Kapittel 2011

1 Kapittel

Norway’s leading housebuilder

Selvaag Bolig builds homes which most

Bergen Norwegians can afford to buy, and has Oslo several thousand units under development at any given time in and around Oslo, Stockholm Stavanger Stavanger and Bergen, Norway. The company also has projects in Stockholm, Sweden.

The company experienced strong growth in 2011, with a sharp increase in turnover as well as in homes sold and under construction.

Selvaag Bolig sold a total of 648 homes in 2011, and had more than 1 000 under construction at 31 December.

Given the large number of housing starts in 2011, the company can expect a sharp increase in turnover for 2012.

2 annual report selvaag bolig 2011

Contents

Background 4 Good year, green outlook 10 Continuing a proud tradition

Organisation 6 Managers with solid experience 8 Organisation chart 9 Housebuilder from A to Z

Housing market 12 Cathrine won housing competition 14 Not over-inflated 16 Enough space

Market position 18 Rigging for growth 20 Putting together profitably 22 Here comes your home 24 Land bank for 8 800 homes 26 Profitable to let others build 28 Green commitment

Housing concepts 32 Start: Dream became reality 34 Hjem: A home for the whole family 36 Pluss: Simple and comfortable

Financial 38 Directors’ report 44 Consolidated financial statements

Front cover illustration: Lund+Slaatto Arkitekter 3 Background

Good year, green outlook

We have a good year behind us at Selvaag Bolig, and a very exciting time ahead. We experienced strong growth in 2011, with a sharp increase in turnover, results and homes sold. Our ambitions for 2012 are continued growth, a commitment to climate-friendly buildings and a stock market listing.

Populations are growing strongly and housing homes is that they are energy-efficient. We are demand is good in our priority areas in and around now making minor adjustments to enhance Oslo, Stavanger and Bergen, and we strengthened this aspect even more. During 2012, we will considerably in all these regions. Through organic be positioning ourselves as Norway’s leading growth, mergers and acquisitions in 2011, we environment-friendly housebuilder. Our ambition have become one of the country’s leading house- is that all the modularised homes we deliver builders, with about 9 000 homes under devel- in the future will meet the “passive building” opment. The goal over the next four-five years is standard, while a large proportion of our other to continue developing the land portfolio in order homes qualify as “low energy”. Climate-friendly to be able to deliver 1 500 homes per year. We homes are the future. To a greater extent than have a good operational platform, a solid brand before, housebuyers expect their new purchase and a financial position which puts us in a good to be green and energy efficient, and the gov- position to reach this goal. ernment believes that an environment-friendly Our good results partly reflect the ability to building industry is essential for overcoming deliver homes people want at a sensible price. A environmental and climate challenges. We are large proportion of our homes are built with the working to meet these requirements as early as aid of modules we buy from external suppliers. the present year. That gives us several competitive advantages. Modularised buildings have fewer construction We are looking forward to continuing our journey. defects because they are built under cover in a factory. In addition, a large volume means that building costs are substantially reduced. We can accordingly offer our customers cheaper homes of high quality while simultaneously increasing our margins. Baard Schumann Another direct advantage of modularised CEO

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5 Bakgrunn

Selvaag Bolig’s executive management: Sverre Molvik, Halvard Kverne, Anne Grethe Storaker, Baard Schumann, Haavard Rønning and Petter Cedell.

6 Organisation

Managers with solid experience Selvaag Bolig’s management team has broad and varied knowledge of housebuilding and business development. This ensures competent decisions which lay the basis for the group’s continued growth.

Baard Schumann has been the president and Anne Grethe Storaker is vice president sales CEO of Selvaag Bolig since 2008. He was previ- and marketing at Selvaag Bolig. She has the ously chief executive of NCC Bolig, marketing principal responsibility for sales and mar- vice president of Peab Bolig and regional keting of all Selvaag Bolig’s housing projects. manager of DnB Eiendom. Mr Schumann is also Ms Storaker has long and varied experience of chair or director of a number of housing devel- housing development, project management, sales opment companies. and marketing. She joined Selvaag in 2006.

Haavard Rønning is the chief financial officer Halvard Kverne is responsible for following of Selvaag Bolig and has worked for Selvaag up many of Selvaag Bolig’s projects. He has since 2004. His previous posts there include long and broad experience of developing and finance manager and analyst. Before then, he executing housing projects, both as a contractor worked on auditing and corporate finance at and as the construction client. PwC. Petter Cedell is responsible for identifying Sverre Molvik is responsible for following up new project opportunities for Selvaag Bolig. He many of Selvaag Bolig’s projects. He has more assesses development openings and enters into than 10 years of experience in the development land purchase contracts. Mr Cedell has gained and execution of housing projects on behalf of long and varied experience of acquisition, project the construction client. Mr Molvik worked previ- development and project execution during many ously as business controller, project manager years with Selvaag. and chief executive of Skanska Bolig AS, and as regional vice president of Peab Bolig AS. He has an MSc in civil engineering and an MBA from Webster University in Geneva.

7 ORGANISATION CHART

Board

Baard Schumann President and CEO*

Haavard Rønning CFO*

Trond Stensrud Anne G Storaker Halvard Kverne Sverre Molvik General manager Vice president sales Vice president port- Vice president port- Selvaag Bolig and marketing* folio management* folio management* Modulbygg**

Jørgen Blix Petter Cedell General manager Vice president Meglerhuset property investment* Selvaag**

* Member of the executive management ** Reports directly to the president and CEO Anders Haavik General manager Pluss Service**

8 Organisation

Housebuilder from A to Z

Selvaag Bolig buys and sells new housing land, and is one of the few Norwegian developers to take responsibility for the whole value chain from acquiring sites to completing and selling homes.

The company is one of Norway’s largest and also handles occupied homes, with the focus on most experienced housing developers, with some clients buying a new residence from Selvaag 9 000 homes in the pipeline and unique first- Bolig. It has dedicated and experienced estate hand knowledge of the housing market as well agents with various specialisations. The company as the development and construction process. builds on the Selvaag group’s experience from The various links in the value chain are managed developing and selling more than 50 000 homes in part through the Selvaag Bolig Modulbygg, since the 1940s. Based at Løren in Oslo, it Selvaag Pluss Service and Meglerhuset Selvaag has its own estate agency offices at Løren and subsidiaries. Tjuvholmen.

Selvaag Bolig Modulbygg Selvaag Pluss Service The company develops flats and terrace houses The company is responsible for operating with the aid of modules. These are built in the Selvaag Bolig’s Pluss homes. These are lifestyle Baltic states and Poland, and shipped to Nor- residences for people of all ages and conditions. wegian building sites for assembly. Modular Their unique feature is that residents receive construction represents a modern and industrial something extra in the form of security and approach to housebuilding, and helps to secure service. All the homes have a large common area low building costs. The modules meet very high staffed by service-minded hosts. Residents have standards, and the risk of construction faults is access to a number of services, ranging from reduced because they are built indoors. cleaning to changing tyres and booking tickets. Selvaag Pluss Service develops new and existing Meglerhuset Selvaag services in close consultation with residents. This is an estate agency business which sells new homes for Selvaag Bolig. The company

9 background

Continuing a proud tradition

The revolutionary housebuilding ideas developed by engineer Olav Selvaag are just as relevant today, after 60 years and more than 50 000 homes sold. Selvaag Bolig meets the future with backing from Selvaag’s knowledge of and visions for building homes.

Nobody has been a greater innovator in Nor- one which prevailed immediately after 1945. way’s housebuilding sector than Olav Selvaag. Homes are in short supply and the pace of con- He was a pioneer of terrace houses, industrial struction is too slow.” building and a number of other cheap and inno- vative technical solutions. His creative ideas and Afford ability to put them into effect made an important The founder’s goal was to build cheap homes to contribution to overcoming the housing shortage a high standard, which most Norwegians could after the Second World War, and helped to set afford. He was active in the housing debate and many of the standards which apply today. not afraid to criticise government policy in the area. This is the heritage Selvaag Bolig can now Relevant continue to build on. The company is an inno- Selvaag’s history is more relevant than ever, vative housebuilder, offers reasonably-priced maintains Olav H Selvaag, Olav’s grandson and homes to ordinary people, and is a prime mover chair of Selvaag Bolig. for a new, more active and solution-oriented “It’s one of the reasons why we’re one of housing policy. Norway’s biggest housing developers today,” he “We work in accordance with Selvaag’s says. “We’ve constantly managed to develop in values of concern for others and creativity, step with new technology and market needs. At and do what we can to build a lot of homes at 31 December, we had more than 1 000 homes a sensible price,” says chief executive Baard under construction. That’s a very important Schumann. “Our ambition is to reduce building contribution to overcoming today’s housing costs while delivering better homes in terms of shortage. The present position is very like the construction technology.”

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REVOLUTIONARY: Baard Schumann (left) and Olav H Selvaag in front of the Ekeberg House, which set a new standard for Norwegian housebuilding in 1948. The house was Olav Selvaag’s proof that it was possible to build three times as fast and at a third of the price. 11 Kapittel

12 housing market

Cathrine won housing competition

More than 70 000 young Norwegians competed to secure Selvaag’s 50 000th home. Nineteen-year-old Cathrine Fattnes from Stavanger drew the longest straw and a new flat worth NOK 1.7 million.

Selvaag Bolig announced in September that “This was first and foremost a memorable way the 50 000th home built by Selvaag since 1948 to highlight the fact that Selvaag has completed would be given away to a person aged between 50 000 homes, but all the attention also had a 18 and 34. More than 70 000 people signed up direct impact on our housing sales at Løren.” for the draw, and the company secured more When the rest of the flats in the project which than 43 000 new Facebook friends. After 250 includes the prize home were put on sale, 90 finalists had been drawn, the final was celebrated offers were quickly received for a total of 88 at Løren in Oslo and Cathrine ended up as the homes. All were Start homes – small units aimed winner. at young people and first-time buyers.

Change Difficult The new flat owner explains that she had already Cathrine feels that the housing market for young decided to move to Oslo, and says the prize will people is difficult, and says that her win will give change her life. her financial freedom and new opportunities. “It’s quite amazing that I won – an indescribable “Selvaag has always worked to ensure that feeling,” she says. “This is my first flat, and I can everyone can afford to own their own home, leave home at last. I’ve already started thinking and we’ll be maintaining that tradition,” says about interior decoration.” Ms Storaker. “The flat we’ve given away is a Selvaag Start home, a housing product for Success young people where we try to keep costs as low The anniversary celebration has been a success, as possible.” observes Anne Grethe Storaker, vice president for sales and marketing.

13 housing market

Not over-inflated

Bjørn Erik Øye at construction analyst Prognosesenteret says it is inaccurate to describe Norwegian house price developments as a bubble.

“Less than 30 000 homes were built in Norway low interest rates and unemployment and sharp during 2011,” he notes. “That’s half the number pay rises. we need to meet long-term population growth. “That’s been the picture for 20 years. In We actually face a growing housing shortage.” addition come population growth and urba­ nisation. This means that housebuilding must Different expand sharply if the pressure on prices is to be He explains that the Norwegian housing market reduced over time.” is fundamentally different from those in the USA, Denmark, Spain or Ireland, which were Demand affected by excess construction and speculation “The outlook is bright for Norwegian house- before the bubble burst in 2008. builders because of steadily growing demand “If we’d had the pace of housebuilding seen for homes,” Mr Øye says. “Unfortunately, the in Spain during 2007, another 120 000 homes picture is less positive for first-time buyers. The would have been constructed here. The same failure to build enough naturally puts pressure picture applies in the other countries, where the on prices, particularly in the urban areas where common denominator was speculation-driven demand is highest.” construction based on expectations of perpetual He expects price growth in 2012 to be more price growth. We have the opposite problem, moderate than in 2010-11. with a growing gap between population change “We’ll see an increase of five-seven per cent and housebuilding.” this year, but prices are now meeting resistance According to Mr Øye, the high temperature because they’ve grown so much more than pay of the Norwegian housing market reflects rates over time. The pace of housebuilding is ulti- favourable trends in the national economy, with mately governed by the ability of buyers to pay.”

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15 housing market Enough space

Housing developers in the Oslo area face a bright future, believes Bård Folke Fredriksen, the city’s Conservative vice mayor for urban development. He promises to make enough land available to ensure an adequate supply of homes.

Oslo is the fastest-growing national capital Demand in Europe. According to Statistics Norway, “We’ve got to stay ahead of the curve,” he empha- its population is set to grow by about 10 000 sises. “Housing developers must be able to build people per year from 2011-30. This means an when the demand and need are there. Assuming a average of 5 000 homes must be built annually. stable Norwegian economy and high employment, Mr Fredriksen says that the city council’s and that forecasts of strong population growth most important job will be to provide planning prove correct, the outlook for developers is very permission for enough attractive sites. bright.”

16 housing market

Oslo has enough space, Mr Fredriksen main- ensure that development proceeds in a restrained tains. But this depends on the construction of the manner. Fjord City project, re-zoning of commercial and “Quantity isn’t the only criterion of success,” industrial areas, and more infill for the inner city he says. “It’s also a question of building quality and public transport hubs. He emphasises the and residential environments where people thrive. need to invest in better public transport and for We’re not going to wake up and find that we don’t better collaboration with other local authorities recognise the city we love so much.” in the region. “Work on the 2013 municipal master plan has begun,” he reports. “We’re planning for 100 000 new homes and 100 000 additional jobs. The plan has a section on land use which identifies where the homes are to be built. We have unimaginable amounts of space if it’s used properly. Økern and Groruddalen will be the next major development areas after Fjord City. They have the capacity for tens of thousands of new homes. The inner city will expand up the Groruddalen valley.”

Restrained Although Oslo needs many new homes in coming years, Mr Fredriksen is concerned to

17 BIG-CITY COMMITMENT: Selvaag Bolig is focusing on Oslo (pictured), Bergen and Stavanger and their environs. (Photo: Nyebilder.no) housing market

Bergen Stavanger Rigging Oslo for growth

Both short- and long-term housing demand in Norway will be highest in the urban growth areas. Selvaag Bolig accordingly increased its concentration on Stavanger, Bergen, Oslo and the areas around these cities during 2011.

The population of Oslo and the surrounding 2011, it also expanded its workforce in such Akershus county will increase by 350 000 people areas as project development, project man- up to 2030, according to Statistics Norway. For agement and sales. Rogaland and Hordaland, the counties containing Stavanger and Bergen respectively, the rise is put Stronger at 125 000 and 100 000. The city of Bergen alone Bergen and Stavanger were precisely where will see its population grow by 60 000 people. Selvaag Bolig became considerably stronger So demand for new homes will be high in the during 2011. Hansa Property Group was merged time to come. with the company in August, giving it control over a unique bank of housing sites in both west Biggest coast cities. In connection with the merger and Selvaag has been one of the biggest housing subsequent share purchases, Selvaag Bolig also players in the Oslo region for many years, became the owner of Stavanger-based housing and has a number of large projects under developer Bo En – renamed Selvaag Bolig development in such areas as Greater Oslo, Rogaland. Lørenskog, Moss, Drammen and Tønsberg. The Access to good development sites is crucial for company is also working strategically to grow the ability to build attractive homes. Favourable in Bergen and Stavanger, where demand for new land in areas subject to growth pressures does homes is high. It is concentrating solely on areas not grow on trees, because the choicest acreage where the market is favourable, has good depth has already been developed. Exceptions nev- and will remain buoyant for a long time to come. ertheless exist, and Selvaag Bolig owns a solid Selvaag Bolig has a good operational platform and attractive land bank in all its priority areas. and a financial position which makes it well Existing sites will yield about 9 000 homes. equipped for growth in all these regions. During

19 market position Putting together profitably

Modular construction yields homes with both high quality and a sensible price. Selvaag Bolig also achieves better margins.

The company is the first Norwegian housebuilder Bolig Modulbygg subsidiary, which serves as a to adopt modular construction on a large scale. centre of expertise. The modules are built to Nor- All its timber-frame terrace houses and flats are wegian standards by sub-contractors in the Baltic built with the aid of modules. states and Poland. This represents an industrial approach to housebuilding which yields both Industrial approach cheaper and technically better homes, explains Modular homes are developed by the Selvaag general manager Trond Stensrud.

20 market position

“It’s easy to deliver quality homes at a high Appetite price, but far harder to do so at a sensible cost,” The success of this approach so far has whetted he points out. “Our modules meet very high the company’s appetite. Mr Stensrud says standards, and building under cover reduces the that the modules provide a solid competitive risk of faults. Prices are kept down by building edge, and that the commitment to them will be the modules abroad and in long series.” intensified. “We’re way ahead of the competition in this Modern area, but will nevertheless be giving it an even The modules are produced by manufacturers higher priority in the future,” he notes. “The with a number of Europe’s most modern fac- high volume ensures profitability. A third of our tories for such units, shipped to Norway by sea homes in 2011 were modularised. That reduced and lifted into place on pre-installed foundations. construction costs in this part of the portfolio Skilled tradesmen from the factories assemble by 10-20 per cent. We expect to increase the the modules into complete homes, such as a volume of modular construction in 2012, which three-story terrace house with roof veranda, or will cut costs and boost quality even further.” a flat in a galleried block. These construction teams can assembly a terrace house comprising three modules in 1.5 hours, after which the building is completed internally and connected to power and piping.

21 market position Here comes your home

About a third of Selvaag Bolig’s homes are fabricated in the Baltic states and Poland, shipped by sea to Norway and installed in less than two hours apiece.

22 market position

These modules are made to Norwegian standards at the After being freighted to Norway, the completed struc- company’s sub-contractors in the east European coun- tures are loaded onto semi-trailers for transport by road tries. Factory production ensure high quality and reduces to the construction site. the risk of construction errors and damp problems.

The work is carefully coordinated. The foundations on It then takes little time to complete the work. Only site are prepared in advance, and the modules lifted into details have to be finished indoors, such as connecting place by crane. A terrace house comprising three mod- electricity and piping. These homes in Moss were ules is positioned and assembled in 1.5 hours. assembled in mid-October and ready for occupation in good time before Christmas.

23 Kapittel VALUABLE SITES: Selvaag Bolig owns a number of good devel- opment properies in Bergen. (Photo: Maestro Media)

24 market position

Land bank for 8 800 homes

Selvaag Bolig is among the Norwegian housebuilders with the largest number of sites available. That ensures more predictable projects and a higher volume.

The company has a total of 8 800 homes under itself rather than buying sites with planning development on attractive sites in and around permission. Stavanger, Oslo and Bergen. Unlike many other “Much of the land was acquired a number of housebuilders in Norway, it owns the properties years ago, and its price has risen substantially. itself. Using our own expertise in the development process also adds value. We secure gains from Advantages both development and execution phases.” Good sites are in short supply, notes Petter Cedell, vice president for property investment. Prime sites Selvaag Bolig’s solid land bank gives it Selvaag Bolig is developing a number of the important advantages both immediately and in prime sites in its land portfolio. Selvaag acquired the long term. a former military barracks at Løren in Oslo “We’ve built up this holding over a long time in 1999, and construction of more than 1 800 and through acquisitions, and the properties have homes there will continue until 2016. The a good geographical spread in our focus areas,” company is also pursuing a major development says Mr Cedell. “That gives us greater predict- at Lørenskog, where it acquired large properties ability in our projects, and ensures that we have in 2000. The projects embrace more than 2 500 enough land for the high volume we’re going to homes, with building due to continue until 2024. deliver in the years to come. Our strategy is to Through mergers and acquisitions in 2011, deliver 1 500 homes a year. That’s a lot, so we’re Selvaag Bolig also secured a number of good wholly dependent on owning good sites.” sites in Stavanger and Bergen. One of the biggest Securing planning permission for housing sites of its projects in western Norway is Lervig in Norway can be a long and demanding bureau- Brygge in Stavanger, where construction of the cratic process. Mr Cedell explains that Selvaag first of 850 homes began in 2011. Bolig benefits greatly from developing the land

25 market position

Profitable to let others build

Selvaag Bolig is one of the few Norwegian housebuilders which can pick and choose between offers from different construction con- tractors. That confers benefits.

Contractors who build The company does not have its own building “We fetch in the expertise we need,” says for Selvaag Bolig include: personnel in-house, but purchases such services Mr Molvik. “That means we don’t have 400 freely in the market. According to portfolio vice hungry builders to feed in quiet times, and avoid AF Gruppen presidents Halvard Kverne and Sverre Molvik, capacity problems when building several projects Betonmast Bygg who are responsible for supervising Selvaag simultaneously.” Kruse Smith OKK Entreprenør Bolig’s projects, benefits of this approach include No building companies are the same, and often Peab more favourable prices and a better bottom line. have leading-edge expertise in different areas. Realbygg “Many housing developers have their own Mr Molvik explains that Selvaag Bolig benefits Selvaagbygg construction arm, which they’re forced to use,” from the best in many companies. Skanska Veidekke observes Mr Kverne. “When we’re going to “We largely use builders who know us well, Wegger & Kvalsvik build, we obtain a number of bids. The biggest but we’re always concerned to collaborate with advantages are that we always get the right those who’re able to overcome our challenges in market price, and that we achieve profitability the best possible way. AF Gruppen, for instance, at every stage. More favourable prices from has much greater environmental expertise than contractors mean cheaper homes and better its competitors. Other contractors are experts margins.” at tall buildings. No two housing projects are exactly the same, so it’s valuable for us to be Less exposed able to secure precisely the expertise we need for Another advantage is that the company becomes each one.” less exposed to market fluctuations.

26 FREE CHOICE: Selvaag Bolig is to construct 119 Pluss flats at Nyhavn in Bergen. The company obtains bids from various contractors. (Illustration: Dyrvik Arkitekter)

27 Markedsposisjon

28 market position

Green commitment

The position as the Norwegian housing developer who builds the most environment-friendly homes will be taken by Selvaag Bolig during 2012.

Building use accounts for about 40 per cent of Values Norway’s overall energy consumption. Selvaag Ms Storaker believes that the company’s position Bolig is now committed to achieving the on the environment accords well with Selvaag’s “passive building” standard for all its modular history and values base, where concern for others housing, and “low energy” status for a large and creativity are the cornerstones. proportion of its other homes. “Most housebuilders have some form of green commitment, but none have taken a clear Simple leading position,” she observes. “Instead of The time is favourable for mounting an environ- communicating plans and intentions, we’ll be mental drive, says Anne Grethe Storaker, vice launching specific measures in good Selvaag president for sales and marketing, and explains style for almost all our new buildings during that the company’s modular buildings can be 2012.” made even greener through relatively simple The environment-friendly buildings will not measures. be a special housing type, but an improvement “Standards for lower energy consumption of the company’s existing Start, Hjem and Pluss in Norwegian homes are set to tighten even concepts. Designated Selvaag Bolig Green, further,” she notes. “Many of the qualities homes meeting the new standard will have which environment-friendly housing must have “Green” attached to their existing label – such are already incorporated in our buildings or as Hjem Green. must be built in regardless. We believe it’s wise to do this now in order to achieve the greatest possible impact in the market. People are con- cerned about this today.”

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31 housing concepts

Dream became reality

After five years, 29-year-old Yvonne Aune Bjerke is still really satisfied with her flat at Mortensrud. She lived in many different places before the dream of her own home was finally fulfilled.

“I was incredibly lucky. I won the lottery,” she afternoon. During the summer months, I sit explains. She was one of 450 hopeful first-time outside almost all the time.” buyers who queued up when Selvaag put 52 She has seen quite a few sunsets over Oslo flats on sale. The young nurse thought she had from her favourite chair on the veranda – which no chance when she saw how many others were has become even finer after kindly neighbours interested. helped to extend it. “I was overjoyed when my number was drawn. I was able to buy the flat I liked best at a Friends price I could afford. The way prices are today, I “I’ve made many new friends since moving wouldn’t have a chance to get onto the housing here,” Yvonne relates. “The doors are open ladder in the normal way.” throughout the building.” Her neighbours socialise a lot, eating dinner together, organ- Modern ising TV evenings or going for country walks. Yvonne’s flat is 29 square metres with its own She also values the proximity to the woods and bathroom and bedroom, and has a light and beach. modern style. Despite being happy with the lay- “There aren’t many single nurses under the out, however, the outdoor space is the feature she age of 30 who can afford to buy their own flat,” likes best. she observes. “I feel quite simply privileged.” “The veranda is large and gets the sun all

Start • For first-time buyers • 30-65 square metres • Two- and three-room flats • Good layout • Light and modern homes • Reasonably priced

32 Kapittel

As its name suggests, a Start home gives you a good jumping- off point in the housing market.

A Start home is a two- or three-room flat, ranging in size from 30-65 square metres. An efficient layout ensure that each square metre is used in the optimum way. The flats are constructed to the latest building and envi- ronmental standards. They are often found on the edge of cities, but close to public transport and shops. A col- laboration with DnB offers financing for buyers between 18-34 years of age.

FORTUNATE: A Start home at Mortensrud allowed Yvonne Aune Bjerke to get on the housing ladder. (Photo: Katrine Lunke)

33 housing concepts

A home for the whole family

When André and Aina Kristianslund decided to start a family, they fell at once for the home in Løren. Their son Marcus can enjoy great playgrounds just outside, and they are in walking distance of all the shops they need.

“We fell in love with the area at first sight,” says particularly full of people in the summer,” Aina Aina. She had never been to Løren before, but reports. Both she and André think having their had only heard about it from André on the basis own sculpture park in the midst of a residential of a visit he had paid to a friend. Both husband district is great fun. “We were visited by some and wife liked an area which is calm and German friends who’re very familiar with Nor- peaceful despite being very central in Oslo. wegian culture, and they were most impressed,” “It was also great to avoid having to redec- says André. orate, and just to be able to move straight into a fine and brand-new flat,” adds André. Events A big building known as Kanonhallen (Canon Playgrounds Hall) stands in the heart of the area, and is used Many of the couple’s neighbours also have for a variety of events such as a Christmas children, and Marcus often meets other young- market, concerts and children’s theatre. sters in one of the many playgrounds located “We really like it here,” says André. He was between the buildings. The most popular meeting not familiar with Selvaag before buying, but place for both adults and children is the sculpture understood he had shot the goose with the golden park, a collection of artworks which follows egg when he told his grandparents in their 80s Ibsen’s Peer Gynt play act by act. about the purchase. “They cried out at once: ‘Oh “The park’s in use all year round, but it’s yes, then you’ve made a good buy there’.”

Hjem • For people who want a home for life • Good living environments and pleasant • Terrace houses and flats in peaceful and outdoor areas child-friendly areas • Close to nurseries and schools, sports facilities, shops and public transport

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Selvaag Hjem is the secure choice if you want a home for life. This category includes both flats and terrace houses.

Both you and your family will find that Selvaag Hjem provides a good framework for a comfortable lifestyle. Con- structed to well-proven and sound designs, these buildings offer solid quality. A Hjem home characteristically stands in a peaceful and child-friendly neighbourhoods, often close to open country or parks and to schools, sports facilities, shops and public transport. You can find Selvaag Hjem homes in and around Oslo, Bergen and Stavanger.

FLOURISHING: André, Aina and Marcus Kristianslund enjoy themselves in the sculpture park. (Photo: Katrine Lunke)

35 housing concepts

Simple and comfortable

Finn and Marit Andersen moved from a detached house to a Pluss flat at Union Brygge in Drammen. The married couple are now enjoying life, and could never contemplate leaving.

The Andersens were among the first to move into home is close at hand.” this development. After many years of tending Everybody is keen on the waffles served every a garden and shovelling snow, they wanted a Friday. In addition to such fixed events, themed simpler life. evenings are staged – everything from wine- “I’m really comfortable here,” says Finn tasting courses to bridge. enthusiastically. He is happy to have only one place to look after – the holiday cabin. In their Secure Pluss flat, he and Marit can just take it easy in a “I’ve slept so well at night since moving here,” completely different way. says Finn. “We feel secure, and no longer get up to check out night-time noise.” A security Frequent patrol passes twice a night, and the couple have a Neither of them were familiar with the Pluss number they can call if anything happens. concept before buying the flat, but they have Both also find having a hostess they know to become frequent users of the many services be reassuring. Wenche helps with everything available. The hostess, Wenche, has brought they might need. Even their 20-year-old grand- them their post and taken laundry to the cleaners. daughter envies the good life they lead. Every Tuesday, they attend the soup dinner. “She loves to visit,” says Marit with a laugh. “It’s a great way to get to know people and it’s “She says it’s so luxurious to be here.” informal,” says Marit. “You can pop in, and then

Pluss • High standard for a simple life • Host/hostess service • Common area with staffed reception • Social activities • Shared lobby, gym, function room, • Alarm system and security patrols meeting room and catering facilities

36 Kapittel

Selvaag Pluss is the option if you want a high standard and an easier daily life. These are lifestyle residences for people in all age groups and stages of life.

This category brings some- thing of the experience you get in hotels into your home through extra service, experi- ences and security. A Pluss dwelling normally provides access to a service area with a staffed reception, lobby, guest room, gym, meeting room, hospitality suite and catering facilities – all styl- ishly decorated and fully equipped. Residents have access to a private garden, and most have a furnished roof terrace for common use. A host or hostess is present in reception every day to maintain order in the service area, organises all the services offered and provide practical assistance. Selvaag Bolig’s ambition is to establish Selvaag Pluss in Oslo, Bergen, Stavanger and Stockholm.

HOME WITH A HOST: Finn and Marit have formed a close relationship with hostess Wenche (centre), and praise her to the skies. (Photo: Katrine Lunke)

37 Directors’ report Directors’ report

the board of directors of Selvaag Bolig: Wenche Kjølås, Anne-Kari Drønen Mathiesen, Ole Jarl Rettedal, Karsten Bomann Jonsen, Maria Terese Hosen, Olav Hindahl Selvaag, Baard Schumann og Anne Breive.

The group’s business AS, which produces modular buildings, present portfolio embraces a total area and location and Selvaag Pluss Service AS, which of 109 000 square metres for devel- offers services related to Selvaag Bolig’s opment as commercial premises. Selvaag Bolig is one of Norway’s Pluss concept. The group’s housing Selvaag Bolig has no in-house con- leading housing developers. It buys development business embraces both struction operations, but leases such and develops new housing land, and is wholly and partly owned projects, some capacity on a project-by-project basis. responsible via support functions and of which take the form of joint ventures That gives Selvaag Bolig great flex- construction contracts for the whole with external investors. ibility in selecting the best option for value chain from the acquisition of land The group’s main focus and primary each project. It requires less organi- to completion and sale of the homes. source of revenue in the future will sation, which improves cost-efficiency, The group operates nationwide, but con- relate to the housing development while increasing flexibility in relation centrates particularly on Greater Oslo, business. Its portfolio of land zoned for to market fluctuations. Using external Bergen and Stavanger. It also has pro- development at 31 December totalled contractors rather than building for the jects under development in Stockholm more than 8 800 housing units, with group’s own account also ties up less in collaboration with Veidekke Bostad roughly 6 100 in the Greater Oslo area capital during the construction phase. AB. Support functions include Megler- and the remaining 2 700 spread around Furthermore, Selvaag Bolig pos- huset Selvaag, which pursues regular other regions of Norway. Selvaag Bolig sesses solid expertise through its estate agency and letting activities in also has land zoned for development Selvaag Bolig Modulbygg subsidiary in addition to selling homes developed by as commercial premises, primarily in the development of blocks of flats and the group, Selvaag Bolig Modulbygg relation to major housing projects. The terrace houses with the aid of modules.

38 Directors’ report

A modern and industrial approach to Sole owner of Selvaag Pluss Eiendom Selvaag Hjem (Home) and Selvaag Pluss housebuilding allows Selvaag Bolig As a condition of the merger between concepts. All three concepts are usually Modulbygg to help keep construction Selvaag Bolig and Hansa Property included in large development projects, costs low. The actual modules are Group, a private placement was made which provides greater market breadth manufactured by sub-contractors with the owners of Selvaag Pluss and helps to expand the housebuyer base using good, traditional craftsmanship. Eiendom KS. This resulted in Selvaag for each project. Quality is high, and indoor production Bolig ASA becoming the sole owner of Start homes are typically two- and helps to reduce the risk of fabrication Selvaag Pluss Eiendom. three-room flats, and are often located errors. on the outskirts of the cities close to Selvaag Bolig’s head office is in Oslo, Sole owner of Bo En public transport and retail outlets. and the business address of the group Through the merger with Hansa Financing is offered to buyers aged is Lørenvangen 22, NO-0512 Oslo, Property Group, the company acquired between 18 and 34 years, and the homes Norway. 62.5 per cent of the shares in Bo En AS are particularly suitable for first-time (which changed its name to Selvaag buyers. Overview of 2011 Bolig Rogaland AS). Selvaag Bolig Selvaag Hjem is the option for ASA thereafter reached agreement with someone seeking a lifetime home. Highlights the other shareholders in Bo En on the Buildings in this range include both flats The level of activity in the group is acquisition of the remaining 37.5 per and terrace houses. They are charac- high, a number of construction projects cent of the shares in the latter company. terised by locations in peaceful and have been launched and sales of homes Bo En became a wholly owned sub- child-friendly neighbourhoods, often have increased. More than 1 000 homes sidiary after the approval of the extraor- close to open country or parks and near were under construction by the group dinary general meeting of 21 November services relevant for this category of at 31 December. Demand for housing is 2011. This acquisition will first affect prospective buyer. Selvaag Hjem homes high in the group’s priority areas in and operating revenue in 2012. are offered in and around Oslo and other around Oslo, Stavanger and Bergen, and large Norwegian cities. Selvaag Bolig greatly strengthened its Selvaag Pluss is the high-standard position in all these areas during 2011. Strategic review option. These are lifestyle residences Selvaag Bolig carried out a number of for people in all age groups and stages Strategy major transactions and reorganised its of life. This concept offers extra company structure during 2011, so that Selvaag Bolig’s strategy is to develop services more usually associated with the group now ranks as one of the coun- and offer various housing concepts hotels. It normally provides access to try’s largest housebuilders, with some tailored to housebuyer requirements a service area with a staffed reception, 9 000 homes under construction. in and around large Norwegian cities lobby, guest room, gym, meeting room, and selected regions in other parts of hospitality suite and catering facilities. Important transactions in 2011 Scandinavia. The group’s attention is Selvaag Pluss is offered in central concentrated primarily on areas in and areas of large Norwegian cities and Merger with Hansa Property Group around cities with a large and growing Stockholm in Sweden. The general meetings of Selvaag Bolig population. Projects in other selected ASA and Hansa Property Group AS Scandinavian cities are evaluated con- 1 resolved on 10 June to merge the two tinuously on the basis of their attrac- Financial review companies. tiveness in terms of risk and return. Hansa Property had been run by Income statement Market strategy Selvaag Bolig since January 2010 under Operating revenue a contract which made Selvaag Bolig Geographically, Selvaag Bolig con- responsible for managing the company centrates its attention particularly on Consolidated operating revenue for and its day-to-day activities. Greater Oslo, Bergen and Stavanger, 2011 totalled NOK 309.8 million (NOK At the merger date, Hansa Property but the company also has projects under 379.1 million). The decline from the year had a land portfolio totalling 400 000 development in Stockholm. It offers a before reflected three external projects square metres. Some 80 per cent of this broad range of housing types, which involving module deliveries which were was housing projects. are marketed as the Selvaag Start, largely completed in 2010. Fifty-three

1 Figures in brackets relate to the year before.

39 Directors’ report

homes delivered from wholly owned Operating profit ASA. In addition, the group has established projects during 2011 accounted for NOK The group made an operating profit of a new land credit of NOK 550 million 136.1 million of the revenue (NOK 0). NOK 7.1 million (NOK 20.7 million). allocated to eight different sites. It will be The group’s share of deliveries from converted to construction loans as each part-owned projects came to 25 homes. Financial items project progresses. Income from part-owned projects is not Net financial expenses came to NOK 36.1 The group has an overdraft facility shown as operating revenue but rec- million (NOK 23.3 million). of NOK 150 million, of which NOK ognised net as profit from associates. 80.9 million had been drawn down at 31 Selvaag Bolig delivered no homes in Results December 2011. In addition comes an 2010. Other revenue related to activities The loss before tax expense was NOK 29 overdraft facility of NOK 150 million outside the core business, primarily estate million (NOK 2.5 million). Net tax income to finance the start-up of new projects. agency services. was NOK 23.3 million (expense of NOK This facility remained undrawn at 31 13.8 million), yielding a net loss of NOK December. Project costs 5.7 million (NOK 16.3 million) for the Each project in Selvaag Bolig is Project costs came to NOK 199 million group. organised as a separate company (single (NOK 219 million), and consist primarily purpose vehicle – SPV). In addition to of construction costs for homes delivered Balance sheet financing from the parent company, this in the period as well as project costs which The carried amount of the Selvaag Bolig implies that each company seeks its do not qualify for recognition as inven- group’s inventories (land, housing under own external capital financing for the tories. The reduction in project costs must construction and completed homes) at development of a project. Land credits be viewed in relation to the three external 31 December was NOK 4 211 million, will be converted to construction loans as module deliveries mentioned above. compared with NOK 365.8 million a year the projects start up. Building costs are earlier. This increase reflects the merger wholly financed by loans, and increased Operating costs with Hansa Property Group, the acquisition activity in the companies will accord- Operating costs amounted to NOK of the remaining shares in Selvaag Pluss ingly mean that construction loans rise in 178.8 million (NOK 94.9 million) for Eiendom and Bo En, and the high level of line with progress. In addition, Selvaag the period, with payroll costs accounting activity in a number of projects. Bolig has an unsecured loan of NOK 165 for NOK 76.3 million (NOK 51.2 Equity at 31 December was NOK million from Selvaag Gruppen. million). 1 310.6 million (NOK 322 million), cor- Selvaag Bolig enhanced its image as responding to an equity ratio of 24.2 per Cash flow Norway’s largest housebuilder during cent (30 per cent). Consolidated net cash flow from opera- 2011 in line with the start to sales The group held cash and cash tional activities was negative at NOK 354.9 for several projects. The group also equivalents of NOK 395.2 million at 31 million in 2011 (positive at NOK 28.6 strengthened its organisation, pre- December (NOK 13.5 million). million). The change in net cash flow pri- pared for a stock exchange listing and At 31 December, consolidated non- marily reflects changes in working capital merged with Hansa Property Group. current interest-bearing debt amounted resulting from a substantial increase in con- This increased the other operating costs to NOK 2 376.3 (NOK 0) and con- struction activity. This reduced operational item to NOK 96.7 million (NOK 43.2 solidated current interest-bearing debt cash flow by NOK 256.6 million. million). That is a higher level of costs was NOK 1 189.6 million (NOK 627.9 Net cash flow from investing activities than the group will experience in normal million). These changes reflect the was NOK 32.8 million (negative at operation. above-mentioned transactions as well as NOK 21.9 million). Cash in acquired The item for gain (loss), net associates the fact that the high level of building businesses came to NOK 281.3 million, and joint ventures includes gains of NOK activity is financed mainly by con- partly offset by payments to acquire busi- 78.7 million for 2011. These derive from struction loans. nesses, loans taken over and the addition staged acquisitions related to the merger of associates. Settlement for the project with Hansa Property Group, as well as Financing company amounted to NOK 17.4 million. from the acquisitions of Selvaag Pluss The company has an unsecured credit Net cash flow from financing Eiendom and Bo En. These represent facility of NOK 500 million with DnB. activities was NOK 703.7 million (NOK only accounting gains, without cash This loan is defined as an equity bridge, and 2.5 million). Cash and cash equivalents effect on interests owned before the is due to be redeemed wholly or partly in increased by NOK 381.7 million to above-mentioned transactions. connection with a listing of Selvaag Bolig NOK 395.2 million (NOK 13.5 million).

40 Directors’ report

Events after the balance sheet date Operational risk borrowing costs and could affect the valu- Selvaag Bolig ASA signed a letter of intent Selvaag Bolig draws on external con- ation of its assets. in February related to the sale of the indus- struction companies and service providers trial sections at Kaldnes in Tønsberg to to develop and build new projects. As a Credit risk two Nordic property companies. A further result, it is exposed to the risk of loss and Credit risk is the risk of loss associated with letter of intent was signed for the sale of the additional project cost if a contractor/sup- the granting of credit. The group’s business industrial sections in Vestparken Næring plier finds itself in financial difficulties. is aimed almost entirely at private buyers, AS. These sales are due to be completed in The group is also exposed to increases who have secured and documented the the first half of 2012. in the level of prices for construction financing of their housing purchase before contracts and to cost overruns. However, contracts are entered into. Some forms of Going concern efforts are made to reduce the latter financing solutions are offered as part of the Pursuant to section 3-3a of the Norwegian risk by entering mainly into turnkey Selvaag Start concept. All credit is given Accounting Act, the board confirms that the contracts with large and well-established against a priority mortgage in the relevant going concern assumption is realistic and players. In addition, the opportunity property, and security is accordingly that the financial statements for 2011 have to use modular construction concepts regarded as good. been prepared on that assumption. This provides a good alternative to turnkey view rests on the group’s long-term strategy contracts in order to meet possible fluc- Financial and liquidity risk and forecasts. The group’s financial tuations in construction costs. Cautious liquidity management means position is good. having sufficient liquid assets and available Market risk financing through lines of credit to meet the Coverage of the net loss Housing demand is influenced by a large group’s obligations. The group refinanced The parent company, Selvaag Bolig ASA, number of factors at both micro and macro large parts of its loans during 2011 as a con- made a net loss of NOK 43.2 million (profit level. It may be affected by substantial sequence of the major reorganisations, and of NOK 29.5 million). The parent com- fluctuations in the general level of interest manages its liquidity risk by maintaining pany’s equity amounted to NOK 1 317.1 rates and or significant changes in other adequate cash in hand, bank arrangements million at 31 December, of which NOK financial variables to which potential and credit limits, primarily in the form of 145.9 million was non-restricted. housebuyers might be exposed. Changes in group overdraft facilities, and by con- The board proposes that no dividend housing demand could furthermore affect tinuous monitoring of forecasts and actual be paid for 2011. Selvaag Bolig’s opportunities to sell homes cash flows. The board takes the view that at budgeted prices within the planned time the group had a well-balanced exposure to frames. financial and liquidity risk at 31 December. Risk and risk management Cash and cash equivalents in Selvaag Foreign exchange risk Bolig amounted to NOK 395.2 million at Risk management Virtually all the group’s activities are 31 December (NOK 13.5 million). Liquid As a housing developer, the group is based in Norway. However, the group assets consisted primarily of cash and bank exposed to a number of risk factors. These buys modules from abroad in euros. When deposits. Further reference is made to the can include the public planning process, purchase contracts are signed with foreign comments on financing above and to note development work, environmental consid- module suppliers, the exchange rate is 16 to the consolidated financial statements erations and official prescriptions which locked in by ordering foreign currency at for an overview of loans, maturities and could affect opportunities and the time a fixed rate for future settlement based on loan terms. required to execute a project. The group is the supplier’s payment plan. As a result, also exposed to developments in con- the group has limited exposure to foreign Planning risk struction costs and financing, and to general exchange risk. Changes to zoning plans at various levels trends in the housing market. All these risk by the relevant public authorities could factors could have a negative impact on Interest rate risk (own financing, affect Selvaag Bolig’s various projects, the group’s operations, financial position, deposits) including the interest of future buyers in profits and opportunities to execute Changes in the general level of interest the properties. Such changes could also projects. Some of the most important rates are very important for housing limit opportunities to continue devel- risk factors facing the group are briefly demand, and accordingly for sales by oping the properties, and could lead to described below. Selvaag Bolig. Furthermore, big changes in increased costs. interest rates are significant for the group’s

41 Directors’ report

Insuring against risk Corporate social responsibility Shareholder information Selvaag Bolig seeks to reduce the impact (CSR) of undesirable incidents through its risk The company had 96 shareholders management system, but risks could Selvaag Bolig is concerned with CSR at 31 December 2011, of whom four nevertheless arise which cannot be fully and opportunities for combining value were foreign. See note 7 to the parent contained by preventive measures. The creation with social benefit. Creativity company financial statements for group reduces such risk to some extent and innovation are fundamental to the Selvaag Bolig ASA for detailed share- by purchasing insurance. Selvaag Bolig’s group’s corporate culture, and it strives to holder information. insurance programme covers such areas come up with favourable solutions at all as operational shutdowns, damage to times. Selvaag Bolig wants to build good Transactions with close equipment and real property, liabilities and homes in a positive way, which creates associates other risks. It also covers various kinds of the highest possible “residential value” for risk to people. housebuyers. Homes and housing estates The group purchased some construction will be built to create a quality of life for services in 2011 from AS Selvaagbygg Organisation buyers and to meet their requirements in (which was a subsidiary of Selvaag the best possible manner. In this way, the Gruppen in that year) for certain pro- Selvaag Bolig ASA was established in group contributes to developing enhanced jects. These contracts are considered to 2008 as an independent housing devel- living environments and better cities. be entered into on market terms. opment unit in the Selvaag Gruppen The group wants to be a driving force On 4 May 2011, the group entered group. It is the parent company for the in the social debate in order to promote into an agreement to transfer all equity underlying group subsidiaries, which the housing issue and to speak on behalf interests in the wholly owned Sel- are responsible for operations. At 31 of its customers by communicating its vaaghus AB subsidiary to Selvaag December 2011, the Selvaag Bolig views and being prepared to stand up for Eiendom AS, a subsidiary of Selvaag group had a total of 87 employees, them. Selvaag Bolig wants to create good Gruppen, for NOK 7.4 million. including 42 in the parent company and solutions, and fights for these. It has the It was resolved on 24 May 2011 to 45 in the subsidiaries. courage to think innovatively, follow up expand the share capital of Selvaag ideas and convert them into action. Bolig ASA by NOK 100 million. This Working environment Selvaag Bolig will be a responsible increase was implemented by converting social player and minimise pollution of debt to Selvaag Gruppen, and was The working environment in the group and damage to the natural environment. registered in the Norwegian Register of is regarded as good. Ensuring that It will ensure that resources are utilised Business Enterprises on 18 June 2011. efforts to reduce sickness absence and in the best possible way, and contribute The general meetings of Selvaag prevent injuries have a high priority actively to reducing emissions and Bolig ASA and Hansa Property Group in the company is given emphasis by discharges. The group always seeks to resolved on 10 June 2011 to merge the board. Sickness absence was 2.2 find solutions which minimise intrusion the two companies. As a condition of per cent (2.85 per cent) for the group in the natural environment and use of this merger, the company conducted a and 2.9 per cent (0.51 per cent) for the resources. private placement with the owners of parent company. No injuries were sus- Selvaag Pluss Eiendom. Both transac- tained in 2011. Impact on the natural tions were implemented on 24 August environment 2011, and further details are provided in Equal opportunities note 6 on business combinations in the Selvaag Bolig pays special attention consolidated financial statements. The general policy of the group is that to environmental considerations when The group sold the Ekely property no unequal treatment or other form pursuing its construction activities, at Skøyen in Oslo during June 2011 to of discrimination related to gender and has taken account of the natural Sealbay AS for NOK 5 million. Sealbay or ethnic background will occur. The environment in its planning and is controlled by two directors of Selvaag group gives emphasis to expertise control systems. Its environmental Bolig, Olav Hindahl Selvaag and rather than gender or ethnic back- impact relates primarily to energy Gunnar Frederik Selvaag (who stepped ground when making appointments. consumption, materials, waste and down from the board in September Women account for 39 per cent of the interventions in and use of natural 2011). group’s workforce. resources. A net negative balance of NOK 170

42 Directors’ report

million in Selvaag Gruppen’s group over- new housing are expected to be highest housing. draft facility was converted in the second in Selvaag Bolig’s priority areas, and Selvaag Bolig is concentrating pre- quarter of 2011 into new current interest- the company has a solid platform for cisely on the areas of housing pressure bearing debt to Selvaag Gruppen. growth. in and around Oslo, Stavanger and The group made capital contributions Demand for housing in Norwegian Bergen, and has a good platform for to associates before the merger in 2011 urban areas has been high in recent meeting future demand. The company which comprised NOK 25.5 million to years, which led to a nine per cent strengthened its position markedly during Hansa Property Group and NOK 64.7 growth in house prices during 2011. 2011 in both Bergen and Stavanger. million to Selvaag Pluss Eiendom. The background for continued price Merging with Hansa Property Group growth is the combination of high gave it control over unique development Corporate governance population growth, low interest rates sites and the Stavanger-based housing and unemployment, high pay growth developer Bo En. Selvaag Bolig has a Selvaag Bolig is committed to maintaining and a rising housing shortage in urban number of large projects under devel- a high standard of corporate governance. areas experiencing growth pressures. opment in the Oslo area, which extends A healthy corporate culture is essential The number of households is expected from Jessheim in the north to Moss and for safeguarding confidence in the to rise sharply in coming decades, par- Tønsberg in the south. Access to good company, securing access to capital and ticularly in the large towns, which will land in these areas is essential for growth, ensuing good value creation over time. All boost housing demand. The SSB esti- and Selvaag Bolig now has a solid bank shareholders will be treated equally, and a mates that the population will increase of sites in all these areas. The company’s clear division of labour will exist between from 4.9 million at 1 January 2011 to present land holdings provide space for the board and the company’s executive 6.1-6.6 million by 2030, depending on building 8-10 000 homes. By further management. Selvaag Bolig complies whether cautious or aggressive fore- developing the land portfolio with a with the Norwegian code of practice for casts are applied. A particular increase view to diversification both geographi- corporate governance of 21 October 2010. is expected in the number of first-time cally and in terms of concepts, the group A detailed statement of the way Selvaag households requiring small homes will be able to deliver even more homes Bolig implements the 15 sections of the and terrace housing. This is reflected every year. Selvaag Bolig’s operational code can be found at in Selvaag Bolig’s commitment to platform, solid brand and financial www.selvaagbolig.no/en/investor/ affordably priced small flats and terrace position mean it is well positioned to housing through the Start and Hjem meet the opportunities it faces. The Outlook housing concepts. board keeps the need to secure additional Population growth up to 2030 is capital and a possible application for a Everything points to a good year for expected to be 350 000 in Oslo and stock market listing under continuous Selvaag Bolig. Forecasts from Statistics Akershus county, about 125 000 in observation, and takes the view that the Norway (SSB) indicate annual price Rogaland and 60 000 in the City of group has rigged its organisation well inflation of five-six per cent over the Bergen. This means that these areas will and is prepared for this. next few years. Growth and demand for have a high level of demand for new

Oslo, 21 March 2012

Olav Hindahl Selvaag Ole Jarl Rettedal Karsten Bomann Jonsen Anne Breive Chair Director Director Director

Wenche Kjølås Maria Terese Hosen Anne-Kari Drønen Mathiesen Baard Schumann Director Director Director President and CEO (elected by the employees) (elected by the employees)

43 Consolidated Financial Statements Selvaag Bolig Group Statement of Comprehensive Income for the financial period ended 31 December

(amounts in NOK 1 000, except earnings per share) Note 2011 2010

Sales revenues 2 251 885 357 468 Other revenues 5 57 937 21 662 Total revenues 309 822 379 130

Project expenses 5 (199 002) (219 127) Salaries and personnel expenses 7 (76 319) (51 202) Depreciation and amortisation 10, 11 (5 770) (491) Other operating expenses 8 (96 665) (43 249) Other gain (loss), net 11 (299) (25) Share of income (losses) and gains (losses) on disposal from associated companies and joint ventures 24 75 373 (44 310) Total operating expenses (302 682) (358 404) Operating profit (loss) 7 140 20 726

Financial income 9 19 447 13 327 Financial expenses 9 (55 562) (36 583) Net financial expenses (36 115) (23 256) Profit (loss) before income taxes (28 975) (2 530) Income tax (expense) income 19 23 265 (13 793) Profit (loss) for the period (5 710) (16 323)

Other comprehensive income Foreign currency translation 4 (74)

Total comprehensive income for the period (5 706) (16 397)

Profit (loss) for the period attributable to: Non-controlling interests (1 016) - Shareholders of Selvaag Bolig ASA (4 694) (16 323)

Total comprehensive income for the period attributable to: Non-controlling interests (1 016) - Shareholders of Selvaag Bolig ASA (4 690) (16 397)

Earnings per share for profit (loss) attributable to shareholders of the Selvaag Bolig ASA Earnings per share (basic and diluted, in NOK) (0.15) (163 230)

44 Consolidated Financial Statements Selvaag Bolig Group Statement of Financial Position at 31 December

(amounts in NOK 1 000) Note 2011 2010

ASSETS Non-current assets Deferred tax assets 19 - 3 847 Goodwill 10 389 183 7 007 Other intangible assets 10 90 163 - Property, plant and equipment 11 5 642 3 774 Investments in associated companies and joint ventures 24 141 707 371 452 Loans to associated companies and joint ventures 23, 24 35 500 240 027 Other non-current assets 36 784 - Total non-current assets 698 979 626 107

Current assets Inventory property 5 4 211 025 365 822 Trade receivables 12 31 436 8 278 Other current receivables 12 88 091 68 438 Cash and cash equivalents 13 395 207 13 525 Total current assets 4 725 759 456 063 TOTAL ASSETS 5 424 738 1 082 170

EQUITY AND LIABILITIES Equity Equity attributable to shareholders of the Company 14 1 304 198 322 042 Non-controlling interests 6 461 - Total equity 1 310 659 322 042

Liabilities Non-current liabilities Pension obligations 327 533 Deferred tax liabilities 19 13 934 - Provisions 20 92 112 84 364 Other non-current non-interest-bearing liabilities 28 304 - Non-current interest-bearing liabilities 16 2 376 300 - Total non-current liabilities 2 510 977 84 897

Current liabilities Current interest-bearing liabilities 16 1 189 628 627 901 Trade payables 17 148 682 9 090 Current income taxes payable 19 - - Provisions 20 - - Other current non-interest-bearing liabilities 17 264 792 38 240 Total current liabilities 1 603 102 675 231 Total liabilities 4 114 079 760 128 TOTAL EQUITY AND LIABILITIES 5 424 738 1 082 170

Oslo, 21 March 2012

Olav Hindahl Selvaag Ole Jarl Rettedal Karsten Bomann Jonsen Anne Breive Chair Director Director Director

Wenche Kjølås Maria Terese Hosen Anne-Kari Drønen Mathiesen Baard Schumann Director Director Director President and CEO (elected by the employees) (elected by the employees)

45 Consolidated Financial Statements Selvaag Bolig Group Statement of Changes in Equity

Equity at- tributable to Other Cumulative sharehold- Non- Share Share paid-in translation Other Retained ers of the controlling Total (amounts in NOK 1 000) capital premium capital differences reserves earnings Company interests equity

EQUITY AT 1 JANUARY 2011 159 7 286 699 132 1 149 3 528 (389 212) 322 042 - 322 042

Transactions with owners: Issue of shares related to business combinations 53 802 933 432 - - - 987 234 - 987 234 Purchase of treasury shares related to (21) (367) (388) (388) business combinations Conversion of liabilities to equity 82 413 17 587 - - - 100 000 - 100 000 Group contribution given - - - - (100 000) (100 000) - (100 000) Business combinations ------7 477 7 477

Total comprehensive income for the period: Profit (loss) for the period - - - - - (4 694) (4 694) (1 016) (5 710) Other comprehensive income for the period - - - 4 - - 4 4 (foreign currency translation) - EQUITY AT 31 DECEMBER 2011 136 353 957 938 699 132 1 153 3 528 (493 906) 1 304 198 6 461 1 310 659

EQUITY AT 1 JANUARY 2010 159 7 286 560 546 1 223 1 375 (345 313) 225 276 - 225 276

Transactions with owners: Group contribution received - - 131 000 - - - 131 000 - 131 000 Group contribution received (after taxes) - - 7 586 - - - 7 586 - 7 586 Group contribution given (after taxes) - - - - - (27 576) (27 576) - (27 576) Equity adjustments in associated companies - - - - 2 153 - 2 153 - 2 153 and joint ventures

Total comprehensive income for the period: Profit (loss) for the period - - - - - (16 323) (16 323) - (16 323) Other comprehensive income for the period - - - (74) - - (74) - (74) (foreign currency translation)

EQUITY AT 31 DECEMBER 2010 159 7 286 699 132 1 149 3 528 (389 212) 322 042 - 322 042

46 Consolidated Financial Statements Selvaag Bolig Group Statement of Cash Flows for the financial period from 1 January to 31 December

(amounts in NOK 1 000) Note 2011 2010

CASH FLOW FROM OPERATING ACTIVITIES Profit (loss) before income taxes (28 975) (2 530) Income taxes paid - - Depreciation and amortisation 5 770 491 Other (gains) losses, net 299 25 Share of (income) losses from associated companies and joint ventures 24 (75 373) 44 310 Change in inventory property (510 572) 86 964 Change in trade receivables (42 624) 42 335 Change in trade payables 74 435 (7 730) Changes in other working capital assets 53 219 57 976 Changes in other working capital liabilities 168 959 (193 261) Net cash flow from operating activities (354 862) 28 580

CASH FLOW FROM INVESTING ACTIVITIES Payments for acquisition of tangible and intangible fixed assets (151) (624) Proceeds from disposal of businesses and subsidiaries, net of cash disposed 13 17 404 - Payments for acquisitions of businesses and subsidiaries, net of cash acquired 13 251 370 (164) Payments for acquisition of associated companies and joint ventures (90 156) (11 790) Payments for acquisition of other investments and loans given (147 265) (24 993) Dividends and distributions from associated companies and joint ventures 1 650 15 671 Net cash flow from investing activities 32 852 (21 900)

CASH FLOW FROM FINANCING ACTIVITIES Proceeds from borrowings 16 1 402 499 - Repayments of borrowings 16 (356 576) (25 714) Net change in bank overdraft (Selvaag Group cash pool) 16 (444 001) (75 005) Proceeds from share issue 101 770 - Proceeds from group contribution - 141 536 Payments of group contribution - (38 300) Net cash flow from financing activities 703 692 2 517

Net change in cash and cash equivalents 381 682 9 197 Cash and cash equivalents at 1 January 13 13 525 4 328 Cash and cash equivalents at 31 December 13 395 207 13 525

47 Consolidated Financial Statements Selvaag Bolig Group Notes to the consolidated financial statements for the year ended 31 December 2011

Note 1: General information

Selvaag Bolig AS (the ”Company”) and its sub- The Company’s ultimate controlling party is sidiaries (together “the Group”) is a property Selvaag Gruppen AS. development group, involved in the construc- tion of residential property for sale in the The registered office of the Company is ordinary course of business. Lørenvangen 22, 0580 Oslo.

Note 2: Significant accounting policies

The principal accounting policies are set out reporting period, monetary items denominated ests in subsidiaries that do not result in the below and have been consistently applied to in foreign currencies are retranslated at the Group losing control over the subsidiaries all accounting periods presented. rates prevailing at that date. Non-monetary are accounted for as equity transactions. The items that are measured in terms of historical carrying amounts of the Group’s interests and 2.1 Statement of compliance cost in a foreign currency are not retranslated the non-controlling interests are adjusted to The Group’s consolidated financial statements in subsequent periods. reflect the changes in their relative interests have been prepared in accordance with Inter- in the subsidiaries. Any difference between national Financial Reporting Standards (IFRS) 2.4 Consolidation the amount by which the non-controlling and interpretations issued by the International The consolidated financial statements include interests are adjusted and the fair value of the Accounting Standards Board (IASB) and endor- the financial statements of the Company and consideration paid or received is recognised sed by the EU as at 31 December 2011. entities (including special purpose entities) directly in equity and attributed to owners of These Group consolidated financial state- controlled by the company (its subsidiaries). the Company. ments were authorised for issue by the Board Control is achieved where the Company When the Group loses control of a subsidi- of Directors on 21 March 2012 . has the power to govern the financial and ary, the profit or loss on disposal is calculated operating policies of an entity so as to obtain as the difference between (i) the aggregate 2.2 Basis of preparation benefits from its activities. This is generally of the fair value of the consideration received The Group consolidated financial statements presumed to exist when the Company holds and the fair value of any retained interest and have been prepared on a going concern and more than 50% of the voting rights. The (ii) the previous carrying amount of the assets historical cost basis, except for derivatives existence and effect of potential voting rights (including goodwill), and liabilities of the which are recognised at fair value through that are currently exercisable or convertible subsidiary and any non-controlling interests. profit or loss. are considered when assessing whether the When assets of the subsidiary are carried at Company controls another entity. fair values and the related cumulative gain or 2.3 Functional and presentation currency The results of subsidiaries acquired or loss has been recognised in other compre- (a) Functional and presentation currency disposed of during the year are included in hensive income and accumulated in equity, Items included in the individual financial the consolidated income statement from the amounts previously recognised in other statements of each of the Group’s entities are the effective date of acquisition or up to the comprehensive income and accumulated in measured using the currency of the primary effective date of disposal, as appropriate. equity are accounted for as if the Company economic environment in which the entity Total comprehensive income of subsidiaries is had directly disposed of the relevant assets operates (‘the functional currency’). The con- attributed to the owners of the Company and (i.e. reclassified to profit or loss or transferred solidated financial statements are presented to the non-controlling interests even if this directly to retained earnings as specified by in NOK, which is the Company’s functional and results in the non-controlling interests having applicable IFRSs). The fair value of any invest- the Group’s presentation currency. a deficit balance. ment retained in the former subsidiary at the When necessary, adjustments are made date when control is lost is regarded as the (b) Transactions and balances to the financial statements of subsidiaries to fair value on initial recognition for subsequent In preparing the financial statements of each bring their accounting policies into line with accounting under IAS 39 Financial Instru- individual group entity, transactions in curren- those used by other members of the Group. ments: Recognition and Measurement or, cies other than the entity’s functional currency All intra-group transactions, balances, when applicable, the cost on initial recognition are translated into the functional currency income and expenses are eliminated in full on of an investment in an associate or a jointly using the exchange rates prevailing at the consolidation. controlled entity. dates of the transactions. At the end of each Changes in the Group’s ownership inter-

48 Consolidated Financial Statements Selvaag Bolig Group

2.5 Segment information investment. Any reversal of that impairment Goodwill is measured as the excess of the Operating segments are reported in a manner loss is recognised in accordance with IAS 36 to sum of the consideration transferred, the consistent with the internal reporting provided the extent that the recoverable amount of the amount of any non-controlling interests in the to the CEO and management group. This investment subsequently increases. acquiree, and the fair value of the acquirer’s group is responsible for allocating resources When a group entity transacts with its asso- previously held equity interest in the acquiree and assessing performance of the opera- ciate, profits and losses resulting from the (if any) over the net of the acquisition-date ting segments. For the purposes of internal transactions with the associate are recognised amounts of the identifiable assets acquired reporting the Group utilises the percentage in the Group’ consolidated financial state- and the liabilities assumed. Part of goodwill is of completion method for which the degree of ments only to the extent of interests in the due to the recognition of deferred tax obliga- completion is estimated based on expenses associate that are not related to the Group. tion at nominal value. incurred relative to total estimated cost. Accounting policies of associates have been When a business combination is achieved in Operating profit (loss) under the percentage of changed where necessary to ensure consis- stages, the Group’s previously held equity inte- completion method also includes an estimated tency with the policies adopted by the Group. rest in the acquiree is remeasured to fair value profit element. Share of income (loss) from associated at the acquisition date (i.e. the date when the companies is included within operating profit Group obtains control) and the resulting gain 2.6 Investments in associates (loss) as this is considered integral to the or loss, if any, is recognised in profit or loss. An associate is an entity over which the Group Group’s operations. Any contingent consideration to be transfer- has significant influence and that is neither a red by the acquirer will be recognised at fair subsidiary nor an interest in a joint venture. 2.7 Investments in jointly controlled value at the acquisition date. Subsequent Significant influence is the power to partici- entities changes to the fair value of any contingent pate in the financial and operating policy deci- A joint venture is a contractual arrangement consideration classified as liability will be sions of the investee but is neither control nor whereby the Group and other parties under- recognised in profit or loss. joint control over those policies. Significant take an economic activity that is subject to influence is generally presumed to exist when joint control (i.e. when the strategic financial 2.9 Intangible assets the Company holds between 20% and 50% of and operating policy decisions relating to the a) Goodwill the voting rights. activities of the joint venture require the una- Goodwill arising on an acquisition of a busi- The results and assets and liabilities of nimous consent of the parties sharing control). ness is carried at cost price as established at associates are incorporated in these financial Joint venture arrangements that involve the the date of acquisition of the business (see statements using the equity method of acco- establishment of a separate entity in which note 2.8 above). Goodwill is not amortised, unting. Under the equity method, investments each venturer has an interest are referred but is tested for impairment annually. For the in associates are carried in the consolidated to as jointly controlled entities. The Group purposes of impairment testing, goodwill is statement of financial position at cost and reports its interests in jointly controlled allocated to each of the Group’s cash-genera- adjusted thereafter to recognise the Group’s entities using the equity method, as described ting units (or collections of cash-generating share of the profit or loss and other com- in note 2.6 Investments in associates above, units) expected to benefit from synergies of prehensive income of the associate. When except when the investment is classified as the business combination. the Group’s share of losses of an associate held for sale, in which case it is accounted for A cash-generating unit to which goodwill exceeds the Group’s interest in that associate, in accordance with IFRS 5 Non-current Assets has been allocated is tested for impairment the Group discontinues recognising its share Held for Sale and Discontinued Operations. annually, or more frequently when there is of further losses. Additional losses are recog- Share of income (loss) from joint ventures is indication that the unit may be impaired. If the nised only to the extent that the Group has included within operating profit (loss) as this is recoverable amount of the cash-generating incurred legal or constructive obligations or considered integral to the Group’s operations. unit is less than its carrying amount, the made payments on behalf of the associate. impairment loss is allocated first to reduce Any excess of the cost of acquisition over 2.8 Acquisitions of property and business the carrying amount of any goodwill allocated the Group’s share of the net fair value of the combinations to the unit and then to the other assets of the identifiable assets, liabilities and contingent Where property is acquired through the unit pro rata based on the carrying amount of liabilities of an associate recognised at the acquisition of entities, management consider each asset in the unit. Any impairment loss for date of acquisition is recognised as goodwill, the substance of the assets and activities goodwill is recognised directly in profit or loss which is included within the carrying amount acquired. When acquiring a group of assets or in the consolidated statement of comprehen- of the investment. Any excess of the Group’s net assets that do not constitute a business, sive income. An impairment loss recognised share of the net fair value of the identifiable the cost price is allocated between the indivi- for goodwill is not reversed in subsequent assets, liabilities and contingent liabilities over dual identifiable assets and liabilities acquired periods. the cost of acquisition, after reassessment, is based on their relative fair values as at the On disposal of the relevant cash-generating recognised immediately in profit or loss. acquisition date. unit, the attributable amount of goodwill is The requirements of IAS 39 are applied to Business combinations are accounted for included in the determination of the profit or determine whether it is necessary to recog- using the acquisition method. The acquisition loss on disposal. nise any impairment loss with respect to the is recognised at the aggregate of the consi- Cash-generating units are defined in accor- Group’s investment in an associate. When deration transferred, measured at acquisition dance with Group internal reporting. necessary, the entire carrying amount of the date fair value, and the amount of any non- investment (including goodwill) is tested for controlling interest in the acquiree. For each b) Other intangible assets impairment in accordance with IAS 36 Impair- business combination, the acquirer measures Other intangible assets are initially recogni- ment of Assets as a single asset by comparing the non-controlling interest in the acquiree sed at fair value. The asset’s residual value its recoverable amount (higher of value in use either at fair value or at the proportionate and expected useful life are reviewed on an and fair value less costs to sell) with its carry- share of the acquiree’s identifiable net assets. annual basis and adjusted if necessary. If an ing amount. Any impairment loss recognised Acquisition costs incurred are expensed. asset’s carrying value exceeds the recoverable forms part of the carrying amount of the amount, the asset will immediately be written

49 Consolidated Financial Statements Selvaag Bolig Group

down to the recoverable amount. Any gain or buildings intended for sale in the ordinary is determined as the difference between the loss arising from the disposal of an asset will course of business or which is in the process sales proceeds and the carrying amount of the be determined as the difference between the of construction or development for such sale. asset and is recognised in profit or loss (other asset’s sales price and carrying value, and Inventories thus comprise land, property held gain/(loss), net). recognised in the consolidated statement of for resale, and property under development comprehensive income as Other net profit and construction. Inventories are measured at 2.13 Financial assets (loss). the lower of cost and net realisable value. Financial assets are initially recognised at fair The cost of inventories comprises all costs value. Subsequent measurement depends 2.10 Revenue recognition of purchase, costs of conversion and other on the classification of the assets. The Group Revenue comprises the fair value of the costs incurred in bringing the inventories to classifies its financial assets in the following consideration received or receivable for the their present condition. The cost of conver- categories: “at fair value through profit or sale of property and related transactions in sion includes costs directly related to the loss” and “loans and receivables”. The clas- the ordinary course of the Group’s activities, in construction of the property (such as amounts sification depends on the nature and purpose accordance with IAS 18 Revenues. paid to sub-contractors for construction) and of the financial assets and is determined by an allocation of fixed and variable overheads management at the time of initial recognition. (a) Sale of property incurred during development and construc- The Group has no material financial assets Revenue from sale of residential property tion. Borrowing costs directly attributable to classified at fair value through profit or loss. (including any sale of projects under develop- the acquisition, construction or production of ment and undeveloped land) is recognised at property, are added to the cost of those assets, Loans and receivables the transaction date, when all the conditions until such time as the assets are substantially Loans and receivables are non-derivative for recognition have been satisfied. The trans- ready for their intended use or sale. Capitali- financial assets with fixed or determinable fer of risk and control is completed at the time sation commences when it is more likely than payments that are not quoted in an active of delivery. not that the project will be realised – assu- market. Loans and receivables (including Property may be sold with a degree of conti- ming that the plot is regulated. Other costs trade and other receivables, bank balances nuing involvement by the seller, which may be are included in the cost of inventories only to and cash) are measured at amortised cost commitments to complete construction of the the extent that they are directly attributable using the effective interest method, less any property, or a seller guarantee of occupancy to bringing the inventories to their present impairment. of a housing cooperative for a certain period of location and condition, including e.g. planning time. The Group recognises revenue when the and design costs. Net realisable value is the Impairment of financial assets significant risks and rewards of ownership of estimated selling price in the ordinary course Financial assets, other than those at fair property sold are transferred to the buyer, the of business, based on market prices at the value through profit or loss are assessed for Group retains neither continuing managerial reporting date and discounted for the time indicators of impairment at the end of each involvement to the degree usually associated value of money if material, less the estimated reporting period. Financial assets are impai- with ownership nor effective control over costs of completion and the estimated costs red where there is objective evidence that, as the goods sold, the amount of revenue can necessary to make the sale. When inventories a result of one or more events that occurred be measured reliably and it is probable that are sold, the carrying amount is recognised after the initial recognition of the financial the economic benefits associated with the as an expense (presented as project expense) asset, the estimated future cash flows of the transaction will flow to the Group. The amount in the period in which the related revenue is investment have been impacted. of revenue is not considered to be reliably recognised. The carrying amount of the financial asset measurable until all material contingencies is reduced by the impairment loss directly relating to the sale have been resolved. 2.12 Property, plant and equipment for all financial assets with the exception of Property, plant and equipment are recognised trade receivables, where the carrying amount (b) Lease revenues at historical cost less accumulated deprecia- is reduced through the use of an allowance Rental income from leasing of property (ope- tion and impairment losses. Historical cost account. When a trade receivable is conside- rating leases in which the Group is a lessor) includes expenditure that is directly attributa- red uncollectible, it is written off against the is recognised on a straight-line basis over ble to the acquisition of the items. Subsequent allowance account. Subsequent recoveries of the term of the relevant lease and included in costs are included in the asset’s carrying amounts previously written off are credited Other revenues. amount or recognised as a separate asset, against the allowance account. Changes in the as appropriate, only when it is probable that carrying amount of the allowance account are c) Sale of services future economic benefits associated with the recognised in profit or loss. Revenue from sale of services is recognised item will flow to the Group and the cost of the when the service is performed. Estate agent item can be measured reliably. The carrying De-recognition of financial assets services directly associated with sale of amount of the replaced part is derecognised. The Group derecognises a financial asset property are included in Sales revenue. Other All other repairs and maintenance is recogni- only when the contractual rights to the cash services are included in Other revenue. sed as an expense during the period in which flows from the asset expire, or it transfers it is incurred. Depreciation is calculated on a the financial asset and substantially all the 2.11 Inventory property straight-line basis, generally 3-10 years. risks and rewards of ownership of the asset to Under IAS 2 Inventories, inventories are The asset’s residual values and useful another entity. If the Group neither transfers assets held for sale in the ordinary course lives are reviewed annually, and adjusted if nor retains substantially all the risks and of business, in the process of production for appropriate. An asset’s carrying amount is rewards of ownership and continues to control such sale, or as materials or supplies to be written down immediately to its recoverable the transferred asset, the Group recognises consumed in the production process or in the amount if the asset’s carrying amount exceeds its retained interest in the asset and an asso- rendering of services. Inventories include land its estimated recoverable amount. Any gain ciated liability for amounts it may have to pay. and other property held for resale. or loss arising on the disposal or retirement If the Group retains substantially all the risks The Group has property which is land and of an item of property, plant and equipment and rewards of ownership of a transferred

50 Consolidated Financial Statements Selvaag Bolig Group

financial asset, the Group continues to recog- an entity after deducting all of its liabilities. and reduced to the extent that it is no longer nise the financial asset and also recognises Equity instruments issued by the Group are probable that sufficient taxable profits will be a collateralised borrowing for the proceeds recognised at the proceeds received, net of available to allow all or part of the asset to be received. direct issue costs (net of income tax). recovered. Repurchase of the Company’s own equity Deferred tax assets and liabilities are 2.14 Financial liabilities instruments is recognised and deducted measured at the tax rates that are expected The Group classifies its financial liabilities as directly in equity. No gain or loss is recognised to apply in the period in which the liability is either financial liabilities at “fair value through in profit or loss on the purchase, sale, issue settled or the asset realised, based on tax profit or loss” or “other financial liabilities”. or cancellation of the Company’s own equity rates (and tax laws) that have been enacted The classification depends on the nature and instruments. On subsequent disposal of own or substantively enacted by the end of the purpose of the financial assets and is deter- shares, any consideration received (net of any reporting period. The measurement of defer- mined by management at the time of initial directly attributable incremental transaction red tax liabilities and assets reflects the tax recognition. costs and the related income tax effects) is consequences that would follow from the included in Equity attributable to shareholders manner in which the Group expects, at the end Borrowings of the Company. of the reporting period, to recover or settle the Borrowings are recognised initially at fair Ordinary shares are classified as equity. carrying amount of its assets and liabilities. value, net of transaction costs incurred. Bor- Deferred income tax assets and liabilities rowings are subsequently stated at amortised 2.17 Income tax are offset when there is a legally enforcea- cost; any difference between the proceeds (net Income tax expense represents current tax ble right to offset current tax assets against of transaction costs) and the redemption value expense and changes in deferred tax expense. current tax liabilities and when the defer- is recognised in the income statement over the red income tax assets and liabilities relate period of the borrowings using the effective Current tax to income taxes levied by the same taxation interest method. The tax currently payable is based on taxable authority on either the same taxable entity Borrowings are classified as current liabi- profit for the year. Taxable profit differs from or different taxable entities where there is lities unless the Group has an unconditional profit as reported in the consolidated state- an intonation to settle the balances on a net right to defer settlement of the liability for at ment of comprehensive income because of basis. least 12 months after the end of the reporting items of income or expense that are taxable period. or deductible in other years and items that Current and deferred tax for the year are never taxable or deductible. The Group’s Current and deferred tax are recognised in Trade and other payables liability for current tax is calculated using tax profit or loss, except when they relate to items Trade and other payables are recognised initi- rates that have been enacted or substantively that are recognised in other comprehensive ally at fair value and subsequently measured enacted by the end of the reporting period. income or directly in equity, in which case, the at amortised cost using the effective interest current and deferred tax are also recognised method. If the interest element is insignificant, Changes in deferred tax in other comprehensive income or directly trade payables are carried at the original Deferred tax is recognised on temporary in equity respectively. Where current tax or invoice amount. differences between the carrying amounts deferred tax arises from the initial accounting of assets and liabilities in the consolidated for a business combination, the tax effect is Derivatives financial statements and the corresponding included in the accounting for the business Derivatives are recognised initially and in tax bases used in the computation of taxable combination. subsequent reporting periods at fair value. profit. Deferred tax liabilities are generally Changes in fair value are recognised as Other recognised for all taxable temporary dif- 2.18 Provisions financial expense or –income. ferences. Deferred tax assets are generally Provisions, e.g. for warranties or infra- recognised for all deductible temporary structure, are recognised when the Group has De-recognition of financial liabilities differences to the extent that it is probable a present legal or constructive obligation as The Group derecognises financial liabilities that taxable profits will be available against a result of past events; it is probable that an when, and only when, the Group’s obligations which those deductible temporary differences outflow of resources will be required to settle are discharged, cancelled or they expire. The can be utilised. Such deferred tax assets and the obligation; and the amount can be reliably difference between the carrying amount of liabilities are not recognised if the temporary estimated. Provisions are not recognised for the financial liability derecognised and the difference arises from goodwill or from the future operating losses. consideration paid and payable is recognised initial recognition (other than in a business The amount recognised as a provision is the in profit or loss (financial expense or –income). combination) of other assets and liabilities in best estimate of the consideration required to a transaction that affects neither the taxable settle the present obligation at the end of the 2.15 Cash and cash equivalents profit nor the accounting profit. reporting period, taking into account the risks Cash and cash equivalents as presented in the Deferred tax is recognised for taxable and uncertainties surrounding the obligation. statement of cash flows include cash in hand, temporary differences associated with When a provision is measured using the cash bank deposits, and other short-term highly investments in subsidiaries and associates, flows estimated to settle the present obliga- liquid investments with original maturities and interests in joint ventures, except where tion, its carrying amount is the present value of three months or less. In the statement of the Group is able to control the reversal of the of those cash flows (where the effect of the financial position, bank overdrafts are presen- temporary difference and it is probable that time value of money is material). ted within borrowings in current liabilities. the temporary difference will not reverse in the foreseeable future. No deferred tax is cur- 2.19 Leases 2.16 Equity rently recognised in respect of investments in Leases are classified as finance leases whene- An equity instrument is any contract that associates or joint ventures. ver the terms of the lease transfer substanti- evidences a residual interest in the assets of The carrying amount of deferred tax assets ally all the risks and rewards of ownership to is reviewed at the end of each reporting period the lessee. All other leases are classified as

51 Consolidated Financial Statements Selvaag Bolig Group

operating leases. The group is currently not party to any finance lease arrangements. Rental income from operating leases (in which the Group is a lessor) is recognised on a straight-line basis over the term of the relevant lease and included in Other evenue. Operating lease payments (in which the Group is a lessee) are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. The group is currently not party to any material operating lease arrangements.

2.20 Employee benefits Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Obligations related to early retirement pensions (AFP) are part of a multi-employer defined benefit plan. The Company’s share of the liability is, however, not measurable and the plan is thus accounted for as is it were a defined contribution plan.

2.21 Adoption of new and revised standards and interpretations

Issued accounting standards and interpretations effective for annual periods beginning on 1 January 2011 The following new and revised IFRSs have been applied in the current year and have affected the amounts reported in these financial statements. The amendments have only affected presentation and note disclosures in the consolidated financial statements.

Amendments to IAS 1 The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in Presentation of Financial the statement of changes in equity or in the notes to the financial statements. Statements (as part of Improvements to IFRSs In the current year, for each component of equity, the Group has chosen to present such an analysis as a separate statement issued in 2010) in the consolidated financial statements. Each item comprising Other comprehensive income is included in the consolidated statement of changes in equity. Such amendments have been applied retrospectively.

IAS 24 Related Party IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) the definition of a related party has been changed Disclosures (as revised and (b) a partial exemption from the disclosure requirements for government-related entities has been introduced. in 2009) The company and its subsidiaries are not government-controlled or -related entities. The application of the revised definition of related party set out in the revised IAS 24 in the current year has not resulted in any changes to the notes disclosures for related party information.

The following new and revised/amended IFRSs and interpretations have also been adopted in these consolidated financial statements. The applica- tion has not had any material impact on the amounts reported, but may affect the accounting for future transactions or arrangements.

Applicable to accounting periods Standard/ Interpretation Title Date of issue commencing on or after

Amendments to IAS 32 Classification of Rights Issues October 2009 1 February 2010

Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement November 2009 1 January 2011

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments November 2009 1 July 2010

Improvements (various Improvements to IFRSs May 2010 1 January 20111 IFRSs and interpreta- tions) issued in 2010

1 The effective date of the individual improvements varies, and the earliest obligatory date is 1 July 2010.

As at the date of authorisation of these financial statements, the Standards and Interpretations in the table below had been issued by the IASB, but were not effective for the financial year ended 31 December 2011. The directors anticipate that these Standards and Interpretations will be adopted in the Group’s financial statements for the period beginning 1 January 2012 or later. Effective dates are as applicable for IFRSs as adopted by the European Union as these in some cases will deviate from the effective dates as issued by the IASB. The directors have not yet considered the potential impact of the adoption of these new and revised/amended IFRSs and Interpretations. Standards that are not clearly relevant for the consolidated financial statements (for example amendments to IFRS 1 First-time adoption of IFRSs) are not included in the table below.

52 Consolidated Financial Statements Selvaag Bolig Group

Standard/ Applicable to accounting Interpretation Title Date of issue periods commencing on or after

Amendments to IFRS 7 Disclosures - transfers of financial assets October 2010 1 July 2011

IFRS 9 Financial Instruments November 2009 1 January 2015

IFRS 102 Consolidated Financial Statements May 2011 1 January 2013

IFRS 112 Joint Arrangements May 2011 1 January 2013

IFRS 122 Disclosure of Interests in Other Entities May 2011 1 January 2013

IFRS 132 Fair Value Measurement May 2011 1 January 2013

Amendments to IAS 12 Presentation of Items of Other Comprehensive Income June 2011 1 July 2012

Amendments to IAS 122 Deferred Tax – Recovery of Underlying Assets December 2010 1 January 2012

IAS 19 (revised in 2011)2 Employee Benefits June 2011 1 January 2013

IAS 27 (revised in 2011)2 Separate Financial Statements May 2011 1 January 2013

IAS 28 (revised in 2011)2 Investments in Associates and Joint Ventures May 2011 1 January 2013

Amendments to IFRS 72 Disclosures - Offsetting Financial Assets and Financial Liabilities December 2011 1 January2013

Amendments to IAS 322 Offsetting Financial Assets and Financial Liabilities December 2011 1 January 2014

Amendments to IAS 322 Offsetting Financial Assets and Financial Liabilities December 2011 1 January 2014

2 The standard/amendment has not been adopted by the EU as at the date of approval of these financial statements.

Note 3: Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. Estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources will be required. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. The estimates will, by definition, rarely equal the related actual results. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Certain amounts included in or affecting the financial statements and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared.

Estimation of net realisable value for inventory property: The property development projects are assets held for sale in the ordinary course of business or in the process of production for such sale. Such assets are classified as inventory in accordance with IAS 2. Inventories comprise land, properties held for resale, properties under development and construction, and are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. In determining the net realisable value, management carries out assessment of important factors relevant for the valuation, including macroeconomic factors such as expected housing prices and rental levels, as well as expected yields, approvals from authorities, construction costs and project progression. When considered appropriate, management uses reports from external valuation experts to estimate property values or to corroborate the Company’s own estimates. Changes in circumstances and in management’s assessment and assumptions will result in amendments to the estimated net realisable value. Also refer to note 5.

Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in note 2.9. The recoverable amounts of cash-generating units are determined based on fair value or useful value. These calculations require the use of estimates. No impairment charges have been made for the 2010 through 2011 financial periods and management has determined that any reasonably possible change in key assumptions, such as discount rate and estimated cash flows, would not cause the need to reduce the carrying amount of goodwill.

Provisions The Group has made provisions for contract obligations, e.g. infrastructure and construction of parking areas. The provision is based on present obligation, but of uncertain timing and amount. The size of the provision is estimated based on individual contracts and circumstances. Also refer to note 20.

53 Consolidated Financial Statements Selvaag Bolig Group

Note 4: Segmentinformation

Management has determined the operating segments based on reports reviewed by the CEO and management group and which are used to make strategic decisions. The figures below were reported to the CEO and the management group at the end of the reporting period. During the third quarter of 2011 and following the transactions with Hansa Property Group AS, SPE KS and Bo En AS, the Group redefined its operating segments. The main segments are now defined as Property Development (”Boligutvikling”) within three geographic regions: Greater Oslo, the Rest of Norway, and Other Countries. The transactions are further discussed in note 6 Business Combinations. Previously, Group reporting also comprised the segments Real Estate Development, Modules, and Estate Agent. These operations are now included within ”Other”, along with unallocated revenue and expenses. The comparative figures have been adjusted to correspond with the new segment reporting.

The Group utilises the percentage of completion method in its internal reporting for which the degree of completion is estimated based on expenses incurred relative to total estimated costs. Operating profit (loss) under the percentage of completion method also includes an estimated profit element. The group consolidated income statement is based on the completed contract method, in which revenue is recognised at the time of transfer of risk and control, being the point of delivery of the property. A reconciliation of this effect (from percentage of completion to completed contract) can be found in the segment reporting under ”Reconciliation EBITDA to operating profit (loss)”.

Group management considers segment results based on the percentage of completion method for determining EBITDA. The method of measurement is defined as operating profit (loss) before “Depreciation and amortisation”, “Other gain (loss), net”, and “Share of income (losses) from disposals from associated companies and joint ventures”. Financial income and expenses are not allocated to operating segments since this type of activity is managed by a central finance function focused on managing the Group’s liquidity.

Property development As of 31 December 2011 Greater The rest of Other Other Total (amounts in NOK 1 000) Oslo Norway countries Operating revenues 844 343 218 199 546 143 754 1 206 842 Project expenses (630 374) (184 789) - (70 612) (885 775) Other operating expenses (23 122) (4 956) (629) (144 278) (172 985) EBITDA (percentage of completion) 190 847 28 454 (83) (71 136) 148 082

Reconciliation EBITDA to Operating profit (loss): EBITDA (percentage of completion) 190 847 28 454 (83) (71 136) 148 082 Sales revenues (adjustment effect of percentage of completion) (822 168) (217 063) - - (1 039 231) Sales revenues (completed contract) 136 103 - - - 136 103 Project expenses (adjustment effect of percentage of completion) 620 523 184 789 - - 805 312 Project expenses (completed contract) (118 421) - - - (118 421) Depreciation - - - (5 770) (5 770) Share of income (loss) from associated companies and joint ventures 8 045 - - 67 029 75 074 Other gain (loss), net - - - 5 991 5 991 Operating profit (loss) 14 929 (3 820) (83) (3 886) 7 140

Property development As of 31 December 2010 Greater The rest of Other Other Total (amounts in NOK 1 000) Oslo Norway countries Operating revenues 21 064 - - 219 782 240 846 Project expenses 3 661 - - (124 198) (120 537) Other operating expenses (12 120) - - (82 329) (94 449) EBITDA (percentage of completion) 12 605 - - 13 255 25 860

Reconciliation EBITDA to Operating profit (loss): EBITDA (percentage of completion) 12 605 - - 13 255 25 860 Sales revenues (adjustment effect of percentage of completion) (4 193) - - - (4 193) Sales revenues (completed contract) 38 196 - - - 38 196 Project expenses (adjustment effect of percentage of completion) - - - - - Project expenses (completed contract) (33 714) - - - (33 714) Depreciation - - - (491) (491) Share of income (loss) from associated companies and joint ventures (4 452) - - (39 858) (44 310) Other gain (loss), net - - - 39 378 39 378 Operating profit (loss) 8 442 - - 12 284 20 726

Within the Greater Oslo-segment, the project ”Løren 2B” makes a material contribution towards EBITDA in 2011. However, this project is 70% guaranteed by the non-controlling interests with an ownership of 3.7%. Guarantee fees are not reported as project expense, but as an allocation of profit and thus not reflected in EBITDA. This implies that profits for this project are shared approximately 50/50 between Selvaag Bolig and the non- controlling interests and not in accordance with the ownership interests.

54 Consolidated Financial Statements Selvaag Bolig Group

Note 5: Inventory property Capitalised Borrowing cost project ex- (amounts in NOK 1 000) Land of land penses Total As of 1 january 2010 411 731 - 40 571 452 302 Additions 8 636 - - 8 636 Reclassifications of land to capitalised project expenses - - - - Inventory expenses for delivered units (64 076) - (31 040) (95 116) Annual impairment losses - - - - Reversal of impairment losses - - - - Carrying amount as of 31 December 2010 356 291 - 9 531 365 822

Additions 5 096 13 488 538 328 556 911 Acquisition of subsidiaries (note 6) 2 025 530 69 168 1 323 844 3 418 542 Reclassifications of land to capitalised project expenses (97 651) - 97 651 - Inventory expenses on delivered units - - (125 351) (125 351) Annual impairment losses (4 900) - - (4 900) Reversal of impairment losses - - - - Carrying amount as of 31 December 2011 2 284 366 82 656 1 844 003 4 211 025

(amounts in NOK 1 000) 2011 2010 Land (undeveloped) 2 367 022 356 291 Work in progress 1 749 358 2 600 Finished projects 94 645 6 931 Carrying amount as of 31 December 4 211 025 365 822

Capitalisation rates utilised to determine the amount of borrowing costs eligible for capitalisation were between 3.85% and 5.75% during 2011. There was no capitalised interest on inventory property during 2010 as at the time there were no active projects with qualifying properties.

Valuation of properties Plots of land are considered part of inventory and are valued to the lowest of acquisition cost and net realisable value. An internal assessment of the value of inventory property is prepared annually at year-end in order to determine net realisable value for individual plots/properties. Additionally, and at the Group’s request, an external valuations of properties have been performed as of 31 December 2011. Group management has determined the most significant assumptions relevant to the valuation of individual plots/properties, including size, geographic location, current regulation, potential for development, and timing of sale. The properties included in Hansa Property Group (HPG) prior to the acquisition had previously been valued by an external party, while properties previously part of Selvaag Bolig ASA and Selvaag Pluss Eiendom KS have been valued by the external party for the first time. The external valuation indicates an increase in the value of HGP properties since the previous valuation (excluding units sold).

Sensitivity analysis A sensitivity analysis has been performed for net realisable values as of 31 December 2011. Carrying amounts are not affected to the same extent.

Adjustment to the required rate of return (basis points) 100 200

Effect on inventory properties (undeveloped land) (4%) (8%)

Impairment test inventory property The Group has recognised impairment losses on inventory property (buildings and land) amounting to NOK 4.9 million for 2011. There were no mate- rial impairment losses or reversal of previous years’ impairment losses during 2010. See note 16 for inventory property pledged as collateral for borrowings from financial institutions.

Operating lease revenues The Group recognised operating lease revenues of NOK 23.6 million and NOK 17.9 million in 2011 and 2010, respectively, included in the line ”Other revenues” in the consolidated statement of comprehensive income. As of 31 December 2011 and 2010, all operating leases where the Group acts as a lessor are cancellable.

55 Consolidated Financial Statements Selvaag Bolig Group

Note 6: Business combinations

Acquisitions during 2011 Main business activity Date of business combination Proportion of voting equity acquired Selvaag Pluss Eiendom KS Development and sale of properties 23.8.2011 66.7% Hansa Property Group AS Development and sale of properties 22.8.2011 69.8% Bo En AS Development and sale of properties 25.11.2011 37.5%

The above companies (with subgroups) have been acquired with the purpose of continuing expansion of the Group’s activities, which focus on development and sale of residential properties in and around the largest cities in Norway, as well as in other selected areas. On 10 June 2011 the Annual General Meetings in Selvaag Bolig ASA and Hansa Property Group AS approved a merger of the two companies. Selvaag Bolig ASA is the continuing entity that will operate after the merger and the acquirer for financial reporting purposes. The merger was implemented on 22 August 2011 which is also the date for transfer of control. As a condition for the merger between Selvaag Bolig ASA and Hansa Property Group AS the Company has undertaken a private placement to the owners in Selvaag Pluss Eiendom KS. The share issue was implemented on 23 August 2011 and has resulted in Selvaag Bolig ASA currently holding a 100% ownership interest in the company. In agreement with other shareholders in Bo En AS, Selvaag Bolig ASA assumed 37.5% of the shares. Bo En AS was instituted as a wholly-owned subsidiary upon approval from the extraordinary general meeting held 21 November 2011. The transfer of control for these shares was completed on 25 November 2011.

Consideration (amounts in NOK 1 000) Selvaag Pluss Eiendom KS Hansa Property Group AS Bo En AS Shares in Selvaag Bolig ASA 375 281 502 532 90 000 Cash - - 40 000 Future consideration in shares or cash - - 40 000 Fair value of existing ownership share in aqcuired business 187 612 301 045 255 360 Total consideration 562 893 803 577 425 360

The fair value of shares issued as part of the consideration for Selvaag Pluss Eiendom KS is estimated based on a valuation of the companies invol- ved in the transactions and the exchange ratios between these companies. The valuation is based on management’s pricing of the properties and projects within each company, as well as the value of Selvaag Bolig ASA on a going concern basis. The transaction costs of NOK 11 million are not included in the consideration amount transferred, but is recognised as an expense in the third quarter, as part of ”Other operating expenses” in comprehensive income.

Identifiable assets and liabilities recognised on the date of the business combination - Selvaag Pluss Eiendom KS (amounts in NOK 1 000) Carrying amount Fair value adjustment Fair value ASSETS Non-current assets Deferred tax assets 5 797 (38 248) (32 451) Other intangible assets - 50 000 50 000 Property, plant and equipment - - - Investments in associated companies and joint ventures 39 458 5 000 44 458 Loans to associated companies and joint ventures 35 000 35 000 Other non-current assets 4 129 - 4 129 Total non-current assets 84 384 16 752 101 136

Current assets Inventory property 569 396 30 000 599 396 Trade receivables 865 - 865 Other current receivables 83 867 - 83 867 Cash and cash equivalents 83 042 - 83 042 Total current assets 737 170 30 000 767 170 TOTAL ASSETS 821 554 46 752 868 306

56 Consolidated Financial Statements Selvaag Bolig Group

LIABILITIES Non-current liabilities Pension obligations - - - Deferred tax liabilities 610 - 610 Provisions - - - Other non-current non-interest-bearing liabilities - Non-current interest-bearing liabilities 427 403 - 427 403 Total non-current liabilities 428 013 - 428 013

Current liabilities Current interest-bearing liabilities - - - Trade payables 7 079 - 7 079 Current tax payables - - - Provisions - - - Other current non interest-bearing liabilities 15 286 - 15 286 Total current liabilities 22 365 - 22 365 TOTAL LIABILITIES 450 378 - 450 378

Fair value of net assets 417 928

Identifiable assets and liabilities recognised on the date of the business combination - Hansa Property Group AS

(amounts in NOK 1 000) Carrying amount Fair value adjustment Fair value ASSETS Non-current assets Deferred tax assets 209 767 (137 841) 71 926 Other intangible assets 6 357 35 730 42 087 Property, plant and equipment 472 - 472 Investments in associated companies and joint ventures 308 839 - 308 839 Loans to associated companies and joint ventures - - Other non-current assets 49 873 - 49 873 Total non-current assets 575 309 (102 111) 473 198

Current assets Inventory property 2 018 260 - 2 018 260 Trade receivables 1 922 - 1 922 Other current receivables 12 267 - 12 267 Cash and cash equivalents 187 735 - 187 735 Total current assets 2 220 184 - 2 220 184 TOTAL ASSETS 2 795 494 (102 111) 2 693 383

Non-current liabilities Pension obligations - - - Deferred tax liabilities - - - Provisions 68 390 - 68 390 Other non-current non.interest-bearing liabilities - Non-current interest-bearing liabilities 1 869 759 - 1 869 759 Total non-current liabilities 1 938 149 - 1 938 149

Current liabilities Current interest-bearing liabilities - Trade payables 42 050 - 42 050 Current tax payables - - - Provisions - - - Other current non interest-bearing liabilities 39 064 - 39 064 Total current liabilities 81 114 - 81 114 TOTAL LIABILITIES 2 019 263 - 2 019 263

Fair value of net assets 674 119

57 Consolidated Financial Statements Selvaag Bolig Group

Identifiable assets and liabilities recognised on the date of the business combination - Bo En AS

(amounts in NOK 1 000) Carrying amount Fair value adjustment Fair value ASSETS Non-current assets Deferred tax assets 1 335 - 1 335 Other intangible assets 2 545 - 2 545 Property, plant and equipment 121 - 121 Investments in associated companies and joint ventures 679 - 679 Loans to associated companies and joint ventures - - - Other non-current assets 100 - 100 Total non-current assets 4 780 - 4 780

Current assets Inventory property 800 886 - 800 886 Trade receivables 289 - 289 Other current receivables 849 - 849 Cash and cash equivalents 10 593 - 10 593 Total current assets 812 617 - 812 617 TOTAL ASSETS 817 397 - 817 397

Non-current liabilities Pension obligations - - - Deferred tax liabilities - 83 494 83 494 Provisions 34 274 - 34 274 Other non current non interest-bearing liabilities 842 - 842 Non-current interest-bearing liabilities 149 775 - 149 775 Total non-current liabilities 184 891 83 494 268 385

Current liabilities Current interest-bearing liabilities 157 937 - 157 937 Trade payables 20 153 - 20 153 Current tax payables - - - Provisions - - - Other current non interest-bearing liabilities 45 840 - 45 840 Total current liabilities 223 930 - 223 930 TOTAL LIABILITIES 408 821 83 494 492 315

Fair value of net assets 325 082

Assets and liabilities assumed in connection with the business combination of Selvaag Pluss Eiendom KS, Hansa Property Group AS and Bo En AS have been recognised at the estimated fair value on the date of the business combination. The measurement of identifiable assets and liabilities is based on provisional values determined by management, pending final valuations. The fair value of trade receivables and other receivables in Selvaag Pluss Eiendom KS is NOK 84.7 million and includes trade receivables with a fair value of NOK 0.9 million. No provisions have been made for impairment. The fair value of trade receivables and other receivables in Hansa Property Group AS is NOK 4.2 million and includes trade receivables with a fair value of NOK 1.8 million. The nominal value of the trade receivables is NOK 7.0 million, of which NOK 5.2 million is considered to be impaired. The fair value of trade receivables and other receivables in Bo En AS is NOK 1.1 million and includes trade receivables with a fair value of NOK 0.3 million. No provisions have been made for impairment.

Goodwill

(amounts in NOK 1 000) Selvaag Pluss Eiendom KS Hansa Property Group AS Bo En AS Consideration transferred 562 893 803 577 425 360 Non-controlling interests 5 975 1 501 - Fair value of identifiable net assets acquired (417 928) (674 119) (325 082) Goodwill 150 940 130 959 100 278

58 Consolidated Financial Statements Selvaag Bolig Group

Goodwill arising from business combinations is primarily related to anticipated synergies from on-going operations and the benefit of integrating the entire business into the group (control premium). Part of goodwill can be attributed to recognising deferred tax obligation at nominal value. Goodwill that has arisen as part of business combinations is not tax deductible. Non-controlling interests at the date of transfer of control are measured at the fair value of net identifiable assets attributable to non-controlling shareholders.

Effect on group results The Group has recognised a gain of NOK 62.6 million which resulted from a prior 33.3% ownership interest in Selvaag Pluss Eiendom KS, and which was re-measured at fair value in the business combination. Similarly, a gain of NOK 14.6 million was recognised when re-measuring the prior ownership interest in Hansa Property Group AS at fair value. Finally, a prior 62.5% ownership interest in Bo En AS gave rise to a gain of NOK 1.5 mil- lion when re-measured at fair value. The total gain of 78.7 million is included in the item ”share of profit and gains (losses) on disposal of associated companies and joint ventures” in the statement of comprehensive income. From 24 August 2011 Selvaag Pluss Eiendom KS has contributed NOK 1.5 million in sales revenues and NOK 2.4 million to loss for the period in the statement of comprehensive income. Hansa Property Group AS has from 24 August 2011 contributed NOK 81.4 million in sales revenue and NOK 11.6 million to loss for the period in the statement of comprehensive income. Bo En AS has from 26 November 2011 contributed 0.2 million in sales revenue and 1.2 million to loss for the period in the statement of comprehensive income. If these businesses had been consolidated from 1 January 2011 the sales revenues for the Group would have been NOK 357.5 million and the loss for the Group in 2011 would have been NOK 53.7 million.

Note 7: Salaries and personnel expenses

(amounts in NOK 1 000) 2011 2010 Wages and salaries (64 970) (44 699) Social security tax (9 466) (6 303) Pension costs (defined benefit plans) - - Pension costs (defined contribution plans) (2 952) 1 135 Other benefits (2 678) (1 335) Salary expense capitalised to inventory 3 747 - Total salaries and personnel expenses (76 319) (51 202)

As of 31 December 2011, the Group had 87 employees. In 2011, the average number of employees (and full-time equivalents) was 87.

Specification of pension costs (amounts in NOK 1 000) 2011 2010 Pension cost - defined contribution and disability pension plan (2 816) (1 395) Reversal of provision related to disability pension plan - 2 064 Other pension costs (including early retirement (AFP) (136) 466 Net pension costs (2 952) 1 135

As of 31 December 2011, there were 87 employees included in the defined contribution plan. 44 current employees were included in the early retire- ment (AFP) plan. Also refer to note 10 for Selvaag Bolig ASA.

In accordance with the Accounting Act section 7-30 a), companies in Norway are required to offer a pension plan in line with the Act relating to occu- pational pensions (”lov om obligatorisk tjenestepensjon”), and the Group’s companies have a pension plan that meets these requirements.

59 Consolidated Financial Statements Selvaag Bolig Group

Note 8: Other operating expenses

(amounts in NOK 1 000) Note 2011 2010 Operation and maintenance (8 057) (9 447) Consultancy expenses (36 202) (7 033) Commisions and other sales related expenses (32 002) (7 074) Losses on receivables 12 (628) (2 540) Other operating expenses (19 776) (17 155) Total other operating expenses (96 665) (43 249)

Consultancy expenses during 2011 are material and not directly comparable with a typical operating year. The Group has employed extensive man- power related to large transactions, preparations for the Company’s initial public offering, as well as general marketing. Of the total consultancy expenses, NOK 30 million is related to preparations for the initial public offering and to marketing. Other operating expenses primarily consist of operating lease and administrative expenses for the Selvaag Bolig Group headquarters and other related services purchased from Selvaag Gruppen for a total of NOK 10.5 million.

Note 9: Financial income and expenses

(amounts in NOK 1 000) Note 2011 2010

Interest income on financial assets measured at amortised cost 21 005 11 913 Net foreign currency gains 1 100 1 413 Other financial income (2 658) 1 Total financial income 19 447 13 327

Interest expenses on financial liabilities measured at amortised cost (60 413) (27 636) Capitalised interest 5 13 488 - Total interest expenses (46 925) (27 636) Net foreign currency losses (1 354) (2 864) Other financial expenses (7 283) (6 083) Total financial expenses (55 562) (36 583)

Net financial expenses (36 115) (23 256)

Note 10: Intangible assets Other (amounts in NOK 1 000) Goodwill Trademarks intangible assets Total

Specification of carrying amount Carrying amount at 31 December 2009 - Acquisition cost 7 007 7 007 Accumulated amortisation - Carrying amount at 31 December 2010 7 007 - - 7 007 Acquisition cost 382 176 50 000 44 545 476 721 Accumulated amortisation - (2 500) (1 882) (4 382) Carrying amount at 31 December 2011 389 183 47 500 42 663 479 346

Cost of acquisition Cost at 31 December 2009 - Additions 7 007 7 007 Disposals - Cost at 31 December 2010 7 007 - - 7 007 Additions 382 176 50 000 44 545 476 721 Disposals - Cost at 31 December 2011 389 183 50 000 44 545 483 728

60 Consolidated Financial Statements Selvaag Bolig Group

Accumulated amortisation Accumulated amortisation at 31 December 2009 - - - - Write-downs Amortization Accumulated amortisation at 31 December 2010 - - - - Write-downs Amortization (2 500) (1 882) (4 382) Accumulated amortisation at 31 December 2011 - (2 500) (1 882) (4 382)

Estimated useful life - 5 years 5 years Amortisation method - Straight-line Straight-line

The change in the carrying value of goodwill from 2010 and 2011 relates to the acquisitions of Selvaag Eiendom Pluss KS and Bo En AS, as well as to the merger with Hansa Property Group AS. Please refer to note 6 - Business combinations for further details. The value of the trademark relates to the brand Selvaag Pluss, while other intangible assets are related to long-term property leases. The value of intangible assets is tested for impairment annually, or more often when there is indication that the value may be impaired. If the recoverable amount is less than the carrying amount, the asset is written down to its recoverable amount.

Impairment testing of goodwill and other intangible assets The Group tests goodwill for impairment annually, or more often if internal or external indications of impairment exist. Other intangible assets, including the trademark ”Selvaag Pluss” and long-term property leases will be amortised over their expected useful life and tested for impairment if events during the period indicate that the value may be impaired. a) Goodwill Goodwill arisen from business combinations is allocated to each of the Group’s cash-generating segments as follows:

2011 Goodwill Property development - Greater Oslo 213 309 Property development - The rest of Norway 168 867 Other 7 007 Total 389 183

2011 Goodwill Property development - Greater Oslo - Property development - The rest of Norway - Other 7 007 Total 7 007

Following the acquisitions of Hansa Property Group, Selvaag Pluss Eiendom KS and the remaining shares of Bo En AS during the third and fourth quarter of 2011, the Group altered its operating segment reporting to Property development across three geographic areas - Greater Oslo, The rest of Norway, Other countries, and Other. Goodwill allocated to the ”Other” segment originated from the acquisition of Meglerhuset Selvaag in 2010. Com- parative figures for 2010 have been restated to reflect the revised company structure. Refer to note 4 for segment information and note 6 for further information on business combinations. The recoverable amount of the cash-generating units is calculated based on the value that the asset will generate for the Group in the future (value in use). Liquidity forecasts (before tax) are based on management’s assessment of future cash flows from each cash-generating unit. The forecast period reflects the Group’s time horizon for its property portfolio as of 31 December 2011, followed by a terminal value representing the management’s estimate of future volume produced. The cash flows are discounted using a discount rate of 10% (before tax) which also reflects spe- cific risks for which the estimated cash flows have not been adjusted. The future volume growth rate in the terminal value is estimated at 0%. Other goodwill of NOK 7 million is evaluated in line with the methodology described above. The recoverable amount is found to exceed the carrying amount.

Sensitivity analysis: Increase in the required rate of return of 1 and 2 percentage points will reduce the terminal value with NOK 153 million and NOK 277 million, respec- tively. Decrease in the future production volume (square metres) of 10 and 20 percent will reduce the terminal value with NOK 152 million and NOK 303 million, respectively. Neither of these scenarios will result in the need for impairment of goodwill. b) Trademark The trademark ”Selvaag Pluss” was included in the acquisition of Selvaag Pluss Eiendom KS detailed in note 6. The recoverable amount of the asset

61 Consolidated Financial Statements Selvaag Bolig Group

is calculated based on the expected future value generated by the concept. The liquidity forecasts used in the estimates are based on management’s estimate of the expected excess value of the ”Pluss-concept” during a five-year period. Future cash flows are discounted using a discount rate of 15% (before tax). c) Other intangible assets Other intangible assets include specific long-term property leases in acquired businesses detailed in note 6. The recoverable amount of the asset is calculated based on the expected future value of the property lease. Liquidity forecasts are based on management’s estimate of future expected cash flows generated by property leases in the course of a five-year period. Value assessments are based on the number of square meters leased, the amount of idle leasable space, lease income per square meter and variable lease expenses. Future cash flows are discounted at a rate of 10% after tax.

Note 11: Property, plant and equipment

(amounts in NOK 1 000) Residential properties Other equipment Total

Cost at 31 December 2009 2 000 1 787 3 787 Additions 2010 - 1 247 1 247 Disposals 2010 - (25) (25) Translation differences - (11) (11) Cost at 31 December 2010 2 000 2 998 4 998 Additions 2011 3 255 3 255 Disposals 2011 - Translation differences 1 1 Cost at 31 December 2011 2 000 6 254 8 254 - Accumulated depreciation at 31 December 2009 - (733) (733) Depreciation 2010 - (491) (491) Accumulated depreciation at 31 December 2010 - (1 224) (1 224) Depreciation 2011 - (1 388) (1 388) Accumulated depreciation at 31 December 2011 - (2 612) (2 612)

Carrying amount at 31 December 2010 2 000 1 774 3 774 Carrying amount at 31 December 2011 2 000 3 642 5 642

Estimated useful life - 3-5 years Depreciation method - straight-line

Note 12: Trade and other receivables

(amounts in NOK 1 000) 2011 2010 Trade receivables 31 436 8 278

Current non-interest-bearing receivables from the Selvaag Group 130 5 420 Interest-bearing receivables from associated companies and joint ventures 205 21 100 Other receivables 57 941 34 916 Other current financial receivables 58 276 61 436 Prepaid expenses 29 815 7 002 Total other current receivables 88 091 68 438

The carrying amounts of trade and other receivables are denominated in NOK.

62 Consolidated Financial Statements Selvaag Bolig Group

Analysis of trade receivables overdue at the end of the reporting period 31.12.2011 31.12.2010 Not overdue 36 712 6 161 Overdue 1-100 days 1 214 1 972 Overdue > 100 days 6 259 2 007 Gross trade receivables 44 185 10 140 Total allowance for doubtful debts* 12 748 1 862 Net trade receivables 31 436 8 278

* Additions related to business combinations are NOK 10,455.

Losses on receivables 31.12.2011 31.12.2010 Movement in allowance for doubtful debts (431) (1 862) Receivables written off during the year as uncollectible (197) (677) Losses on receivables in the statement of comprehensive income (628) (2 540)

Note 13: Additional information to the statement of cash flows

Acquisitions of businesses and subsidiaries The table below shows the effects on the consolidated statement of financial position from acquisitions of businesses and subsidiaries:

(amounts in NOK 1 000) 2011 2010 Associated companies and joint ventures 353 976 - Other non-current assets 607 315 7 898 Current assets 3 799 971 38 115 Liabilities (2 961 956) (36 216) Non-controlling interests (7 476) - Total consideration 1 791 830 9 797

Cash payments related to acquisitions (30 000) (9 797) Cash in subsidiaries acquired 281 370 9 633 Payments for acquisitions of businesses and subsidiaries, net of cash acquired 251 370 (164)

Acquisitions in 2011 consist of Hansa Property Group AS, Selvaag Pluss Eiendom KS and Bo En AS, see note 6. In 2010, several real estate agent companies were acquired from from companies in the Selvaag Group.

Disposal of businesses and subsidiaries The table below shows the effects on the consolidated statement of financial position from disposal of businesses and subsidiaries: (amounts in NOK 1 000) 2 011 2 010 Current assets 7 994 - Liabilities (420) - Gains (losses) on disposal of businesses and subsidiaries (202) - Total consideration 7 372 -

Cash proceeds related to disposals of businesses and subsidiaries 18 448 - Cash in subsidiaries disposed of (1 044) - Payments for acquisitions of businesses and subsidiaries, net of cash acquired 17 404 -

Disposals in 2011 consist of Selvaaghus AB. In addition, cash proceeds in 2011 include payment from disposal of businesses recognised in previous years.

Significant non-cash transactions In 2011, consideration for the acquisitions of businesses and subsidiaries largely comprise issue of new shares. In 2010, the disposal of ownership interests in the associated companies Sandvika Boligutvikling AS/KS for a consideration of NOK 58.8 million was settled against an existing liability towards the acquirers. See note 17 for additional information.

63 Consolidated Financial Statements Selvaag Bolig Group

Cash and cash equivalents (amounts in NOK 1 000) 31.12.2011 31.12.2010 Restricted bank accounts - - Non-restricted bank deposits and cash 395 207 13 525 Total 395 207 13 525

Interest payments Payments of interest are classified as operating activities, and were NOK 69.0 million and NOK 27.6 million in 2011 and 2010, respectively.

Note 14: Additional information to the statement of changes in equity

Paid-in capital Number of Share Share Other Total (amounts in NOK 1 000, except number of shares) shares capital premium paid-in capital paid-in capital Equity as of 1 January 2010 100 159 7 286 560 546 567 991 Group contribution received - - - 131 000 131 000 Group contribution received (after taxes) - - - 7 586 7 586 Equity as of 31 December 2010 100 159 7 286 699 132 706 577 Share capital increase through conversion of debt 41 285 820 82 413 17 587 - 100 000

Share capital increases related to business combinations: - acquisition of Selvaag Pluss Eiendom KS 10 814 568 21 629 376 982 - 398 611 - acquisition of Hansa Property Group AS 13 644 552 27 289 475 631 - 502 920 - acquisition of Bo En AS 2 441 756 4 884 85 116 - 90 000 - expenses directly attributable to share capital increases (after taxes) - - (4 297) - (4 297)

Purchase of treasury shares related to business combinations (10 531) (21) (367) (388) Equity as of 31 December 2011 68 176 265 136 353 957 938 699 132 1 793 423

As of 31 December 2011, the share capital of the company (net of treasury shares) was NOK 136 352 530, comprising 68 176 265 fully-paid ordinary shares with a par value of NOK 2.00. As of 31 December 2010, the share capital of the company was NOK 158 792, comprising 100 fully-paid ordinary shares with a par value of NOK 1 587.92. All issued shares carry equal rights. Change in par value per share is due to a share split executed in 2011. The company holds 10 531 treasury shares as of 31 December 2011 (nil as of 31 December 2010). Other paid-in capital consists of group contribution received from companies in the Selvaag Group, and equity effects related to mergers.

Other equity reserves Other reserves in the statement of changes in equity consist of the Group’s share of transactions with owners in associated companies and joint ventures. In 2010, the main transactions were share of expenses from share issues in associated companies.

Non-controlling interests (NCI) NCI ownership in % NCI share of profit (loss) NCI carrying amount (amounts in NOK 1 000) 31 December 2011 2011 as of 31 December 2011 Nesttun Pluss AS/KS 25.0% (1 010) 4 966 Løren 2B AS/IS 3.7% (6) 1 495 (1 016) 6 461

The Group had no non-controlling interests as of 31 December 2010.

Ownership structure As of 31 December 2011, the Group had 96 shareholders, of which four were shareholders outside Norway. As of 31 December 2010, the Group had one shareholder, based in Norway.

64 Consolidated Financial Statements Selvaag Bolig Group

The 20 largest shareholders as of 31 Desember 2011 were as follows:

Shareholder Ordinary shares Ownership/ voting share %

Selvaag Gruppen AS 41 285 920 60.5% Ferd Eiendomsinvest AS 3 604 856 5.3% Havfonn AS 3 604 856 5.3% Skips AS Tudor 3 235 517 4.7% IKM Eiendom AS 3 058 938 4.5% Storebrand Livsforsikring 2 741 388 4.0% Svithun Finans AS 1 181 968 1.7% TS Eiendom AS 1 181 968 1.7% Toluma Invest AS 813 318 1.2% Veidekke Eiendom AS 753 238 1.1% Rotac AS 710 033 1.0% Lema AS 534 501 0.8% MP Pensjon 522 829 0.8% SEB Enskilda ASA 383 225 0.6% AS Wingana 353 359 0.5% Hustadlitt AS 351 449 0.5% Megaron AS 340 924 0.5% Jasto AS 278 089 0.4% Statoil Pensjon 261 960 0.4% Leif Hubert Eiendom 254 507 0.4% Total 20 largest shareholders 65 452 843 96.0% Other shareholders (including treasury shares) 2 733 953 4.0% Total ordinary shares 68 186 796 100.0%

The sole shareholder as of 31 Desember 2010 was as follows:

Shareholder Ordinary shares Ownership/ voting share % Selvaag Gruppen AS 100 100% Total ordinary shares 100 100%

The members of the board of directors and the Chief Executive Officer held no shares or share options in the company during the years 2010 and 2011.

Note 15: Earnings per share

Earnings per share are calculated by dividing the profit (loss) for the period by the weighted average number of shares in issue. There are no diluting effects related to the share capital in the years 2011 and 2010. 2 011 2 010 Profit (loss) for the period attributable to shareholders of the Company in NOK 1 000 (4 694) (16 323) Weighted average number of shares outstanding during the period 31 097 944 100 Basic earnings per share in NOK (0.15) (163 230) Diluted earnings per share in NOK (0.15) (163 230)

65 Consolidated Financial Statements Selvaag Bolig Group

Note 16: Interest-bearing liabilities

Specification of interest-bearing liabilities (amounts in NOK 1 000) 2011 2010 Non-current liabilities Bank loans 2 341 843 - Other non-current liabilities 34 457 - Total non-current interest-bearing liabilities at amortised cost 2 376 300 - Current liabilities Bank loans 1 001 498 13 900 Bond issue 22 000 - Bank overdrafts (Selvaag Group cash pool) - 614 001 Other current liabilities 166 130 - Total current interest-bearing liabilities at amortised cost 1 189 628 627 901 Total interest-bearing liabilites at amortised cost 3 565 928 627 901

During August 2011, liabilities related to the Group’s cash pool were refinanced and replaced with new loans in DNB. The remaining NOK 165 million were converted into current liabilities to Selvaag Gruppen AS. Selvaag Gruppen AS is entitled to convert this debt into shares in the case of a share issue with subsequent initial public offering. The 2010 bank overdraft was related to a cash pool agreement within the Selvaag Group in which the Group no longer participates.

Allocation of bank overdraft to Group companies Company (amounts in NOK 1 000) 2011 2010 Selvaag Bolig AS - 611 063 Selvaag Pluss AS - 1 893 Selvaag Pluss Service AS - 1 046 Selvaag Hus AS - - Total bank overdraft - 614 001

Cur- Maturity Company (amounts in NOK 1 000) Loan instrument Lender 2010 rency date Interest rate Selvaag Bolig AS Property loan DNB 13 900 NOK 31.12.2011 NIBOR 3m + 1.75pp Selvaag Bolig AS Cash pool DNB 614 001 NOK Not NIDR +1.35pp Selvaag Group specified Total bank borrowings at amortised cost 627 901

Cur- Maturity Company (amounts in NOK 1 000) Loan instrument Lender 2010 rency date Interest rate Selvaag Bolig ASA Land loan DNB 546 150 NOK 01.07.2016 NIBOR 3m + 2.25pp Selvaag Bolig ASA Equity Bridge DNB 484 000 NOK 01.12.2012* NIBOR 3m + 3.50pp Selvaag Bolig ASA Loan Selvaag Gruppen 166 130 NOK 31.12.2012** NIBOR 3m + 3.50pp Selvaag Bolig ASA Bond issue Obligasjonseiere 22 000 NOK 31.12.2012 NIBOR 3m + 2.00pp Selvaag Bolig Lillohøyden AS Land loan DNB/Handelsbanken 191 500 NOK 31.12.2013 NIBOR 3m + 1.70pp Skårer Bolig AS Land loan Storebrand 195 000 NOK 19.11.2015 NIBOR 3m + 1.50pp Løren 2 B AS Construction loan DNB/Handelsbanken 221 721 NOK 31.12.2012 NIBOR 3m + 2.00pp Selvaag Bolig Kornmoenga AS Construction loan DNB/Handelsbanken 186 203 NOK 30.06.2014 NIBOR 3m + 1.65pp Selvaag Bolig Løren 5 AS Construction loan DNB/Handelsbanken 146 826 NOK 31.12.2013 NIBOR 3m + 1.65pp Nesttun Pluss KS Construction loan DNB 178 542 NOK 30.09.2013 NIBOR 3m + 1.50pp Lervik Brygge AS Construction loan SR Bank 115 854 NOK 31.12.2012 NIBOR 3m + 1.95pp Other companies in Greater Oslo Land loan DNB/Handelsbanken/Storebrand 251 093 NOK 2013 - 2015 - Other companies in Greater Oslo Construction loan DNB/Storebrand 273 093 NOK 2012 - 2013 - Other companies in the rest of Norway Land loan DNB/SR Bank 360 894 NOK 2013 - 2017 - Other companies in the rest of Norway Construction loan SR Bank 76 295 NOK 2012 - 2015 - Other companies Other loans - 150 627 - 2013 - 2022 - Total interest-bearing liabilities 3 565 928

66 Consolidated Financial Statements Selvaag Bolig Group

* According to plan, this loan will be paid in part or fully in the case of a share issue with subsequent initial public offering, with the option to post- pone the maturity date to 30 June 2014 at the Company’s request. If this option is used, the lender will receive the right to convert any remaining balance into shares in the company. ** The loan has no set maturity date, but can be converted into Company shares in the case of a share issue and subsequent initial public offering, planned for 2012.

Non-current interest-bearing liabilites Maturity schedule for non-current loans: Period 2011 2010 To be repaid during 2013 1 067 190 - To be repaid during 2014 382 909 - To be repaid during 2015 266 778 - To be repaid during 2016 546 150 - To be repaid during 2017 or later 113 273 - Total 2 376 300 -

Current interest-bearing liabilities The table below includes liabilities maturing within 12 months subsequent to the reporting period. Maturity schedule for current loans: Period 2011 2010 Repayable within 0-6 months after period-end 290 679 307 Repayable within 6-12 months after period-end 898 949 14 219 Unspecified maturity schedule (Group cash pool) - 614 001 Total 1 189 628 628 527

Collateral and guarantees etc.

Secured loans 2011 2010 Bank loans - financial institutions 2 742 882 13 900 Bank loans - Selvaag Gruppen AS - 611 100

Carrying value of land pledged as security on bank loans 2011 2010 Land 3 925 669 356 291

Note 17: Trade and other payables

(amounts in NOK 1 000) 31.12.2011 31.12.2010 Trade payables 148 682 9 090

Current non-interest-bearing liabilities payable to the Selvaag Group 1 293 151 Accrued expenses 76 197 5 176 Other current financial liabilities * 78 141 10 879 Total other current non-interest-bearing financial liabilities 155 630 16 206 Other current liabilities 109 162 22 034 Total other current non-interest-bearing liabilities 264 792 38 240

Trade payables The Group’s trade payables have the following maturity structure at 31 December: Maturity 2011 2010 Repayable 0-3 months after the end of the reporting period 148 682 9 076 Repayable 3-6 months after the end of the reporting period - 14 Net trade payables 148 682 9 090

* Other current liabilities include NOK 60 million in deferred settlement to former shareholders in Bo En AS. Of this amount, NOK 40 million can be paid in shares at the Company’s request, in the event of a share issue and subsequent initial public offering.

67 Consolidated Financial Statements Selvaag Bolig Group

Note 18: Managing capital and financial risk management

18.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management activities seek to minimise potential adverse effects on the Group’s financial performance. The CEO and management group identify and evaluate financial risks on an on-going basis.

(a) Market risk (i) Foreign exchange risk The company is a Norwegian real estate developer, focusing on Norwegian development projects and properties. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk, however to a limited degree.

(ii) Price risk The Group is generally exposed to property price risk, and the Group is mainly exposed geographically in Norway.In addition, the Group has invested in one project in Spain and two future projects in Sweden. The Group is also exposed to risks related to construction costs and material prices. The profit margin of each project will vary depending on the development of sales income per square meter for the residential properties. The Group’s exposure to price risk is partly hedged as presales is limited until construction contracts have been signed. The degree of risk associated with the prices of goods and services varies depending on contract type. Projects often span over several years and material prices and salary expenses may increase during the construction period. Most contracts are based on fixed prices for the construction period, but certain contracts contain index clauses allowing price increases.

(iii) Interest rate risk The Group’s interest rate risk arises largely from long term borrowings. Borrowings issued at variable rates expose the Group to interest rate fluctuations affecting cash flows. The Group capitalises interest cost as part of development projects (inventory property) as the projects progress, in accordance with IAS 23 Borrowing Costs. Refer to note 16 Interest-bearing liabilities for details of the Group’s borrowings. Projects outside Norway are financed in local currency through subsidiaries. The current policy is not to hedge foreign currency exposure.

(b) Credit risk Credit risk is managed on a Group level. The Group is exposed to counterparty risk when Group companies enters into agreements regarding sales of residential property. Credit risk also arises from outstanding receivables, such as loans to associated companies. Credit risk related to sale of property is considered to be limited since sales take place through professional estate agents. Normally, a 10% depo- sit is required from home buyers upon entering a contract. The balance is settled upon transfer of title. Based on the above, the Group assesses credit risk associated with financial assets to be low. The Group’s maximum exposure to credit risk comprises the classes ’trade receivables’, ’other current and non-current receivables’, and ’cash and cash equivalents’. See note 18.3 for carrying amounts of these classes as of 31 December 2010 and 2011.

(c) Liquidity risk The Group aims to maintain sufficient liquidity to meet its foreseeable obligations as well as securing a reasonable capacity to meet its funding and liquidity management requirements. The Group manages its liquidity risk by maintaining adequate cash reserves, banking facilities and borrowing facilities, mainly through the Selvaag Bolig Group cash pool facility, and by continuously monitoring forecast and actual cash flows. The forecasts take into consideration the Group’s financing plans and covenant compliance. See note 16 ’Interest-bearing liabilities’ and note 17 ’Trade and other payables’ for maturity analysis of financial liabilities. The majority of current non-interest bearing liabilities are repayable within 6 months.

Maturity schedule for the Group’s liabilities (nominal values)

Interest-bearing liabilities (amounts in NOK 1 000) Note Total per 31.12.2011 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not specified Bank loans* 16 3 758 260 1 063 430 1 866 726 784 745 - 43 359 - Other interest-bearing liabilities 16 222 587 188 130 34 457 - - - - Total interest-bearing liabilities 3 980 847 1 251 560 1 901 183 784 745 - 43 359 -

68 Consolidated Financial Statements Selvaag Bolig Group

Non-interest-bearing liabilities (amounts in NOK 1 000) Note Total per 31.12.2011 < 1 year 1-3 years 3-6 years 6-10 years > 10 years Not specified Trade payables 17 148 682 148 682 - - - - - Current non-interest-bearing liabili- 17 1 293 1 293 - - - - - ties payable to the Selvaag Group Accrued expenses 17 76 197 76 197 - - - - - Other current financial liabilities 17 78 141 78 141 - - - - - Other current liabilities 17 109 162 109 162 - - - - - Other non-current non-interest- 18.3 28 304 - 28 304 - - - - bearing liabilities Total non-interest-bearing liabilities 441 778 413 474 28 304 - - - -

* Including estimated interest payments.

18.2 Capital risk management The Group’s objective when managing its capital is to ensure the ability of the entities in the Group to continue as going concerns while providing returns for shareholders and benefits for other stakeholders and maintaining an optimal capital structure. In achieving this objective, the Group focuses on the profitability of the various projects. In order to optimise the capital structure, management evaluates all available funding sources on an on-going basis. Capital requirements are mainly funded through a cash pool arrangement in which selected entities in the Selvaag Bolig Group participates. In addition, the Company has a facility related to start-up of new projects. The Group may also monitor capital based on the gearing level, although this is not currently a priority. The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as current and non-current interest-bearing liabilities less cash and cash equivalents. Total capital is calculated as total equity plus net debt. Additionally, the share of building loans as a proportion of total interest-bearing liabilities is disclosed as this provides information related to the company’s acitvity level.

18.3 Financial assets and liabilites Classification of financial assets and liabilities 2011 2010 Fair value through Loans and Fair value through Loans and (amounts in NOK 1 000) Note profit and loss receivables profit and loss receivables Financial assets Loans to associated companies and joint ventures - 35 500 - 240 027 Other non-current assets 36 784 - Financial non-current assets - 72 284 - 240 027 Trade receivables - 31 436 8 278 Other current financial receivables 12 - 58 276 - 61 436 Cash and cash equivalents - 395 207 - 13 525 Financial current assets - 484 919 - 83 239 Financial assets - 557 203 - 323 266

Fair value through Financial liabilities Fair value through Financial liabilities profit and loss at amortised cost profit and loss at amortised cost Financial liabilities Non-current interest-bearing liabilities 16 - 2 376 300 - - Other non-current non-interest-bearing liabilities - 28 304 - - Financial non-current liabilites - 2 404 604 - - Current interest-bearing liabilities - 1 189 628 - 627 901 Trade payables - 148 682 - 9 090 Other current non-interest-bearing financial liabilities 17 10 948 155 630 - 16 206 Financial current liabilites 10 948 1 493 940 - 653 197 Financial liabilites 10 948 3 898 544 - 653 197

69 Consolidated Financial Statements Selvaag Bolig Group

Classes of financial assets and liabilities

(amounts in NOK 1 000) Note 2011 2010 Trade receivables and other current and non-current financial assets Loans to associated companies and joint ventures 35 500 240 027 Other non-current assets 36 784 - Trade receivables 31 436 8 278 Other current financial receivables 12 58 276 61 436 Total trade receivables and other current and non-current financial assets 161 996 309 741

Cash and cash equivalents Cash and cash equivalents 395 207 13 525

Trade payables and other non-interest-bearing financial liabilities Other non-current non-interest-bearing liabilities 28 304 - Trade payables 148 682 9 090 Other current non-interest-bearing financial liabilities 17 155 630 16 206 Total trade payables and other non-interest-bearing financial liabilities 332 616 25 296

Interest-bearing liabilities Non-current interest-bearing liabilities 16 2 376 300 - Current interest-bearing liabilities 16 1 189 628 627 901 Total interest-bearing liabilities 3 565 928 627 901

Derivatives (interest rate swap) 10 948 Other current non-interest-bearing financial liabilities 17 10 948 -

Sensitivity analysis

Interest rate risk

2011 Adjustment to interest level in basis points 50 100 150 Effect - Bank loans (4 986) (9 972) (14 957) Effect - Bank overdraft to the Selvaag Group (2 047) (4 093) (6 140) Effect - Other loans (305) (610) (915) Effect on cash flow (in NOK 1 000) (7 337) (14 675) (22 012)

2010 Adjustment to interest level in basis points 50 100 150 Effect - Bank loans (134) (268) (401) Effect - Bank overdraft to Selvaag Group (3 258) (6 515) (9 773) Effect on cash flow (in NOK 1 000) (3 391) (6 783) (10 174)

The above table details the Group’s sensitivity to a decrease or increase in interest rates by 50, 100 and 150 basis points respectively. The effects are calculated on a pre-tax basis and based on the average outstanding amounts during the period.

Foreign exchange risk The Group is to a limited degree exposed to foreign currency risk. Fluctuations in the amount of +/- 5% as of 31 December 2011 would cause immaterial changes to the Group’s profit and loss, and will affect the consolidated statement of changes in equity only with immaterial amounts.

70 Consolidated Financial Statements Selvaag Bolig Group

18.4 Fair values of financial instruments

Principles for estimating fair values Based on the characteristics of the financial instruments that are recognised in the consolidated financial statements, the financial instruments are grouped into classes as described below. The estimated fair values of the Group’s financial instruments are based on available market prices where applicable and the valuation methodologies per class are described below.

Fair value hierarchy The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in measuring the fair value of financial instruments.

Level 1: Quoted prices (unadjusted) in active markets for identical financial instruments Level 2: Inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

Trade receivables and other current and non-current financial assets For trade receivables and other current and non current financial assets, the nominal amount, adjusted for allowance for bad debt, is assessed to be a reasonable approximation of fair value. The effect of not discounting is considered to be immaterial for this class of financial instruments.

Cash and cash equivalents The fair value for this class of financial instruments is assessed to be equal to the nominal amount.

Trade payables and other non-interest-bearing financial liabilities For trade payables and other non-interest-bearing financial liabilities, the nominal amount is assessed to be a reasonable approximation of fair value. The effect of not discounting is considered to be immaterial for this class of financial instruments.

Interest-bearing liabilities The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

Derivatives Fair values of foreign currency forward contracts are retrieved from external financial institutions based on the applicable foreign currency rates in the market at the end of the reporting period. Fair values of interest rate swap contracts are retrieved from external financial institutions based on the applicable interest rates in the market at the end of the reporting period. The derivatives are measured using level 2 inputs. The carrying amounts for the assets and liabilities of all classes are assessed to be a reasonable approximation of fair values, and a table showing the carrying amounts and fair values per class is not considered necessary.

Note 19: Income taxes

Specification of income tax (expense) income: (amounts in NOK 1 000) 2011 2010 Current income taxes payable (4 952) - Changes in deferred taxes 28 217 (13 793) Income taxes in profit (loss) 23 265 (13 793)

The Group’s business activities are mainly related to Norway with only insignificant amounts arising in other countries. An allocation of income tax expense between countries is thus not considered necessary.

Specification of current income taxes payable: (amounts in NOK 1 000) 2011 2010 Income taxes payable - expense for the period (4 952) - Income taxes on Group contribution given 4 952 - Current income taxes payable in the statement of financial position - -

71 Consolidated Financial Statements Selvaag Bolig Group

Reconciliation from nominal to effective income tax rate: (amounts in NOK 1 000) 2011 2010 Profit (loss) before income taxes (28 975) (2 530)

Estimated income taxes according to nominal tax rate (28%) 8 113 708

Taxable income related to the exemption method, in accordance with the 6 373 (308) Norwegian Taxation Act section 2-38 Other non-deductible expenses (6 275) (398) Other non-taxable income 2 747 57 Other items (4 944) (2 083) Unrecognised deferred tax assets (1 532) (1 624) Share of income from associated companies and joint ventures 18 784 (10 146) Income tax income (expense) 23 265 (13 793) Effective income tax rate (80.3%) 545.2%

Share of income from associated companies and joint ventures Share of income from associated companies and joint ventures which are not limited partnerships is recognised on an after tax basis and therefore does not impact the Group’s income tax expense, see note 24. The difference between effective tax rate and nominal tax rate in 2011 is primarily due to gains from step acquisitions excluded from the tax base. For 2010, the difference is primarily due to negative results from associated companies.

Deferred tax assets and liabilities as of 31 December 2011 2010 (amounts in NOK 1 000) Asset Liability Liability Forpliktelse Non-current assets - 20 273 4 494 - Inventory property - 211 377 - 8 913 Receivables 11 502 - 10 004 - Current liabilities 21 451 - - - Non-current liabilities 5 080 - 2 894 - Losses carried forward 188 782 - 1 658 - Total temporary differences 226 815 231 650 19 050 8 913 Unrecognised deferred tax assets 9 099 - 6 290 - Net deferred tax assets (liabilities) in the statement of financial position (13 934) - 3 847 -

Deferred tax assets are included in the statement of financial position to the extent that the realisation of the related tax benefit through future taxable profits is probable. There are no expiration dates on losses carried forward. NOK 7.6 million of unrecognised deferred tax assets is related to provisions for loss on receivables in an associated company.

The net movement of deferred tax assets (liabilities) is as follows: (amounts in NOK 1 000) 2011 2010 Net deferred tax assets (liabilities) as of 1 January 3 847 9 598 Acquisition of subsidiaries (42 717) 268 Recognised in the statement of comprehensive income 23 265 (13 793) Recognised directly in the statement of changes in equity 1 671 7 774 Net deferred tax assets (liabilities) as of 31 December (13 934) 3 847

72 Consolidated Financial Statements Selvaag Bolig Group

Note 20: Provisions

(amounts in NOK 1 000) 31.12.2011 31.12.2010 Provision for contractual infrastructure 92 112 84 364 Other non-current provisions - - Total non-current provisions for other liabilities 92 112 84 364

Provision for contractual infrastructure - - Other current provisions - - Total current provisions for other liabilities - -

The provision for contractual infrastructure is related to infrastructure and construction of parking areas in Lørenskog. The provision for 2010 was primarily related to demolition and preparation of land held for development by the Hansa Selvaag joint venture companies which are now consolidated subsidiaries.

Development during the period (amounts in NOK 1 000) 2011 2010 As of 1 January 84 364 93 368 Obligations arising during the year and effects of changes in estimates - 1 262 Amounts utilised (1 262) (7 701) Reclassification after business combinations (83 102) - Reclassification of pension obligations - (2 565) Obligations in acquired companies 92 112 - As of 31 December 92 112 84 364

Companies with active development projects have obligations to build infrastructure etc. as a consequence of regulatory requirements and develop- ment plans. These obligations are reflected in the carrying value of the various projects and are not recognised separately as provisions.

Note 21: Contingent liabilities and guarantees

The Group is subject to the following contingent liabilities due to ownership interests in associated companies and joint ventures:

(amounts in NOK 1 000) 31.12.10 Share issue commitment 25 454 Capital not called up - limited partnerships 92 555 Total contingent liabilities 118 009

The Group has given personal guarantees of NOK 113 million during 2011, and NOK 32 million during 2010. The Group fulfills legal requirements (pursuant to Housing Construction Act section 12) with respect to purchased bank guarantees and other guarantees. Corresponding liabilities included in the statement of financial position are not included in the above amounts.

For information on conversion rights, see note 16.

The share issue commitment in 2010 was related to ownership interest in Hansa Property Group AS. The capital not called up is related to the Group’s ownership in limited partnership companies (KS).

Note 22: Remuneration and fees to management, board of directors and auditors

This statement of remuneration is valid for work performed by leading employees in the Group. In accordance with the Public Limited Companies Act section 6-16a, the Board of Directors shall prepare a statement on determination of salary and other remuneration to the CEO and other senior management. The Group has the following principles regarding the determination of remuneration to the CEO and Management Group:

In the opinion of the Board of Directors, salary and other remuneration to the CEO and management should appear competitive, and total remuneration should reflect the extent of their responsibilities. The CEO may receive remuneration as a bonus in addition to basic salary, conditional on fulfilment of certain performance criteria, as well as ordinary additional remuneration for this type of position. All managers are members of the ordinary pension scheme of the Group. The Group has no specific remuneration arrangement for the CEO or other managers connected to the shares or the development of the share price, including options. In the event of dismissal, the CEO will receive 12 months’ salary.

The Board of Directors has not received remuneration during 2011 and 2010, and owns no shares or share options in the company.

73 Consolidated Financial Statements Selvaag Bolig Group

Specification of remuneration to management (amounts in NOK 1 000): 2011 Position Salary Bonus Pension Other Total Baard Schumann President and CEO 2 315 1 474 46 54 3 889 Haavard Rønning CFO 1 439 700 47 6 2 192 Halvard Kverne1 Vice president portfolio management 752 350 50 3 1 155 Sverre Molvik Vice president portfolio management 1 413 - 47 6 1 466 Anne Grethe Storaker Vice president sales and marketing 997 300 52 6 1 355 Petter Cedell Vice president property investment 1 020 200 49 6 1 275 Total - Group management 7 936 3 024 291 81 11 332

2010 Position Salary Bonus Pension Other Total Baard Schumann President and CEO 1 785 1 500 46 52 3 383 Haavard Rønning CFO 1 328 1 000 44 10 2 382 Halvard Kverne Vice president portfolio management 355 1 000 47 6 1 408 Sverre Molvik2 Vice president portfolio management 250 400 - - 650 Anne Grethe Storaker Vice president sales and marketing 939 300 52 18 1 309 Petter Cedell Vice president property investment 970 200 47 8 1 225 Total - Group management 5 627 4 400 236 94 10 357

1 From February 2010 to June 2011, Halvard Kverne has been engaged part-time as Project Director in Hansa Property Group AS. 2 Sverre Molvik started in Selvaag Bolig ASA on 1 November 2010.

Specification of fees paid to the auditor: (amounts in NOK 1 000) 2011 2010 Statutory audit services to the parent company 382 325 Statutory audit services to subsidiaries 190 315 Other assurance services 2 190 45 Tax advisory services 42 39 Other non-audit services 525 - Total fees paid to the auditor (exclusive of VAT) 3 329 724

The Board’s statement on determination of salary and other remuneration to leading personnel in Selvaag Bolig ASA The following statement of salary and other remuneration to members of the Group’s management will be presented for a consultative vote at the ordinary general meeting in April 2012.

Guidelines for management remuneration Leading personnel includes the chief executive officer (CEO) and other senior management. For the purposes of these guidelines, the remuneration package signifies total compensation, including one or more of the following elements: fixed base salary, variable pay (including bonus), and other benefits (including pension contribution, termination benefits, fringe benefits and other benefits-in-kind). Severance pay comprises compensation related to resignation, and may include termination payments, other financial compensation and payment in kind.

Main principles for determination of remuneration packages Remuneration to management in Selvaag Bolig ASA should be competitive, but not leading compared to similar companies. The primary element of a remuneration package shall be the fixed base salary. The remuneration packages must be designed as to avoid unreasonable compensation due to external circumstances outside management’s control. The individual elements in a remuneration package, including fixed base salary, any variable pay or other benefits such as pension contributions and severance, must be considered in the context of total compensation. The Board must maintain an overview of the total value of each manager’s agreed compensation and ensure that management’s remuneration packages do not have adverse consequences for the Company or in other ways are detrimental to the Company’s reputation. Individuals in the Group’s management shall not receive specific compensation for Board positions within wholly owned subsidiaries.

Variable pay Any variable pay shall be based on the following principles: Clear connections must exist between the goals determining variable pay and the objectives of the company. Variable pay must be based on objective, definable and measurable criteria. For the management group, variable pay (bonus) may not exceed 60% of fixed base salary (67% for the CEO). The criteria shall be based on circumstances which are possible for management to influence and set forth a distinct period for which variable pay will be determined. A system for variable pay must be transparent and easily comprehensible.

74 Consolidated Financial Statements Selvaag Bolig Group

Pension contributions The terms for determining management’s pension should be equal to those of other employees.

Severance pay In the case of a pre-established agreement through which the chief executive officer waives the protection against dismissal as set forth by the working environment act (“Arbeidsmiljøloven”), an agreement regarding severance can be reached. Severance payments should not be utilised in the event of voluntary resignation, except if warranted by special circumstances. Severance pay should not exceed 12 months’ fixed base salary in addition to any compensation during the period of notice. Severance pay should be withheld if conditions for dismissal exist, or if during the period in which severance pay is provided, irregularities or acts of negligence are discovered that may result in liabilities for damages or the individual being indicted for violation of the law.

Note 23: Related party transactions

Receivables, liabilities and transactions between Selvaag Bolig ASA and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation and are not disclosed in this note. Details of significant transactions between the Group and other related parties are disclosed below.

During the year, Group entities entered into the following transactions with related parties: (amounts in NOK 1 000) 2011 2010 Sales of goods and services Selvaag Gruppen AS (parent company) 976 812 Associated companies 23 750 17 686 Joint ventures 41 848 59 799 Other related parties (including subsidiaries of parent company) 1 677 6 766

Purchase of goods and services Selvaag Gruppen AS (parent company) (9 111) (10 625) Other related parties (including subsidiaries of parent company) (157 735) (44 450)

Financial income Selvaag Gruppen AS (parent company) - 351 Joint ventures 5 310 1 479 Associated companies 704 7 684 Other related parties (including subsidiaries of parent company) - 719

Financial expenses Selvaag Gruppen AS (parent company) (18 164) (25 218)

The following receivables and liabilities, excluding the Selvaag Group cash pool, were outstanding as of 31 December: (amounts in NOK 1 000) 2011 2010 Receivables Selvaag Gruppen AS (parent company) 284 2 748 Joint ventures* - 64 160 Associated companies* 35 705 201 956 Other related parties (including subsidiaries of parent company) 2 400 3 239

Liabilities Selvaag Gruppen AS (parent company) (166 212) (130) Other related parties (including subsidiaries of parent company) (39 479) (2 120)

* Receivables from joint ventures and associated companies in 2010 mainly consist of subordinated loans related to the Hansa Selvaag joint venture companies and Hansa Property Group AS. In 2011, a net negative account balance of NOK 170 million in the Selvaag Group cash pool was converted into current interest-bearing liabilities, as reflected in the table above - liabilities to Selvaag Gruppen AS.

75 Consolidated Financial Statements Selvaag Bolig Group

Other related party transactions

Sale of Selvaaghus AB On 4 May 2011, the Group entered into an agreement to transfer all ownership interests in the wholly owned subsidiary Selvaaghus AB to Selvaag Eiendom AS, a subsidiary of Selvaag Gruppen AS, for a consideration of NOK 7.4 million.

Conversion of debt to Selvaag Gruppen AS On 24 May 2011, a share capital increase of NOK 100 million in Selvaag Bolig AS was approved. The increase was carried out through conversion of debt to Selvaag Gruppen AS, and was registered in the Company register on 18 June 2011.

Sale of property In June 2011 the group sold the ”Ekely” property in Skøyen to Sealbay AS for NOK 5 million. Sealbay AS is controlled by two of the directors in Selvaag Bolig AS, Olav Hindahl Selvaag and Gunnar Frederik Selvaag (left the Board in September 2011).

Business combinations with related parties On 24 August 2011, Selvaag Bolig ASA merged with Hansa Property Group AS and carried out a private placement directed to the owners in the limited partnership Selvaag Pluss Eiendom KS. In agreement with the other shareholders in Bo En AS, Selvaag Bolig ASA assumed 37.5% of the shares in the company. The transfer of control for these shares was completed on 25 November 2011. Further information on these transactions can be found in note 6.

Capital contributions to associated companies During 2011, the Group gave capital contributions to associated companies of NOK 25.5 million to Hansa Property Group AS and NOK 64.7 million to Selvaag Pluss Eiendom KS. For more information, refer to note 24.

Provision for obligations related to Hansa Selvaag companies As of 31 December 2010, the Group held a provision of NOK 83.1 million for obligations related to demolition of buildings and renovation of plots based on an agreement with six Hansa Selvaag joint venture companies. These companies were consolidated during 2011 and are not regarded as related parties as of 31 December 2011. Please refer to note 6 and 20 for further information.

Acquisition of Selvaag Boligmegling AS, Selvaag Boligutleie AS and Selvaag Eiendomsoppgjør During 2010, the Group acquired three estate agencies, Selvaag Boligmegling AS, Selvaag Boligutleie AS, and Selvaag Eiendomsoppgjør AS from Selvaag Gruppen for a total consideration of NOK 9.8 million.

See note 16 for disclosure of the Selvaag Group cash pool and note 22 for disclosure of compensation of key management.

Note 24: Investments in associated companies and joint ventures Ownership and voting power Company (amounts in NOK 1 000) Year of acquisition Registered office 2011 2010 Sandvika Boligutvikling KS 2008 Norway 33.3% 33.3% Sandvika Boligutvikling AS 2008 Norway 37.0% 37.0% Lørenplatået 1 KS 2008 Norway 27.0% 27.0% Lørenplatået 1 Komplementar AS 2008 Norway 30.0% 30.0% Stord Industribygg AS 2011 Norway 66.0% Stord Industribygg Holding AS 2011 Norway 66.0% HEBO AS 2011 Norway 50.0% Bo Emmaus AS 2011 Norway 50.0% Tangen pluss AS 2011 Norway 50.0% Union Pluss KS 2011 Norway 50.0% Union Pluss Komplementar AS 2011 Norway 50.0% Projektbolaget Sädesärlan AB 2011 Sweden 50.0% Nordic Residential S.L. 2011 Spain 50.0%

76 Consolidated Financial Statements Selvaag Bolig Group

Specifications of investments in associated companies and joint ventures: Owner- Carrying amount Additions/ Equity adjustments Carrying amount Company (amounts in NOK 1 000) ship share 01.01.11 disposals Share of profit and dividends 31.12.11 Selvaag Pluss Eiendom KS 33.3% 65 339 (59 360) (5 979) - - Sandvika Boligutvikling KS 33.3% 24 161 - 8 046 - 32 207 Sandvika Boligutvikling AS 37.0% 3 843 - - - 3 843 Lørenplatået 1 KS 27.0% 8 370 - (121) (1 215) 7 034 Lørenplatået 1 Komplementar AS 30.0% 1 141 - (35) - 1 106 Mortensrudhøyden 2 KS 18.0% 38 (38) 185 (185) - Mortensrudhøyden 2 Komplementar AS 20.0% 449 (436) (13) - - Moss Glassverk 1 KS 22.5% - (330) 330 - - Moss Glassverk 1 Komplementar AS 25.0% 333 (285) 202 (250) - Selvaag Bolig Mortensrudhøyden AS 30.0% 6 831 (8 735) 1 904 - - Selvaag Bolig Bjørnåsen Syd II AS 30.0% 25 270 (24 815) (455) - - Selvaag Bolig Lillohøyden AS 30.0% 8 065 (7 995) (70) - - Selvaag Bolig Løren 2B AS 30.0% 3 577 (3 091) (486) - - Selvaag Bolig Løren 5 AS 30.0% 28 870 (28 807) (63) - - Selvaag Bolig Kornmoenga AS 30.0% 4 314 (4 165) (149) - - Hansa Property Group AS 29.7% 190 614 (181 405) (9 209) - - Stord Industribygg AS 66.0% - 53 140 (726) - 52 414 Stord Industribygg Holding AS 66.0% - - (18) - (18) Bo En AS 62.5% - 334 (334) - - HEBO AS 50.0% - 152 4 - 156 Bo Emmaus AS 50.0% - 527 (150) - 377 Tangen pluss AS 50.0% - 5 177 - - 5 177 Union Pluss KS 50.0% - 14 364 398 (2 700) 12 062 Union Pluss Komplementar AS 50.0% - 136 (92) - 44 Projektbolaget Sädesärlan AB 50.0% - 8 509 10 - 8 519 Nordic Residential S.L. 50.0% - 19 045 (349) - 18 697 Other 238 95 (243) - 90 Total 371 452 (217 982) (7 414) (4 350) 141 707 Profits at realisation1 82 787 Total 75 373

1 Share of income (losses) and gains (losses) on disposal from associated companies and joint ventures primarily include profits on realisation of associated companies and joint ventures related to step acquisitions.

Owner- Carrying amount Additions/ Equity adjustments Carrying amount Company (amounts in NOK 1 000) ship share 01.01.10 disposals Share of profit and dividends 31.12.10 Selvaag Pluss Eiendom KS 33.3% 63 911 11 667 (10 238) - 65 339 Sandvika Boligutvikling KS 33.3% 81 602 (53 434) (4 007) - 24 161 Sandvika Boligutvikling AS 37.0% 10 169 (5 880) (445) - 3 843 Lørenplatået 1 KS 27.0% 11 833 - 587 (4 050) 8 370 Lørenplatået 1 Komplementar AS 30.0% 3 101 - 590 (2 550) 1 141 Mortensrudhøyden 2 KS 18.0% 3 996 - (175) (3 783) 38 Mortensrudhøyden 2 Komplementar AS 20.0% 760 - 189 (500) 449 Moss Glassverk 1 KS 22.5% 4 798 - (510) (4 288) - Moss Glassverk 1 Komplementar AS 25.0% 510 - 323 (500) 333 Selvaag Bolig Mortensrudhøyden AS 30.0% 5 778 - 1 053 - 6 831 Selvaag Bolig Bjørnåsen Syd II AS 30.0% 4 402 - (88) - 4 314 Selvaag Bolig Lillohøyden AS 30.0% 28 945 - (75) - 28 870 Selvaag Bolig Løren 2B AS 30.0% 8 025 - 39 - 8 065 Selvaag Bolig Løren 5 AS 30.0% 26 446 - (1 176) - 25 270 Selvaag Bolig Kornmoenga AS 30.0% 9 697 - (920) (5 200) 3 577 Hansa Property Group AS 29.7% 217 231 - (28 770) 2 153 190 614 Other 802 123 (688) - 238 Total 482 004 (47 524) (44 310) (18 718) 371 452

77 Consolidated Financial Statements Selvaag Bolig Group

Summarised financial information (100%) of associated companies and joint ventures as of 31 December

(amounts in NOK 1 000) 2011 2010 Total assets 878 497 3 594 060 Total liabilities 606 564 2 412 962 Net assets 271 933 1 181 098

Total revenues 503 231 183 809 Total profit (loss) for the year 79 983 (145 138)

Note 25: Events after the reporting period

In February 2012, Selvaag Bolig ASA entered into an agreement of intent to sell the business sections at Kaldnes in Tønsberg to two Nordic property companies. Furthermore, the Group entered into an agreement of intent to sell the business sections of Vestparken Næring AS. The sales are expected to be executed during the first six months of 2012.

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79 Auditor’s report

To the Annual Shareholders' Meeting of Selvaag Bolig ASA

Independent auditor’s report

Report on the Financial Statements

We have audited the accompanying financial statements of Selvaag Bolig ASA, which comprise the financial statements of the parent company and the financial statements of the group. The financial statements of the parent company comprise the balance sheet as at 31 December 2011, and the income statement and cash flow statement, for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements of the group comprise the balance sheet at 31 December 2011, income statement, changes in equity and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information.

The Board of Directors and the Managing Director’s Responsibility for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of the financial statements of the parent company in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and fair presentation of the financial statements of the group in accordance with International Financial Reporting Standards as adopted by EU and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, www.pwc.no Org.no.: 987 009 713 MVA, Medlem av Den norske Revisorforening

80 Auditor’s report

Independent auditor's report - 2011 - Selvaag Bolig ASA, page 2

To the Annual Shareholders' Meeting of Selvaag Bolig ASA

Opinion on the financial statements of the parent company

IndependentIn our opinion, the a financialuditor statements’s report of the parent company are prepared in accordance with the law and regulations and present fairly, in all material respects, the financial position for Selvaag Bolig ReportASA as at on 31 the December Financial2011 Statements, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally Weaccepted have audited in Norway. the accompanying financial statements of Selvaag Bolig ASA, which comprise the financial statements of the parent company and the financial statements of the group. The financial statementsOpinion on of thethe financial parent company statementscompriseof the group the balance sheet as at 31 December 2011, and the income statement and cash flow statement, for the year then ended, and a summary of significant accounting policiesIn our opinion, and other the explanatory financial statements information. of theThe group financialpresent statements fairly, in of allthe material group comprise respects, the balancefinancial sheet position at 31 ofDecemberthe group2011,Selvaag income Bolig statement ASA as at, changes31 December in equity 2011 and, andcashits financial flow for the year thenperformance ended, and and a its summary cash flows of significant for the year accounting then ended policies in accordance and other with explanatory International information Financial. Reporting Standards as adopted by EU. The Board of Directors and the Managing Director’s Responsibility for the Financial Statements Report on Other Legal and Regulatory Requirements The Board of Directors and the Managing Director are responsible for the preparation and fair presentationOpinion on the of theBoard financial of Directors’statementsreport of the parent company in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparationBased on our and audit fair of presentation the financial of statements the financial as statementsdescribed above, of the it group is our in opinion accordance that thewith Internationalinformation presented Financial in Reporting the Board Standards of Directorsas adopted report concerning by EU and the for suchfinancialinternal statements controland as the the Boardgoing concernof Directors assumption,and the Managi and theng proposal Director for determinecoverageis of necessary the loss is to consistent enable the with preparation the financial of financialstatementsstatements and complies that are with free the fromlaw and material regulations. misstatement, whether due to fraud or error.

Auditor’sOpinion on Responsibility Registration and Documentation

OurBased responsibility on our audit is of to the express financial an opinion statements on these as described financial above, statements and controlbased procedureson our audit. weWehave conductedconsidered our necessary audit in in accordance accordance with with laws, the International regulations, and Standard auditing on standards Assurance and Engagementspractices ISAE generally3000 “Assurance acceptedEngagements in Norway, including Other than International Audits or Reviews Standards of Historical on Auditing. Financial Those standards Information”, require it is thatouropinion we comply that with management ethical requirem has fulfilledents and itsdutyplan toand produce perform a properthe audit and to clearly obtainset reasonable out registration assuranceand documentation about whether of the thecompany’s financial accounting statements information are free from in materialaccordance misstatement.with the law and bookkeeping standards and practices generally accepted in Norway. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.Oslo, 21 In Marchmaking 2012 those risk assessments, the auditor considers internal control relevant to the entity’s preparationPricewaterhouseCoopers and fair presentation AS of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as wellErling as Elsrudevaluating the overall presentation of the financial statements. State Authorised Public Accountant (Norway) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ourNote: audit This opinion. translation from Norwegian has been prepared for information purposes only.

(2) PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, www.pwc.no Org.no.: 987 009 713 MVA, Medlem av Den norske Revisorforening

81 SELSKAPSRegnskap Selvaag Bolig ASA

82 SELSKAPSRegnskap Selvaag Bolig ASA

Selvaag Bolig ASA Photos and illustrations: Consulting, design and production: Postal address: Aftenposten/Scanpix P O Box 544 Økern Apeland APELAND NO-0512 Oslo Bård Gudim Dyrvik Arkitekter English translation: Visiting address: Finansavisen Rolf E Gooderham Lørenvangen 22 Fotoringen NO-0512 Oslo Jarle Nyttingnes Print: Lund+Slaatto Arkitekter Phone: +47 23 13 70 00 Lasse Burell Zoom Grafisk E-mail: [email protected] Maestro Media www.selvaagbolig.no Nyebilder.no

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