIDITY RISK AND REMAINING MATURITY ON BALANCE SHEET ITEMS Funding is provided by the parent company Société Générale, on the basis of a framework agreement and limits. The company's liquidity risk is therefore linked to the owner, and refinancing is organised in close collaboration with the group treasury departement. The table below shows due date for assets and liabilities in nominal values. Amounts in NOK thousand

2009:

from 1 month from 3 months

from 1 year

Without

1 month

to 3 months

to 1 year

to 5 years

> 5 år.

271 046

0

0

0

0

271 046

Loans to financial institutions

0

163 344

176 704

1 100 085

1 375 107

2 815 240

Financial derivatives

0

0

0

0

0

0

Loans to customers

2 567 103

2 407 495

6 159 029

14 779 077

1 470 192

27 382 896

- hereof foreign currency

751 936

527 503

1 674 302

3 849 599

286 538

7 089 878

Other assets

295 491

0

0

0

0

Total assets 31.12.2009

3 133 640

2 570 839

6 335 733

15 879 162

2 845 299

Debt to banks

5 757 034

11 290 629

1 824 099

6 375 243

1 096 766

- hereof foreign currency

1 254 373

2 288 588

1 095 547

2 286 280

0

Loans / receivables, banks

maturity

295 491 0

30 764 673 26 343 771 6 924 788

305 445

Customer deposits

Total

305 445

Financial derivatives

134 302

Retention of margin

22 762

22 762

1 034 695

1 034 695

Other liabilities

134 302

Equity Total liabilities and equity 31.12.2009

6 948 793

11 290 629

1 824 099

6 375 243

from 1 month from 3 months

from 1 year

1 096 766

2 923 698

2 923 698

3 229 143

30 764 673

Amounts in NOK thousand

2008: Loans / receivables, banks

Without

1 month

to 3 months

to 1 year0

to 5 years

> 5 år.

529 336

0

177 015

0

0

529 336 2 553 023

maturity

Total

6 469

139 886

0

990 956

1 238 697

Financial derivatives

0

0

5 499 609

0

0

0

Loans to customers

1 529 801

2 644 398

1 644 622

18 383 457

2 003 590

30 060 855

- hereof foreign currency

543 956

737 917

0

5 185 984

484 201

8 596 680

Other assets

233 449

0

5 676 624

0

0

2 299 055

2 784 284

19 374 413

3 242 287

13 470 353

9 908 368

3 677 447

853 069

2 788 592

2 848 074

1 597 612

45 494

Loans to financial institutions

Total assets 31.12.2008

233 449 0

33 376 663

972 950 Debt to banks - hereof foreign currency

945 318

28 882 187 8 225 090 394 300

Customer deposits

394 300

Financial derivatives

150 116

Retention of margin

15 746

15 746

1 180 438

1 180 438

Other liabilities

150 116

Equity Total liabilities and equity 31.12.2008

972 950 14 816 653

9 908 368

3 677 447

853 069

2 753 876

2 753 876

3 148 176

33 376 663

24. NET POSITION PER CURRENCY Foreign currency positions arise from contracts in foreign currencies, and from the activities in the branches in Demark and Sweden. Net foreign currency position at year end 2009 was TNOK 7.726. Hence giving a foreign currency sensitivity of TNOK 772,6 with a 10% shift in exchange rates between NOK and other foreign currencies. The impact on net result and equity would be equivalent to TNOK 556,3. For 2008, a shift of 10% in exchange rates would have resulted in an impact of TNOK 1 613,2 before tax, and TNOK 1 161,5 on net profit and equity.

40 41

annual report 2009 annual accounts – notes

24. NET POSITION PER CURRENCY (cont) Assets 2009:

Amounts in currency thousand

USD

EUR

SEK

JPY

CHF

GBP

DKK

CAD

Norway

156 987

79 869

27 532

2 669

8 661

5 050

3 926

79

Sweden

24 269

18 668

181 256

109 899

27 532

2 669

8 661

5 050

3 926

79

Norway

156 473

82 267

28 440

1 363

8 661

5 005

1 284

34

Sweden

24 220

18 631

180 693

111 577

28 440

1 363

8 661

5 005

1 284

34

563

-1 678

-908

1 306

0

45

2 642

45

3 241

-13 925

-735

82

0

418

2 946

247

Denmark Sum of assets 31.12.2009

11 362

Debt :

Denmark Sum of debt 31.12.2009 Net balance sheet items Converted to NOK

10 679

Foreign currency sensitivity (10% shift) before tax

324

-1 393

-74

8

0

42

295

25

Foreign currency sensitivity (10% shift) after tax

23

-1 003

-53

6

0

30

212

18

Amounts in currency thousand

Assets 2008:

USD

EUR

SEK

JPY

CHF

GBP

DKK

CAD

Norway

229 864

81 753

39 727

927 291

3 592

5 620

4 338

64

Sweden

28 536

5 040

258 400

88 857

39 727

927 291

3 592

5 620

4 338

64

Norway

229 057

82 329

37 961

920 659

3 624

5 301

46

38

Sweden

28 441

5 014

257 498

88 973

37 961

920 659

3 624

5 301

46

38

Denmark Sum of assets 31.12.2008

2 064

Debt :

Denmark Sum of debt 31.12.2008

1 630

902

-116

1 766

6 632

-32

319

4 292

26

6 313

-1 145

1 597

515

-212

3 231

5 683

150

Foreign currency sensitivity (10% shift) before tax

631

-115

160

52

-21

323

568

15

Foreign currency sensitivity (10% shift) after tax

455

-82

115

37

-15

233

409

11

Net balance sheet items Converted to NOK

25. OWNERSHIP The share capital of SG Finans AS is constituted of 101 shares, with a nominal value of 9.360.750 NOK per share. All issued shares have equal voting rights and the same right to receive dividend. All shares are held by SG Equipment Finance SA & Co KG, Wuppertal, Germany, which is 100% owned by Société Générale SA, Paris, France. Amounts

Ordenary shares Issued and fully paid:

2009

2008

January the 1st

101

101

December 31st

101

101

26. INFORMATION ON RELATED PARTIES AND REMUNERATIONS Receivables from and debt to Group companies (Société Générale) amounted to:

Amounts in NOK thousand

31.12.09

Renter i 2009

31.12.08

Renter i 2008

2 815 241

119 315

2 533 616

104 356

Assets Loans to Group companies Other loans (outside the Group) Sum of Loans to financial institutions

19 232

19 407

2 834 473

2 553 023

Liabilities Loans from Group companies

26 336 238

751 188

28 874 733

1 632 742

Funding is provided by the parent company Société Générale, on the basis of a framework agreement and limits. All transactions are made on market terms.

26. INFORMATION ON RELATED PARTIES AND REMUNERATIONS (cont)

Amounts in NOK thousand

Pension

Other

Share

Total

Totalt

cost remuneration

options

2009

2008

Pay

Bonus

Carsten Thorne, CEO

1 783

553

801

215

92

3 444

3 371

Odd Sørensen, Chief Credit Officer

1 156

147

325

190

0

1 818

1 759

Hans Einar Herzog, CFO

1 189

221

165

176

65

1 817

1 761

Total remuneration of senior management

4 128

920

1 291

582

157

7 078

6 892

Remuneration of senior management

Senior managers are persons with authority to commit the company by virtue of their position (power of procuration). Bonus payments are dependant on the results achieved in relation to agreed targets. An early retirement pension plan is established for the CEO, entitling him to receive an early retirement pension of 60 % of pensionable salary from the age of 62 years. Share options are issued from Société Générale SA, and give the right of purchase of shares in Société Générale SA. The options have a 3 year lock-in period, and the following conditions are defined for the exercise; – the employee must be employed at the date of exercise. – for 50% of options issued in 2008, EPS for Société Générale SA must exceed EUR 15 in 2010. – for 50% of options issued in 2009, EPS for Société Générale SA must exceed EUR 3,5 / EUR 7,5 in average for the financial years 2009-2012. Options 2009

Received in the

Excercised

Balance

760

0

5 148

0

0

0

543

0

2 052

financial year Carsten Thorne, CEO Odd Sørensen, Chief Credit Officer Hans Einar Herzog, CFO Strike price per share option Issue year

2006

2007

2008

2009

Number of options recceived

1 429

847

3 621

1 303

Strike price per share option Exercise date (start)

105,65

130,30

67,08

24,45

31.03.09

31.03.10

31.03.11

31.03.12

Carrsten Thorne, CEO, and Hans Einar Herzog, CFO, have received in the financial year 947 and 677 deferred shares respectively, in total 1.624 deferred shares. The total amount of deferred shares received is 947 for Carsten Thorne, CEO, and 677 for Hans Einar Herzog, CFO, in total 1.624 deferred shares. The performance conditions for deferred shares are the same as for share options, and the vesting period is until 31 March 2013. The fair value of deferred shares is presented with the fair value of share options in the presentation of remuneration to senior management above, with TNOK 72 for Carsten Thorne, CEO, and TNOK 51,5 for Hans Einar Herzog, CFO. Amounts in NOK thousand

Other

Total

Total

Pay / Fees

Bonus

remuneration

2009

2008

Jean-Marc Mignerey, chairman

0

0

0

0

0

Jacques Bensen, board member

0

0

0

0

0

Tommy Pedersen, board member

125

0

0

125

125

Christine B. Meyer, board member

Remuneration to the Board of Directors

110

0

0

110

100

Gérard Pignatel, board member

0

0

0

0

0

Kjell Vegard Opheim, employee

12

0

0

12

0

4

0

0

4

100

251

0

0

251

325

representative Members resigned from the Board of

Amounts in NOK thousand

Total

Totalt

Pay / Fees

Bonus

remuneration

2009

2008

116

0

0

116

98

Karl Anton Nilsen

16

0

0

16

20

Anders Aavatsmark

20

0

0

20

20

152

0

0

152

138

Remuneration to the Control Committee Stephen Knudtzon, chairman

Total remuneration to the Control

Other

Fees of TNOK 52,5 were paid to the Committee of Representatives, with the Chairman receiving TNOK 25 and the other members TNOK 2,5 each. No loans or guarantees have been granted to senior managers in the Company. Nor have any loans or guarantees been granted to related members of the Board of Directors, Committee of Representatives or the Control Committee.

42 43

annual report 2009 annual accounts – notes

27. CAPITAL ADEQUACY The calculation of capital requirement and capital adequacy has been done following the Standard Method for Credit Risk and the Basic Indicator Approach for Operational Risk. The entity does not take Market Risk positions and the capital requirement for Market Risk is nil. Amounts in NOK thousand

Sum of equity

31.12.2009

31.12.2008

2 923 698

2 753 876

-26 880

-36 120

Deductions: Other intangible assets Deferred tax asset Overfinancing of pension liabilities (after tax) Core capital

2 896 818

2 717 756

Total capital base

2 896 818

2 717 756

24 293 548

26 841 418

1 943 484

2 147 313

125 617

107 822

Risk-weighted assets Capital adequacy ratio Capital requirement credit risk Capital requirement operational risk Capital requirement market risk

0

0

Total capital requirement

2 069 101

2 255 135

Capital adequacy ratio

11,20 %

9,64 %

28. GUARANTEE LIABILITIES AND LOAN COMMITMENTS

Amounts in NOK thousand

31.12.09

31.12.08

Endorser's liability

5 963

4 115

Guarantee liability

52 903

53 266

Total pr. 31.12

58 867

57 380

SG Finans AS has at year end 2009 given loan commitments of TNOK 294.317. The commitments are related to agreed financing of equipment where the contracts have not yet been established. By the end of 2008, the corresponding amount was TNOK 250.400.

29. CONTINGENCIES SG Finans AS had no major legal disputes pending or contingencies at the end of 2009.

30. NUMBER OF EMPLOYEES Totalt

Norway

Sweden

Denmark

357

295

34

28

Recruitment

28

22

5

1

Departures

27

22

5

0

358

295

34

29

Number of employees 01.01.09

Number of employees 31.12.09

31. NEW ACCOUNTING STANDARDS ISSUED IFRSs and IFRICs issued but not yet effective Amendments to IFRS 2 Share-based Payments – Group Cash-settled Sharebased payment Transactions The amendment to IFRS 2 provides more guidance on the accounting for group cashsettled share-based payment transactions. In addition, the definition of share based payment is somewhat modified. This amendment supersedes IFRIC 8 and IFRIC 11. This amendment is effective for annual periods beginning on or after 1 January 2010, but the amendment is not yet approved by the EU. The Group expects to apply the amendment as of 1 January 2010. IFRS 9 Financial Instruments IFRS 9 replaces the classification and measurement rules in IAS 39 Financial Instruments- Recognition and measurement for financial instruments. According to IFRS 9 financial assets with basic loan features shall be measured at amortised cost, unless one opts to measure these assets at fair value. All other financial assets shall be measured at fair value. IFRS 9 is effective for annual periods beginning on or after 1 January 2013, but the standard is not yet approved by the EU. The Group expects to apply IFRS 9 as of 1 January 2013. IAS 24 (revised) Related Party Disclosures The revised IAS 24 clarifies and simplifies the definition of a related party, compared to the current IAS 24. The revised standard also provides some relief for governmentrelated entities to disclose details of all transactions with other government-related entities (as well as with the government itself). IAS 24 (R) is effective for annual periods beginning on or after 1 January 2011, but the revised standard is not yet approved by the EU. The Group expects to implement IAS 24 (R) as of 1 January 2011. IAS 27 (revised) Consolidated and Separate Financial Statements The revised IAS 27 provides more guidance on accounting for changes in ownership interest in a subsidiary and the disposal of a subsidiary, compared to the current IAS 27. According to the revised standard the entity measures the interest retained in a former subsidiary at fair value upon loss of control of the subsidiary, and the corresponding gain or loss is recognised through profit and loss. The revised standard also includes a change in the requirements relating to the allocation of losses in a loss-making subsidiary. IAS 27 (R) requires total comprehensive income to be allocated between the controlling and the non-controlling party, even if this results in the non-controlling interest having a deficit balance. IAS 27 (R) is effective for annual periods beginning on or after 1 July 2009. The Group plans to implement IAS 27 (R) as of 1 January 2010. Amendments to IAS 39 Financial instruments – Recognition and measurement - Eligible Hedged Items The amended IAS 39 clarifies the principles for determining whether a hedged risk or portion of cash flows is eligible for designation for certain risks or components of the cash flow. The approved changes gives primarily additional guidance for hedging a one-sided risk (hedging with options) and hedging of inflation risk, but also clarifies that designated risks and cash flows must be identifiable and can be reliable measured. The amendment is effective for annual periods beginning on or after 1 July 2009. The Group plans to implement the amendments as of 1 January 2010. IFRIC 16 Hedges of a net investment in a foreign operation The interpretation addresses issues relating to the accounting of a hedge of the foreign currency exposure arising from a net investment in a foreign entity. The interpretation clarifies what types of hedges that might qualify for hedge accounting and what types of foreign currency risks that might be hedged. The interpretation is effective for annual periods beginning on or after 1 July 2009. The Group plans to implement IFRIC 16 as of 1 January 2010. IFRIC 17 Distributions of Non-cash Assets to Owners The interpretation provides guidance on how to account for distributions of non-cash assets to its owners and distributions that give owners a choice of receiving either non-cash assets or a cash alternative. The interpretation applies prospectively and is applicable for annual periods beginning on or after 1 July 2009. The Group plans to implement IFRIC 17 as of 1 January 2010.

IFRIC 18 Transfers of Assets from Customers The interpretation provides guidance on accounting for transfers of assets which an entity receives from a customer for the acquisition or construction of such items. These items of plant, property and equipment must then be used to connect the customer to a network, or provide the customer ongoing access to a supply of goods and services, or both. The interpretation is effective for annual periods beginning on or after 1 November 2009. The Group plans to implement IFRIC 18 as of 1 January 2010. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The interpretation clarifies the accounting treatment of financial liabilities that, as a result of a renegotiation of the terms of the financial liability, are fully, or partially, extinguished with equity instruments. The interpretation is effective for annual periods beginning on or after 1 July 2010, but the interpretation is not yet approved by the EU. The Group expects to implement IFRIC 18 as of 1 January 2011. Annual improvements project The IASB issued amendments to its standards and the related Basis for Conclusions in its annual “improvements to IFRSs”. The improvement project is an annual project that provides a mechanism for making necessary but non-urgent amendments. These amendments are not yet approved by the EU. • IFRS 2 Share-based Payment: Clarifies that the contribution of a business on formation of a joint venture and combinations under common control are not within the scope of IFRS 2 even though they are outside of scope of IFRS 3 (R). • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies that the disclosures required in respect of non-current assets or disposal groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued operations. • IAS 7 Statement of Cash Flow: Explicitly states that only expenditure that results in a recognised asset can be classified as a cash flow from investing activities. • IAS 18 Revenue: More guidance is added to determine whether an entity is acting as a principal or as an agent. • IAS 36 Impairment of Assets: Clarifies that the largest unit permitted for allocating goodwill acquired in a business combination is the operating segment, as defined in IFRS 8 before aggregation for reporting purposes. • IAS 38 Intangible Assets: Clarifies that if an intangible asset acquired in a business combination is identifiable only with another intangible asset, the acquirer may recognise the group of intangible assets as a single asset provided the individual assets have similar useful lives. • IAS 39 Financial Instruments – Recognition and Measurement: o Clarifies that a prepayment option is considered closely related to the host contract when the exercise price of a prepayment option reimburses the lender up to the approximate present value of lost interest for the remaining term of the host contract. o Clarifies that the scope exemption for contracts between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date, applies only to binding forward contracts, and not derivative contracts where future actions by either party are still to be taken. o Clarifies that gains or losses on cash flow hedges of a forecast transaction that subsequently results in the recognition of a financial instrument or on cash flow hedges of recognised financial instruments should be reclassified in the period that the hedged forecast cash flows affect profit or loss. • IFRIC 9 Reassessment of Embedded Derivatives: The scope paragraph is amended to clarify that the interpretation does not apply to possible reassessment, at the date of acquisition, to embedded derivatives in contracts acquired in a combination between entities or businesses under common control or the formation of a joint venture. • IFRIC 16 Hedges of a Net Investment in a Foreign Operation: The amendment states that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of IAS 39 that relate to a net investment hedge are satisfied. SG Finans does not expect that implementation of the amendments listed above will have a material effect on the financial statements of the company on the date of implementation.

ANNUAL REPORT 2009 Auditor’s report/Control Committee’s statement

44 45

Employee representatives and management in 2009 BOARD OF DIRECTO RS Chairman Jean-Marc Mignerey Jaques Bensen Gérard Pignatel Christine Benedikte Meyer Tommy Pedersen Employee representative Kjell Vegard Opheim Carsten Thorne

Employer Chief Executive Officer, SG Equipment Finance Supervisor DSFS, Paris Chief Country Officer, Société Général, Oslo Health commisssioner, Bergen CEO, Augustinus Fonden Head of Sales/Operations, Region East CEO, SG Finans AS

COMMITTEE OF REPRESENTATIVES Chairman Kjersti Tröbråten, Oslo Tommy Eriksen, Grålum Inge Jan Thorsen, Stavanger Finn Corwin, Oslo Tom Erik Eriksen, Oslo Øyvind Nossum, Bergen Leif Finsveen, Bodø Ivar Vallestrand, Torp Håvard Brynjulvsrud, Skarnes Substitute Gunnar Thorud, Oslo Substitute Dag Swanstrøm, Oslo Substitute Erik Hansen, Oslo Employee representative Grethe Hoel, Drammen Finn Arne Graabak, Trondheim Line Karlgren, Fredrikstad

CONTROL COMMITTEE Chairman Stephen Knudtzon, Oslo Deputy Chairman Karl Anton Nilsen, Brumunddal Anders Aavatsmark, Oslo Substitute Gérard Pignatel, Bærum MANAGEMENT TEAM SG FINANS AS Employment Carsten Thorne CEO Odd Sørensen Credit Adviser Sverre Edin IT Hans Einar Herzog Finance Armand Taillandier Credit Finn Mathisen Sales and Business Development Equipment Finance Jan Juliussen Sales and Business Development Factoring Stig-Are Eriksen Region North Espen Brochmann Region West Arne Hodnefjell Region Oslo/Akershus and South Finn Kristiansen Region East Anders Holmgren Sweden Lars Rasmussen Denmark Auditor Ernst & Young AS, represented by Eirik Larsson, state authorised public acccountant

Addresses Scandinavia Norway

TEL. +47 21 63 20 00

Oslo (head office)

Fredrikstad

Kristiansand

Tromsø

Strandveien 18

Stortorvet 1

Kjøita 40

Grønnegata 27-29

1366 Lysaker

1607 Fredrikstad

4630 Kristiansand

9251 Tromsø

Bergen

Hamar

Porsgrunn

Trondheim

Sandviksbodene 66

Fredvang Allé 10, Briskeby stadion

Dokkvegen 10

Klæbuveien 194

5035 Bergen

2307 Hamar

3920 Porsgrunn

7037 Trondheim

Bodø

Harstad

Sandefjord

Ålesund

Storgaten 8

Rikard Kaarbøesplass 3B

Framnesveien 7

Kipervikgaten 13

8006 Bodø

9405 Harstad

3222 Sandefjord

6003 Ålesund

Drammen

Haugesund

Stavanger

Tårnkvartalet, Hauges gate 2

Haraldsgate 115

Kongsgårdbakken 3

3019 Drammen

5527 Haugesund

4005 Stavanger

Sweden

TEL. + 46 8 470 9530

Stockholm (head office)

Malmø

Skellefteå

Sundsvall

Solna Torg 3, 4 trappa 171 29

Kungsgatan 6

Kanalgatan 43

Östra Långgatan 14 Nb

Solna

221 49 Malmø

031 32 Skellefteå

852 36 Sundsvall

Göteborg Drakegatan 6 412 59 Göteborg

Denmark

TEL. + 45 70 22 90 33

Copenhagen (head office)

Vejle

Roskildevej 342 B

Havneparken 14 B 1 sal

2630 Taastrup

7100 Vejle

SG Equipment Finance Head office International Visit adress

Postal adress

SG Equipment Finance

SG Equipment Finance - DSFS/SGE

Chassagne Tower, 17 cours Valmy

Tour Société Générale

Paris - La Défense 7

75886 PARIS Cedex 18

France

France



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