Annual Report 2005

Contents

Main Features of 2005 4 Financial highlights 5 Facts about Sparebanken Vest 6 Managing director Stein Klakegg 8 Group management 10 Corporate governance 12 The brand 16 Retail market 18 Corporate market 20 Subsidiaries 22 Risk and capital management 24 Visjon Vest 28 Personnel 30 Primary capital certifi cates 31 Directors’ report 32 Profi t and loss account - Group 41 Balance sheet - Group 42 Statement of cash fl ows - Group 44 Equity movements 45 Notes to the accounts - Group 46 Key fi gures 2001-2005 - Group 70 Key quarterly fi gures 2001-2005 - Group 73 Profi t and loss account - Parent Bank 77 Balance sheet - Parent Bank 78 Statement of cash fl ows - Parent Bank 80 Notes to the accounts - Parent Bank 81 Key fi gures 2001-2005 - Parent Bank 110 Key quarterly fi gures 2001-2005 - Parent Bank 113 Auditor’s report 117 Control committee’s report 118 Organisational structure 119 Elected offi cers 120 Overview - notes to the accounts 124

Sparebanken Vest focuses on the West of Norway. Through the photos in the Annual Report the bank wishes to illustrate its diversity and commitment to its customers, employees and the regional culture.

Published by Sparebanken Vest, the Information Department P.O. Box 7999, NO-5020 Bergen Tel.: +47 21 74 42 Fax: +47 55 21 72 89 www.spv.no

Project management: Jørn Lekve and Anne Lise Urdal, Sparebanken Vest Design / layout: Creato Media AS Printing: Graﬁ sk Trykk AS Photos: Kai Berg, Morten Vee, NorPhoto AS, Robin Strand, Bente Synnevåg, Terje Rakke/Nordic Life, Egil Mathiesen, Øystein Klakegg, Erstad&Lekven and Marit Hommedal 3 Main features of 2005

Highlights

• Sparebanken Vests recorded proﬁ ts of NOK 475m after tax in 2005

• The bank’s ﬁ nancial targets were reached, with a return on equity of 15.44%, against 11.54% in 2004, reﬂ ecting earnings of 17.25 per PCC

• NOK 100m of the proﬁ t for the year has been allocated to gifts for the public beneﬁ ts, with NOK 45m to be distributed in 2006 and NOK 55m allocated to the gift fund

• The bank’s market shares have increased, with a net inﬂ ow of 4 700 new retail customers and 400 corporate customers. An ofﬁ ce providing advisory services has also been opened in Florø

• Total assets increased by NOK 8.2bn to NOK 54.6bn, mainly due to a sound increase in home mortgage loans

• The level of net interest income, measured in kroner, was in line with the previous year and other income developed well

• On 9 January 2006 Stein Klakegg, a graduate in economics and business administration, took over as managing director of Sparebanken Vest

Main activities in the period ahead

• A high level of activity related to the bank’s application for approval as an IRB bank

• Establishing a lower cost level will entail personnel reductions

• In January 2006 a new branch providing advisory and real estate services was opened in Haugesund. A new branch is also due to open in Etne in the course of 2006

• The decision to merge the regions of Sogn and Nordfjord and create one region - Sogn & Fjordane - reﬂ ects a stronger focus on this county

• The Western of Norway is characterised by optimism in the commercial sector, and the bank’s activities for the public beneﬁ t will be directed at initiatives in the ﬁ eld of commercial and social development

• The bank expects to maintain a satisfactory level of earnings in the coming years, although the results for 2006 are likely to be slightly below the strong performance recorded in 2005

4 Financial highlights

Financial Highlights - Sparebanken Vest Group

(NOK million) 2005 2004 2003 2002 2001

Proﬁ t and loss account

Net interest income and credit commissions 972 960 903 876 787 Net operating income 471 406 353 115 183 Total operating expenses 875 819 747 722 684

Proﬁ t before losses and write-downs 568 547 509 269 286 Loan write-downs and losses on guarantees (75) 60 114 166 86

Proﬁ t before tax 643 487 395 103 200

BALANCE SHEET

Total assets 54 680 46 457 40 351 35 449 32 367

Net lendings 46 565 41 089 36 559 31 838 28 762 Securities 3 155 2 966 2 347 2 083 1 812

Deposits from and debt to customers 27 333 24 871 22 237 22 192 19 349 Subordinated loan capital and equity 4 206 3 778 3 160 2 954 2 571

Key Ratios (%)

Ratio of net interest income and credit commissions to average total assets 1.92 2.19 2.33 2.52 2.50 Ratio of proﬁ t before tax to average total assets 1.27 1.11 1.02 0.30 0.63

Return on equity after tax 15.44 11.54 11.80 3.12 6.39

Loan loss ratio (0.16) 0.14 0.31 0.51 0.29

Change in gross loans to and receivables from customers 12.78 12.22 14.39 10.99 9.53 Change in deposits from and debt to customers 9.90 11.85 0.20 14.69 8.81

Net capital base (NOK mill.) 3 909 3 477 2 901 2 705 2 192 Capital ratio 11.36 11.28 10.48 11.07 9.93 Core capital ratio 9.95 9.56 8.38 8.63 9.68

Dividend per primary capital certiﬁ cate (PCC) (NOK) 17.10 12.60 12.60 3.50 9.50 PCC price at year-end (NOK) 206.00 187.50 162.00 104.00 118.00 Effective return per PCC 16.59 23.52 59.13 (3.81) 0.00

Further information is shown in the summary of main ﬁ gures and deﬁ nitions on pages 70-72.

5 Facts about Sparebanken Vest

More customers and a broader market area

Sparebanken Vest exists on the strength of its customers. 2005 again saw a gratifying net inﬂ ow of new customers and at year-end Sparebanken Vest was the main bank for 206 000 retail clients - an increase of more than 4 700 on the previous year.

On the corporate side, the bank had 10 200 clients at year-end, reﬂ ecting an increase of 400 in the course of the year.

Sparebanken Vest and society The launch of a new The bank’s vision is to be a driving trademark and graphic force in the development of the proﬁ le in 2004 has been social and commercial life of the a success. Customer West of Norway. Our main objective surveys show that the is to be an independent savings bank scores high marks for bank and the leading ﬁ nancial recognisability, and we are services group based in the associated with the values West of Norway. we seek to represent.

Sparebanken Vest strives to be Broader market area when its predecessor, Bergens a good and attractive work place, Today, Sparebanken Vest Sparebank, was founded. where our core values create is an independent, alliance-free and a workforce that is customer- a modern bank for the market area Vision and objectives oriented, skilled at forging represented by the counties of The bank’s business concept is customer relationships, and Hordaland and Sogn & Fjordane, and two-fold, with the emphasis on banking highly competent. Haugalandet in Rogaland. A new branch operations, but also taking account of offi ce and real estate activities were the bank’s social involvement. As an independent institution, started in Haugesund in January 2006. initiatives aimed at enriching The Group also conducts real estate “While maintaining satisfactory society are an essential part broker activities through its subsidiary profi tability and an appropriate level of our activities. The bank seeks Eiendomsmegler Vest and real estate of risk, Sparebanken Vest shall cover to establish fruitful partnerships management operations through AS the customers needs for fi nancial with others to promote and Filialbygg. In March 2006, the bank services through sales and advisory develop the best interests of the extended its real estate broker activities services. Western Norway, and in so doing with the purchase of a 70% holding the allocation of gifts for the in Kyte Næringsmegling. Sparebanken The bank’s commercial operations shall public benefi t plays an important role. Vest is Norway’s third-largest contribute to the development of the The accounts for 2005 gives scope savings bank with total assets of West of Norway by providing added for gift allocations totalling NOK 100m. NOK 54.7bn, 57 branches and 749 value for those whose interests are Of this, NOK 55m has been added employees. Based in Bergen, it is also linked to the bank. Gifts for the public to the bank’s gift fund, the second-oldest bank in Norway with benefi t are a supplement to business while NOK 45m will be roots stretching back to 1823 operations.” distributed in 2006.

6 7 Managing director Stein Klakegg

Good prospects for the West of Norway and Sparebanken Vest

-In the course of 2006 Sparebanken Vest will strengthen and conﬁ rm its position as the bank of ﬁ rst choice in the region. The bank’s focus will continue to be directed at the Western Norway. The key to further progress lies in close and active interaction with the customers.

So says Stein Klakegg - managing director of Sparebanken Vest since 9 January 2006.

look forward to considerable changes. More acquisitions and mergers can be expected. Sparebanken Vest is set to play a role in the development within the industry and is determined to remain in the forefront of growth and development in our market area.

Sparebanken Vest’s vision is to be a driving force in the development of the social and commercial life of the Western Norway. What does this entail? -The Western Norway is our market area and is thus the basis of our It is natural to ask the new and commitment to take up the fi ght. existence. We shall realize our vision managing director about his view We must ensure that we stand by our by being a good bank for the region of the future. What will be your key core values, as refl ected in the words - meeting both the requirements of the priorities in the period ahead? “ Stay close, be friendly, competent and commercial sector and the individual -Above all, further success will committed” in order to serve the best needs of retail customers for banking continue to be based on a close interests of our customers. services. But we want to be more than and active relationship with our that. Banking operations alone do not customers. A customer orientation There is a keen debate within the qualify us to be a driving force. and the implementation of planned Norwegian fi nancial circles A key element of our value base is the activities are decisive in this concerning the structure of the fact that we channel funds back to connection. There is a constant fi ght for industry. What is its signifi cance for the areas where capital resources are the customers - and the competition Sparebanken Vest? built up. That is why a considerable has never been stronger. -The Norwegian savings banks are in proportion of our profi ts are allocated The established banks and insurance a process of change. The windows of to promote social development, by companies have, to a large extent, opportunity now opening up within the encouraging devoted individuals and realised their ambitions of providing industry present a challenge that we voluntary work in general and cultural a full range of fi nancial services, at the must seize. Changes in the initiatives in particular. This activity is same time the number of participants regulatory environment, the possibility under good management and it is an in the market is steadily increasing. of reorganisation as a limited company area that is accorded increasing This makes great demands of our and the establishment of foundations importance by customers, the personnel in terms their determination all mean that the fi nancial industry can management and the employees.

8 Managing director Stein Klakegg says that in 2006 Sparebanken Vest will strengthen and conﬁ rm its position as the bank of ﬁ rst choice in the region.

Stein Klakegg underlines that the Our investments and commitments competitive position, which benefi ts bank’s activities for the public good to participate in innovative projects the customers. However, the funds we follow three main directions. of this kind involve venture capital of give in the form of gifts are not a cost There are initiatives which are targeted more than NOK 100m. It is naturally but an allocation of profi ts, in line with at the public at large, then there are our hope that this will contribute to the the bank’s value base. We can allocate those of a more strategic nature which commercialization of good research large amounts only if earnings and the relate to the Western Norway. results and other sound commercial capital base are at a good level and The last group relates to specifi c ideas that may turn up. there is a satisfactory dividend on PCCs. initiatives related to innovation in the This will provide both employment But we cannot allocate commercial sector. and a return on capital employed. corresponding amounts to the A return on investment is necessary if customers or the employees, -In 2006 and the years to come permanent jobs are to be established as this would be a cost that would we will naturally continue to allocate and thereby ensure the further positive reduce profi ts. considerable amounts for cultural development of our region. This is in purposes, to children and activities the best interests of those who live This is the very heart of the matter. designed to improve the wellbeing of and work here, and of the bank, says We have to exercise extreme care with young people, to local societies and Stein Klakegg. dispositions which can reduce profi ts, associations, for humanitarian purposes, while the bank’s governing bodies can and for research and education. How do you explain that the bank is exercise their discretion in the way the We will gradually increase our focus reducing costs and at the same time profi ts are allocated. on initiatives aimed at promoting allocating large amounts for the innovation in the commercial sector. public benefi t? This is why we can have a situation At the same time, we seek to bring -I can understand that this may seen where internal cost savings can go together resource persons capable as a paradox. Firstly, it is important hand in hand with an increase in gift of innovation and to serve as to realise that at any given time the allocations. This is how economics and a source of inspiration for others. bank’s borrowings in the the market works. We will still be We wish to contribute to the international capital market amounts seeking to pay a considerable realisation of good research results to almost NOK 20 billion, and that “social dividend” and thereby make and help individuals to bring ideas good results are necessary to have our part of the world an even to fruition by taking an active stand access to these funds. Put simply, better place to work and live. and providing the necessary risk the better our results, the cheaper it is It will also strengthen the bank, capital for the best ideas. to borrow. And this strengthens our says Stein Klakegg.

9 Group Management

A bank with ambitious goals.

Sparebanken Vest has set ambitious goals for itself in 2006. The key to further progress is easy to describe, but it still represents a challenge: The customers shall be even more aware of the bank’s core values, as represented in the words: “Close by, friendly, competent and committed”.

The Group Management shall develop market and ensure that the customers positive perception in the marketplace. and run Sparebanken Vest as an continue to make Sparebanken Vest The focus on the West of Norway will independent bank for the beneﬁ t of the their ﬁ rst choice. Keeping professionally be reinforced and strengthened. customers, the employees, society and updated is therefore a major priority. the owners of PCCs. Sparebanken Vest’s task is to make the Sparebanken Vest’s talented and customers strong and to strengthen The customers shall feel that the bank committed workforce are its most the region. This is where value is has become even better at providing important resource. Their loyalty, created, and Sparebanken Vest shall advisory services, at establishing expertise and high level of job-satisfac- play a key role in the creation and relationships, and in meeting sales tion means that the bank is well placed management of these resources. requirements. At the same time, the to make further advances in terms of In short, Sparebanken Vest shall be a bank shall constantly adapt to the customer satisfaction, sales, results and bank where it is good to be a customer.

10 Stein Klakegg (b. 1957) DnB and was divisional director Information Services & PR in 1996. Managing director since 9 January with Vital Forsikring AS. Graduate of NHH. Previously editor 2006. Graduate in economics and of Horda Tidend and business business administration from the Arne Selle (b. 1953) journalist with Bergens Tidende. Norwegian School of Economics and Divisional Director - Business Administration (NHH). Service since 1994. Jan Erik Kjerpeseth (b. 1970) Formerly with Rieber & Søn ASA and Joined the bank in 1992. Market Director since 2003. A/S Nevi, lastly as Group Director with Graduate civil engineer from Joined the bank in 1999. Rieber & Søn ASA. He has also held Norwegian University of Science Graduated in civil marketing at the various Board positions with Norwegian and Technology (NTH). Norwegian School of Marketing, and foreign companies. Previously with Frank Mohn AS. MBA from Herriot Watt University,

Group Management: Rear from left: Jørn Lekve -Director of Information Services & PR, Jan Erik Kjerpeseth - Market Director, Monica Salthella - Deputy Managing Director and head of Corporate Market, Arne Selle - Divisional Director - Service, Pål Pedersen - Legal Director.

Front from left: Mona Biering - Acting Personnel Director, Elin Sjødin Drange - Divisional Director - Retail Market, Stein Klakegg - Managing Director

Monica Salthella (b. 1969) Mona Biering (b. 1962) and Executive MBA in brand Deputy managing director and Acting Personnel Director since October management at NHH. director of Corporate Market 2004. Graduate of NHH. Previously Previously market manager with Division since 2002. Economist acting Divisional Director - Corporate Sparebanken Sogn & Fjordane. from Kings College, London. Market, Sparebanken Vest. Previously Formerly managing director of regional director and market director Pål Pedersen (b. 1954) Skandia Fondsforvaltning AS. with DNB Finans AS. Legal Director since 1994. Joined the bank in 1990. Elin Sjødin Drange (b. 1959) Jørn Lekve (b. 1961) Law graduate from the Divisional Director - Retail Market. Director of Information University of Bergen. Joined the bank in 2002. Graduate Services & PR since 1999. Formerly assistant judge and of NHH. Formerly employed with Joined the bank as head of lawyer in private practice.

11 Corporate Governance

Corporate Governance and Sparebanken Vest

Sparebanken Vest complies with recommendations concerning corporate governance in so far as they are compatible with the activities of a savings bank. The topics referred to in the recommendations have been considered in 2005 and adjustments have been made to the framework governing the bank’s operations.

As part of this process, the bank’s included in the annual Objectives and A working committee comprising objects clause has been amended to Development Talk between all Group members of the Board of Directors, give a closer correspondence between managers and employees. the Board of Governors, the the legal and the strategic defi nition Nomination Committee and the of the bank’s activities. The bank’s Structure of control and corporate management is considering ways objects clause now reads as follows: governance - Board of Governors of simplifying the structure model Sparebanken Vest is organised in for elected offi cers and its “The object of Sparebanken Vest accordance with the Savings Banks recommendations will be presented is to provide fi nancial services to the Act and the Act relating to Financial in the course of the year. public and to the commercial and Institutions and Financing Activities. public sectors in the West of Norway. The Board of Governors exercises the Board of Directors The business shall be run with highest authority in the bank. Each of The Board of Directors directs the satisfactory profi tability and an the groups which make up the owners bank’s activities in accordance with acceptable level of risk.” of primary capital certifi cates, laws, regulations, resolutions of the depositors, local authority-appointed Board of Governors and The complete by-laws, as well as the representatives and the bank Board instructions. bank’s vision statement and core employees elects 12 representatives values, can be accessed at the bank’s to this body. The Board of Governors The Board of Directors has 10 home page: www.spv.no. draws up the bank’s bye-laws, approves members who are elected by the its accounts, appropriates the profi t Board of Governors. One of the Board The bank’s value base and elects the members of the Board members shall be elected from among Based on its vision, objects and cores of Directors, the Control Committee the local authority-elected governors, values (“close by, friendly, competent and the Nomination Committees. and one shall be elected from the Sogn and committed”), the bank has defi ned and Nordfjord regions, on a rotational its value base as follows: The composition of the Board of basis. Two members of the Board shall Governors appears on page 102. be elected by the employees. “Sparebanken Vest shall display Remuneration to the Board of Governors In accordance with the Savings Banks a genuine interest in its customers, appears in note 4 and details of Act, the managing director is a employees, society and investors ownership of PCCs are shown in note member of the Board of Directors. through its attitudes, competence 27 to the accounts of the parent bank. and actions.” Following the election in April 2005, The chairman of the Board of the Board of Directors is comprised Ethical guidelines Governors is Arne Buanes and the as follows: In line with the bank’s value base, deputy chairman is Bjørn Kvamme. new ethical guidelines have been Chairman drawn up with a related code of Trond Mohn is chairman of the Pål W. Lorentzen behaviour for all Group employees Nomination Committee. Barrister and Board members. The Board of The other members are: Law fi rm Thommessen. Governors will be asked to approve Margunn Samnøy, Sigurd Toft, Mette Chairman and member of the Board these regulations so that they also Nora Sætre, Roald Korsøen, Jostein since 2000. Graduated in law at the apply to all elected offi cers. The ethical Valen, Kari Laila Skrede, Inger Finne University of Oslo. Legal practice since guidelines are one of the topics and Steinar Danielsen. 1971. Barrister since 1976.

12 Currently chairman of the Norwegian Inger Karin Larsen Vest in 1986. Bachelor of Business Bar Association’s Constitutional Rights Director of own company - Inger Karin Administration (Banking and Finance). Committee, chairman of the Larsen - with coaching as main activity. Board member, the Finance Sector Harmonien Foundation, Bergen Board member since 2004. Regional Union of Norway. Holding of Philharmonic Orchestra and the Kavli college graduate, Bachelor of Business Sparebanken Vest PCCs: 100 Foundation, and member of the Board Administration. Experience from Aker of Kavli Holding AS. Previous positions Stord, commercial director Bømlo Local Stein Klakegg of trust incl. chairman of companies in Authority, man. dir. Olympia Utvikling Managing director of Sparebanken shipping, offshore and fi sheries sectors. Troll Park, parliamentary secretary Vest and Board member since Holding of Sparebanken Vest PCCs: 0. at Ministry of Trade and Industry. 9 January 2006. Graduate in Board member, Sunnhordland Lufthavn economics and business administration Deputy Chairman AS and Sunde Transport AS. Formerly from the Norwegian School of Erik Bøckmann held board positions with Hordaland Economics and Business Deputy Managing Director of & Bergen Trade & Tourism Board,, Administration (NHH). Formerly Group Bergen Energy AS. Board member since Haugesunds Avis, Telenor, Siva and Director with Rieber & Søn ASA and 2000. Deputy Chairman since 2004. Stord/Haugesund University College. experience from A/S Nevi. He has Graduate of Norwegian School of Holding of Sparebanken Vest PCCs: 0 also held various Board positions with Economics and Business Administration (NHH). Previous positions with AS Nevi, AS Investa as fi nancial director, Norgeskreditt AS and managing director of Vestenfjeldske Bykreditt AS. Currently member of the Board of Marin Vekst ASA and Holberg Forvaltning ASA. Holding of Sparebanken Vest PCCs: 500 Sparebanken Vest staff: Jan O. Yttredal Anders Hosøy, Managing Director of Sør-Norge Grete Haugen and Aluminium. Board member since 1998. Liv Marit Vatna. Graduate engineer (NTH) and previously director of Norsk Hydro. Erling Mjelde Norwegian and foreign companies. Holding of Sparebanken Vest PCCs: 0 Board member since 2002, elected Holding of Sparebanken Vest PCCs: 0 by local authority-appointed governors. Geir Navarsete Education in economics and marketing. Board activities Principal, Kaupanger School. Has held various position in sales and The Board convenes 12-14 times a Board member since 2003. Qualifi ed marketing, lastly as sales manager. year. There are instructions governing teacher (HSF), long experience as Political experience from Arna Urban the work of the Board and its activities teacher and principal. Heads Neighbourhood Council for 3 periods follow a pattern which includes Sogningen Storsenter and association (12 years), lastly as chairman. strategic topics such as operations, instructor with the Norwegian Football Permanent member of Bergen City risk and sales reporting. Association. Has held various Council until 2007. Holding of A Board conference is held once a year. positions of trust incl. board positions Sparebanken Vest PCCs: 0 The Board may appoint Board with Sogndal Football and Sogn & committees to consider matters of Fjordane Football Association. Arve Havnerås a special and complicated nature. Holding of Sparebanken Vest PCCs: 0 Board member since 2003 - employee In following up Finance Credit a representative. Corporate Market committee of this kind has been set up. Anne Gine Hestetun Adviser - ass. manager. Bachelor of The Board also appointed a committee Board member since 1998. Business Administration, NCO Course. to consider the appointment of a new Municipal Counsellor, Bergen Joined Sparebanken Vest in 1983. managing director to succeed Local Authority. Qualifi ed engineer, Holding of Sparebanken Vest Knut Ravnå. In relation to corporate regional college graduate. Experience PCCs: 150 governance, the Board has an annual as senior consultant, Lillehammer plan governing its activities. The annual Olympic Games, director of Bergens- Tone Mattsson plan includes the Board’s evaluation banen, Norwegian State Railways, line Main elected representative, the of its own work and the composition director with Fjordline and member Finance Sector Union of Norway. of the Board with the aim of ensuring of Municipal Executive Board, Bergen. Board member since 2003 - employee that the bank achieves long-term Holding of Sparebanken Vest PCCs: 0 representative. Joined Sparebanken value-creation and development.

13 Corporate Governance

Board remuneration Directors and the work of the Control PCCs and is authorised to buy back Details of Board remuneration appear Committee, the bank’s activities are up to 10% of the total PCC capital. in note 4 to the accounts of the parent subject to internal audits carried out The purpose of this authorisation is to company. Remuneration to individual by state authorised public accountant stimulate trading in the bank’s PCCs, Board members for work done, in addition Bernt R. Petersen. The internal auditor and PCCs are bought back through to the Board fee, is decided by the board. reports directly to the Board of normal stock exchange trading. Directors and attends its meetings. Control Committee The external audit is performed by Free tradability This committee has fi ve members state authorised public accountants The bank’s PCCs can be traded freely. elected by the Board of Governors. On Jon Haugervåg, representing the fi rm Transactions must be reported to the behalf of the Board of Governors the of auditors PriceWaterhouseCoopers bank within one month. Control Committee shall supervise the AS. The auditor’s report for 2005 bank’s activities and ensure that it is appears on page 117. The Board of Dividend policy functioning in an appropriate and satis- Directors has annual meetings with The bank’s dividend policy appears factory way and in accordance with the external auditor and the Control in the article on Sparebanken Vest’s laws, and regulations, the articles of Committee. The fee for the audit and primary capital certifi cates (SVEG). association, resolutions, guidelines from consultancy services appears in note 5. the Board of Governors and directives PCC owners’ election meeting from the Financial Supervisory Authority Group Management The notice of meeting and the Nomina- of Norway. The Control Committee’s The Group Management, tion Committee’s recommendations are Report for 2005 appears on page 118. comprising eight directors, is presented sent to all owners of PCCs. The notice Remuneration to the Control Committee on pages 10 and 11 of the Annual of the meeting appears in the press is set by the Board of Governors and Report. Salaries, loans and the and in a stock exchange notifi cation. appears in note 41 to the accounts for ownership of primary capital the parent company. The composition certifi cates appear in notes 4 and 27. Rating of the Control Committee appears on The bank uses the services of at least page 120. The chairman of the Control Structure of equity two international rating agencies to Committee in 2005 was Lillian Torsvik. The bank’s equity consists of retained monitor its development in relation earnings totalling NOK 2 788m and PCC to the capital base, return on capital The Nomination Committee capital of NOK 250m. In other words, employed and exposure levels. This is The Nomination Committee for the PCC capital represents approximately also done to enable the fi nancial market Board of Governors has representatives 8.34% of the bank’s total equity. to assess the bank’s creditworthiness as from all groups who make up the Board The bank is therefore to a large extent a borrower in the international funding of Governors. It prepares the election of a self-owning foundation. It has been market at any given time. the chairman and the deputy chairman the bank’s practice to give the owners of the Board of Governors, as well as of PCCs their relative share of the Financial calendar 2006 and the election of members of the Board profi t for the year in the form of a cash market communication of Directors, the Control Committee dividend, rather than accumulate a Accounting information is presented in and Nomination Committees. dividend equalisation reserve. four interim reports and in the Annual The Nomination Committee has nine This is consistent with the Report which includes the Directors’ members and its chairman in 2005 bank’s dividend policy. Report and segment articles was Trond Mohn. There are separate dealing with main lines of development nomination committees which prepare Capital base and dividend concerning the bank. The bank’s policy the election of members of the Board of The bank’s equity gave a core capital stresses openness and equal access Governors representing the depositors ratio of 9.94% at year-end. The bank to information. and representing the owners of primary seeks to have a core capital ratio of at capital certifi cates. The recommen- least 9% at any given time. The quarterly accounts for 2006 will be dations of the Nomination Committees The dividend of NOK 17.10 per PCC for presented in stock exchange notifi ca- are given without grounds, but the 2005 is in accordance with earnings tions and press releases. Complete recommendations submitted by the per PCC after adjusting for a change quarterly reports and an overview of Board of Governor’s Nomination in the reserve for valuation variances. the fi nancial calendar will be available Committee are accompanied by oral at out website: www.spv.no. The bank grounds. The bank will evaluate the role Equal treatment of PCC owners provides comprehensive information of the nomination committees and pro- Sparebanken Vest’s PCCs (SVEG) are through presentations for the fi nancial pose improvements, where appropriate. quoted on the Oslo Stock Exchange. market and the fi nancial press relating The PCCs are not subject to any to developments in connection with Audit activities restrictions on voting rights, beyond the publication of the interim reports. In addition to internal controls, what is required by law. At year-end, The presentations can also be followed management reports to the Board of the bank owned 68 600 of its own directly through the bank’s website.

14 15 Sparebanken Vest - the brand

The Sparebanken Vest brand - our strength

Since launching its new proﬁ le in 2004, Sparebanken Vest has taken systematic steps to give visible expression to the bank’s strong local roots. Surveys in 2005 show that this communication strategy has again had the desired effect.

Good communications depend on campaigns in both the corporate and When people from the West of Norway actions, but is just as much a matter of the retail markets focused specifi cally who are not yet customers of the attitudes. Good communication means on this burning commitment to bank are asked which bank they would being responsive to target groups and commercial development and cultural choose if they were to change banks, knowing how to communicate with life in the West of Norway. This was as many as 28% say they would optimal effect. The fact that most illustrated through a number of the choose Sparebanken vest. people have neither time for nor bank’s initiatives. In 2005, the sixth interest in fi nancial and insurance West of Norway Conference was In the corporate market, products presents the fi nancial industry arranged to highlight regionalisation Sparebanken Vest is strongly with a great challenge. How can an and resource management in the perceived as a local bank, close at emotional connection be established West of Norway. hand, associated with the West of between a bank and a market when Norway and accessibility. The bank’s the products offered do not evoke an Sparebanken Vest has also increased its credibility as a bank for the commercial emotional response in the market? support for local communities through sector has been clearly strengthened. gifts and sponsoring activities. The A commercial bank is strongly Sparebanken Vest has formulated sponsoring side has been strength- associated with a local presence. a slogan that is a clear statement ened partly by increasing the bank’s When potential clients in the of the bank’s strategy and position: presence and involvement in the corporate market are asked which football clubs Brann and Sogndal, bank they would choose if they were Sparebanken Vest as well as the Lost Weekend Festival, to change banks, as many as 23% - focusing on the West of Norway Opera Nordfjord, Bergen International say they would choose Sparebanken Festival, BIT Teatergarasjen, Bergenfest Vest. This refl ects an improvement Sharing the same roots creates a and Knarvikmila, to name but a few. on the 20% fi gure recorded in 2004. common identity that is easily Sparebanken Vest has long traditions recognised by most people, but at the as a donor of funds for worthy causes. The brand position, the bank has same time it offers suffi cient scope to Under the Savings Banks Act, the bank established, indicates that embrace all kinds of people. The bank’s may allocate up to 25% of its profi ts in Sparebanken Vest can look forward communication strategy seeks to high- the form of gifts for the public benefi t. to increased demand for its products light what the people of western Norway This area of activity is in constant de- and services, making it well placed have in common, however different they velopment, and with effect from 2005 to win market shares in the period may be. In deciding where to start a the bank’s social involvement has been ahead. family, where to live, and where to work designated Visjon Vest. The new name - they have chosen the West of Norway. is a summary of the bank’s vision: Brand building is a long-term process, and in order to establish a strong brand Illustrating our common identity Sparebanken Vest shall be a driving we must have a constant, long-term Creating growth and development in force in the development of the social presence over time and, not least, be the West of Norway requires more than and commercial life of the West of faithful to the communication strategy just money. It calls for creativity and Norway. that has been chosen. The strongest a willingness to pull together. The brands today are those that have done West of Norway is rich in resources, In 2005, many voluntary clubs and just this. In 2006 and the coming years and among our most valuable assets organisations received funds from Sparebanken Vest will therefore employ are the dedicated individuals who are Visjon Vest, and 16 individuals working considerable resources to maintain and passionately concerned about their in various artistic areas received an strengthen its position in the consciousness local environment. In 2005, the profi le artistic grant from Sparebanken Vest. of the people of western Norway.

16 Sparebanken Vest is the general sponsor of Brann F.C. Bengt Sæternes is a key player, with most league goals in 2005. 17 Retail Market

Market leader in the retail market

Sparebanken Vest has a sound position as an independent bank. A net inﬂ ow of 4 700 new customers in 2005 conﬁ rms this. With a market share of around 40% Sparebanken Vest is the undisputed leading retail bank in its geographical area of operations.

Satisfi ed and loyal customers provide Vestavinn - saw a 13% increase the level of loan security. The use of the basis for sound economic in the number of programme decision-making support models development in the future. clients in 2005. ensures that there are safe, reliable and Sparebanken Vest carries out regular uniform credit procedures throughout surveys of customer satisfaction and Developments in 2005 the bank. Loan defaults in the retail the results in 2005 show that the retail Loans to the retail sector rose by segment are still at a very low level customers are very satisfi ed, with the 16.6% in 2005, which is considered to and are likely to remain so in the bank achieving a score of 73. A good be very satisfactory, with most of the next 12 months. reputation, good products, low increase attributable to well secured borrowing rates and, not least, home mortgage loans. At the same Job satisfaction throughout competent staff, are the main time, deposits were 8.9% higher. the organisation reasons for the good results. The bank offers a broad range of Both the employees and the organisation have shown a great willingness to adapt, and the general level of employee satisfaction is high and unchanged from 2004. The personnel in the retail segment report a high level of job satisfaction and pride in the job they do for the bank, and this, in turn, is refl ected in the positive feedback given by the customers in the form of a high level of customer satisfaction.

The Ministry of Finance has set out clearly defi ned competence requirements which must be met by fi nancial advisers, and Sparebanken Vest is engaged in a number of initiatives designed to raise the level of For many years the bank has a special savings products in the area of fund competence. In collaboration with the focus on the younger age groups, investment, insurance, ordinary savings Norwegian Institute of Management, drawing up banking to meet the accounts and guaranteed savings the bank has established a competence special needs of children, adolescents products. Guaranteed savings products, programme for advisers which is a and students. This provides good in particular, were an area of great combination of instruction, e-learning long-term rewards and contributes interest for the bank’s customers in and personal study in order to ensure to the healthy and stable development 2005. During the year the bank started that the bank meets the requirements. of the customer base. Bank cards using electronic decision-making sup- with photo motifs from the port models and portfolio Looking ahead West of Norway have been very management systems in connection A further increase in the number popular among the younger the management of credit risk. Loan of active online banks, combined age groups, with “Brann F.C. motifs” applications as assessed taking with a clear decline in both the level continuing to top the list. account of the applicant’s debt-servicing of customer visits to the bank The bank’s benefi ts programme - ability and willingness and and the number of manual branch

18 Local cheer-leaders: Each year the bank allocates considerable amounts to local clubs and organisations in the West of Norway. We wish to support the local community and the dedicated individuals who keep the wheels turning!

transactions, makes organisational a score higher than 80. The Eiendomsmegler Vest acquired changes inevitable. We are customers make combined use of Haugalandet Eiendomsmegling therefore gradually reducing the Customer Service, the branch network with effect from 1 January 2006. number of payments transfer branches and online banking, and the bank and concentrating more on advisory strives to ensure that each channel Intense competition services. Manpower levels in the branch provides good service. in the Retail Market network have been reduced in the last Further development of the online Competition in the Retail Market few years, mostly affecting personnel banking service, branch changes and intensifi ed further in 2005. involved in everyday over-the-counter adjustment of the branch network Several banks are in the process transactions. Among the bank’s are therefore bank priorities. of opening premises in our customers aged between 18 and 35, market area, and a number of as many as 75% now use our online In 2005 a branch was opened in Florø the large banks are increasing banking service. The corresponding and a decision was taken to open a their focus on the retail market. fi gure for those aged over 18 is 56%. branch in Haugesund. An new auto- As a result, margins are under mated banking facility was installed great pressure and there are Customer Service - the bank’s tele- at the branch offi ce in Bømlo, and in increased expectations of new phone-based banking facility - received several branches the counter service and better products as well as around 1 million calls in 2005, split be- was replaced by recycling machines. a high standard of personal tween daily banking services, insurance advisory services. In this competitive and switchboard inquiries. More than Further steps were taken to broaden environment Sparebanken Vest 33 000 online mailbox messages were co-operation with Eiendomsmegler is both well placed and well answered, as well as more than 13 000 Vest by sharing premises in an equipped. We will continue to e-mails, with communications of this increasing number of branches. develop our core values as a bank kind growing fastest. The automatic During the year Eiendomsmegler Vest that is close-by, friendly, competent telephone bank received more than established a presence in Askøy and and committed, always seeking to 4.8 million calls, slightly down on 2004. Fyllingsdalen, and preparations were ensure that our retail customers are Customer Service continues to enjoy a made for the establishment of shared satisfi ed with our products, services high level of customer satisfaction, with premises in Haugesund when and advice - and with our personnel!

19 Corporate Market

Expertise and in touch with local trade and industry

Sparebanken Vest’s Corporate Market Division attracted 400 new corporate clients in 2005 bringing the total to 10 200, while deposits were 15.1% higher.

The largest advances were made in instance, the bank is offering courses Sparebanken Vest’s losses were at the area of alternative forms of saving. in cash management, programmes and a historically low level in 2005. The Net loans to the corporate market solutions for companies which can help encouraging results reﬂ ect the high increased by 2.2%, while overall them to achieve greater efﬁ ciency. quality of the portfolio and positive commitments increased by 3.1% The bank’s commercial clients are climate of trade. Net losses totalled only NOK 10m, compared with NOK 60m in 2004.

The bank’s governing strategy for the coming three-year period seeks to achieve growth in the corporate market and to win further market shares in our area of operations/market area.

In touch with local trade and industry In order to keep fully abreast of local commercial developments, the bank has divided commercial activities into 11 main sectors, each with a sector manager. The sector manager keeps a close eye on developments, trends and analyses within his sphere of to NOK 13.2bn. Loans to this sector increasingly taking advantage of responsibility. This ensures that the are expected to increase signifi cantly electronic solutions for banking bank has the required knowledge in 2006 based on the optimism and services. As well as helping to provide and expertise, and that competent prospects for growth as expressed by corporate clients with better solutions advisers are at the disposal of our representatives of trade and industry in economic terms, this also reduces corporate clients. in the region. Technological the bank’s administration costs. developments in the banking sector In particular, we see that many Macro and micro-economic present great scope for improving customers are increasingly interested developments within the bank’s market effi ciency, for the benefi t of both the in receiving mail/information from area are monitored and analysed. customers and the bank. Sparebanken the bank by electronic mail. Twice a year, the Business Barometer Vest is therefore focusing on a broad This trend has also led to for the counties of Hordaland and Sogn range of good and effi cient payment an 18% decline in counter & Fjordane is published in co-operation service products and solutions. For transactions in the corporate market. with Innovasjon Norge, the

20 Confederation of Norwegian Business income, revenues from “other income” of key-person risk occupies and Industry (NHO), the Norwegian are of great importance to the bank. a central position. By offering Public Employment Service (Aetat), Insurance is gradually becoming attractive products which include Hordaland County Authority and a key bank product. In an environment insurance solutions we are able Sogn & Fjordane County Authority. where value is created by commercial to reinforce the steps taken by The barometer measures the level operations, with a high level of venture the client and at the same time of activity and presents the outlook activity and innovation, the concept reduce the bank’s exposure. for the various industries as well as key factors.

CREDIT LIMITS AT New work processes 31.12.2005 At 31.12.2004 Limit Utilised Proportion In order to provide its corporate clients Sector NOK mill. Mill kroner % Ramme Faktisk NOK mill. Proportion with swift, high-quality and effective 1 Primary industries 450 371 82% 4% 2.8% 378 2.9% services, the bank has invested in, and 2 Fish farming 500 366 73% 4% 2.8% 353 2.7% applies, new credit models and credit 3 Fisheries/ﬁ shing industry 800 496 62% 6% 3.7% 466 3.6% application procedures. Steps have 4 Manufacturing 1.200 1.107 92% 9% 8.4% 921 7.1% also been taken to enhance the 5 Building and construction 1.100 1.158 105% 9% 8.8% 860 6.6% 6 Wholesale and retail trade 1.500 1.143 76% 12% 8.6% 1.173 9.1% competence of all company advisers, 7 Hotels / restaurants 400 293 73% 3% 2.2% 342 2.6% while an ongoing competence 8 Mainland transportation 550 511 93% 5% 3.9% 499 3.9% development programme has been 9 Shipping 3.000 1.920 64% 25% 14.5% 2.126 16.4% 10 Shipbuilding 1.000 447 45% 8% 3.4% 535 4.1% established for all bank personnel. 11 Real estate 3.750 3.452 92% 25% 26.1% 3.145 24.3 % 12 Other 2.200 1.970 90% 20% 14.9% 2.141 16.5 % In a market characterised by TOTAL 15.000 13.234 88% 100% 12.939 100% a generally falling level of net interest

21 Subsidiaries

Another very good year for Eiendomsmegler Vest AS

2005 was a good year for residential property, with prices 9.2% higher. The increase was greatest for ﬂ ats and semi-detached properties where prices rose by around 10%, while detached properties were 8% higher. A high turnoverrate and value appreciation characterised the residential property market in 2005.

urban neighbourhoods and its satisfaction are decisive for further distribution strategy aimed at profi ling growth and success. the company as a strong local In 2005 Eiendomsmegler Vest participant has been successful. had 49 employees, 45 of whom were involved in sales. Of the Expansion in co-operation company’s 36 estate agents, 20 with the bank are state authorised. The company Eiendomsmegler Vest opened two new attaches great importance to the estate agency offi ces in 2005, one in highest standards of professionalism Fyllingsdalen and one in Askøy, located at all levels, and during the year further in the bank’s premises in Oasen and training courses were held for the staff, Kleppestø Shopping Centre. At the start of in-house and externally. 2006 the company broadened its market area to include Rogaland with the opening Market surveys in 2005 showed that of a new offi ce in Haugesund, the company has the highest in co-operation with the parent bank. preference share in the market Further growth This offi ce provides solely advisory services and scores very well on Eiendomsmegler Vest has experienced and non-cash bank functions, and along customer satisfaction. sound growth in the last few years, and with Property it will offer a broad range of 2005 was no exception. The company fi nancial products related to real estate, Price development sold almost 2000 properties, 11% up fi nancing, investment and insurance. The property market in on 2004, with a transaction value of The company is convinced that 2005 was characterised by NOK 3.5bn. collaboration with the bank will make it a high turnover and rising possible to extract common synergies and prices. In Bergen, prices rose The company is market leader in the create added value for the customers. by 15%, while the average overall market for the counties of turnover time was 19 days. Hordaland and Sogn & Fjordane, with Competence and customer satisfaction In Hordaland, excluding Bergen, a market share of around 24% in The high quality of the company’s the corresponding fi gures 2005. It has a strong position in all services combined with customer were 9% and 27 days.

22 On a national basis, prices now are 139% up on 1987, which are the counties of Hordaland and Sogn & Fjordane. which was the last peak year. After adjusting for inﬂ ation, The company has a staff of 25. prices are 49% higher. The annual accounts show a pre-tax proﬁ t for the year A/S Filialbygg of NOK 11.4m, which was NOK 2.8m down on the previous A/S Filialbygg is the Group’s other subsidiary. It owns year. This was mainly due to a one-time provision relating all the commercial properties and is responsible for to one person in accordance with company regulations all of the Sparebanken Vest Group’s leases. The buildings concerning Contractual Pension Agreements, and higher consist of premises located in the bank’s area of operations, extraordinary maintenance costs compared with 2004.

23 Risk and Capital Management

Risk and capital management

Banking activity entails risk in many areas. The challenge is therefore balance the bank’s market ambitions against its ability to assume risk. Sparebanken Vest applies good risk management as a key strategic tool for value creation.

Sparebanken Vest seeks to measurement. The risk-adjusted portfolio The Board is responsible for ensuring maintain a moderate risk profi le. return is in place as a control fi gure for that the level of equity is suffi cient The bank’s ability to balance its 2006 (reported continuously in 2005). in relation to the bank’s exposure and ambitions against its risk-bearing activities. It shall also ensure that the ability will have both quantitative Sparebanken Vest also monitors and capital base meets statutory and qualitative effects. measures it positions in relation a requirements. The Board also sets A pronounced risk culture structure of parameters. This structure the bank’s objectives and operating characterises an organisation with contributes to the maintenance of a parameters in all risk areas, including a strong focus on risk and profi tability, diversifi ed portfolio and supports the guidelines for risk management. and its overall effect is to underpin bank’s risk profi le objectives. the bank’s rating, and thus facilitate The parameters are reassessed at least The managing director has access to the capital market. once a year and are set by the Board. responsibility for the bank’s overall risk management, including the development of effective models and parameters for management and control purposes. All decisions related to risk and risk management are normally taken by the managing director in consultation with other members of the senior management. In its reports to the managing director, the Risk Management section focuses on crucial functions linked to management, controls, reporting and analysis. Risk Management is also responsible for the models used in each of the bank’s risk areas.

All managers are responsible for risk management and good internal Sparebanken Vest is in the process Target fi gures and parameters are control within their designated areas, of reorganising its risk management reported to Board on a quarterly basis. in line with the risk profi le adopted by and risk measurement practice, The quality and independence of the bank. In order to maintain good and new approaches are being the reports are safeguarded as those fi nancial and administrative implemented in stages. Most progress responsible for the reporting function management each manager shall have has been made in the development are organisationally independent of the required understanding of the of the bank’s own solutions for the the operative function. risks that are involved in his area of management of credit risk, while responsibility. new models for other risk areas are Organisation/responsibility gradually being implemented. The level Responsibility for risk management and The role of the internal audit function of risk-adjusted capital is applied as controls is split between the Board, the in relation to risk management is to an expression of the bank’s risk management and the operative units. monitor the bank’s overall risk

24 management and internal controls on behalf of the be suffi cient to conduct the activity in question. Board of Directors. The internal audit function shall also The risk-adjusted capital and the statutory minimum test whether procedures and guidelines are being requirement are compared with the bank’s actual equity. complied with, and consider whether the models used It the equity is higher than necessary, this represents for risk management give a correct picture of the bank’s an additional buffer and a reserve for expansion. overall risk profi le. The bank’s processes related to capital assessment are Capital management based on quantifi cation of the capital requirement for each Although Sparebanken Vest’s prices take account of risk area. Stress tests are run to simulate the effects expected losses, the bank is required to have capital reserves of unexpected events, but where such situations could entail suffi cient to cover unforeseen losses. The amount of major unexpected losses. At the same time, the quantitative risk-adjusted capital is calculated for all risk areas and shall analyses are supplemented by qualitative assessments.

25 Risk and Capital Management

Sparebanken Vest uses internal systems Retail Market and the Corporate accounting results as a consequence to quantify working capital for credit risk Market. This is compared with the net of insuffi ciency or failure on the part purposes. The credit portfolio is split into contribution from these areas in order of internal processes, personnel, internal 11 risk groups where the customers are to determine the level of risk-adjusted systems or external events, as a result classifi ed by quality as refl ected profi tability, and this fi gure is of which the bank is required to have in the probability of defaults. Using a monitored on an ongoing basis. a capital reserve in order to meet large time horizon of one year, a default is and unexpected operational losses. typically a situation where an account Risk management has been overdrawn or amounts due The bank’s risk management activities Sparebanken Vest has established its have not been paid for more than 90 relate to four risk areas: own risk strategies for each area, and days and/or specifi c circumstances have The credit risk is the bank’s largest risk specifi c control targets and parameters arisen (“no likelihood of payment” cf. area. It is the risk of losses in the event are set for each area of risk. These Basel II) affecting the customer’s that customers are unable to meet strategies are reassessed at least once debt-servicing ability. their obligations related to loans, a year in connection with the bank’s credit facilities, guarantees and the like. other review processes. Control targets The expected exposure in the event of The market risk is defi ned as the risk and parameters laid down in the defaults is also calculated, which also of loss on “on-/off balance sheet bank’s risk strategies shall contribute includes lendings and committed credit positions” because of changes in to the bank’s profi tability in both the facilities. Where defaults arise, the loss market variables and/or market short and the long term. The aim is is the proportion of this exposure conditions within a specifi ed time avoid excessive concentrations of that the bank can expect to lose. horizon. The market risk arises when operational risk. - Concentrations that, In determining the amount of this loss, the bank has open positions in different given unfavourable developments, could contribute to a weakening of the

3.9 billion bank’s proﬁ tability and capital base.

0.5 billion Supplementary capital The Board of Directors delegates 0.4 billion Perpetual subordinated - 2.5 billion loan capital authority to the managing director 3.0 billion within the risk areas. All authorisations Pillar 2 capital established within the organisation are Other balance sheet exposure Equity personal. In relation to both the retail Liquidity risk Core capital and the corporate market there are Market risk automatic decision-support systems Operational risk and portfolio management systems. Credit risk and supplement for External and internal data can thus variation be used as support in credit assessment and credit management.

The credit risk in 2006 will be managed Limited Actual equity working capital using a larger number of key fi gures Parent bank, incl. pillar2 capital compared with 2005, and new ones, - including leading indicators and the level of loan security and fi nancial instruments. This includes the historical data. Key elements in this the amount that can be realised stock market, interest rate and foreign respect are the likelihood of defaults, in a default situation are key factors. exchange risk, and it can arise with expected losses, risk-adjusted capital Based on these three components, instruments which are either on or and the risk-adjusted return. the expected loss is calculated, off-balance sheet. The risk may be of a Concentration limits have also been as well as the capital linked linear or non-linear nature (options etc.). set for each industry, for individual to unexpected losses. The liquidity risk consists of two commitments and the overall volume elements: the refi nancing risk and of major commitments. Until more advanced methods are the price risk. By the refi nancing risk is developed for other types of risk meant the risk of the bank being As regards the market risk, the individual (market, liquidity, operational), the unable to refi nance its obligations areas are managed within defi ned working capital as calculated for without incurring considerable costs position parameters. In a maximum regulatory purposes will be used as in the form of exceptionally expensive exposure situation, an unfavourable a basis for calculating working capital. funding or a decline in the value development will not weaken the As regards credit risk, risk-adjusted of assets that have to be realised. results or the capital base to any capital is allocated to the bank’s The operational risk means appreciable extent. Our aim is to set up business areas represented by the unexpected fl uctuations in the VAR (Value-at-Risk) models as a basis

26 for calculating working capital and which along with for the operational risk. Pillar no. 2 relates to the public other tied-up capital and for other risk areas, will be supervisory function and the bank’s own assessment better able to calculate the bank’s overall need for risk of its capital position. This seeks to ensure that fi nancial capital. At normative level, Sparebanken Vest focuses on the institutions and the authorities arrive at a better liquidity indicator and the funding ratio. The liquidity understanding of the institutions’ portfolios and the risk. indicator measures the ratio of the bank’s stable funding Pillar no. 3 relates to market discipline which in the case to its non-liquid assets, while the funding ratio measures of the institutions means further external reporting the ratio of total customer deposits to lendings. The target requirements on risk elements. ratio for the liquidity indicator is now 100%, including unutilised committed credit facilities, while the target In the autumn of 2005 Sparebanken Vest applied to fi gure for the funding ratio has been set at 55%. A liquidity the Financial Supervisory Authority of Norway for indicator ratio of 100% means that a shortfall in deposits is permission to apply advanced methods (IRB-retail and covered by long-term funding in the money market. IRBF) of calculating the capital related to credit risk. The application is based on draft regulations and an ap- It is diffi cult to establish rational and sound normative plication package drawn up by the Financial Supervisory target fi gures for operational risk. Of central importance Authority of Norway. In order to receive approval to use to operational risk management are the bank’s risk these methods, banks are required to meet a number of identifi cation processes. Expert assessments and requirements. The Financial Supervisory Authority of Norway management confi rmations provide a basis for identifying has informed the bank that its application qualifi es for major risks. An event data base has also been established consideration and assessment. This process is likely to last as a supplement to help ensure that signifi cant events are until the autumn of 2006. reported as they arise. The bank’s management of operational risk is co-ordinated with internal controls The Board of Sparebanken Vest has adopted a programme in accordance with the Internal Control Regulations. aimed at compliance with the new capital adequacy regulations and the bank’s application in this respect. New capital adequacy regulations The programme takes due account of the responsibility New regulations concerning supervision and capital and the roles of the Board, the management and the adequacy, based on recommendations from the Bank internal audit section in relation to the requirements of of International Settlements (BIS), Basel II, will be the IRB method. The steering group consists of members implemented with effect from 2007. To a greater extent of the bank’s senior management, with the managing than today, the regulations will focus on the real credit director as chairman. The programme is headed by the quality and the aggregate risk. director responsible for the bank’s Risk Management. The Board of Directors is kept updated on the activities The new code of practice rests on three pillars. of the steering group.

Pillar no. 1 relates to the minimum capital adequacy The models and framework developed by Sparebanken Vest requirement. This seeks to bring the capital requirement in the last few years have been aimed at improving into line with the actual economic risk to which the the bank’s ﬁ nancial control procedures, using the institution is exposed. There is also a capital requirement recommendations from Basel II as a basis.

27 Visjon Vest

Passionate enthusiasts - with a desire to enrich society

Without passionate enthusiasts the West of Norway would be poorer off. Without their enthusiasm the West of Norway would not be what it is today.

Passionate enthusiasts - like those who arranged the largest Norwegian veteran boat and transport festival ever - Nordsteam 2005 - in the port of Bergen in August 2005.

Passionate enthusiasts - like those who bring together local talents, amateur and professional, and create a theatrical and musical event in Bømlo, year after year. Passionate enthusiasts - like those who after thousands of hours of voluntary work were able to open the artiﬁ cial grass stadium at Eide in Odda in 2005. Hardly a day passes without either training or matches on the new grass surface. The artiﬁ cial grass surfaces in Kaupanger, Førde and Strandebarm are also thanks to voluntary efforts. The same applies to the ongoing restoration of D/S Oster.

These are just some of the projects West of Norway, backed by funds from 6 to 10 are able to take part in that received funds from Sparebanken Visjon Vest. Helle was previously editor a unique philosophy project. Funds to Vest in 2005 as part of the support for of a multi-volume history of the world encourage fi lm-making in the West of worthy causes provided under Visjon and a corresponding history of Norway. Norway is helping to strengthen one of Vest. The considerable team efforts It was therefore that he should have the main cultural industries. There was show that money is not everything. responsibility for the history of the also great enthusiasm among the 250 But it is not that simple. By supplementing West of Norway. This is the fi rst regional who participated in the West of voluntary efforts with fi nancial support history of its kind in Norway. Publiction Norway Conference in 2005. This the benefi ts for society become much is due in the autumn of 2006. Conference provides a forum for greater. This can be described discussion of regional developments, as a synergy effect. Put simply, The 16 individuals who in 2005 and this time the themes were it is Sparebanken Vest’s experience received funds under the grant scheme commerce and culture. that one krone given to an enthusiast “The West of Norway in writing, sound is paid back ten-fold to society. and photos” are all enthusiasts. Enthusiasts and enthusiasm are also All art used in photos, on the stage to be found in the hundreds of clubs By defi nition, enthusiasts are and in books starts with a creative and associations which received funds characterised by enthusiasm, process. It is this process that Visjon for different projects in 2005. Finally, and this enthusiasm is contagious Vest wishes to stimulate. The response we must not forget the involvement and goes beyond the confi nes of was overwhelming when the grants that extends beyond our region. voluntary team efforts. were fi rst announced in 2005, with For example, the bank supported the 444 applications for funds. Rafto Foundation which has been Around thirty historians meet regularly engaged in demanding and daring in Sparebanken Vest’s premises to Enthusiasm is also created at the work for many years aimed at bringing discuss a major project. The editorial Apeltun, Bønes and Fjellsdalen schools the justice that we take for granted board, headed by Professor Knut Helle, in Bergen and in Torvmyrane School to regimes that show no respect is writing a 3-volume history of the in Florø where children aged from for human rights.

28 Visjon Vest - a strategic step Photo above: Sparebanken Vest’s support of worthy Nordsteam was the causes through Visjon Vest illustrates largest Norwegian veteran boat and the bank’s acceptance of its social transport festival ever, responsibility. In the last few years arranged in Bergen the commercial sector has shown an the summer of 2005. increasing awareness that its responsi- Supported bility extends beyond making money. by Visjon Vest. Corporate social responsibility is the international name of this trend. Photo to the left: This is nothing new for Sparebanken Art, culture, the theatre Vest. We have been allocating funds and music are primary to good causes since 1847. areas for Visjon Vest. The Savings Bank Act permits us to do so. The savings banks are allowed In 2005 the provision for worthy the bank, they are evaluated by to allocate 25% of their profi ts to causes amounted to NOK 65m, based competent people who are brought gifts for the public good, after tax and on the profi t for 2004. Of this, NOK together in “think-tanks”, juries etc. dividends on primary capital certifi cates. 40m was allocated and NOK 25m Funds are also allocated to initiatives was transferred to the gift fund. based on applications. Allocations to worthy causes are a part In 2006 NOK 45m will be allocated and of the bank’s strategy. Here, it is stated NOK 55m will be credited to the gift The funds for worthy causes are that our main function is to engage in fund, bringing it up to NOK 100m. allocated by several bodies. Decisions banking activity. Thereafter, where The gift fund serves as a buffer to may be taken by the bank’s highest operations make it possible, and provided be used at times when the bank’s authority, the Board of Governors, that the capital base is satisfactory, profi ts are lower. or by the Board of Directors, but also a provision not exceeding the amount at regional level in consultation with allowed by law may be made for gifts Some of the funds are allocated to the local board of directors. for the public benefi t. This activity projects initiated by the bank itself. Overall, the bulk of the funds in is in line with the bank’s vision is to These are often large projects with the the last few years have gone to be a driving force in the development strategic purpose of strengthening the causes related to culture/coastal of the social and commercial life region. In order to ensure the quality culture and projects aimed at of the West of Norway. and legitimacy of projects initiated by children and young people.

29 Personnel

A stimulating working environment

Sparebanken Vest shall attract, develop and keep talented staff by offering competitive beneﬁ ts in a stimulating and attractive working environment.

Employees at Sparebanken Vest keep ﬁ t together. They have all received a pedometer and there is keen internal competition. -It’s good for job satisfaction, the level of sick leave and the environment, says Director of Corporate Communications Jørn Lekve.

From left: Maria Helsengreen Anders Hosøy Lisbeth Haugen and Jan Vidar Jensen

Sparebanken Vest’s personnel and employee are an important element in relating to fi nancial advisers in Norway. organisation policy is designed to monitoring job satisfaction and perfor- Training and development activities help the bank achieve its strategic mance at individual level. The results are being initiated to ensure that there objectives. are evaluated and rewarded in annual is a satisfactory level of competence salary meetings, which is additional to throughout the organisation in relation Strategic work on the development incentives and bonus schemes. to sales and both professional and of human resources is targeted on formal requirements. the establishment of an organisation Each year the bank carries out an capable of adapting swiftly and organisational survey to identify factors Management development effectively, in response to and in in the working environment that affect Sparebanken Vest has defi ned anticipation of new external factors. job satisfaction. Replies from 95% of coaching as an important the employees refl ect a high level of management style. In practice, Sparebanken Vest employs a manage- commitment, and at normative level this is effected in training situations ment wheel to determine when the the results for 2005 were very good where the employees are coached by various activities and processes are and show a positive trend. managers in communication skills, to be implemented. The management but also through daily management wheel starts with the strategy process Competence where the focus is on improving results in the spring and continues with Sparebanken Vest is through the development of the budget work in the autumn with a knowledge-based enterprise with individual. In 2005 a number specifi cation of market action plans. a systematic and targeted approach of courses were held for the to the development of competence. management, targeting on the use Sparebanken Vest promotes a perfor- In 2005 there was a special focus of management tools and the mance culture, and talks with each on meeting public requirements role of the manager in practice.

30 Primary capital certiﬁ cates

Primary capital certiﬁ cates - developments in 2005

In 2005 the PCC index rose by 47.4%, once again outperforming the general rise in share prices on the Oslo Stock Exchange, which stood at 40.3%.

This performance again shows that Vest’s activities is to achieve the savings bank’s equity instrument results which provide a satisfactory - the primary capital certifi cate - return on total capital employed. is a very attractive and competitive The dividend on primary capital investment alternative in times certifi cates shall refl ect the bank’s of appreciating stock exchange values. fi nancial results. Payment of Because of the moderate risk attached a competitive cash dividend is to savings bank activities, PCCs are a priority for Sparebanken Vest.” usually presented as a good investment The dividend corresponds to alternative in periods of low economic the relative share of profi ts accruing growth. However, developments to PCCs, based on their proportion in 2005 show that it is profi table of the parent bank’s equity to include PCCs in an investment at the start of the year. portfolio also in periods This proportion of equity of economic prosperity. stood at 9.48% at the start of 2005, and the dilution Sparebanken Vest was not among the effect reduced this to 8.36% savings banks which contributed most at the start of 2006. to the development of the PCC index in 2005. Our PCC (SVEG) rose from The bank will continue to seek NOK 187.50 to NOK 206 in 2005, to establish an liquid market and a dividend of NOK 12.50 also for its own PCCs by buying for Team Sparebanken Vest paid in the course of the year. own account. At year-end 2005 - one of our sponsorees Sparebanken Vest owned 68 600 in 2005 The overall return for the year was of its own PCCs. thus 16.6%. By itself, this was a satisfactory return in a market characterised by low interest rates, but it was still considerably less than the rise in the index in the same period. PCC price development

The bank’s operations in 2005 permit Turnover Price payment of a dividend of NOK 17.10 per PCC, which is the entire amount of the PCC’s share of the proﬁ t for the year, after allocations to the reserve for valuation variances. There will therefore be no allocation to the dividend equalisation reserve.

Dividend policy This is in line with the bank’s adopted Turnover (NOK 1 000)price dividend policy which states that Development ”the ﬁ nancial objective of Sparebanken

31 Directors’ Report

Directors’ Report 2005

2005 was a good year for Sparebanken Vest, with operating proﬁ ts at a record level. The improved performance reﬂ ects not only sound operations, but also positive macro-economic conditions and the reversal of losses written off in previous years. Sparebanken Vest has strengthened its position as the leading retail bank and is also an important commercial bank in the region. The positive trend which characterised 2005 was instrumental in broadening our involvement in the commercial and social development of the West of Norway.

During the year Sparebanken Vest with branches in the counties He took up his position with the extended its activities in the West of Rogaland, Hordaland and bank on 9 January 2006 and of Norway with the establishment Sogn & Fjordane. Based in Bergen, the at the same time joined of a branch in Florø providing advisory bank has 58 sales outlets in the region. the Board of Directors. services and the opening of an estate The Group is also engaged in estate agency offi ce in Haugesund, effective agency activities through Eiendoms- Personnel from January 2006. megler Vest AS and property manage- At year-end, the Group provided Profi ts before tax totalled NOK 643m, ment through AS Filialbygg, both of employment equivalent to 749 against NOK 487m in 2004, which companies are wholly owned by full-time positions, 42 down from the corresponding to a return on equity the parent bank, Sparebanken Vest. previous year. The corresponding fi gure for the parent bank showed a net reduction of 44, of which approximately 60% related to withdrawals under Contractual Pension Agreements with a gift pension, while natural wastage accounted for the remainder. The bank’s aim is to reduce the level of employment further within the current strategy period, and to this end the accounts for 2005 include a restructuring provision of NOK 33m.

Working environment For the fi fth consecutive year, the bank carried out an employee survey in 2005. The results showed an organisation characterised by job of 15.44%. In line with the bank’s Elected offi cers and management satisfaction and involvement, and the dividend policy, the Board proposes The composition of the Board of scores achieved by the bank were well a cash dividend of NOK 17.10 per Directors remained unchanged within the strategic targets set for the primary capital certifi cate for 2005. following the elections in 2005. working environment. The Board also proposes an allocation In the spring, Knut Ravnå gave notice of NOK 100m to gifts for the public that he wished to step down as HES – sick leave benefi t, of which NOK 45m will be managing director of Sparebanken In 2002 Sparebanken Vest became distributed in 2006 while NOK 55m Vest, and the Board immediately a signatory to the Inclusive Working will be credited to the gift fund, initiated the process of fi nding his Environment Agreement. The level bringing it up to NOK 100m. successor. In September, a joint of sick leave within the bank has meeting of the Board of Governors developed positively and is now well Business operations and the Board of Directors within the target limits set when the Sparebanken Vest is an independent appointed Stein Klakegg to take agreement was signed. One of the banking and fi nancial services group over as managing director. bank’s strategic objectives has been

32 The Board of Directors: Rear from left: Erling Mjelde, Geir Navarsete, Arve Havnerås, Inger Karin Larsen, Jan O. Yttredal og Erik Bøckmann (deputy chairman).

Front from left: Anne Gine Hestetun, Stein Klakegg (managing director), Pål W. Lorentzen (chairman) og Tone Mattsson.

to bring the level of sick leave below the average for the to be over-represented in managerial positions. There is industry, and this objective is now being met. The incidence an ongoing process aimed at a more equal distribution of sick leave in 2005 stood at 4.5%. and one of the initiatives in this connection is a new management talent programme which is being Equality started in 2006. Women make up 58% of the bank’s total workforce and The Board of Directors comprises nine elected men 42%. For several years, the bank has sought to create members and the managing director. greater gender equality, especially at senior management Three of the elected members are women. level, and this has been achieved in both the Retail Market Women account for 47% of the Board of Governors division and in the Group management. and men 53%, while the Control Committee consists At other levels within the organisation men continue of three women and two men.

33 Directors’ Report

External environment commitments for the accounting amount of the parent bank’s No resources or production methods treatment of pension commitments profi ts that can be distributed is NOK are used which directly pollute the permit estimate divergences 17.12 (12.62) per PCC and the Board external environment. The bank in subsequent period to be posted proposes a dividend of NOK 17.10 encourages environmental awareness in a corridor for amortisation. (12.60) per PCC, in line with the bank’s in relation to the use of paper, The bank has chosen this dividend policy. the management of waste implementation option. Income from PCCs accounted for 8.36% (9.48) of and recycling. the sale of structured savings the parent bank’s equity at year-end. The bank has a broadly differentiated products are amortised with effect At the same time, the Group’s capital commercial portfolio and a number from and including 2005. This change ratio stood at 11.36% (11.8), with of companies with loans from the bank in accounting principles has also been core capital accounting for 9.5 (9.6) are engaged in activities that affect the implemented by the parent bank. percentage points. The Board proposes external environment. Thus, through its Unless stated otherwise, references to allocating NOK 100m of the profi t to business processes, Sparebanken Vest the consolidated fi gures for 2004 relate gifts for the public benefi t. Of this, is indirectly able to infl uence the to re-stated IFRS fi gures. The 2004 NOK 55m (25) will be transferred to external environment, and it is an fi gures for the parent bank have been the gift fund. important factor in the bank’s changed due to the implementation of At year-end, the Group had total assets assessment of creditworthiness. IAS 19. This change has reduced costs of approximately NOK 54.7bn (46.5).

Income Despite a sharp rise in lendings, deposits and total assets, there was only a modest increase in net interest income, from NOK 960m to NOK 972m, corresponding to roughly 1.92% (2.19) of average total assets. The trend in net interest income refl ects intense competition in the credit market as well A meeting of customer as the continuing low level of interest advisers. From left: rates and the fact that a large Aina Røsseland, proportion of the increase in Ove Mulelid and lendings relates to home mortgage Ina Ravnanger. loans. Lendings grew by approximately NOK 5.3bn in 2005, of which home Annual accounts in 2004 by around NOK 5m, compared mortgage loans accounting for about The annual accounts are submitted on the with the fi gure that appeared in the NOK 4.5bn. At year-end, loans of this assumption that that the bank will continue annual accounts for 2004. kind made up roughly 68.7% (66.6), as a going concern. This is based on In the view of the Board, the annual and of this home loans to customers operational forecasts for 2006 and accounts prepared in accordance with participating in the bank’s benefi ts projections with a time horizon the principles described above give programmes accounted for 57.0 (50.6) extending for a further three years. a correct picture of the fi nancial percentage points. Loans under the position of the Group. benefi ts programmes are cheaper than Changes in accounting principles other home loans. and comparability Main accounting fi gures Net interest income is also affected Sparebanken Vest’s consolidated The results for the year refl ect volume by the way lending growth is funded. accounts are presented in accordance growth, an increase in other income, Deposit from and debt to customers with the IFRS regulations. The parent a stable level of ordinary operating covered around NOK 2.5bn (47%) of bank has implemented IAS for the expenses and a considerable the lending growth of NOK 5.3bn, while accounting treatment of pension write-back of losses. the remainder was raised mainly in commitments with effect from 2004, Group profi ts before tax totalled NOK the money market where the cost of and new lending regulations with 643m (487) and NOK 475m (308) borrowing is normally higher than effect from 2005. The net effect on after tax, giving a return on equity interest on customer deposits. equity as at 1 January 2005 is an of 15.44% (11.54). The parent bank Implementation of the new lending increase of approximately NOK 20m, recorded profi ts of NOK 455m (313). regulations also means that one-time of which about NOK 2m has been The parent bank’s profi ts for the year fees related to lending activities must credited to the equalisation fund. corresponded to earnings of NOK be amortised over the expected term The provisions of IAS 19 relating to 17.25 (12.96) per PCC, also of the loans. This change in accounting the accounting treatment of pension on a diluted basis. The maximum principles reduced earnings by about

34 NOK 16m, compared with 2004. Net interest income Pre-tax profi t accounted for 67.3% (70.3) of the Group’s total income of NOK 1 443m (1 366). The corresponding fi gure for the parent bank was 71.4% (72.5). The Group’s aggregate net (other) income in 2005 totalled NOK 471m (406). Of this, NOK 4m was net income from banking services, NOK 40m relates to net gains on fi nancial instruments, while an increase in other operating income provided NOK 21m and was entirely attributable to higher estate agency commissions received by Eiendomsmegler Vest. The accounts show that the parent bank’s net (other) operating income rose by NOK 24m, from NOK 366m to NOK 390m. Of this, fi nancial instruments accounted for NOK 20m and banking services NOK 4m. In considering the development of other income, due account should be taken of the fact in 2005 there was Development in net interest income a change in the accounting principles used by the parent bank to record income from the sale of structured savings products. Starting in 2005, income of this kind is amortised over the lifetime of the product, while previously this was taken to income in the year of issue. It is estimated that the effect of this on the accounts for 2006 will be to reduce income by about NOK 16m. The bank’s two subsidiaries – Eiendomsmegler Vest AS and AS Filialbygg – recorded profi ts of NOK 13.1m (7.5) and NOK 8.6m (10.5), respectively. This is incorporated in the accounts of the parent bank applying the equity method.

Operating expenses Group operating costs for the year were 6.8% higher Development in operating costs at NOK 875m (819). The difference between the Group’s costs and those of the parent bank relates primarily to Eiendomsmegler Vest AS and IFRS implementation effects. The parent bank’s costs showed a nominal increase of 4.9% and included provision for restructuring amounting to NOK 33m which was charged against proﬁ ts and a performance-related bonus of NOK 25.7m (20.3). After adjusting for these items, the parent bank’s nominal costs were unchanged from 2004. The provision for restructuring will be used for further cost realignment within the bank. This is necessary because of the keen competition in the bank’s core areas of activities, and not least in view of the changes being brought about by technological advances and customer preferences. Technological developments have also provided a basis for higher productivity and the need for restructuring of the bank’s production activities. As a parallel development, the Development in return on equity- accumulated per quarter banking industry is required to comply with fundamental changes in regulatory requirements – requirements which create their own development and realignment needs. Inﬂ uences of this kind contribute to the process of reallocating the bank’s resources. Restructuring and performance-related costs are included in the Group’s personnel costs. After adjusting for these items, personnel costs increased by NOK 12.3m (3.3%) in 2005, most of which is attributable to higher pension costs (NOK 19m), NOK 5m of which was due to the implementation of IAS 19.

35 Directors’ Report

Losses, write-downs and defaults including credit facilities. losses, growth and the concentration of The fi gure for losses on loans and Approximately 45% of the increase exposure. In the view of the Board, the guarantees shows a net recovery in lendings was funded by a rise in overall credit risk is acceptable. The risk of NOK 75m, while the fi gure for 2004 deposits, while the remainder was profi le is low, defaults are at an was a net loss of NOK 60m. In the third fi nanced largely through the money acceptable level and losses are low. and fourth quarters of 2005 the bank market. This contributed to the The bank’s liquidity risk is managed received a total of NOK 85m related increase of NOK 4.2bn in fi nancial on the basis of the liquidity indicator, to its commitment with Finance Credit. liabilities. the funding ratio and parameters for After adjusting for these recoveries, Sparebanken Vest has a conservative unutilised, committed credit facilities net losses in 2005 totalled approxi- liquidity strategy which is continuously and the bank’s borrowing facility with mately NOK 10m. The exceptionally monitored using the liquidity indicator. Norges Bank. Throughout 2005 the favourable development in losses Under this strategy, the bank is very bank was well within the parameters made a major contribution to the liquid from time to time, and this is set by the Board. good results that Sparebanken Vest refl ected in the increase of NOK 1.4bn Interest rate exposure relates to the is able to present for 2005. in lendings to and receivables from bank’s holdings of interest-earning Net losses corresponded to –0.16% credit institutions in 2005. securities, fi xed-rate lendings and (0.14) of gross lendings at year-end, At year-end, Group equity totalled fi xed-rate deposits. Here, too, the bank while the default ratio stood NOK 3.3bn (2.7). At the same time, was within the limits set for interest at 0.33% (0.36). the qualifying capital base for capital rate exposure throughout 2005. In the view of the Board, adequacy purposes amounted to NOK Norges Bank’s foreign exchange the write-downs are suffi cient in 3.9bn (3.5), with core capital regulations set the limits for bank’s relation to the assessed credit risk accounting for NOK 3.2bn (2.9). Core maximum foreign exchange exposure. attached to the commitments. capital includes subordinated loan Sparebanken Vest’s aggregate foreign capital totalling NOK 406m (363). exchange exposure is moderate and Tax cost corresponded to NOK 42m at year-end. The effective rate of tax for 2005 is Summary The parameters set for investments considerably below the 2004 level due In the view of the Board, developments in equities have been redefi ned to to the introduction of the so-called in 2005 were in line with expectations. refl ect the overall exposure limit of NOK exemption model which was The industry is characterised by intense 500m. At year-end 2005 the bank’s adopted/implemented in 2004 which competition with continuous pressure overall exposure stood at NOK 385m. resulted in an unusually high rate of tax on margins in the bank’s core areas. The Board regards the risk position as in that year related to write-downs of However, the bank can report good moderate. the bank’s shareholding in underlying growth from ”other income” The bank’s internal control procedures Sparebankgruppen AS at that time. and ordinary costs that refl ect a stable based on relevant Regulations have As a result of the exemption model, the development. Manpower reductions been established as an integrated part effective rate of tax in 2005 was lower have been achieved as planned. of strategic management. Through its due to relatively high capital gains. The level of losses remains low. work on risk strategies and ongoing The bank’s performance has resulted in monitoring and controls the bank Assets, liabilities and equity a good return on equity and a high cash ensures that the regulatory At year-end, the Group had total assets dividend on PCCs. requirements relating to overall risk of NOK 54.7bn (46.5). assessment and confi rmations are During the year, deposits increased Risk implemented. Risk assessment also by NOK 2.5bn (2.6), or 9.9% (11.8 ). Sparebanken Vest’s risk management include an evaluation of the strategic risk. At the same time, gross lendings rose is concerned with the bank’s exposure The parent bank’s risk-adjusted tied up by NOK 5.3bn (4.5), or 12.8% (12.2), related to strategy, fi nancial capital at year-end 2005 was estimated with the retail market accounting for activities and operations. The fi nancial at NOK 2.5bn. At the same time, NOK 5.1bn (4.7) and the corporate risk consists of the exposure in relation the parent bank’s capital base totalled market NOK 0.2bn (-0.2). to credit, the market (interest and approximately NOK 3.9bn, The retail market accounted for NOK foreign exchange rates and share indicating that Sparebanken Vest 1.4bn (1.4) of the increase in deposits prices) and liquidity. The strategic is very well capitalised in relation to and the corporate market NOK 0.5bn risk refl ects whether the bank has the the risk attached to its activities. The (0.9). Wholesale money market right focus on its activities, while the bank’s equity is also well above the deposits increased by approximately operational risk relates to unforeseen regulatory requirement. NOK 0.6bn (0.3). fl uctuations in performance due to In the autumn of 2005 Sparebanken At year-end the funding ratio was the inadequacy or failure of internal Vest applied to the Financial 58.7% (60.5), while the liquidity processes, systems or external events. Supervisory Authority of Norway for indicator based on Norges Bank’s The credit risk is managed taking permission to apply advanced methods norm stood at 103.0% (103.2), account of the risk profi le, defaults and of calculating the capital related to

36 credit risk. The bank has been informed that the application Development in capital ratio has been accepted for consideration. This process is likely to last until the autumn of 2006. The Board is of the view that the bank’s methods and procedures for risk and asset management are satisfactory and were further improved in 2005. Risk and asset management and control are key focuses of attention for the Board, and based on quarterly reports the Board evaluates the risk situation in relation to the adopted management and control parameters. The Board regards the overall exposure as moderate, and thus within the target framework set for the bank’s risk proﬁ le.

Retail and corporate market Sparebanken Vest has a portfolio of 206 000 retail customers who use the bank to cover all their requirements, an increase of more than 3000 on the previous year. During the same period the number of corporate customers increased by 400 to 10200.

Retail market The retail customer segment was characterised by sound growth in both deposits and lendings, the increase standing at 8.3% and 16.1%, respectively. The various beneﬁ ts programmes offered by the bank also enjoy broad popularity and play an important role in forging stronger bonds between individual customers and the bank. The Vestavinn Voksen programme has proved to be especially popular with a 12.5% rise in the number of customers in 2005. The bank is also active in promoting products targeted at the younger generation and the various concepts have good coverage. The home saving scheme for young people continues to be a very attractive savings product and has shown good growth in the segment for customers aged between 18 and 34. At present, 75% of the bank’s customers in this age group are members of this scheme. There is also increasing use of the bank’s online banking services which are now used by 54% of our adult clientele. The online facility is especially popular among those in the age group 18 – 35 where 75% of the customers are active users of the service. Among customers over 18 years, 90% use the bank’s card-based services. Increasing use of electronic services has reduced both the use of and the need for over-the-counter services, as reﬂ ected in the 6% drop in the number of customers who visited the bank in 2005. The counter capacity will be brought into line with this trend. The bank’s services are continuously adapted to market requirements in terms of content, scope and price, and survey feedback shows that Sparebanken Vest enjoys a high level of customer satisfaction.

Corporate market On the corporate side, there was an inﬂ ow of 400 new customers in 2005. Gross loans increased by 1.8%, the level of growth being affected by a reduction of NOK 400m in syndicated loans, largely as a result of the bank’s withdrawal from the SpareBank 1 alliance. At the same time, deposits rose by 8.2%, and if wholesale deposits from the money market are included the corporate segment grew by NOK 13.0%.

37 Directors’ Report

Corporate customers are increasingly ensures that the bank accepts and Any rise in interest rates would inclined to use the bank’s electronic complies with the market terms in force strengthen the krone, which in turn solutions for banking services. This is at any time in the equity market for would weaken the position of industries economically benefi cial for the customers, primary capital certifi cates, and that the where exchange rates are a while at the same time contributing to bank establishes a history which helps competitive factor. Nevertheless, it is lower administration costs for the bank. to ensure that the bank has a stock likely that Norges Bank will increase Many customers are increasingly exchange market as a possible source its key rate by 0.75 percentage points interested in receiving mail/information of funding, if the need should arise. to 3% p.a. in 2006. Measures to lower from the bank by e-mail, and this has the level of activity will be called for also led to a reduction in over-the- Economic developments as the Norwegian economy in general counter transactions by as much Low interest rates and the prospect and the labour market in particular are as 18% in the corporate market. of a further period with a low real rate approaching full capacity. A number of steps have been taken to of interest were important precursors At the end of 2005 the three-month provide corporate customers with swift, to the further maintenance of rate stood at 2.56%, refl ecting a rise high-quality and effi cient services – a strengthening Norwegian economy of 0.59 percentage points in the course including the introduction of new credit in 2005. A thriving international of the year. models and new application processing economy and a high level of oil-related Although short-term rates are expected procedures. Resources have also been investments contributed to the positive to rise in 2006, it is unlikely that there allocated to enhance expertise among economic climate. In Norway, there will be a corresponding rise in more all corporate advisers and a compe- was better utilisation of capacity and long-term rates. tence development programme has infl ation was moderately up on 2004. A moderate strengthening of the been established for all bank personnel Norges Bank increased its key rate Norwegian krone can be expected in dealing with corporate clients. twice in 2005 by a total of 0.5 the course of the year. Estimates put percentage points. International the fi gure at around 3 percentage Corporate governance interest rates also started to rise due to points in the course of 2006 Sparebanken Vest has decided to increasing infl ation as a result of higher (import-weighted exchange rate implement the recommendations on energy prices. In the USA the key rate related to 44 countries), slightly less corporate governance adopted by the has risen 13 times since 2004 and than the fi gure for 2005 which was Oslo Stock Exchange in 2005, in so far as stood at 4.25% at year-end 2005. about 5 percentage points. they can be harmonised with the legal The European Central Bank increased provisions on organisation and controls its key rate to 2.25%. Regional economic development that apply to savings banks. Strong growth was a feature of the The counties of Hordaland and Sogn The bank has been working on topics fi nance markets in 2005, while at home & Fjordane are among Norway’s most taken up in the recommendation, and credit volume rose by 13.2% and productive regions in terms of value steps taken include the review and deposit rose considerably, despite creation. Every fi fth Norwegian export adoption of ethical guidelines and low interest rates. krone comes from this region, procedures which have been extended underlining the major contribution to cover all Group companies and all Norway enters 2006 with made by these counties to Norway’s employees and Board members. Board strong macro fi gures national product. instruction have also been drawn up and The positive trend is likely to continue The Business Barometer was published adopted for Sparebanken Vest. A process in 2006. Although a lower pace of in January 2006. This is a measure has also been initiated to strengthen growth can be expected, of the economic climate based on interaction between the bank’s a continuation of the high oil price a survey of almost 1500 companies in governing bodies. and a relatively strong krone will keep the counties of Hordaland and drawn An amendment of the bank’s objects infl ation moderate and interest rates up by Sparebanken Vest in clause in 2005 means that there is now low. Norges Bank’s monetary policy is co-operation with the two county a greater correspondence between the geared to low and stable infl ation, and authorities and their employment legal and the strategic defi nition of the the annual rise in the retail price index offi ces, as well as Innovasjon Norge bank’s activities. stands at almost 2.5% over time. The and the Norwegian Confederation of Sparebanken Vest is to a great extent a central bank would probably like to Business and Industry. The main self-owned institution which owns more increase the key rate in order to curb fi ndings show increasing optimism than 90% of the equity. The remainder, the rise in credit, but so far it has among the counties’ business leaders consisting of externally held primary refrained from doing so as long as and households. This, combined with capital certifi cates, shall be characterised annual infl ation is as low as 0.9%, rising profi tability provides a basis for by predictability in terms of equality of on an annualised basis. The annual greater investment in both the treatment, rate of return and infl uence infl ation rate for 2005 is expected to be commercial sector and among on corporate governance. The stock 1.3%, while expectations for 2006 put individuals. The Business Barometer exchange listing of the bank’s PCCs the fi gure at around 1.5%. also shows that more than half

38 of the companies surveyed expect to see positive market developments in 2006, and the prospects are considered to be far brighter than was indicated in a corresponding survey in May 2005. While there is an atmosphere of optimism in most sectors, it is most apparent in shipping, Heidi Marie Vestrheim, the shipbuilding industry and in singer and song-writer building and construction. from Øystese, was one In Hordaland alone, employment of the 16 artists to in these areas is expected to rise from receive a grant from 5000 to 6000 in 2006. To an increasing Sparebanken Vest extent, the demand for labour will be in 2005. covered by foreign manpower. In Sogn & Fjordane there is also a considerable need for more human resources in the travel and tourism industry, and here, too, this is likely to be reﬂ ected in further imports of labour from the new EU countries.

Social responsibility In the last few years, there has been an increasing awareness in the commercial sector that companies have social responsibility which extends beyond performing profi tably. Both in Norway and internationally there is a trend for companies to develop their own strategies for corporate social this kind require considerable insight, distributed in the form of gifts for the responsibility (CSR). Sparebanken Vest’s a willingness to take risks and patience public benefi t and/or be transferred to social responsibility fi nds on the part of the investors before the gift fund. expression in its vision which seeks to a return can be expected. The bank’s In 2005 NOK 40m was distributed make the bank a driving force in the long-term objective in this connection based on the annual accounts for social and commercial development is to receive a return on investment. 2004. At the same time, NOK 25m was of the West of Norway. In the period since the scheme was transferred to the gift fund, bringing Sparebanken Vest’s objective is to establish up to the end of 2005 the it up to NOK 45m. It is proponed that show social responsibility in all its funds invested, especially in the area NOK 100m of the profi t for 2005 be activities. The bank’s venture of energy, marine activities and allocated to gifts for the public benefi t, investments and activities for the biotechnology, have shown a good of which NOK 45m will be distributed public benefi t are described in the return. Further information about in 2006 and NOK 55m will be allocated following section. venture investments appears in note 17. to the gift fund, which will then total NOK 100m. The gift fund is designed Venture investments Gifts for the public benefi t to provide continuity of allocations for The decision to participate with equity Sparebanken Vest has a tradition for the public benefi t, also in years of lower in unlisted projects in an early phase of distributing funds for the public benefi t earnings, but where the capital base development (venture companies) was which can be traced back to the 1800s. still provides scope for allocations. taken in 2001, refl ecting the bank’s Gifts for the public benefi t are an Allocations have been made to projects wish to contribute to the establishment allocation of profi ts which is made initiated under Visjon Vest, while of sources of capital for companies possible under section 28 of the others have been made on the basis of in the development phase before Savings Banks Act. In Sparebanken applications received. Initiatives related this could be taken over by the stock Vest it is called Visjon Vest and it is a to culture/coastal culture, youth work, market. fundamental part of the bank’s strategy. innovation, education/research and The aim is to create the conditions Where operations make it possible, humanitarian activities have been needed for companies with great and provided that the capital base is priority areas in the last few years. development potential, primarily within satisfactory, up to 25% of the profi t for Funds have also been channelled to a the bank’s market area. Investments of the year (less PCC dividends) may be large number of projects run by clubs and

39 Directors’ Report

associations in the West of Norway. Sparebanken Vest has established customer portfolio, a strong capital In determining the recipients, a good brand with a high level of base, a good reputation in the market, importance is attached to strategic customer satisfaction. Nonetheless, a broad range of products, a loyal and projects that can have lasting effects competition is intense in the bank capable workforce, as well as deep local and strengthen the region. market in the West of Norway, and roots and a good sales culture. The West of Norway Conference is there is an increasing awareness of Sparebanken Vest’s strategy is to help an example of major projects which online competitors. The pressure on to promote growth and development benefi t from the bank’s support. The margins from traditional banking in the West of Norway through the Conference was held for the 6th time in services is therefore likely to continue. maintenance of local roots, close 2006, this time focusing on culture and In its annual review of the three-year customer relationships, shorter commerce. Another project is a written strategy plan the Board has made decision-making lines, and activities history of the West of Norway which is some adjustments aimed at improving for the public benefi t. to be published in three volumes. profi tability within the Group. More In the view of the Board, this is The bank has also become involved in ambitions target fi gures have been a strategy that is in the best interests the project “Bergen in 2020”, which the set to reduce the level of costs per of the bank and all interested parties. bank hopes can be gradually krone of income, and the focus on the The Board envisages a sound broadened to cover a larger area. corporate is being strengthened by performance in 2006, with profi ts raising the level of competence and by at a good level, albeit slightly down Prospects ensuring that customer application on last year, and with the return on Sparebanken Vest believes that the procedures and decision-making equity again at a satisfactory level. economic prosperity enjoyed by the process refl ect greater effi ciency. West of Norway in the last few years Costs will be reduced throughout the Vote of thanks to customers, will continue for much of 2006. bank in order to maintain profi tability. business associates, elected A high level of investment in oil-related Sparebanken Vest will continue to representatives and employees activities will result in strong demand attach importance to good 2005 was a demanding year for the for many local companies. At the same corporate governance and to address bank, calling for fl exibility, great efforts time, a number of industries can look the challenge of ensuring that there and commitment throughout the forward to higher prices for their is a satisfactory balance between the organisation. The Board wishes to products in the international market. bank’s market ambitions and its thank all customers, business Global trade is increasing, providing risk-bearing ability. Calculations show associates, elected representatives and a sound basis for satisfactory earnings, that the bank’s real equity exceeds the employees for their strong spirit of also in the maritime sector. total of the risk-adjusted tied-up capital co-operation in 2005. The positive business climate rests on and regulatory requirements. In particular, the Board wishes to sound foundations with low infl ation, Application of the profi t will be an express its thanks to Knut Ravnå low interest rates and falling element of the bank’s strategy. Work in for the considerable contribution unemployment - all of which give this area will be of a long-term nature. he has made to the bank for grounds for optimism about the future Thanks to its strong position in the more than 30 years in the commercial sector and among market, Sparebanken Vest is well placed – the last 15 of which in the the population at large. for further growth. We have a large capacity of managing director.

Bergen, 31 December 2005 / 17 February 2006 The Board of Directors of Sparebanken Vest

Pål W. Lorentzen Erik Bøckmann Chairman Deputy Chairman

Anne Gine Hestetun Jan O. Yttredal Inger Karin Larsen

Erling Mjelde Arve Havnerås Geir Navarsete

Tone Mattsson Stein Klakegg Managing Director 40 Proﬁ t and Loss Account

1 January - 31 December

IFRS IFRS NGAAP NGAAP NOK million Notes 2005 2004 2004 2003

Interest income etc. 3 1 883 1 725 1 711 2 316 Interest expenses etc. 3 911 765 751 1 413

Net interest income and credit commissions 3 972 960 960 903 Commissions receivable and income from banking services 4 368 363 363 333 Commissions payable and cost of banking services 4 79 78 78 89 Net gain/(loss) on ﬁ nancial instruments 4 102 62 62 61 Other operating income 4 80 59 59 48 Net operating income 4 471 406 406 353

Total operating income 1 443 1 366 1 366 1 256 Salaries and general administration expenses Parent Company 4 708 657 661 583 Depreciation 16 59 60 54 47 Other operating expenses 5 108 102 102 117 Net operating expenses 875 819 817 747

Proﬁ t before write-downs and tax 568 547 549 509 Loan write-downs and losses on guarantees 6 (75) 60 60 114

Proﬁ t before tax 643 487 489 395 Taxes 7 168 179 180 118

Proﬁ t after tax 475 308 309 277

Allocations Dividend on primary capital certiﬁ cates (43) (31) (31) (32) Transferred to Sparebanken capital fund (309) (212) (213) (195) Transferred to gift fund and/or gifts for the public beneﬁ t (100) (65) (65) (50) Transferred to other reserves (23)

Total allocations (475) (308) (309) (277)

41 Balance Sheet

31 December

IFRS IFRS NGAAP NGAAP NOK million Notes 2005 2004 2004 2003

Assets

Cash and deposits with central banks 328 351 351 229 Loans to and deposits with credit institutions 9 2 839 1 441 1 441 677 Gross loans to customers 10 46 835 41 526 41 526 37 004 Write-down on individual loans 12 (111) (165) (165) (197) Write-down on loan groups 12 (159) (272) (272) (248) Net loans to customers 46 565 41 089 41 089 36 559 Financial assets - stated at actual value through the profit and loss account (incl. trading) - shares 14 381 429 429 316 Shares available for sale 14 62 429 316 Financial assets stated at actual value through the proﬁ t and loss account - commercial paper and bonds 15 2 712 2 537 2 537 2 031 Deferred tax assets 7 48 51 46 91 Other intangible assets Parent Company 18 23 25 25 18 Fixed assets 16 336 357 277 279 Financial derivatives 17 1 049 44 44 Other assets 25 15 15 12 Accrued and amortised income 18 312 118 118 139

Total assets 54 680 46 457 46 372 40 351

Liabilities and equity

Debt to credit institutions 19 1 093 1 509 1 509 1 793 Deposits from and debt to customers 20 27 333 24 871 24 871 22 237 Securitised debt 22 19 643 15 500 15 500 12 426 Financial derivatives 17 1 180 63 63 Accrued amortised costs and prepaid income 495 193 192 202 Provisions for commitments 23 216 179 81 104 Other liabilities 21 514 364 436 429 Subordinated loan capital 24 934 1 062 1 062 731 Total liabilities 51 408 43 741 43 714 37 922

Revaluation reserve 58 Primary capital certiﬁ cates 250 250 250 250 Holdings of own PCCs (7) (3) (3) PCC premium reserve 4 4 4 4 Paid-up equity 247 251 251 254

Gift fund 100 45 45 25 Equalisation fund 2 Other equity 2 865 2 420 2 362 2 150 Retained earnings 2 967 2 465 2 407 2 175

Total equity 3 272 2 716 2 658 2 429

Total liabilities and equity 54 680 46 457 46 372 40 351

42 Balance Sheet

Bergen, 31 December 2005 / 17 February 2006 The Board of Directors of Sparebanken Vest

Pål W. Lorentzen Erik Bøckmann chairman Deputy Chairman

Anne Gine Hestetun Jan O. Yttredal Inger Karin Larsen

Erling Mjelde Arve Havnerås Geir Navarsete

Tone Mattsson Stein Klakegg Managing Director

43 Statement of cash ﬂ ows

2005 2004 2003 Cash ﬂ ow from operations Interest, commission and fee income 2 093 1 985 2 560 Interest, commissions and fees paid 399 449 865 Receivables from commitments previously written off 97 16 22 Net increase/decrease in instalment loans (4 904) (4 808) (4 710) Change in utilised overdraft facilities (481) 199 (149) Net increase/decrease in customer deposits 2 583 2 634 44 Payments for goods and services 164 293 271 Payments to employees, pension schemes, national insurance, tax deductions etc. 495 441 402 Payment of taxes and public dues 94 116 96 Net cash ﬂ ow from operations (1 764) (1 273) (3 867)

Cash fl ow from investment activities Sale of shareholdings and investments in other companies 1 135 285 729 Purchase of shareholdings and investments in other companies 782 502 728 Purchase of other short-term securities 3 120 3 252 6 272 Revenues from other short-term securities 2 226 2 860 5 853 Revenues from sale of securities, real estate etc. 229 497 46 Purchase of securities, real estate etc. 309 382 94 Revenues from sale of fi xed assets etc. 1 1 1 Purchase of fi xed assets etc. 35 57 46 Net cash fl ow from investment activities (655) (550) (511)

Cash fl ow from fi nancing activities Net revenues/payments on deposits from Norges Bank and other fi nancial institutions (1 350) (744) 53 Net revenues/payments on deposits from Norges Bank and other fi nancial institutions (446) (313) (557) Income from sale of securities for short-term trading purposes 2 253 3 008 4 410 Payments on purchase of securities for short-term trading purposes 2 132 2 934 4 034 Subordinated loan capital received 978 363 Payments related to subordinated loan capital 1 169 67 47 Income related to bond debt 37 628 11 897 13 990 Payments related to bond debt 33 283 9 211 9 388 Dividends paid 83 54 23 Net cash fl ow from fi nancing activities 2 396 1 945 4 404

Net cash ﬂ ow in period (23) 122 26

Net change in cash and cash equivalents (23) 122 26 Liquid assets at 1 January 351 229 203 Liquid assets at 31 December 328 351 229

44 Equity movements Equalisation reserve Gift fund Other equity not in P&L posted earnings Retained Total PCC capital reserve PCC premium

Equity at 1 January 250 4 25 2 150 2 429

Adjustment to deemed cost, net after tax 62 62 Pension commitments accumulated estimate divergence, net after tax (74) (74) Provision for dividends and gifts payable 57 57 New calculation of equity at 1.1.2004 after implementing IFRS 250 4 25 45 2 150 2 474

Sale of own PCCs 3 3 6 Purchase of own PCCs (6) (4) (10) Gift fund utilised (5) (5) Payment of dividend and gifts 2003 (57) (57) Allocations 25 283 308 Equity at 31 December 2004 247 4 45 (12) 2 432 2 716

Actual value of fi nancial assets available for sale 58 58 Actual value of fi nancial assets posted through the profi t and loss account 42 42 Value change on loans valued at fair value option, net after tax 123 123 Value change on loans amortised cost, net after tax 2 86 88 Actual value of fi nancial debt valued at fair value option, net after tax (16) (16) Actual value of derivatives, net after tax (100) (100) Amortisation of fi nancial debt / equities-linked bonds, net after tax (35) (35) New calculation of equity at 1.1.2005 after implementing IAS 39 247 4 2 45 146 2 432 2 876

Sale of own PCCs (3) (3) Purchase of own PCCs (4) (4) Gift fund utilised 0 Payment of dividends and gifts 2004 (72) (72) Allocations 55 420 475 Equity at 31 December 2005 243 4 2 100 146 2 777 3 272

45 Notes group

Note 1 ACCOUNTING PRINCIPLES - GROUP

The consolidated accounts are prepared in accordance with International Financial Reporting Standards – IFRS - based on the best interpretation of regulations currently in force. All amounts are stated in NOK million, unless stated otherwise.

The opening balance at 1 January 2004 has been re-stated in accordance with IFRS, except for items covered by IAS 39 which do not require comparative ﬁ gures.

The effects of implementing IFRS are posted against equity (cf. “Change in equity” and note 8 IFRS - effect on equity and results).

Choice of accounting principles rate of interest, and also for fi nancial Segment information Under IFRS 1, there is an exception liabilities at a fi xed rate of interest The bank’s activities are divided to the required re-statement or with an interest rate derivative into two primary segments: of comparative accounting fi gures agreement. By using the fair value the Retail Market (RM) the Corporate for previous periods where the cost option it is possible to provide more Market (CM). The secondary segment of such re-statement is more than relevant information as it eliminates is defi ned as the geographical location. the benefi t brought. inconsistent measurement of the Note 2 provides information about the In respect of buildings owned over various components which make up distribution of income and expenses a long period which are stated at the instruments. with related assets and liabilities for historical cost and are depreciated both the primary and the secondary over the lifetime of the asset in Full consolidation segments. question, the split up of historical The consolidated accounts comprise the cost prices cannot be implemented parent bank and subsidiaries where the Financial assets in practice. We have applied the option parent bank directly or indirectly owns Financial assets and liabilities offered by the regulations to use the 50 per cent of the shares or more, or is are valued in accordance with IAS 39, actual value as the new cost price. able to control the company’s and both presentation and In the case of pension commitments, operations. All internal transactions supplementary information are the incorporation of retrospective and intercompany accounts payable in accordance with IAS 32. fi gures would be very time-consuming. and receivable are eliminated. The implementation effect of the We have therefore chosen to apply transition to IFRS is posted against the option which allows unamortized On the acquisition of subsidiaries the equity at 1 January 2005. Subsequent estimate deviations (corridor) to cost price of the shareholding in the value changes are posted in the profi t be set at zero against equity on parent company is eliminated against and loss account or against the reserve for implementation. the equity of the subsidiary at the date valuation variances (equity), depending of acquisition. The difference between on the balance sheet classifi cation. “Amendment to IAS 39” dated June the cost price and the net book value 2005 permits the recording of fi nancial at the date of acquisition is added Financial assets stated at fair value assets and commitments at actual value to the assets to which the surplus value through profi t or loss with value changes recorded relates, within the market value of This category has two subcategories: in the profi t and loss account (fair value these assets. Any part of the cost price fi nancial assets held for trading purposes through profi t or loss - FVO) from 1 that cannot be added to specifi c assets and fi nancial assets initially classifi ed January 2006, but it can also be used in represents goodwill. Goodwill is at fair value through profi t or loss. the accounts for 2005. This option must amortised on a straight line basis This is where we have classifi ed shares be chosen on the fi rst-time entry in the over the period in which the benefi ts and interest rate securities purchased for balance sheet (with the of goodwill are expected to accrue. profi t taking, or of such a nature that a transitional rules for reclassifi cation dated Intra-group transactions and balances sale would be considered if a good offer 1 September 2005) and it cannot be are eliminated. The accounts was received. reversed until the fi nancial instrument in of the subsidiaries are prepared question is removed from the balance in conformity with the Norwegian Financial assets available for sale sheet. We have applied this option and accounting standard Financial assets available for sale are use the fair value for fi xed rate loans and NRS - based on the principle assets purchased for a purpose other loans with a built-in of materiality. than profi t taking.

46 Notes group

Financial assets which are stated at Loans and accounts receivable posted under “Net gain on fi nancial fair value through profi t or loss are Loans and accounts receivable are instruments” in the period when they initially stated at actual value and the non-derivative fi nancial assets involving arise. transaction costs are charged against stipulated payments and which are profi ts. Financial assets available for not traded in an active market. Foreign exchange sale are initially stated in the balance Receivables and accounts payable sheet at actual value plus transactions Floating rate loans denominated in foreign currency are cost. Financial assets available for sale Loans and losses are initially translated at the middle rate on the Oslo and fi nancial assets stated at fair value assessed at nominal value, plus direct Stock Exchange at year-end. through profi t or loss are stated at transaction costs. In periods after Income and expenses denominated actual value after the fi rst-time entry the fi rst assessment, lendings are in foreign currency are translated in the balance sheet. The actual value assessed at amortised cost based on the into Norwegian kroner at the rates of listed investments is based on the effective interest rate method, prevailing on the date of the market price at year-end. In the case as an expression of the fair value transaction. Foreign exchange items are of unlisted securities where there is no of the loan. If there is objective mainly hedged by ensuring that they active market, the Group applies evidence of a decline in the value are matched against corresponding assessment techniques to determine of an individual loan or groups items on the other side of the balance the actual value. These techniques are of loans, the loans are written down. sheet, or through off-balance sheet based on the last issue price, traded The amount of the write-down is hedging items. prices known to us and discounted cash calculated as the difference between fl ows. In the case of securities where the balance sheet value and the Fixed assets there is no turnover, the value is based present value of future cash fl ows, based In accordance with IFRS, an overall on available accounting information, on the expected lifetime assessment has been made to mainly in order to assess the need of the loan. Write-downs are determine whether the Group’s to write down the item or write up classifi ed as a chargeable cost. properties are operating assets for own its value because of obvious value Interest income is taken to income on use or whether they are investment appreciation. the basis of the effective interest rate properties. All properties are considered method. The implementation effect to be operating assets for own use and Financial assets are removed from consists of the write-back of the accounting treatment is in the balance sheet when the right to establishment costs taken to accordance with IAS 16. receive cash fl ows from the investment income/ custodial fees for accrual over Group properties are initially stated terminates or is transferred on realisation. the expected lifetime of the loan, and at historical cost less depreciation the write-back of unspecifi ed loss over their expected lifetime. Different Realised gains/losses and changes provisions as an adjustment for components with different lifetime are in assessed values of fi nancial assets the write-down of loan groups. separated and depreciated individually. stated at fair value through profi t or loss, Separation and identifi cation of including dividends, are posted in the Fixed rate loans and loans historical cost prices cannot be accounts under “Net gain on fi nancial with a built-in derivative implemented in practice for buildings instruments” in the period when they Fixed rate loans and loans with owned for a long time. We have used arise. Changes in the value of equity a built-in derivative are stated at fair the actual value option as the new cost instruments classifi ed as value (FVO). Fair value is calculated price on implementation of IAS 16. New available for sale are posted directly by discounting the loan cash fl ow using prices have been obtained for separated against equity. the required rate of return derived from items such as lifts, equipment and When securities classifi ed as available the zero coupon curve. ventilation plant, and these price have for sale are sold or written down, the been used along with external aggregate value regulation that has Derivatives valuations of the buildings. On this basis, been posted against equity is posted Derivative are stated in the balance surplus values have been treated as in the profi t and loss account as sheet at nominal value when the an implementation effect and posted a profi t or loss on investments in contract is made, and thereafter on against equity at 1 January 2004. A securities. Dividends from shares a fair value basis. Derivatives in the “write-down test” is carried at the end classifi ed as available for sale are posted balance sheet include forward foreign of each accounting year. Where there in the profi t and loss account when the exchange transactions, forward rate has been a decline in the market value, Group’s right to the dividend has been agreements, interest rate swaps, foreign the item in question is written down and established. currency interest rate swaps, interest the effect is posted in the profi t and loss rate options and share options (linked account. Fixed assets are stated at ac- Investments in limited and general to bank deposits with a stock exchange quisition cost or at the “new cost price” partnerships are incorporated on return). Realised gains/profi ts on changes less accumulated ordinary the basis of the cost method. in the assessed value of derivatives are depreciation. Ordinary depreciation is

47 Notes group

based on the cost price and Buy-backs of the bank’s own bonds for premium fund. The fi gure for net depreciation is on a straight line basis debt reduction purposes are posted net pension commitments corrected for over the lifetime of the asset. against bond debt. deviations from estimates and changes The ordinary depreciation charge for the in pension assumptions appears in the year is included in operating expenses Taxation balance sheet. Deviations and changes for the year. Deferred tax and deferred tax assets of this kind are measured against the are stated in the balance sheet in larger of gross pension commitments Intangible assets accordance with IAS 12 Deferred Tax. and total pension fund assets. Software that has been developed is posted in the balance sheet under The tax charge in the profi t and loss The pension charge for the year intangible assets when the amounts account includes both the tax is stated net in the profi t and loss involved are deemed to be material and payable for the period and the change account under «Salaries and general the items are expected to have lasting in deferred tax. Deferred tax/deferred administration expenses». value. In the development of software, tax assets are calculated at a tax rate of costs related to use of own resources, 28% on the basis of timing differences Commitments / provisions pre-planning, implementation and between values for accounting and A provision for restructuring has been training are charged in the profi t and taxation purposes at year-end. Taxable made in accordance with IAS 37. loss account. Software that has been and tax-deductible timing differences The provision meets the requirement developed by the bank and posted in which are reversed or can be reversed that a commitment exists as a result the balance sheet is depreciated over within the same time interval are netted of a previous event, and there is a high the expected lifetime of the item against each other and entered net. probability that the commitment will in question. There is continuous have to be met. The provision has been assessment of the need for write-downs Deferred tax assets are posted in calculated as the present value of future where the expected economic benefi ts the balance sheet on the basis of payments required to meet the are less than the balance sheet value. expectations of taxable income commitment. through earnings in future years. Financial liabilities The proposed dividend and gifts for Financial liabilities at a fl oating rate are Pension commitments distribution had not been formally stated at amortised cost. Amortised cost Pension commitments are calculated decided at year-end and thus do not is defi ned as the initial amount of the in accordance with IAS 19. Financial meet the criteria for what constitutes instrument less repayments of principal, assumptions used to calculate the a commitment under IAS 37. with an addition or deduction for pension commitments are updated accumulated amortisation of all at year-end, including the discount rate Statement of cash fl ows differences between the initial amount which is based on year-end market rates. The statement of cash fl ows is prepared and the nominal amount, less all IAS 19 permits the effect of divergence on the basis of gross cash fl ows from write-downs. Amortisation is based between estimated and actual operations and investment and on the effective interest rate method. assumptions to be entered in a fi nancing activities. “corridor”. In subsequent periods a new Financial liabilities at a fi xed rate of corridor will be established within the Cash fl ows from operations are defi ned interest are stated at fair value (FVO). parameters set under the accounting as ongoing interest related to customer This applies to bond debt and standard. Deviations from estimates borrowings and deposits, net receipts/ perpetual subordinated loans. In the and assumptions are measured against payments related to lending and case of indexed bonds and deposits, the larger of gross pension deposit activities, and payments related the derivative is separated from the commitments and total pension fund to the cost of ordinary operations. main contracts ant posted separately. assets. If the deviations exceed 10% Bonds and deposits are stated at fair of the basis of measurement, Investment activities are defi ned as value (FVO) and the option is classifi ed the difference is amortised over the cash fl ows from securities transactions and posted in the balance sheet among average remaining period of service. apart from the trading portfolio, other derivatives. Fair value is calculated as well as the purchase of fi xed by discounting the loan cash fl ow The bank’s net pension commitments assets and real estate. using the required rate of return derived are calculated and posted as from the zero coupon curve. The credit a long-term liability in the accounts. Cash fl ows from other securities spread on interest-earning securities is Net pension commitments are the transactions, the issue and determined on the basis of an overall difference between gross pension repayment of subordinated loans, assessment which includes the observed commitments (the present value bond debt and equity are defi ned turnover in the market, credit margin of expected future pensions) and the as fi nancing activities. reports from different brokers, and balance on pension funds assets in internal evaluations. the insurance fund and the pension

48 Notes group

SEGMENT INFORMATION Note 2

Primary report:

2005 Profi t and Loss Account Corporate Market Retail Market Unallocated Total Net interest income 307 474 191 972 Operating income 119 250 102 471 Operating expenses (71) (319) (485) (875) Losses (7) (13) 95 75 Pre-tax profi t/loss(-) 348 392 (97) 643 Taxes (168) Profi t/loss(-) after tax 348 392 (97) 475

2004 Profi t and Loss Account Corporate Market Retail Market Unallocated Total Net interest income 273 438 249 960 Operating income 67 254 85 406 Operating expenses (69) (314) (436) (819) Losses (37) (5) (18) (60) Profi t/loss(-) before tax 234 373 (120) 487 Taxes (179) Profi t/loss(-) after tax 234 373 (120) 308

Operating income and operating expenses are allocated directly, except for staff-related costs. Net interest is allocated on the basis of the internally calculated intra-group interest, based on 3-month NIBOR.

2005 Balance Sheet Corporate Market Retail Market Unallocated Total Lendings 10 400 36 358 (193) 46 565 Other assets 810 4 432 2 873 8 115 Deposits 8 103 17 896 1 334 27 333 Other liabilities 2 168 19 531 2 376 24 075

2004 Balance Sheet Corporate Market Retail Market Unallocated Total Lendings 10 194 31 151 (258) 41 087 Other assets 1 069 1 806 2 495 5 370 Deposits 7 487 16 523 861 24 871 Other liabilities 1 076 16 024 1 770 18 870

Secondary report: Net interest 2005 Lendings Deposits income Region Hardanger/Midthordland 3 992 2 564 89 Region Nordfjord 3 124 1 768 65 Region Nordhordland 5 177 3 178 105 Region Sogn 1 502 772 28 Region Sunnhordland 6 695 3 434 131 Region West 5 996 2 364 100 Bergen Region 20 349 13 253 454 Sparebanken Vest - Total 46 835 27 333 972

Net interest 2004 Lendings Deposits income Region Hardanger/Midthordland 3 539 2 349 90 Region Nordfjord 2 773 1 647 67 Region Nordhordland 4 447 2 937 103 Region Sogn 1 304 763 27 Region Sunnhordland 5 804 3 004 132 Region West 4 943 2 039 102 Bergen Region 18 716 12 132 439 Sparebanken Vest - Total 41 526 24 871 960

49 Notes group

Note 3 NET INTEREST INCOME AND CREDIT COMMISSIONS

2005 2004 2003 Interest etc. on loans to and deposits with credit institutions 48 18 34 Interest etc. on loans to and receivables from customers: - valued at amortised cost 1 656 1 652 2 154 - voluntarily stated at fair value through proﬁ t or loss 118 Interest etc. on commercial paper, bonds and other interest-earning securities 61 55 110 Total 1 883 1 725 2 298

Interest etc. on loans from credit institutions 21 35 40 Interest. etc. on deposits and loans from customers: - valued at amortised cost 367 321 820 Interest etc. securities issued: - valued at amortised cost 270 474 467 - voluntarily stated at fair value through profi t or loss 264 Interest payable on subordinated loan capital: - stated at amortised cost 28 43 34 - voluntarily stated at fair value through profi t or loss 29 Interest etc. on fi nancial derivatives, ordinary activities (68) (108) 5 Fee to Savings Banks’ Guarantee Fund 29 Total 911 765 1 395 Net interest income and credit commissions 972 960 903

Note 4 NET OPERATING INCOME

2005 2004 2003 Guarantee commissions 12 14 15 Payment transfer charges/interbank credit charges 203 196 189 Other commissions and fees receivable 153 153 129 Commission income receivable and income from banking services 368 363 333

Payment charges/BBS/EFTPOS 39 43 51 Payment transfer charges/interbank debit charges 26 26 28 Other commissions and fees payable 14 9 10 Commission income payable and cost of banking services 79 78 89

Income from shareholdings and other securities with a variable return 19 12 10 Net change in value of and gain/(loss) on commercial paper, bonds and other interest-earning securities (1) 3 5 Net change in value of and gain/(loss) on shareholdings and other securities with a variable return 46 23 11 Net gain/(loss) on fi nancial derivatives: 28 30 - trading (6) - ordinary activities (164) Net change in value of and gain/(loss) on foreign exchange 16 Net gain/(loss) on fi nancial instruments, voluntarily stated at fair value through profi t or loss 1) 155 Product margin amortised SparX 28 (Write-down)/reversal of write-down and gain/(loss) on long-term securities 9 (4) 5 Net gain/(loss) on fi nancial instruments 102 62 61

Real estate income 6 Brokerage fees 77 56 41 Gains on disposal Other operating income 3 3 1 Other operating income 80 59 48 Net operating income 471 406 353

1) See notes 10, 20, 22 and 24

50 Notes group

OTHER OPERATING EXPENSES Note 5

2005 2004 2003 Real estate operating expenses 0 50 50 Ofﬁ ce rental and other running costs 10 2 5 Fixed assets charged against income 13 12 15 Other operating expenses 85 38 47 Other operating expenses 108 102 117

Audit fee (NOK 1 000) 2005 2004 2003 Audit fee 1 187 1 095 1 570 Letters of conﬁ rmation 85 155 230 Taxation advisory services 30 29 104 Other services 668 91 206 Total fee 1 970 1 370 2 110

Other services in 2005 comprises: IFRS work NOK 255 000, legal assistance NOK 263 000 and internal courses held NOK 150 000.

LOAN WRITE-DOWNS AND LOSSES ON GUARANTEES Note 6

2005 2004 2003 Loan write-downs (77) 60 115 Losses on guarantees 2 0 (1) Loan write-downs and losses on guarantees (75) 60 114

Increase in write-down of commitments written down previously 3 12 23 Write-down of commitments not written down previously 3 54 72 Reduction in previous years’ write-downs of individually assessed loans (10) (47) (44) Increase in write-down of loan groups 0 24 30 Reduction in write-down of loan groups (10) 0 0 Realised losses not covered by previous write-downs 35 33 55 Recoveries on losses realised previously (98) (16) (22) Loan write-downs (77) 60 114

Realised losses on guarantees not provided for previously 2 0 0 Losses on guarantees 2 0 0

Realised loan losses covered by previous write-downs 28 52 147 Realised losses on guarantees not provided for previously 2 0 0 Realised loan losses not covered by previous write-downs 35 33 55 Realised losses 65 85 202

51 Notes group

Note 7 TAXES

The difference between the pre-tax accounting profi t, the basis of assessment for the year and the tax charge for the year is specifi ed below. 2005 2004 Pre-tax profi t 643 489 +/- permanent differences 1) (68) 141 +/- change in timing differences as specifi ed 195 (160) Tax base for the year / taxable income 770 470

Of which assessed tax at 28% 216 132 - Credit for dividends received Capital tax at 0.3% 7 5 Tax provision in the balance sheet 223 137 Excess (-) / insufﬁ cient tax provision in 2004, due in 2005 0 (2) Change in tax provision for the year 223 135 +/- change in deferred tax (55) 44 Tax charge for the year 168 180

1) Including the effect of the exemption model, non-deductible costs and deductions for the share of proﬁ ts recorded by subsidiaries (the share of proﬁ ts is deducted since it has already been taxed in the hands of the individual companies).

Why the tax charge does not correspond to 28% of the pre-tax proﬁ t

2005 2004 28% tax on pre-tax proﬁ ts 180 137 28% tax on permanent differences (19) 40 Excess (-) / insufﬁ cient tax provision in previous years 0 (2) Capital tax 7 5 Estimated tax charge 168 180

Deferred tax / tax assets Deferred tax is posted net when the group has a legal right to set deferred tax assets against deferred tax in the balance sheet.

The following amounts have been posted net: 2005 2004 Deferred tax assets: - Deferred tax assets to be reversed after more than 12 months 60 50 - Deferred tax assets to be reversed within 12 months 59 12 118 62 Deferred tax - Deferred tax to be reversed after more than 12 months 69 42 - Deferred tax to be reversed within 12 months 0 25 69 67

The calculation of deferred tax /deferred tax assets is based on the timing differences between the accounting and taxation values at year-end and the tax loss to be carried forward. Speciﬁ cation of the timing differences and the tax loss carried forward, along with the calculation of deferred tax /deferred tax assets.

31/12-05 31/12-04 1/1-05 Change from After the corrected effects of OB implementation Investments in companies 0 1 1 (1) Proﬁ t and loss account 12 15 15 (3) Difference related to ﬁ nancial items (137) 10 88 (225) Long-term foreign currency items 138 0 138 New regulations for accounting treatment of lendings 82 123 (41) Pension commitments (214) (178) (178) (36) Accounting provisions (72) (44) (44) (28) Fixed assets 18 13 13 5 Total timing differences (173) (183) 18 (191) Rate of tax 28 % 28 % 28 % 28 % Deferred tax assets in the accounts (48) (51) 6 (55)

Deferred tax assets are posted in the balance sheet since income is expected in future years, or realistic tax adjustments should make it possible to utilise these assets. No provision has been made for deferred tax on the temporary differences between the proportion of equity and the tax value for investments in subsidiaries and jointly controlled companies.

52 Notes group

IFRS EFFECT POSTED AGAINST EQUITY AND PROFITS Note 8

Implementation effect posted against equity at 1.1.2004: Total equity at 31.12.2003 2 429

Adjustment of actual value of ﬁ xed assets to deemed cost 86 Deferred tax assets 4 Pension commitment acc. estimate divergences (102) Provision for dividends and distribution of gifts 57 45 Adjusted equity at 1.1.2004 2 474

The implementation effect posted against the consolidated proﬁ t and equity in 2004 is as follows:

Proﬁ t changes

Proﬁ t before implementing the IFRS regulations 309

Increase in depreciation of ﬁ xed assets (6) Reduced pension cost 4 Deferred tax effect 1 Adjusted proﬁ t in accordance with IFRS 308

Equity changes in 2004

Adjusted equity at 1.1.2004 2 479 Equity changes in 2004 before IFRS changes 229 Provision for dividends and gifts in 2003 57 Provision for dividends and gifts at 31.12.2004 71 Proﬁ t effect (1) Adjusted equity at 31.12.2004 2 716

Implementation effect posted against equity at 1.1.2005:

Total adjusted equity at 31.12.2004 2 716

Fair value changes related to shareholdings 97 Fair value changes related to commercial paper and bonds 3 Product margin/ subscription fees share-indexed bonds (48) Net effect of changed accounting treatment of lendings 88 140

Fair value assessment of lendings 171 Fair value of ﬁ nancial liabilities (22) Fair value of derivatives (139) 10 Deferred tax 10 10 Adjusted equity as 1.1.2005 in accordance with IFRS 2 876

IFRS effects on proﬁ ts in 2005

Increased depreciation charge on ﬁ xed assets due to “new cost price” (5)

Fair value changes related to shareholdings stated at fair value through proﬁ t or loss 30 Fair value changes related to commercial paper and bonds stated at fair value through proﬁ t or loss 1

Amortisation effect of previous years’ product margin/ subscription fees for share-indexed bonds and posted in profi t and loss account 22 Fair value of lendings in 2005 stated using the fair value option 1) (112) Fair value of fi nancial liabilities stated using the fair value option 2) 196 Net change in value of derivatives (115) Overall IFRS effect on profi ts in 2005 17 Deferred tax effect 3 Overall IFRS effect on profi ts in 2005 after tax 20

1) See note 10

2) See note 20, 22 and 24

53 Notes group

Note 9 LOANS TO AND RECEIVABLES FROM CREDIT INSTITUTIONS

2005 2004 2003 Loans to and deposits with credit institutions with an agreed term or period of notice 96 88 35 Loans to and deposits with credit institutions with no agreed term or period of notice 2 743 1 353 642 Total 2 839 1 441 677

Geographical risk areas Hordaland 31 23 46 Sogn & Fjordane 15 0 20 Other parts of Norway 1 122 1 332 425 Foreign 1 671 86 186 Total 2 839 1 441 677

Note 10 GROSS LOANS TO CUSTOMERS 2005 2004

Book Fair Book The bank’s loans are split into the following portfolios: value value value Floating rate loans 44 704 44 704 Fixed rate loans 1 563 1 563 Loans with built-in interest rate option 568 568 Total 46 835 46 835 41 526

The fair value is calculated by discounting the cash ﬂ ow from the loans using a required rate of return derived from the zero coupon curve. Where the loan interest period is set for a short period the book value is virtually the same as the fair value. All of the bank’s ﬁ xed interest loans are included in the portfolio of loans assessed at actual value.

Gross lendings are classiﬁ ed in the balance sheet as follows: 2005 Book value Valued at amortised cost: 44 704 Original book value 2 071 Accumulated value change 60 Stated at fair value through proﬁ t or loss: 2 131 Total 46 835

Lendings assessed at actual value with value change posted in proﬁ t and loss account: 2005 2004 Book value NGAAP at 31.12. 1 550 Implementation effect of IAS39 posted against equity at 1.1 126 Net additions/disposals (46) Value change in period (67) Book value of ﬁ xed interest loans at 31.12. 1 563 1 550 Book value NGAAP at 31.12. 758 Implementation effect of IAS39 posted against equity at 1.1. 46 Net additions/disposals (191) Verdiendring i perioden (45) Book value of loans with built-in interest rate option at 31.12. 568 758 Total 2 131 2 308

There are no value changes due to a change in the credit exposure of the portfolios assessed at actual value.

Gain/(loss) on loans voluntarily stated at fair value through proﬁ t or loss in period 1.1.- 31.12. 2005 2004 Total value change (112) Total realised 60 Net gain/(loss) in period 1.1.-31.12. 1) (52) 0

1) See note 4

54 Notes group

LOAN WRITE-DOWNS Note 11

Individually assessed 2005 2004 2003 Non-performing commitments Gross non-performing commitments 149 151 158 Write-down (26) (49) (55) Net non-performing commitments 123 102 103 Percentage provided for 17 % 32 % 35%

Potential bad debts and defaults (in excess of 90 days) where the balance in default on one of the commitment accounts is more than NOK 1 000.

Total non-performing commitments 2005 2004 2003 2002 2001 Gross non-performing commitments 149 151 158 296 220 Write-down (26) (49) (55) (185) (88) Net non-performing commitments 123 102 103 111 132

2005 2004 2003 Performing commitments provided for Gross commitments subject to impairment assessment 218 289 352 Write-down (85) (116) (142) Net commitments subject to impairment assessment 133 173 210 Percentage provided for 39 % 40 % 40 %

New regulations for the accounting treatment of loans have resulted in lower write-downs compared with previous years’ loss provisions.

Total non-performing commitments 2005 2004 2003 2002 2001 Gross commitments subject to impairment assessment 218 289 352 289 256 Write-down (85) (116) (142) (107) (107) Net commitments subject to impairment assessment 133 173 210 182 149

LOAN WRITE-DOWNS POSTED IN THE BALANCE SHEET Note 12

Movements in loan write-downs and provisions for losses on guarantees in period 2005 2004 2003 Loan write-downs at 1 January (nominal values) 437 446 510 Implementation effect (127) 0 0 Realised loss on loans covered by previous write-downs (28) (52) (147) Increase in write-down of loans written down previously 3 12 23 Amortisation effect 2 0 0 Write-down of loans not written down previously 3 54 72 Reduction in previous years’ write-down of individually assessed loans (10) (47) (42) Increase in write-down on loan groups 0 24 30 Reduction in write-down of loan groups (10) 0 0 Loan write-downs 270 437 446 Provisions to cover losses on guarantees at 1 January 2 2 4 Reduction in previous years’ loss provisions (write-back) 0 0 (2) Realised losses on guarantees covered by previous loss provisions 0 0 0 Speciﬁ ed provisions to cover losses on guarantees 2 2 2

Of total loan write-downs, NOK 159m relates to write-downs of loan groups.

55 Notes group

Note 13 RISK CLASSIFICATION OF LOANS AND GUARANTEES

Sparebanken Vest’s credit portfolio is split into 11 risk classes based on debt-servicing ability (default probability) and 7 classes based on collateral cover. The default probability is deﬁ ned as the likelihood that the customer will default on the loan within the next 12 months. A default may relate to a failure to service debt and 90 days have elapsed or other speciﬁ c circumstances (“unlikeness to pay”, cf. Basel II), affecting the customer’s ability to service the debt.

The default probability is calculated using statistical models (score cards) based on logical regression. The models combine internal and external data to establish statistical relationships. The results are interpreted and form the basis of more logical key ﬁ gures.

The combination of the default probability and the level of collateral cover is used as a basis for setting up 5 risk groups using the following matrix:

Matrix - Risk Groups Security class (Collateral cover) 1234567 A Very Low Very Low Very Low Very Low Very Low Very Low Very Low B Very Low Very Low Low Low Low Low Low C Very Low Low Low Low Medium Medium Medium D Low Low Low Medium Medium Medium Medium E Low Low Medium Medium Medium Medium Medium F Low Medium Medium Medium Medium Medium Medium G Medium Medium Medium Medium Medium Medium Medium-to-High H Medium Medium Medium Medium-to-High Medium-to-High Medium-to-High High Risk class I Medium Medium Medium-to-High Medium-to-High Medium-to-High High High

(Default probability) (Default J Medium-to-High Medium-to-High Medium-to-High Medium-to-High High High High K High High High High High High High Risk class K contains defaulted loans.

Commitments involving activities which are a part of central government with 100% responsibility, as well as county and local authorities are accorded an A1 rating (Very Low). Recently established companies are automatically accorded an H rating for default probability, while companies which have failed to present accounts when due are accorded a J rating.

Risk classiﬁ cation of all commitments takes place on a monthly basis through data obtained automatically from internal and external sources. Corporate commitments are also monitored manually. The frequency of this review depends on the size of the commitment and the related risk.

Speciﬁ cation within risk groups: Write-down on CORPORATE MARKET individual basis Commitment 2005 2004 2005 2004 Very Low 1 490 1 518 Low 2 818 3 325 Medium 5 963 5 397 Medium-to-High 2 223 1 956 High 738 712 88 113 13 232 12 908 88 113

Write-down on RETAIL MARKET individual basis Commitment 2005 2004 2005 2004 Very Low 21 028 18 611 Low 9 494 7 797 Medium 4 752 4 231 Medium-to-High 1 657 1 119 High 637 546 25 54 37 568 32 304 25 54

(In 2005 a new classifi cation model was used. There are therefore no directly comparable fi gures for 2004. All commitments written down on an individual basis are placed in the risk group High since they are in risk class K). A commitment is defi ned as the total of loans and utilised credit facilities, plus unutilised credit facilities and guarantees. Write-downs of loan groups are not allocated to individual risk groups. Information about write-downs of loan groups appears in note 12.

The credit risk is monitored through default reports, risk classiﬁ cation and branch analyses. There is also a strong focus on credit control and monitoring of potential bad debts. Board-approved parameters and objectives for credit risk and monitored continuously and reports are submitted to the Board.

Based on the risk classiﬁ cation system, 32.5% of the loan portfolio in the corporate market is considered to carry no risk or a low risk, while 5.5% is considered to carry a high risk. The corresponding ﬁ gures in the retail market are 81.3% and 1.7%.

No appreciable change in the risk situation is expected in 2006.

The bank’s net losses in 2005 corresponded to -0.16% of total lendings of NOK 46 835m. Losses are expected to remain low in the period ahead. In a longer perspective, the level of losses could correspond to 0.30 - 0.35% of the portfolio, with a best estimate of average losses of 0.2%.

Notes group

FINANCIAL ASSETS- AT ACTUAL VALUE AND POSTED IN THE PROFIT AND LOSS ACCOUNT (INCL. TRADING) - SHARES (NOK 1 000) Note 14

2005 Listed shares - Trading Portfolio 90 455 Listed shares - other short-term holdings 29 036 Total listed shares 119 491

Shares valued on the basis of the OTC list 123 205 Fund investments as valued by the investment management company 9 175 Venture shares 1) 52 479 Shares valued on the basis of other evaluation techniques 2) 75 818 260 677

Total shares - stated at fair value through proﬁ t or loss 380 168

1) The ventrue portfolio relates mainly to fund investments (or participation in invetment companies). The portfolio overviews which we use for valuation purposes are prepared by the funds/companies themselves.

2) Value assessment are based on the last issue price, traded prices known to us and/or accounting considerations make it necessary to write down the cost price if the has been no turnover. Obvious value appreciation is included as a value adjustment, while smaller holdings are written down where this is required.

The balance sheet value of shares, investments and PCCs is classiﬁ ed as follows:

Trading portfolio

Company No. of shares Nominal value Ownership (%) Cost value Fair Share capital NOK mill. capital Share

Royal Caribbean Cruises 4 12 000 12 0.30 3 320 3 642 Tomra Systems 178 45 000 45 0.03 1 717 2 174 Stolt Offshore 2 498 35 000 455 0.02 2 419 2 748 Norsk Hydro ASA 4 739 12 900 236 0.00 6 959 8 940 Petroleum Geo.Services 600 11 000 110 0.02 1 982 2 288 Norske Skog 1 899 20 000 200 0.01 1 951 2 145 Orkla Borregaard 1 302 29 000 181 0.01 4 457 8 106 Wilh.Wilhelmsen AS 737 8 000 160 0.02 1 032 1 988 Smedvig ASA, A-aksjer 538 10 000 100 0.02 1 264 1 970 DnB NOR 13 369 130 000 1300 0.01 6 409 9 360 Eltek ASA 32 20 000 20 0.06 1 749 2 235 Fred Olsen Energy 1 224 10 000 200 0.02 1 540 2 430 TGS Nopec Geophysical Company ASA 26 5 000 5 0.02 1 242 1 585 Prosafe ASA 341 5 000 50 0.01 1 166 1 433 Tandberg Television ASA 149 30 000 20 0.01 2 252 2 678 Visma ASA 160 10 000 50 0.03 682 1 000 Storebrand 1 293 50 000 250 0.02 2 351 2 913 Schibsted ASA 69 9 000 9 0.01 1 563 1 809 EDB Business Partner ASA 159 30 000 53 0.03 1 262 1 470 Aker Yards ASA 412 5 000 100 0.02 1 292 1 620 Aker Kværner ASA 550 10 000 100 0.02 1 834 4 145 Yara International 535 40 000 68 0.01 2 829 3 930 Statoil ASA 5 474 60 000 150 0.00 7 783 9 300 Sinvest ASA 346 15 000 90 0.03 935 1 286 Telenor ASA 10 239 100 000 600 0.01 4 591 6 625 Other listed shares 1 992 2 638 Trading portfolio - Total 66 571 90 455

Note continues on next page 57 Notes group

Company No. of shares Nominal value Ownership (%) Cost value Fair Share capital NOK mill. capital Share

Stated at fair value through proﬁ t or loss on initial entry in balance sheet:

Epsis AS 0.266 10 902 10 3.76 3 271 3 271 Rieber & Søn ASA 796 440 000 4 400 0.55 24 912 22 110 Hardanger Sunnhordlandske 18 8 770 175 0.97 1 657 2 806 Data Invest AS 2 82 860 41 2.07 2 230 1 450 Domstein ASA 35 200 000 100 0.29 1 353 1 090 Petromena ASA 470 220 000 1 100 0.23 1 210 1 100 Eidesvik Offshore 2 40 000 2 0.10 1 874 2 020 Lifecare AS 6 5 400 000 540 9.00 3 280 3 780 Åsane Invest AS 21 20 800 2 080 9.77 2 080 2 600 Bergensavisen AS 10 315 840 989 9.83 11 000 10 422 Nygårdstangen AS 4 760 760 20.27 4 439 6 080 Eksportfi nans AS 1 594 1 517 15 929 1.00 27 952 27 952 Bergens Tidende AS 16 150 220 1 502 9.39 46 618 72 556 Eiendomskreditt AS 160 123 000 12 300 7.69 12 872 12 792 Kredittforeningen 50 2 760 3 0.01 2 843 2 898 Norsk Tillitsmann ASA 11 4 000 400 3.64 2 445 2 448 Oslo Børs Holding 50 27 581 276 0.55 6 321 10 757 VPS Holding 50 129 400 1 294 2.59 18 018 38 173 Sagafjord Sea Farm AS 1 8 900 89 10.00 4 681 4 681 Sarsia Innovation AS 31 12 200 1 525 4.91 3 590 3 538 Sarsia Life Science Fund AS 31 1 527 439 1 909 6.18 4 316 6 064 Fjordinvest 78 10 000 10 000 12.76 10 550 11 000 Marin Vekst ASA 13 164 000 1 640 12.62 18 050 21 320 Energivekst AS 3 24 314 24 0.81 2 707 5 835 Holberg Norden 851 38 624 3 862 0.45 4 414 6 169 Holberg Norge 268 11 758 1 176 0.44 1 000 3 005 Other shares stated at fair value 3 915 3 796 Total short-term shares stated at fair value through profi t or loss 227 598 289 713 Total shares stated at fair value through profi t or loss 380 168

Shares available for sale

BBS/Bank-Aksept Holding AS 165 239 821 5 996 3.63 3 428 14 000 Teller ASA 8 280 280 3.50 140 47 964 Classiﬁ ed as available for sale 3 568 61 964

Value assessments are based on the last traded price known to the company, and discounting of expected cash ﬂ ows from the company.

58 Notes group

FINANCIAL ASSETS STATED AT FAIR VALUE THROUGH PROFIT OR LOSS - COMMERCIAL PAPER AND BONDS Note 15

Risk weight 2005 2004 Commercial paper and bonds issued by public authorities 0 % 886 1 151 10 % 0 0 20 % 1 0 100 % 495 256 Commercial paper and bonds issued by others 20 % 1 180 761 100 % 150 369 Total 2 712 2 537

Distribution of book values at 31 December 2005

Book Fair Real rate Currency Listed Portfolio Cost value value of return proportion Trading portfolio 78 77 77 2.78 NOK 100 Stated at fair value through proﬁ t or loss on initial entry in balance sheet: 2 626 2 635 2 635 2.82 NOK 100 Total 2 704 2 712 2 712 2.82

The average real rate of return is calculated by identifying the discount rate which gives a calculated value equal to the stated market value.

FIXED ASSETS Note 16

Machinery, equipment Buildings and Total and vehicles other real estate Accounting year 2004 Cost at 1 January 2004 383 207 591 Regulated cost price on split up 86 86 Additions 39 3 42 Disposals 2 2 Accumulated depreciation at 31 December 2004 299 61 360 Book value at 31 December 2004 122 234 357

Ordinary depreciation 2004 39 11 50 Gain on disposal 1 1 Depreciation rates 10-33 % 0-10 %

Accounting year 2005

Historial cost or regulated cost on split up at 1 January 2005 422 294 716 Group adjustment 3 3 Additions 25 1 26 Disposals 1 3 4 Accumulated depreciation at 31 December 2005 335 70 405 Book value at 31 December 2005 111 225 336

Ordinary depreciation 2005 35 10 45 Gain on disposal 1 1 Depreciation rates 10-33 % 0-10 %

Group properties are stated at historical cost and depreciated over their expected lifetime. In order to split up the various elements for individual depreciation over the lifetime of the element, we have used the actual value option as the new cost price on implementation of IAS 16. New prices have been obtained for lifts, equipment and ventilation plant. We have also obtained external valuations of the buildings at 1.1.2004. The net effect of the higher cost price less deferred tax has been credited to Group equity.

59 Notes group

Note 17 FINANCIAL DERIVATIVES 2005 2004

ASSETS LIABILITIES ASSETS LIABILITIES Financial derivatives Book Book Book Book value value value value

Trading portfolio at 31.12.: - Forward purchases/sales of foreign currency 18 17 60 -Interest rate contracts 20 20 3 Total 38 37 Ordinary banking activity at 31.12.: - Forward purchases/sales of foreign currency 27 0 3 -Interest rate contracts 159 323 41 - Options 826 820 Total 1 012 1 143 44 Financial derivatives - Total 1 049 1 180 44 63

Financial derivatives are agreements entered into with ﬁ nancial institutions and customers in order to set interest rates, foreign exchange rates and the value of equity instruments for speciﬁ c periods.

Sparebanken Vest has used the following ﬁ nancial derivatives in the course of the year:

Forward foreign exchange transactions These are agreements to purchase or sell a speciﬁ c amount of foreign currency at an agreed exchange rate.

Interest rate contracts comprise: - Forward Rate Agreements (FRA) which stipulate a certain rate of interest on a nominal amount for a future period of time. - Interest rate swaps which are agreements to exchange interest rates (fi xed for fl oating) for a specifi c amount over a given period of time. - Foreign currency interest rate swaps which are agreements to swap both currencies and interest rates for a specifi c amount over a given period of time. - Interest rate (call) options which give the buyer the right to receive from the seller the difference between the market rate and an agreed rate of interest for a specifi c amount over a given period. - Interest rate (put) options which give the buyer the right to receive from the seller the difference between the market rate and an agreed rate of interest, if the market rate is lower than the agreed rate, for a specifi c amount over a given period.

Options The bank’s holdings of options relates to bank deposits with a stock exchange return and the issue of share index linked bonds to customers. All indexed products sold to customers are secured against corresponding holdings in the market, and the bank’s open position related these options is very limited.

Market risk The credit risk is expressed by the risk-weighted volume calculated in accordance with capital adequacy regulations laid down by the Financial Supervisory Authority of Norway. The credit risk is the risk that contractual obligations are not met by the bank’s counterparty. Internal regulations regulate the maximum counterparty exposure. The above table shows that no major risk is attached to the above ﬁ nancial derivatives.

60 Notes group

ACCRUED AND AMORTISED INCOME Note 18

2005 2004 2003 Accrued income 287 94 125 Other prepaid costs 25 24 14 Total 312 118 139

DEBT TO CREDIT INSTITUTIONS Note 19

2005 2004 2003 Loans and deposits from credit institutions with no agreed term or period of notice 70 30 26 Loans and deposits from credit institutions with an agreed term or period of notice 1 023 1 479 1 767 Total 1 093 1 509 1 793

DEPOSITS FROM AND DEBT TO CUSTOMERS Note 20 2005 2004

Book Actual Book The book value of deposits from and debt to customers is classiﬁ ed as follows: value value value Stated at amortised cost: 25 963 25 963

Original book value 1 510 Accumulated value change (140) Stated at fair value through proﬁ t or loss: 1) 1 370 1 370

Total 27 333 27 333 24 871

The actual value is calculated by discounting the cash ﬂ ow from the deposits using a required rate of return derived from the zero coupon curve. The book value of deposits with a short ﬁ xed interest period is virtually the same as the actual value.

Deposits from and debt to customers stated at fair value through proﬁ t or loss: 2005 2004 Book value NGAAP at 31.12. 1 139 Implementation effect under IAS 39 posted against equity at 1.1. (119) Net additions/disposals 368 Value change in period due to change in interest rates (18) Book value at 31.12 1) 1 370 1 139

Gain/(loss) on deposits voluntarily stated at fair value through proﬁ t or loss in period 1.1.- 31.12. 2005 2004 Total value change: 18 Total realised: 8 0 Net gain/(loss) in period 1.1. - 31.12. 2) 26 0

1) All deposits included in the bank’s portfolio stated at actual value are indexed deposits. Indexed deposits are part of a composite instrument where each instrument making up the product is dealt with individually for accounting purposes. The bank has no interest expenses on deposits taken separately.

2) See note 4

OTHER LIABILITIES Note 21 IFRS NGAAP Note 2005 2004 2004 2003 Unassessed tax payable 7 223 135 135 113 Other current liabilities 291 168 240 255 Own pension premium fund 0 30 30 29 Other liabilities/provision for dividend on PCCs 0 31 31 32 Total 514 364 436 429

61 Notes group

Note 22 SECURITISED DEBT 2005 2004

Book Actual Book The bank’s securitised debt is split into the following portfolios: value value value

Commercial paper and bonds at ﬂ oating rate in NOK 7 681 7 698 Commercial paper and bonds at ﬂ oating rate in foreign currency 3 489 3 496 Fixed rate bonds 7 039 7 039 Share-indexed bonds 1) 1 434 1 434 Total securities issued 19 643 19 667 15 500

The actual value is based on the discounted loan cash ﬂ ow using a required rate of return derived from the zero coupon curve. All ﬁ xed rate securities issued are included in the portfolio stated at actual value.

2005

Book Actual Securities issued which are posted in the balance sheet are classiﬁ ed as follows: value value

Valued at amortised cost: 11 170 11 194 Original book value 8 585 Change in accumulated credit spread 32 Accumulated value change (112) Stated at fair value through proﬁ t or loss: 8 473 8 473 Total securities issued 19 643 19 667

Securities issued stated at fair value through proﬁ t or loss: Effective rate 2005 2004 Book value NGAAP at 31.12. 5 609 Implementation effect of IAS 39 posted against equity at 1.1. 150 Net additions/disposals 1 398 Value change in period due to change in interest rates (124) Value change in period due to changed credit spread 6 Book value of ﬁ xed interest bonds at 31.12. 3,44 % 7 039 5 609 Book value NGAAP at 31.12. 534 Own holding transferred from accounts receivable to net liabilities (19) Implementation effect of IAS 39 posted against equity at 1.1. (32) Net additions/disposals 1 030 Value change in period (79) Book value of share-indexed bonds at 31.12. 1) 1 434 534 Total 8 473 6 143

There is no value change due to a changed credit spread for indexed bonds.

Gain/(loss) for commercial paper and bonds voluntarily stated at fair value through proﬁ t or loss in the period 1.1. - 31.12 2005 2004 Total value change 197 Total realised in period 3 2 Net gain/(loss) in period 1.1. - 31.12. 2) 200 2

1) All indexed bonds are included in the bank’s portfolio stated at actual value. Indexed deposits are part of a composite instrument where each instrument making up the product is dealt with individually for accounting purposes. The bank has no interest expenses for bonds taken separately.

2) See note 4

62 Notes group

PENSION COMMITMENTS Note 23

Sparebanken Vest’s pension schemes consist of the following: 1. A group pension scheme which provides all the bank’s employees with a pension equal to 70% of the fi nal salary, based on the present level of national insurance but limited to 12 times the national insurance base rate (G). At year-end 2005 the scheme covered 827 persons in employment. A further 235 persons currently receive pensions under the scheme. 2. Contractual pension agreements (CPA) from 62 to 67 years of age, with an expected CPA acceptance rate of 40%. At year-end 2005 there were 58 recipients of pensions under the CPA scheme. In its estimated pension commitment in the closing balance for 2005 the acceptance rate for the Group has been changed to 50%. 3. A top hat scheme covering 12 employees, with the option of a retirement pension at the age of 64 (managing director at 60). The pension benefi ts correspond to 70% of the fi nal salary until 67 years of age, at which point these persons become members of the group pension scheme. 4. Early retirement schemes. At year-end 2005 the parent bank had 2 recipients of early retirement pension.

2005 2004

Balance sheet changes in net pension commitment Total Uninsured Insured Total Uninsured Insured Net pension commitment in balance sheet NRS6 31.12.2003 92 115 (23) Implementation effect of IAS 19 posted against equity at 1.1: Elimination of corridor in closing balance 2003: 40 (22) 62 Estimate divergence due to changed assumptions and difference between estimated and actual return: 62 (1) 63 Net pension commitment in balance sheet under IAS19 at 1.1 177 96 81 194 92 102 Correction of proﬁ t for 2004 posted against equity in opening balance 2005: (4) 1 (5) Costs charged in year 46 15 31 34 7 27 Pension payments and payment of pension premium (8) (7) (1) (47) (4) (43) Net pension commitment in balance sheet under IAS19 at 31.12. 215 103 112 177 96 81

2005 2004

Total Uninsured Insured Total Uninsured Insured Profi t and Loss Account Present value of accumulated pension rights 30 4 26 26 4 22 + Interest charge on accrued pension commitments 36 5 31 31 4 28 - Expected return on pension fund assets 30 30 30 30 + Difference between expected and actual return and changes in estimates 0 0 0 + Plan changes posted in the profi t and loss account 4 4 0 0 0 0 Employer’s national insurance contribution posted against profi ts 5 1 4 3 3 Net pension cost for the period 46 15 31 31 8 23 Balance Sheet Gross pension commitment 896 134 762 721 98 623 - Pension fund assets 513 513 504 504 Net pension commitment 383 134 249 217 98 119 - Unposted effect of changed estimates and difference between actual and expected return 2004 1) 58 10 48 62 14 48 - Unposted effect of changed estimates and difference between actual and expected return 2005 2) 136 33 103 Employer’s national insurance contributions 26 12 14 22 12 10 Net pension commitment in balance sheet 215 103 112 177 96 81

1) The Group uses the special “corridor” equalisation method for the accounting treatment of changes in estimates and the difference between the expected and the actual return on pension fund assets, changes in economic assumptions used to calculate pension commitments and other estimate divergences. The differences increased by NOK 58m at 1 January 2005, mainly due to a change in the discout rate from 5.25% to 5%, a lower return than expected and higher pension payments (CPA).

2) At 31 Decemeber 2005 the parent bank changed the discount rate used to calculate the gross pension commitment and the assumptions used to calclulate the CPA acceptance rate. The change in the discount rate from 5% to 4% has increased the gross pension commitment by NOK 106m. The change in the CPA acceptance rate from 40% to 50% has increased the gross pension commitment by NOK 29m, all of which has been posted in the corridor. The pension cost for the year is based on underlying assumptions at 1 January 2005.

Assumptions CB 2005 2005 2004 Discount rate 4.00 % 5.00 % 5.25 % Return on pension fund assets 6.00 % 6.50 % Salary growth 3.00 % 3.00 % Change in national insurance base rate 2.50 % 2.50 % Pension adjustment 2.50 % 2.50 % Voluntary withdrawals 1.00 % 1.00 % CPA acceptance rate 50.00 % 40.00 % 40.00 % Actuarial calculations have been used

63 Notes group

Note 24 SUBORDINATED LOAN CAPITAL

Interest rate Redemption right 2005 2004 2003 Subordinated bond loan of NOK 250m issued in November 2000 0 250 250

3mth NIBOR call option Subordinated bond loan of NOK 147m + 1.4% 20/12-06 issued in Dec. 2001 147 147 147

3mth USD call option Subordiated loan of USD 50m LIBOR +1% 23/7-07 issued in July 2002 385 385 385

Fixed rate call option Perpetual subordinated bond loan 7.30% 1) 30/4-14 of USD 60m issued in April 2004 1) 472 429

Foreign exchange loss on subordinated loan 2) (47) (83) (51)

Foreign exchange loss on perpetual subordinated loan 2) (23) (66)

Subordinated loan capital 934 1 062 731

1) The loan interest rate is ﬁ xed until 2034. Thereafter it will run at a ﬂ oating rate.

2) Foreign exchange losses are eliminated against corresponding positions in the balance sheet.

The actual value is based on the discounted loan cash ﬂ ow using a required rate of return derived from the zero coupon curve. The book value of short-term loans is virtually the same as the actual value.

The book values of subordinated loans are classiﬁ ed as follows: 2005 2005 2004

Effective rate Book Actual Book value value value Subordinated loan NOK 147 149 Subordinated loan USD 338 340 Valued at amortised cost 485 489 Perpetual subordinated loan USD 60m (nominal amount) 406 Accumulated change in credit spread 38 Value change 5 Classiﬁ ed at fair value through proﬁ t or loss 6.59 % on initial posting in balance sheet 449 449 Total subordinated loans 934 938 1 062

AnsvSubordinated loans stated at fair value through proﬁ t or loss: 2005 2004 Book value NGAAP at 31.12. 363 Implementation effect of IAS39 posted against equity at 1.1. 24 Change in foerign exchange loss 43 Value change in period due to change in interest rates 10 Value change in period due to change in credit spread 9 Book value at 31.12. 449 363

Evaluated and realised gain/(loss) on subordinated loans voluntarily classiﬁ ed at fair value through proﬁ t or loss in period 1.1. - 31.12. 2005 2004 Total value change (19) 0 Total realised 0 0 Net gain/(loss) in period 1.1. - 31.12. 3) 3) (19) 0

3) See note 4

64 Notes group

CAPITAL ADEQUACY Note 25 2005 2004 2003

NOK % NOK % NOK % Core capital 3 424 9.95 2 949 9.56 2 321 8.38 Net supplementary capital 485 1.41 699 2.27 731 2.64 Other deductions 0 0.00 (171) (0.55) (151) (0.55) Net capital base 3 909 3 477 2 901 Risk-weighted volume 34 414 30 835 27 690 Capital ratio 11.36 11.28 10.48

Speciﬁ cation of risk-weighted volume - Group Nominal amount Risk-weighted volume

Risk weight: 0% 10% 20% 50% 100% 31/12-05 31/12-04 31/12-03 Banking portfolio Cash and ordinary bank deposits 328 0 2 839 0 0 568 288 135 Short-term investments in securities 887 0 1 151 0 632 862 898 431 Lendings 871 0 84 28 062 17 758 31 805 29 046 26 601 Other accounts receivable 0 0 25 286 18 166 42 79 Fixed assets 79 0 0 0 481 481 430 420 Total assets 33 882 30 704 27 666 Off-balance sheet items 576 526 424 Total risk-weighted volume, banking portfolio 34 458 31 230 28 090

Trading portfolio Position risk related to equity instruments 136 97 61 Position risk related to instruments of debt 67 92 125 Counterparty risk and other risk 24 26 12 Total risk-weighted volume, trading portfolio 227 215 198 Total risk-weighted volume, banking and trading portfolio 34 685 31 445 28 288 Deductions: Subordinated loans to other ﬁ nancial institutions 0 (171) (151) Use of the equity method in the accounts of the parent bank 0 0 0 Loss provisions (271) (439) (447) Basis of calculation of capital adequacy 34 414 30 835 27 690 Currency risk, 8% of basis of calculation, trading portfolio 18 17 16

EARNINGS PER PRIMARY CAPITAL CERTIFICATE Note 26

Earnings per primary capital certifi cate (PCC) are calculated as the profi t after tax divided on the basis of the ratio of PCC capital to total equity at the start of the fi nancial year. As there are no options agreements linked to the bank’s PCCs, earnings per PCC are also the same on a diluted basis.

2005 2004

Earnings per PCC 17.25 12.96

DIVIDEND PER PRIMARY CAPITAL CERTIFICATE (PCC) Note 27

The maximum dividend per PCC is calculated as the share of the total capital base less the reserve for variation variances, capital loans and subordinated loan capital at 1 January in the accounting year to which PCCs, the premium reserve and the equalisation reserve are entitled. The proposed dividend remains as part of the equity until a resolution has been formally adopted by the Board of Governors.

2005 2004

Proposed dividend 17.10 12.60

65 Notes group

Note 28 GUARANTEES AND MORTGAGES

Guarantees 2005 2004 2003 Guarantee speciﬁ cation: Payment guarantees 402 336 364 Contract guarantees 261 490 484 Loan guarantees 2 2 3 Guarantees for taxes 2 5 7 Other guarantee liabilities 212 172 125 Total customer guarantees 879 1 005 983 Guarantees on behalf of Savings Banks’ Guarantee Fund 0 50 50 Total guarantee liability 879 1 055 1 033

Mortgages Bonds and commercial paper - as security for overnight loans from Norges Bank - valued at 2 548 2 506 1 989 Total mortgages 2 548 2 506 1 989

Note 29 LIQUIDITY RISK / RESIDUAL MATURITY OF BALANCE SHEET ITEMS

Liquidity risk means the risk that the bank is unable to reﬁ nance its debt as it matures, or is unable to fund increases in assets. The liquidity risk is reduced by adjusting the balance sheet structure, including the bank’s dependence on funding from sources other than its customers, and the extra costs involved in raising long-term funding in the money market compared with the cost of shorter-term funding until maturity. In 2005, Sparebanken Vest again reviewed and developed its strategy and parameters for liquidity management activities. The current strategy takes account of the recommendations of the Basel Committee concerning good liquidity management for banks.

Most of the bank’s long-term funding which matures in more than one year is linked to agreements where the interest rate is tied up to ﬁ xed short-term interest rates. This is done in order to reduce the interest rate risk involved in raising long-term funding.

Residual maturity of balance sheet items at 31 December 2005

0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Totalt month months months years years maturity Assets Cash and deposits with central banks NOK 129 0 0 0 0 189 318 Foreign currency 0 0 0 0 0 10 10 Loans to and deposits with credit institutions NOK 785 90 0 0 0 0 875 Foreign currency 1 964 0 0 0 0 0 1 964 Gross customer loans Amortised cost NOK 1 709 515 2 889 9 426 28 504 0 43 043 FVO NOK 1 270 1 800 60 2 131 Foreign currency 77 48 40 370 1 010 116 1 661 Write-down of individual loans NOK 0 0 0 0 0 (111) (111) Foreign currency 0 0 0 0 0 0 0 Write-down of loan groups NOK 0 0 0 0 0 (159) (159) Financial instruments at fair value through proﬁ t or loss - commercial paper and bonds NOK 200 110 1 450 796 152 4 2 712 Foreign currency 0 0 0 0 0 0 0 Other assets NOK 0 0 0 0 0 2 231 2 231 Foreign currency 0 0 0 0 0 5 5 Total assets 4 864 763 4 380 10 862 31 466 2 345 54 680 NOK 2 823 715 4 340 10 492 30 456 2 214 51 040 Foreign currency 2 041 48 40 370 1 010 131 3 640

66 Note continues on next page Notes group

Residual maturity of balance sheet items at 31 December 2005

0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity Liabilities and equity Debt to credit institutions NOK 416 20 10 0 350 0 796 Foreign currency 16 0 0 0 281 0 297 Deposits from and debt to customers Amortised cost NOK 25 491 0 40 0 0 25 531 FVO NOK 1 510 (140) 1 370 Foreign currency 432 0 0 0 0 432 Securitised debt Amortised cost NOK 600 0 1 150 5 682 249 0 7 681 FVO NOK 250 1 024 197 5 769 1 313 (80) 8 473 Foreign currency 0 0 1 404 80 2 005 0 3 489 Other liabilities NOK 0 0 0 0 0 2 405 2 405 Foreign currency 0 0 0 0 0 0 0 Subordinated loan capital NOK 0 0 0 0 147 0 147 Amortised cost Foreign currency 0 0 0 0 338 0 338 FVO Foreign currency 406 43 449 Equity NOK 0 0 0 0 0 3 272 3 272 Total liabilities and equity 27 205 0 2 801 11 531 6 599 5 500 54 680 NOK 26 757 1 044 1 397 11 451 3 569 5 457 49 675 Foreign currency 448 0 1 404 80 3 030 43 5 005 Net liquidity exposure gap on balance sheet items (22 341) (281) 1 579 (669) 24 867 (3 155) 0 NOK (23 934) (329) 2 943 (959) 26 887 (3 243) 1 365 Foreign currency 1 593 48 (1 364) 290 (2 020) 88 (1 365) Net liquidity exposure gap on forward foreign currency transactions 0 11 (8) 1 0 0 33 Forward purchases of foreign currency NOK 305 67 282 0 0 0 654 Foreign currency 1 585 958 820 23 0 0 3 386 Forward sales of foreign currency NOK (1 087) (55) (822) 0 0 0 (1 964) Foreign currency (774) (959) (288) (22) 0 0 (2 043) Net total - all items (22 312) (270) 1 571 (668) 24 867 (3 155) 33 NOK (24 716) (317) 2 403 (959) 26 887 (3 243) 55 Foreign currency 2 404 47 (832) 291 (2 020) 88 (22)

Overdraft facilities are grouped under loans with a residual maturity of up to 1 month. Instalment loans are apportioned in accordance with the loan structure. Value changes related to balance sheet items and derivatives are posted under “No residual maturity”.

Note continues on next page 67 Notes group

INTEREST RATE RISK / PERIOD UNTIL INTEREST RATE REGULATION

Agreed/probable time for adjustment of interest on balance sheet items and ﬁ nancial derivataives at 31 December 2005

0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity Assets Cash and deposits with central banks NOK 129 0 0 0 0 189 318 Foreign currency 0 0 0 0 0 10 10 Loans to and deposits with credit institutions NOK 785 90 0 0 0 0 875 Foreign currency 1 964 0 0 0 0 0 1 964 Gross customer loans Amortised cost NOK 0 0 0 0 0 43 043 43 043 FVO NOK 13 186 139 1 264 469 60 2 131 Foreign currency 422 1 082 157 0 0 1 661 Write-down of individual loans NOK 0 0 0 0 0 (111) (111) Foreign currency 0 0 0 0 0 0 0 Write-down of loan groups NOK 0 0 0 0 0 (159) (159) Financial instruments at fair value through proﬁ t or loss - commercial paper and bonds NOK 554 751 1 368 35 0 4 2 712 Other assets NOK 0 0 0 0 0 2 231 2 231 Foreign currency 0 0 0 0 0 5 5 Total assets 3 867 2 109 1 664 1 299 469 45 272 54 680 NOK 1 481 1 027 1 507 1 299 469 45 257 51 040 Foreign currency 2 386 1 082 157 0 0 15 3 640

Liabilities and equity Debt to credit institutions NOK 414 382 0 0 0 0 796 Foreign currency 297 0 0 0 0 0 297 Deposits from and debt to customers Amortised cost NOK 2 0 14 9 0 25 506 25 531 FVO NOK 1 510 (140) 1 370 Foreign currency 0 0 0 0 0 432 432 Securitised debt Amortised cost NOK 3 125 3 398 1 150 8 0 0 7 681 FVO NOK 250 1 180 197 5 613 1 313 (80) 8 473 Foreign currency 0 3 489 0 0 0 0 3 489 Other liabilities NOK 0 0 0 0 0 2 405 2 405 Foreign currency 0 0 0 0 0 0 0 Subordinated loan capital NOK 0 147 0 0 0 0 147 Amortised cost Foreign currency 338 0 0 0 0 0 338 FVO Foreign currency 406 43 449 Equity NOK 0 0 0 0 0 3 272 3 272 Total liabilities and equity 4 426 8 596 1 361 7 140 1 719 31 438 54 680 NOK 3 791 5 107 1 361 7 140 1 313 30 963 49 675 Foreign currency 635 3 489 0 0 406 475 5 005 Net liquidity exposure gap on balance sheet items (559) (6 487) 303 (5 841) (1 250) 13 834 0 NOK (2 310) (4 080) 146 (5 841) (844) 14 294 1 365 Foreign currency 1 751 (2 407) 157 0 (406) (460) (1 365) Off balance sheet ﬁ nancial derivatives which affect interest rate exposure (3 275) (3 336) (310) 5 636 1 318 0 33 Purchase positions NOK 2 156 12 106 27 561 9 461 1 575 0 52 859 Foreign currency 1 585 1 359 821 23 406 0 4 194 Sales positions NOK (5 835) (15 842) (28 003) (3 826) (663) 0 (54 169) Foreign currency (1 181) (959) (689) (22) 0 0 (2 851)

68 Note continues on next page Notes group

Agreed/probable time for adjustment of interest on balance sheet items and ﬁ nancial derivataives at 31 December 2005

0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity Net interest rate exposure incl. off-balance sheet ﬁ nancial derivatives (3 834) (9 823) (7) (205) 68 13 834 33 NOK (5 989) (7 816) (296) (206) 68 14 294 55 Foreign currency 2 155 (2 007) 289 1 0 (460) (22) Net interest rate exposure of average total assets (9.87) (25.30) (0.02) (0.53) 0.18 35.63 0.08 NOK (15.42) (20.13) (0.76) (0.53) 0.18 36.81 0.14 Foreign currency 5.55 (5.17) 0.74 0.00 0.00 (1.18) (0.06)

Interest rate sensitivity Throughout 2005 Sparebanken Vest had holdings of bonds and commercial paper, mainly for the purpose of meeting statutory requirements relating to liquidity reserves and deposits required as security for payment settlements and loans from Norges Bank.

At year-end, the bank’s holdings of bonds and commercial paper amounted to NOK 2 738m, with an average duration of 0.35 years. Taken separately, the interest rate risk on these investments would result in a loss of value of NOK 9.5m in the event of a parallel rise in the interest rate of 1 percentage point.

In managing its interest rate exposure, the bank realises that that different maturities can develop differently. The basic risk has been accounted for by ensuring that the bulk of the bank’s interest-earning investments are in gilts.

A large part of the bank’s funding in the bond market is in the form of fi xed rate bond loans. In order to reduce the interest rate exposure the bank has entered into interest rate swap agreements which are stated at fair value (FVO) in the consolidated balance sheet. In order to give a balanced picture of the consolidated balance sheet fi xed rate bond loans are stated at fair value (FVO). In connection with a reduction of the market risk related to indexed products derivative contracts have been entered into with other fi nancial institutions. These derivative contracts are stated at fair value, and as a matching item the bank has chosen to state the indexed products at fair value (FVO). The interest rate risk attached to the bank’s fi xed rate lendings has been partly reduced through interest rate swap agreements. In order to give a balanced picture of the consolidated balance sheet these fi xed rate lendings are stated at fair value (FVO).

Foreign exchange risk Assets and liabilities in foreign currency at 31 December 2005, re-stated in NOK:

Posted in Not posted in Balance Sheet Balance Sheet Net Currency Assets Liabilities Forward purchases Forward sales positions USD 696 1 032 726 415 (25) EUR 2 221 3 925 2 239 513 22 CHF 604 0 334 933 5 JPY 60 0 6 66 0 GBP 21 38 77 61 (1) DKK 28 1 0 28 (1) SEK 3 8 1 21 (25) Other 2 2 8 5 3 Total 3 635 5 006 3 391 2 042 (22)

Foreign currency items are secured through corresponding items in the balance sheet or through different off-balance sheet hedging positions.The foreign exchange risk is therefore always limited.

TRANSACTIONS WITH ASSOCIATED COMPANIES Note 30

The information is given in accordance with Accounting Standard 24 for “Information about associated companies”.

Sparebanken Vest deﬁ nes the subsidiaries AS Filialbygg and Eiendomsmegler Vest AS as associated companies in relation to the accounting standard.

Account balances at year-end 2005 between the parent bank and subsidiaries appear in note 17 to the accounts of the parent bank. All transactions between companies of the group are on normal commercial terms and conditions.

69 Group Key Figures 2001 - 2005

1 January - 31 December IFRS PROFIT AND LOSS ACCOUNT SUMMARY 2005 2004 2004 2003 2002 2001

Interest income etc. 1 883 1 725 1 711 2 316 2 690 2 560 Interest expenses etc. 911 765 751 1 413 1 814 1 773

Net interest income and credit commissions 972 960 960 903 876 787

Commissions receivable and income from banking services 368 363 363 333 310 270 Commissions payable and cost of banking services 79 78 78 89 88 77 Net gain/(loss) on ﬁ nancial instruments 102 62 62 61 (171) (76) Other operating income 80 59 59 48 64 66 Net operating income 471 406 406 353 115 183

Total operating income 1 443 1 366 1 366 1 256 991 970

Salaries and general administration expenses 708 657 661 583 514 540 Depreciation 59 60 54 47 47 46 Other operating expenses 108 102 102 117 161 98 Net operating expenses 875 819 817 747 722 684

Proﬁ t before write-downs and tax 568 547 549 509 269 286

Loan write-downs and losses on guarantees (75) 60 60 114 166 86

Proﬁ t before tax 643 487 489 395 103 200

Taxes 168 179 180 118 34 63

Proﬁ t after tax 475 308 309 277 69 137

BALANCE SHEET SUMMARY 31 December

Assets

Cash and deposits with central banks 328 351 351 229 203 332 Loans to and deposits with credit institutions 2 839 1 441 1 441 677 695 920 Gross loans to customers 46 835 41 526 41 526 37 004 32 348 29 145 Write-downs on individual loans (111) (165) (165) (197) (292) (195) Write-downs on loan groups (159) (272) (272) (248) (218) (188) Net loans to customers 46 565 41 089 41 089 36 559 31 838 28 762 Repossessed assets 2 2 Financial assets stated at fair value through proﬁ t or loss (incl. trading) - shares 381 429 429 316 240 175 Shares available for sale 62 Financial instruments stated at fair value through proﬁ t or loss - commercial paper and bonds 2 712 2 537 2 537 2 031 1 843 1 312 Shareholdings in jointly controlled companies 325 Deferred tax assets 48 51 46 91 96 32 Other intangible assets 23 25 25 18 3 4 Fixed assets 336 357 277 279 279 320 Financial derivatives 1 049 44 44 Other assets 25 15 15 12 9 19 Accrued and amortised income 312 118 118 139 241 164 Total assets 54 680 46 457 46 372 40 351 35 449 32 367

70 Group Key Figures 2001 - 2005

31 December IFRS BALANCE SHEET SUMMARY cont. 2005 2004 2004 2003 2002 200 1

Liabilities and equity

Debt to credit institutions 1 093 1 509 1 509 1 793 2 299 2 963 Deposits from and debt to customers 27 333 24 871 24 871 22 237 22 192 19 349 Securitised debt 19 643 15 500 15 500 12 426 7 382 6 856 Financial derivatives 1 180 63 63 Accrued costs and prepaid income 495 193 192 202 220 245 Provisions and pension commitments 216 179 81 104 71 56 Other liabilities 514 364 436 429 331 327 Subordinated loan capital 934 1 062 1 062 731 746 397 Total liabilities 51 408 43 741 43 714 37 922 33 241 30 193

Reserve for valuation variances 58 Primary capital certiﬁ cates 250 250 250 250 250 250 Holdings of own primary capital certiﬁ cates (7) (3) (3) (1) Premium reserve 4 4 4 4 4 4 Paid-up equity 247 251 251 254 253 254

Gift fund 100 45 45 25 Equalisation fund 2 Other equity 2 865 2 420 2 362 2 150 1 955 1 920 Retained earnings 2 967 2 465 2 407 2 175 1 955 1 920

Total equity 3 272 2 716 2 658 2 429 2 208 2 174

Total liabilities and equity 54 680 46 457 46 372 40 351 35 449 32 367

AVERAGE TOTAL ASSETS 50 500 43 826 43 782 38 827 34 739 31 518

RESULTS AS A PERCENTAGE OF TOTAL ASSETS

Interest income etc. 3.73 3.94 3.91 5.96 7.74 8.12 Interest expenses etc. 1.80 1.75 1.72 3.64 5.22 5.63

Net interest income and credit commissions 1.92 2.19 2.19 2.33 2.52 2.50

Commissions receivable and income from banking services 0.73 0.83 0.83 0.86 0.89 0.86 Commissions payable and cost of banking services 0.16 0.18 0.18 0.23 0.25 0.24 Net gain/(loss) on ﬁ nancial instruments 0.20 0.14 0.14 0.16 (0.49) (0.24) Other operating income 0.16 0.13 0.13 0.12 0.18 0.21 Net operating expenses 0.93 0.93 0.93 0.91 0.33 0.58

Total operating income 2.86 3.12 3.12 3.23 2.85 3.08

Salaries and general administration expenses 1.40 1.50 1.51 1.50 1.48 1.71 Depreciation 0.12 0.14 0.12 0.12 0.14 0.15 Other operating expenses 0.21 0.23 0.23 0.30 0.46 0.31 Net operating expenses 1.73 1.87 1.87 1.92 2.08 2.17

Proﬁ t before write-downs and tax 1.12 1.25 1.25 1.31 0.77 0.91

Loan write-downs and losses on guarantees (0.15) 0.14 0.14 0.29 0.48 0.27

Proﬁ t before tax 1.27 1.11 1.12 1.02 0.30 0.63

Taxes 0.33 0.41 0.41 0.30 0.10 0.20

Proﬁ t after tax 0.94 0.70 0.71 0.71 0.20 0.43

71 Group Key Figures 2001 - 2005

IFRS 2005 2004 2004 2003 2002 2001

Return on investment, earnings and capital structure (%)

1. Return on equity after tax 15.44 11.54 11.96 11.80 3.12 6.39 2. Return on total assets before losses and tax 1.12 1.25 1.25 1.31 0.77 0.91 3. Net return on total assets 0.94 0.70 0.71 0.71 0.20 0.43 4. Ratio of operating costs to operating income 60.64 59.96 59.81 59.47 72.86 70.52 5. Funding ratio 58.70 60.53 60.53 60.82 69.70 67.27

Balance Sheet development (%)

6. Change in gross loans to and receivables from customers 12.78 12.22 12.22 14.39 10.99 9.53 7. Change in commercial paper, bonds and other interest-earning securities 6.90 24.91 24.91 10.20 40.47 (35.08) 8. Change in deposits from and debt to customers 9.90 11.85 11.85 0.20 14.69 8.81 9. Change in total assets 17.70 14.66 14.92 13.83 9.52 4.08

Defaults. provisions and loan losses

10. Loan loss ratio (0.16) 0.14 0.14 0.31 0.51 0.29 11. Gross default ratio 0.32 0.36 0.36 0.43 0.92 0.75 12. Net default ratio 0.26 0.25 0.24 0.28 0.35 0.45 13. Percentage write-down of defaulted loans 17.45 32.45 32.45 34.81 62.50 40.00 14. Write-down of loan groups as a percentage of gross loans (0.34) (0.66) (0.66) (0.67) (0.67) (0.65)

Capital adequacy

15. Net capital base 3 909 3 477 3 477 2 901 2 705 2 192 16. Basis of calculation 34 414 30 835 30 835 27 690 24 443 22 076 17. Capital ratio 11.36 11.28 11.28 10.48 11.07 9.93 18. Core capital ratio 9.95 9.56 9.56 8.38 8.63 9.68

Personnel

Number of employees 802 848 848 854 850 857 Number of full-time positions 749 791 791 795 796 813

Distribution network

Sales outlets 58 58 58 58 59 63

Deﬁ nitions:

1. Profi t for the year as a percentage of opening equity adjusted for IFRS + 50% of the profi t for the year. 2. Operating profi t before losses and taxes as a percentage of average total assets. 3. Operating profi t after tax as a percentage of average total assets. 5. Deposits from and debt to customers as a percentage of loans to and receivables from customers. 6. Change in gross lendings to customers at year-end compared with the previous year-end volume. 7. Change in securities at year-end compared with the previous year-end volume. 8. Change in customer deposits at year-end compared with the previous year-end volume. 10. Losses on loans and guarantees as a percentage of gross loans to and receivables from customers at year-end. 11. Ratio of gross defaults to gross lendings. 12. Ratio of defaulted loans less individual write-downs to net lendings. 13. Individual write-downs on defaulted loans as a percentage of the gross volume of these loans.

72 Group Key Figures - Quarterly Results (cum.)

31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Interest income etc. 1 883 1 357 899 439 1 725 1 274 846 430 Interest expenses etc. 911 631 420 200 765 556 372 205

Net interest income and credit commissions 972 726 479 239 960 718 474 225

Commissions receivable and income from banking services 368 266 172 85 363 269 178 95 Commissions payable and cost of banking services 79 56 39 19 78 62 42 21 Net gain/(loss) on ﬁ nancial instruments 102 81 54 19 62 45 44 34 Other operating income 80 60 37 13 59 48 32 13 Net operating income 471 351 224 98 406 300 212 121

Total operating income 1 443 1 077 703 337 1 366 1 018 686 346

Salaries and general administration expenses 708 504 340 168 657 486 322 165 Depreciation 59 44 29 13 60 45 30 13 Other operating expenses 108 71 42 21 102 77 53 23 Net operating expenses 875 619 411 202 819 608 405 201

Proﬁ t before write-downs and tax 568 458 292 135 547 410 281 145

Write-downs on loans and guarantees (75) (43) 3 (7) 60 48 40 27

Proﬁ t before tax 643 501 289 142 487 362 241 118

Taxes 168 145 83 41 179 105 70 34

Proﬁ t after tax 475 356 206 101 308 257 171 84

AVERAGE TOTAL ASSETS 50 500 49 580 49 037 47 882 43 826 43 194 42 685 42 100

RESULTS AS A PERCENTAGE OF AVERAGE TOTAL ASSETS

Interest income etc. 3.73 3.66 3.70 3.72 3.94 3.94 3.99 4.11 Interest expenses etc. 1.80 1.70 1.73 1.69 1.75 1.72 1.75 1.96

Net interest income and credit commissions 1.92 1.96 1.97 2.02 2.19 2.22 2.23 2.15

Commissions receivable and income from banking services 0.73 0.72 0.71 0.72 0.83 0.83 0.84 0.91 Commissions payable and cost of banking services 0.16 0.15 0.16 0.16 0.18 0.19 0.20 0.20 Net gain/(loss) on ﬁ nancial instruments 0.20 0.22 0.22 0.16 0.14 0.14 0.21 0.32 Other operating income 0.16 0.16 0.15 0.11 0.13 0.15 0.15 0.12 Net operating income 0.93 0.95 0.92 0.83 0.93 0.93 1.00 1.16

Total operating income 2.86 2.90 2.89 2.85 3.12 3.15 3.23 3.31

Salaries and general administration expenses 1.40 1.36 1.40 1.42 1.50 1.50 1.52 1.58 Depreciation 0.12 0.12 0.12 0.11 0.14 0.14 0.14 0.12 Other operating expenses 0.21 0.19 0.17 0.18 0.23 0.24 0.25 0.22 Net operating expenses 1.73 1.67 1.69 1.71 1.87 1.88 1.91 1.92

Proﬁ t before write-downs and tax 1.12 1.24 1.20 1.14 1.25 1.27 1.32 1.39

Write-downs on loans and guarantees (0.15) (0.12) 0.01 (0.06) 0.14 0.15 0.19 0.26

Proﬁ t before tax 1.27 1.35 1.19 1.20 1.11 1.12 1.14 1.13

Taxes 0.33 0.39 0.34 0.35 0.41 0.32 0.33 0.32

Proﬁ t after tax 0.94 0.96 0.85 0.86 0.70 0.79 0.81 0.80 73 Group Key Figures - Quarterly Results (cum.)

QUARTERLY RESULTS 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q (non-cumulative) 2005 2005 2005 2005 2004 2004 2004 2004

Interest income etc. 526 458 460 439 451 428 416 430 Interest expenses etc. 280 211 220 200 209 184 167 205

Net interest income and credit commissions 246 247 240 239 242 244 249 225

Commissions receivable and income from banking services 102 94 87 85 94 91 83 95 Commissions payable and cost of banking services 23 17 20 19 16 20 21 21 Net gain/(loss) on ﬁ nancial instruments 21 27 35 18 17 1 10 34 Other operating income 20 23 24 13 11 16 19 13 Net operating income 120 127 126 97 106 88 91 121

Total operating income 366 374 366 336 348 332 340 346

Salaries and general administration expenses 204 164 172 168 171 164 157 165 Depreciation 15 15 16 13 15 15 17 13 Other operating expenses 37 29 21 21 25 24 30 23 Net operating expenses 256 208 209 202 211 203 204 201

Proﬁ t before write-downs and tax 110 166 157 134 137 129 136 145

Write-downs on loans and guarantees (32) (46) 10 (7) 12 8 13 27

Proﬁ t before tax 142 212 147 141 125 121 123 118

Taxes 23 62 42 41 74 35 36 34

Proﬁ t after tax 119 150 105 100 51 86 87 84

BALANCE SHEET DEVELOPMENT 31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Assets

Cash and deposits with central banks 328 556 400 942 351 204 307 185 Loans to and deposits with credit institutions 2 839 2 717 3 532 951 1 441 676 1 648 1 119 Gross loans to customers 46 835 45 362 44 104 42 950 41 526 41 058 39 903 38 633 Write-downs on individual loans (111) (135) (134) (140) (165) (133) (175) (187) Write-downs on loan groups (159) (159) (159) (283) (272) (299) (293) (283) Net loans to customers 46 565 45 068 43 811 42 527 41 089 40 626 39 435 38 163 Financial assets stated at fair value through proﬁ t or loss (incl. trading) - shares 381 360 319 305 429 375 372 326 Shares available for sale 62 62 62 62 0 0 0 0 Financial instruments stated at fair value through proﬁ t or loss - commercial paper and bonds 2 712 2 709 2 056 2 700 2 537 2 181 2 194 2 218 Deferred tax assets 48 26 28 31 51 96 91 91 Other intangible assets 23 22 28 28 25 32 31 28 Fixed assets 336 339 339 354 357 344 350 357 Financial derivatives 1 049 503 631 541 44 0 0 0 Other assets 25 24 30 37 15 15 16 12 Accrued and amortised income 312 352 220 484 118 161 142 187 Total assets 54 680 52 738 51 456 48 962 46 457 44 710 44 586 42 686

74 Group Key Figures - Quarterly Results (cum.)

BALANCE SHEET DEVELOPMENT 31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Liabilities and equity

Debt to credit institutions 1 093 381 661 1 541 1 509 1 592 1 741 3 598 Deposits from and debt to customers 27 333 27 246 26 593 24 395 24 871 24 368 24 195 22 910 Amortised debt 19 643 18 803 18 333 17 343 15 500 13 981 14 081 12 228 Financial derivatives 1 180 663 669 727 63 0 0 0 Accrued amortised expenses and prepaid income 495 655 480 373 193 405 309 209 Provisions and pension commitments 216 175 183 183 179 193 196 197 Other liabilities 514 534 449 529 364 356 328 312 Subordinated loan capital 934 1 155 1 118 1 093 1 062 1 145 1 158 741 Total liabilities 51 408 49 612 48 486 46 184 43 741 42 040 42 008 40 195

Reserve for variation variances 58 58 58 58 0 0 0 0 Primary capital certiﬁ cates 250 250 250 250 250 250 250 250 Holding of own primary capital certiﬁ cates (7) (7) (7) (7) (3) (2) (7) (7) Premium reserve 4 4 4 4 4 4 4 4 Paid-up equity 247 247 247 247 251 252 247 247

Gift fund 100 45 45 45 45 23 25 25 Equalisation fund 2 Other equity 2 865 2 420 2 414 2 327 2 420 2 138 2 135 2 135 Retained earnings 2 967 2 465 2 459 2 372 2 465 2 161 2 160 2 160

Total equity 3 272 2 770 2 764 2 677 2 716 2 413 2 407 2 407

Interim proﬁ t (unallocated) 356 206 101 257 171 84 Total liabilities and equity 54 680 52 738 51 456 48 962 46 457 44 710 44 586 42 686

Return on investment, earnings and capital structure (%)

Return on equity after tax 15.44 15.73 14.56 14.43 11.54 13.18 13.41 13.40 Return on total assets before losses and tax 1.12 1.24 1.20 1.14 1.25 1.27 1.32 1.39 Net return on total assets 0.94 0.96 0.85 0.86 0.70 0.79 0.81 0.80 Ratio of operating expenses to operating income 60.64 57.47 58.46 59.94 59.96 59.72 59.04 58.09 Ratio of operating expenses to operating income, adjusted for capital gains/(losses) 65.25 62.15 63.33 63.52 62.54 62.49 62.21 63.61

Funding ratio 58.70 60.46 60.70 57.36 60.53 59.98 61.35 60.03

Solvency (%)

Loan loss ratio (0.16) (0.13) 0.01 (0.07) 0.14 0.16 0.20 0.28 Capital ratio 11.36 11.08 11.31 11.41 11.28 10.78 11.07 11.04

Personnel - Group

Number of full-time positions 749 755 756 770 791 789 793 799

See page 72 for deﬁ nitions.

75 76 Proﬁ t and Loss Account

1 January - 31 December

NOK million Notes 2005 2004 2003

Interest income etc. 2 1 859 1 717 2 327 Interest expenses etc. 2 884 752 1 416

Net interest income and credit commissions 2 975 965 911 Commissions receivable and income from banking services 3 368 363 333 Commissions payable and cost of banking services 3 79 78 89 Net gain/(loss) on ﬁ nancial instruments 3 100 80 67 Other operating income 3 1 1 1 Net operating income 3 390 366 312

Total operating income 1 365 1 331 1 223 Salaries and general administration expenses 4 652 609 541 Depreciation 18/19 47 48 41 Other operating expenses 5 123 127 134 Net operating expenses 822 784 716

Proﬁ t before write-downs and tax 543 547 507 Loan write-downs and losses on guarantees 6 (75) 60 114

Proﬁ t before tax 618 487 393 Taxes 7 163 174 116

Proﬁ t after tax 455 313 277

Allocation of profi t Dividend on primary capital certifi cates (43) (31) (32) Transferred to reserve for valuation variances (3) (4) 0 Transferred to Sparebanken capital fund (309) (213) (195) Transferred to gift fund and/or gifts for the public benefi t (100) (65) (50) Total allocations (455) (313) (277)

77 Balance Sheet

1 January - 31 December

NOK million Notes 2005 2004 2003

Assets

Cash and deposits with central banks 328 351 229 Loans to and deposits with credit institutions 8 2 839 1 441 677 Gross loans to customers 9 46 923 41 679 37 161 Write-downs on individual loans 11.12 (111) (165) (197) Write-downs on loan groups 12 (159) (272) (248) Net loans to customers 46 653 41 242 36 716 Commercial paper, bonds and other securities with a ﬁ xed return 14 2 738 2 537 2 031 Shareholdings, investments and other securities with a variable return 16 316 429 316 Shareholdings in group companies 17 15 12 6 Deferred tax assets 7 55 72 91 Other intangible assets 18 23 25 18 Fixed assets 19 105 118 120 Other assets 19 8 6 Prepaid expenses and accrued income 20 307 67 140

Total assets 53 398 46 302 40 350

Liabilities and equity

Debt to credit institutions 21 1 093 1 509 1 793 Deposits from and debt to customers 22 27 517 24 906 22 258 Securitised debt 23 19 653 15 459 12 426 Other liabilities 24 571 410 417 Accrued expenses and prepaid income 422 189 200 Provisions for accrued costs and commitments 25 213 177 96 Subordinated loan capital 26 891 1 062 731 Total liabilities 50 360 43 712 37 921

Primary capital certiﬁ cates 27 250 250 250 Holdings of own primary capital certiﬁ cates (7) (3) Premium reserve 2 2 2 Paid-up equity 28 245 249 252

Reserve for valuation variances 7 4 Capital fund 2 684 2 292 2 152 Gift fund 100 45 25 Equalisation fund 2 Retained earnings 28 2 793 2 341 2 177

Total equity 28 3 038 2 590 2 429

Total liabilities and equity 53 398 46 302 40 350

Assets denominated in foreign currency 3 635 2 928 2 954 Liabilities denominated in foreign currency 4 963 4 062 3 825

Off-balance sheet items

Contingent liabilities Guarantees 30 899 1 055 1 043 Mortgages 30 2 548 2 506 1 989 Joint and several liability 0 12 13

Commitments Foreign currency purchase agreements 3 386 3 545 3 688 Foreign currency sales agreements 2 043 2 372 2 803

78 Balance Sheet

Bergen, 31 December 2005 / 17 February 2006 The Board of Directors of Sparebanken Vest

Pål W. Lorentzen Erik Bøckmann chairman deputy chairman

Anne Gine Hestetun Jan O. Yttredal Inger Karin Larsen

Erling Mjelde Arve Havnerås Geir Navarsete

Tone Mattsson Stein Klakegg Managing Director

79 Statement of cash ﬂ ows

2005 2004 2003 Cash ﬂ ows from operations Interest, commission and fee income 2 100 1 990 2 566 Interest, commissions and fees paid 384 452 873 Receivables from commitments previously written off 97 17 22 Net increase/decrease in instalment loans (4 953) (4 803) (4 705) Change in utilised overdraft facilities (481) 199 (149) Net increase/decrease in customer deposits 2 611 2 647 Payments for goods and services 248 359 304 Payments to employees, pension schemes, national insurance, tax deductions etc.. 357 407 371 Payment of taxes and public dues 84 110 96 Net cash ﬂ ow from operations (1 699) (1 278) (3 910)

Cash fl ow from investment activities Sale of shareholdings and investments in other companies 1 077 285 729 Purchase of shareholdings and investments in other companies 899 502 728 Purchase of other short-term securities 3 131 3 252 6 272 Revenues from other short-term securities 2 714 2 861 5 856 Revenues from sale of securities, real estate etc. 234 513 74 Purchase of securities, real estate etc. 251 400 94 Revenues from sale of fi xed assets etc. 1 1 1 Purchase of fi xed assets etc. 31 53 41 Net cash fl ow from investment activities (286) (547) (475)

Cash fl ow from fi nancing activities Net payments/revenues on loans to and receivables from other fi nancial institutions (1 350) (745) 54 Net revenues/payments on deposits from Norges Bank and other fi nancial institutions (446) (313) (557) Income from sale of securities for short-term trading purposes 2 233 3 008 4 410 Payments on purchase of securities for short-term trading purposes 2 132 2 934 4 034 Subordinated loan capital received 978 363 Payments related to subordinated loan capital 1 198 67 47 Income related to bond debt 38 505 11 897 13 990 Payments related to bond debt 34 574 9 211 9 388 Dividends paid 67 54 21 Group contribution received 13 3 4 Net cash fl ow from fi nancing activities 1 962 1 947 4 411

Net cash ﬂ ow in period (23) 122 26

Net change in cash and cash equivalents (23) 122 26 Liquid assets at 1 January 351 229 203 Liquid assets at 31 December 328 351 229

80 Notes parent bank

ACCOUNTING PRINCIPLES Note 1

The annual accounts have been prepared in accordance with current accounting legislation, relevant regulations and generally accepted accounting practice. All amounts are stated in NOK million, unless stated otherwise.

Subsidiaries Subsidiaries are valued on the basis of the equity method in the company accounts. The parent company’s share of proﬁ ts is based on the subsidiaries’ proﬁ ts after tax and after deducting internal gains and any amortisation of goodwill arising from the cost price of the shareholding being higher than the acquired share of book equity.

Recording of income and expenses Interest and commissions are included in the profi t and loss account when earned as income or incurred as expenses. Fees that are direct payment for services rendered are taken to income when paid. Loan establishment fees which exceed the direct external cost of establishing the loan are amortised over the expected lifetime of the loan. Prepaid income and accrued expenses payable at year-end are accrued and entered as a liability in the balance sheet, while accrued income receivable Securities Shareholdings and investments is recorded in the balance sheet under Shares: included in the trading portfolio are accounts receivable. Shares and investments in joint stock valued at fair market value at year- companies, general partnerships and end where they are traded on a stock Dividends are stated as income limited partnerships are classifi ed as exchange or in a regulated market and in the year they are received, except follows: are broadly and easily traded. Shares for dividends from subsidiaries, and investments included in the trading associated companies and jointly • Trading portfolio portfolio and other short-term share- controlled activities which are included • Other short-term shareholdings holdings, but which are not eligible for in the share of the profi t for the year • Long-term investments a market valuation, are valued at the in the accounts. • Investments in general lower of cost and actual value. and limited partnerships In calculating gains/losses on sales of • Investments in subsidiaries, Long-term shareholdings are valued shares, bonds and commercial paper associated companies and jointly at acquisition cost. If the real value of the average cost method is used. controlled activities. a shareholding is lower than cost, and

81 Notes parent bank

the fall in value is not deemed to be translated at the middle rate on the Trading transactions are transactions temporary, the shareholding is written Oslo Stock Exchange at year-end. entered into for own account in order down to its real value. If there is no Income and expenses denominated to make a profi t by exploiting price longer a need to write down the value in foreign currency are translated into differentials and price changes. Open of a shareholding, the write-down Norwegian kroner at the rates prevail- positions in this category are valued on shall be reversed. ing on the date of the transaction. the basis of the market value principle. Foreign exchange items are mainly This means that the bank calculates Investments in limited and general hedged by ensuring that there are cor- the profi t or loss that would arise if partnerships are incorporated on responding items on the other side of it had covered its foreign exchange the basis of the cost method. the balance sheet, or through off-bal- and interest rate exposure on all open ance sheet hedging items. positions at the date of assessment. The accounting treatment The calculated profi t or loss on open of investments in subsidiaries Interest rate related and foreign ex- positions can therefore be incorporated is described above. change instruments in the accounts on a continuous basis, The bank uses different off-balance even if the position has not been fi nally Commercial paper and bonds sheet fi nancial instruments to manage closed. Commercial paper and bearer bonds its interest rate and foreign exchange are classifi ed as follows: exposure and to take positions in the Loans and guarantees • Trading portfolio interest rate and foreign exchange Loans and losses are initially assessed • Other short-term investments markets. These instruments relate to at nominal value, plus direct transaction costs. In periods after the fi rst assessment, lendings are assessed at amortised cost based on the effective interest rate method, as an expression of the fair value of the loan. If there is objective evidence of a decline in the value of an individual loan or groups of loans, the loans are written down. The amount of the write- down is calculated as the difference between the balance sheet value and the present value of future cash fl ows, based on the expected lifetime of the loan. Write-downs are classifi ed as a chargeable cost. Interest income is taken to income on the basis of the effective interest rate method.

Commercial paper and bonds forward foreign exchange transactions, The effects of the transition to the investments included in the trading interest rate swaps, forward rate new regulations for the accounting portfolio are valued at fair market value agreements (FRAs) and foreign treatment of lendings are charged at year-end where they are traded on currency interest rate swaps. Interest against equity. The implementation a stock exchange or in a regulated market rate related and foreign exchange effect consists of the write-back of and are broadly and easily traded. transactions are classifi ed either as establishment costs taken to income hedging transactions or as trading / custodial fees for accrual over the Other short-term bearer bonds transactions when they are made. expected lifetime of the loan, and the and commercial paper not included write-back of unspecifi ed loss provisions in the trading portfolio are valued Hedging transactions are entered as an adjustment for the write-down collectively at the lower of the into in order to guard against existing of loan groups. portfolio’s aggregate market value or expected interest rate or foreign and acquisition cost. This portfolio exchange exposure. There must Repossessed assets also includes securities which are therefore be a high degree of negative Repossessed assets are stated separately linked to a re-purchase agreement. correlation with regard to value in the balance sheet and are assessed changes between the hedging at the lower of cost and realisable value. Foreign exchange instrument and the hedged object. Any changes in value are refl ected Receivables and accounts payable The hedging instrument is valued in the fi gure for losses on a continuous denominated in foreign currency are in connection with the item hedged. basis.

82 Notes parent bank

Fixed assets Buy-backs of the bank’s own bonds for the existing corridor is set at zero In the balance sheet fi xed assets re-sale as a part of the bank’s market and the effect posted against equity. are entered at cost less accumulated initiatives are classifi ed as short-term Economic parameters upon which ordinary depreciation. Ordinary bonds. No gain or loss is calculated the calculation of the pension depreciation is based on the cost price on such buy-backs. Any gain or loss commitments is based have been and is calculated using the straight line on re-sale is classifi ed as a gain or loss updated as at the year-end, method of depreciation based on on short-term bonds. including the discount rate which is the economic lifetime of the assets. Subordinated loans denominated based on market rates at year-end. in foreign currency are valued at the IAS 19 allows the effect of divergences Ordinary depreciation for the year higher of the drawdown rate and between estimated parameters is posted under operating expenses. the year-end rate. and fi nal parameters to be posted in a ”corridor”. In subsequent periods If the actual market value is Taxation a new corridor will be established signifi cantly lower than book value Deferred tax and deferred tax assets within the limitations imposed and the decrease in value is not are treated in accordance with the by the accounting standard. considered to be temporary, the asset preliminary Norwegian accounting Deviations and changes of this kind is written down to the actual market standard for the treatment of are measured against the larger value. Write-downs of this kind are income tax. of gross pension commitments posted in the profi t and loss account The tax charge in the profi t and loss and total pension fund assets. under «Write-downs and gains/losses account includes both the tax If the deviations/changes exceed on long-term securities». If there is no payable for the period and the change 10% of the basis of measurement, longer a need to write down the item, in deferred tax. Deferred tax/deferred the difference is amortised over the the write-down shall be reversed. tax assets are calculated at a tax rate average remaining period of service. of 28% on the basis of timing Software differences between values for The fi gure for net pension Software that has been developed is accounting and taxation purposes commitments corrected for deviations posted in the balance sheet under at year-end. Taxable and tax-deductible from estimates and changes in pension intangible assets when the amounts timing differences which are reversed assumptions is posted net in the profi t involved are deemed to be material and or can be reversed within the same and loss account under «Salaries and the items are expected to have lasting time interval are netted against each general administration expenses». value. In the development of software, other and entered net. costs related to use of own resources, Business areas pre-planning, implementation and Pension commitments Sparebanken Vest regards its banking training are charged in the profi t and The bank’s net pension activities as a single area of activity. loss account. Software that has been commitments are calculated and developed by the bank and posted in posted as a long-term liability in Statement of cash fl ows the balance sheet is depreciated over its the accounts. The Norwegian The statement of cash fl ows expected lifetime. There is continuous Accounting Standard 6A permits is prepared on the basis of gross cash assessment of the need for write-downs the use of the IFRS standard IAS fl ows from operations and investment where the expected economic benefi ts Benefi ts to employees. and fi nancing activities. are less than the balance sheet value. The calculation of pension Cash fl ows from operations are defi ned commitments is in accordance with as ongoing interest related to customer Liabilities IAS 19 with implementation effect borrowings and deposits, net receipts/ Bonds issued are stated in the balance from 1 January 2004. payments related to lending and de- sheet at nominal value, adding any The implementation effect on the posit activities, and payments related premium and deducting any discount. profi t and loss account is incorporated to the cost of ordinary operations. Premiums are taken to income in the comparative fi gures for 2004. Investment activities are defi ned as and discounts are charged as an Net pension commitments are the cash fl ows from securities transactions adjustment of current interest expenses difference between gross pension apart from the trading portfolio, until the bond matures. commitments (the present value as well as the purchase of fi xed assets of expected future pensions) and and real estate. Buy-backs of the bank’s own bonds the balance on pension funds assets Cash fl ows from other securities for debt reduction purposes are posted in the insurance fund and the pension transactions, the issue and repayment net against bond debt. Gains or losses premium fund. of subordinated loans, bond debt arising on the purchase or sale of the and equity are defi ned as fi nancing bank’s own bonds in the secondary In accordance with IFRS 1 First-time activities. market are treated as premiums/ implementation of international discounts on issue. standards for fi nancial reporting,

83 Notes parent bank

Note 2 NET INTEREST INCOME AND CREDIT COMMISSIONS

2005 2004 2003 Interest etc. on loans to and deposits with credit institutions 48 18 35 Interest etc. on loans to and receivables from customers 1 750 1 626 2 164 Interest etc. on commercial paper, bonds and other interest-earning securities 61 55 110 Other interest income etc. 0 18 18 Total 1 859 1 717 2 327

Interest etc. on loans from credit institutions 21 35 39 Interest. etc. on deposits and loans from customers 395 348 824 Interest etc. securities issued 419 324 467 Interest etc. on subordinated loans 49 35 34 Other interest and funding expenses 0 10 23 Fee to Savings Banks’ Guarantee Fund 0 0 29 Total 884 752 1 416 Net interest income and credit commissions 975 965 911

Note 3 NET OPERATING INCOME

2005 2004 2003 Guarantee commissions 12 14 15 Payment transfer charges/interbank credit charges 203 196 189 Other commissions and fees receivable 153 153 129 Total 368 363 333

Payment charges/BBS/EFTPOS 39 43 51 Payment transfer charges/interbank debit charges 26 26 28 Other commissions and fees payable 14 9 10 Total 79 78 89

Income from shareholdings and other securities with a variable return 18 12 10 Income from shareholdings in subsidiaries 22 18 6 Net change in value of and gain/(loss) on commercial paper, bonds and other interest-earning securities 19 3 5 Net change in value of and gain/(loss) on shareholdings and other securities with a variable return 32 23 11 Net change in value of and gain/(loss) on foreign exchange and ﬁ nancial derivatives 9 28 30 (Write-down)/reversal of write-down and gain/(loss) on long-term securities (4) 5 Net gain on ﬁ nancial instruments 100 80 67

Other operating income 1 1 1 Total 1 1 1 Net operating income 390 366 312

84 Notes parent bank

SALARIES AND GENERAL ADMINISTRATION EXPENSES Note 4

Parent Bank Group

2003 2004 2005 2005 2004 2003 266 308 350 Salaries 383 336 291 30 30 44 Pensions 1) 46 31 31 57 63 58 Social security contributions 64 70 62 188 208 200 Administration expenses 215 220 199 541 609 652 Total 708 657 583

1) See notes 23 and 25 for Group and Parent Bank, respectively

The average number of employees in 2004 was 738 for the parent bank and 810 for the Group.

Salary and other beneﬁ ts received by the managing director Parent Bank (NOK) 2005 2004 2003 Salary 1 520 909 1 493 749 1 295 325 Bonus 412 800 240 000 Fringe beneﬁ ts 141 411 145 185 123 631 Total 2 075 120 1 878 934 1 418 956

The retiring managing director has an agreement entitling him to two year’s salary for a total amount of NOK 3m, effective from the ﬁ rst quarter of 2006. He has a pension agreement which allows him to retire at 60. The pension corresponds to 70% of his salary on retirement until the age of 67 when he will be covered by the group scheme. In 2005 a premium of NOK 122 880 was paid for the previous managing director’s mambership of the group pension scheme.

Senior employees Senior employees participate in a Board approved bonus scheme linked to the target achievement rate using a Balanced Score Card. In relation to senior employees the bonus scheme has an upper limit of 25% of salary for 2005.The actual payment are proportional to the percentage target achivement. In according to this sceme the bonus payment to managing director for 2005 was NOK 274.500, approximately 18% of salary. The bonus was disbursed in 2006 as it is payable in the year after it was earned. The bonus payment to those who have held senior positions for the whole year varied from NOM 138 000 to NOK 190 000. Together, the bonuses amounted to NOK 950 000 and are payable in March 2006.

Other senior management relates to deputy man. dir. Monica Salthella, divisional directors Elin Sjødin Drange and Arne Selle, director of corporate communications Jørn Lekve, market director Jan Erik Kjerpeseth and acting personnel director Mona Biering. Salaries paid to other senior employees varied from NOK 800.000 to NOK 1.200.000. Fringe beneﬁ ts were roughly in line with those received by the managing director. The salary paid to the deputy managing director is determined by the Board of Directors, while the managing director detemines the salary of the other senior management.

Sparebanken Vest has a top hat pension scheme covering 12 employees. See note 25 “Pensions”.

Elected ofﬁ cers Remuneration to the Board of Directors of the parent bank totalled NOK 1 236 667 (2004: NOK 1 223 333 2003:NOK 1 190 000). The Board of Directors has also received fees totalling NOK 314 600 for work done by the Board Committee in connection with the appointment of a new managing director. Excluding the reimbursement of expenses, payments to the chairman of the Board of Directors /his company totalled NOK 1 039 783, excl. V.A.T., and consisted of the following: Board fee: NOK 293 333 Fees to companies for work done for the Board Committee related to the appointment of a new managing director: NOK 185 000 + VAT. Fees to companies for work done for the Board committee related to follow-up of the bank’s account receivable from FinanceCredit: NOK 105 45 + VAT. Fees to companies for work done related to the West of Norway Conference 2005 and the bank’s focus on the West of Norway in 2005: NOK 450 000 + VAT. The reimbursement of expenses is additional and totals NOK 15 212.

In addition to the ordinary Board fee of NOK 150 000, the deputy chairman of the Board of Directors received NOK 39 600 for work done as a member of the Board committee. The total fee was thus NOK 189 600. The Board fees are in accordance with resolutions of the Board of Governors, while the other fees are pursuant to resolutions of the Board of Directors.

Remuneration to the Board of Governors of the parent bank totalled NOK 135 000 (2004: NOK 105 00012 500, 2003: NOK 112 500). Additional to this are attendance fees totalling NOK 611 500 (2004: NOK 190 500 2003: NOK 219 000). Remuneration to the Control Committee of the parent bank totalled NOK 420 000 (2004: NOK 360 000 2003: NOK 360 000).

The cost of subsidising interest on loans to the employees has not been charged as an operating cost and therefore does not affect the bank’s net interest income. Note continues on next page 85 Notes parent bank

Loans and guarantees to the managing director and deputy managing director (NOK 1 000), Parent Bank Loan Managing director Knut Ravnå 409 Deputy managing director Monica Salthella 2 930 Loans are given on general terms.

Loans and guarantees to elected ofﬁ cers (NOK 1 000), Parent Bank Chairman of the Board of Directors Pål W. Lorentzen 36

Loans to Board members Jan O. Yttredal 1408 Erling Mjelde 59 Geir Navarsete 962 Loans are given on ordinary customer terms.

Employee representatives Arve Havnerås 1 398 Tone Mattsson 1 366 Loans are given on general terms.

Chairman of the Board of Governors Arne Buanes 340

Total loans and guarantees to employees and Board members (NOK 1 000) Parent Bank Employees 631 768 Board of Directors 1) 2 465

Group Employees 691 668

Total loans and guarantees to other members of the Board of Governors and Control Committee (NOK 1 000) Board of Governors 2) 6 846 Control Committee 1 089

1) Excluding the managing director and employee representatives.

2) Excluding the chairman of the Board of Governors, members of the Board of Directors and Control Committee and employee representatives.

86 Notes parent bank

OTHER OPERATING EXPENSES Note 5

2005 2004 2003 Real estate operating expenses 0 1 0 Ofﬁ ce rental and other running costs 79 81 77 Fixed assets charged against income 9 7 9 Other operating expenses 35 38 48 Total 123 127 134

Fee to elected auditor (NOK 1 000)

2005 2004 2003 Audit fee 940 985 1 460 Letters of conﬁ rmation 85 155 230 Taxation advisory services 29 104 Other services 621 60 185 Total 1 646 1 229 1 979

Oher services in 2005 relate to IFRS work NOK 255 000, legal assistance NOK 216 000 and internal courses held NOK 150 000.

LOAN WRITE-DOWNS AND LOSSES ON GUARANTEES Note 6

2005 2004 2003 Loan write-downs (77) 60 115 Losses on guarantees 2 0 (1) Total (75) 60 114

Total loan write-downs in period Increase in write-down of commitments written down previously 3 12 23 Write-down of commitments not written down previously 3 54 72 Reduction in previous years’ write-downs of individually assessed loans (10) (47) (44) Increase in write-down of loan groups 0 24 30 Reduction in write-down of loan groups (10) 0 0 Realised losses not covered by previous write-downs 35 33 55 Recoveries on losses realised previously (98) (16) (22) Total (77) 60 114

Total losses on guarantees in period Realised losses on guarantees not provided for previously 2 0 0 Losses on guarantees 2 0 0

Realised losses Realised loan losses covered by previous write-downs 28 52 147 Realised losses on guarantees not provided for previously 2 0 0 Realised loan losses not covered by previous write-downs 35 33 55 Realised losses 65 85 202

87 Notes parent bank

Note 7 TAXES

Tax charge for the year

The difference between the pre-tax accounting profi t, the basis of assessment for the year and the tax charge for the year are specifi ed below. 2005 2004 2003 Pre-tax profi t 618 482 393 +/- permanent differences 1) (61) 123 (2) +/- change in timing differences as specifi ed 178 (166) (31) Tax base for the year / taxable income 735 439 360

Of which assessed tax at 28% 205 123 100 - Credit for dividends received Capital tax at 0.3% 7 5 5 Tax provision in the balance sheet 212 128 105 Excess (-) / insufﬁ cient tax provision in previous years 0 (2) 2 Total tax payable 212 126 107 +/- change in deferred tax (49) 47 9 Tax charge for the year 163 173 116

Why the tax charge does not correspond to 28% of the pre-tax proﬁ t

2005 2004 2003 28% tax on pre-tax proﬁ ts 173 135 110 28% tax on permanent differences (17) 35 (1) Excess (-) / insufﬁ cient tax provision in previous years 0 (2) 2 Capital tax 7 5 5 Estimated tax charge 163 173 116

Tax provision in the balance sheet Tax payable 212 125 107 Tax effect of group contribution 8 5 1 Tax provision in the balance sheet 220 130 108

2005 2004 New OB Change after after impl. corrected OB changes

Investments in companies 0 1 1 (1) Proﬁ t and loss account (6) (6) (6) 0 Differences related to ﬁ nancial items (91) 10 122 (213) Long-term foreign currency items 138 0 138 New regulations for accounting treatments of loans 82 123 (41) Pension commitments (212) (176) (176) (36) Accounting provisions (71) (43) (43) (28) Fixed assets (38) (41) (41) 3 Total timing differences (198) (255) (20) (178) Rate of tax 28 % 28 % 28 % 28 % Deferred tax assets in the accounts (55) (72) (6) (49)

88 Notes parent bank

LOANS TO AND RECEIVABLES FROM CREDIT INSTITUTIONS Note 8

Geographical risk areas Geographical risk areas 31 23 46 Sogn & Fjordane 15 0 20 Other parts of Norway 1 122 1 332 425 Foreign 1 671 86 186 Total 2 839 1 441 677

GROSS LOANS TO AND RECEIVABLES FROM CUSTOMERS Note 9

2005 2004 2003 Overdraft facilities 1 529 1 397 1 327 Building loans 761 411 681 Instalment loans 44 633 39 871 35 153 Total 46 923 41 679 37 161

DISTRIBUTION OF GROSS LOANS AND GUARANTEES Note 10

2005 2004 Loans Guarant ees Loans Guarantees

NOK % NOK % Distribution by sector NOK % NOK % 0 0.00 0 0.00 Central government 1 0.00 0 0.00 71 0.15 0 0.00 Local government 57 0.14 0 0.00 43 0.09 25 2.78 Insurance and ﬁ nance 173 0.42 25 2.46 10 449 22.26 837 93.10 Commercial activity 10 142 24.33 961 94.68 36 195 77.14 33 3.67 Commercial activity 31 124 74.67 17 1.68 165 0.36 4 0.45 Foreign 182 0.44 12 1.18 46 923 100.00 899 100.00 Total 41 679 100.00 1 015 100.00

Commercial distribution 1 053 2.24 4 0.44 Primary industries 1 047 2.51 6 0.59 870 1.85 188 20.91 Manufacturing and mining 630 1.51 366 36.06 Building and construction, power 828 1.76 141 15.68 and water supply 657 1.58 139 13.69 Wholesale/retail trade, 1 064 2.27 86 9.57 hotels and restaurants 1 161 2.79 84 8.28 International shipping 1 392 2.97 212 23.58 and pipe transportation 1 245 2.99 147 14.48 Other transportation, post 695 1.48 73 8.12 and telecommunications 1 041 2.50 131 12.91 3 415 7.28 79 8.79 Real estate operations 3 124 7.50 41 4.04 43 0.09 25 2.78 Insurance and ﬁ nance 173 0.41 25 2.46 1 188 2.53 54 6.01 Services 1 280 3.07 47 4.63 15 0.03 0 0.00 Central/local government 15 0.03 0 0.00 36 195 77.14 33 3.67 Wage earners 31 124 74.67 17 1.68 165 0.36 4 0.45 Foreign 182 0.44 12 1.18 46 923 100.00 899 100.00 Total 41 679 100.00 1 015 100.00

Geographical areas 39 638 84.47 647 71.97 Hordaland 34 426 82.59 803 79.11 4 069 8.67 213 23.69 Sogn & Fjordane 3 408 8.18 165 16.26 3 051 6.50 35 3.89 Other parts of Norway 3 663 8.79 35 3.45 46 758 99.64 895 99.56 Total - Norway 41 497 99.56 1 003 98.82 165 0.36 4 0.45 Foreign 182 0.44 12 1.18 46 923 100.00 899 100.00 Total 41 679 100.00 1 015 100.00

Note continues on next page 89 Notes parent bank

Gross loans and guarantees distributed by main industries and retail market

2005 2004

Gross loans Gross Guarantees (unapplied exposure Potential limits) and guarantee credit and other Defaults bad debts potential and provi- Loan write-downs guarantees sions for and of loan groups Write-down guarantees for provisions loans Gross Guarantees (unapplied exposure Potential limits) and guarantee credit and other Defaults bad debts potential and Loan write-downs guarantees for provisions and Loan write-downs guarantees for provisions

36 195 33 2 014 117 24 44 Retail clients 31 124 17 1 088 142 54 167 74 0 8 4 1 0 Foreign (retail clients) 73 0 6 1 0 36 269 33 2 022 121 25 44 Total - retail clients 31 197 17 1 094 143 54 167 1 053 4 118 49 19 0 Primary industries 1 047 6 93 74 29 0 1 698 329 835 52 28 0 Manufacturing, building and construction 1 287 505 631 54 29 0 1 064 86 271 89 26 0 Commerce, hotels and restaurants 1 161 84 239 77 30 0 Transportation, real estate 6 690 418 576 56 14 0 operations and services 6 690 366 662 92 24 0 91 4 4 0 1 0 Foreign (other) 109 12 0 0 1 0 15 0 24 0 0 0 Municipal/public sector 15 0 24 0 0 0 43 25 15 0 0 0 Insurance and ﬁ nance 173 25 0 0 0 0 0 0 0 0 0 115 Commercial sector 0 0 0 0 0 105 10 654 866 1 843 246 88 115 Total - commercial sector 10 482 998 1 649 297 113 105 46 923 899 3 865 367 113 159 Total 41 679 1 015 2 743 440 167 272

90 Notes parent bank

LOAN WRITE-DOWNS Note 11

Potential bad debts and defaults (in excess of 90 days) where the balance in default on one of the commitment accounts is more than NOK 1 000.

Total non-performing commitments 2005 2004 2003 2002 2001 Gross non-performing commitments 149 151 158 296 220 Write-down (26) (49) (55) (185) (88) Net non-performing commitments 123 102 103 111 132

New regulations for the accounting treatment of loans have resulted in lower write-downs compared with previous years’ loss provisions.

LOAN WRITE-DOWNS POSTED IN THE BALANCE SHEET Note 12

Movements in loan write-downs and provisions for losses on guarantees in period

2005 2004 2003 Loan write-downs at 1 January (nominal values) 437 446 510 Implementation effect (127) 0 0 Realised loss on loans covered by previous write-downs (28) (52) (147) Increase in write-down of loans written down previously 3 12 23 Amortisation effect 2 0 0 Write-down of loans not written down previously 3 54 72 Reduction in previous years’ write-down of individually assessed loans (10) (47) (42) Increase in write-down on loan groups 0 24 30 Reduction in write-down of loan groups (10) 0 0 Loan write-downs 270 437 446 Provisions to cover losses on guarantees at 1 January 2 2 4 Reduction in previous years’ loss provisions (write-back) 0 0 (2) Realised losses on guarantees covered by previous loss provisions 0 0 0 Speciﬁ ed provisions to cover losses on guarantees 2 2 2

91 Notes parent bank

Note 13 RISK CLASSIFICATION OF LOANS AND GUARANTEES

The combination of the default probability and the level of collateral cover is used as a basis for setting up 5 risk groups using the following matrix:

Risk class G Medium Medium Medium Medium Medium Medium Medium-to-High H Medium Medium Medium Medium-to-High Medium-to-High Medium-to-High High (Default probability) (Default I Medium Medium Medium-to-High Medium-to-High Medium-to-High High High J Medium-to-High Medium-to-High Medium-to-High Medium-to-High High High High K High High High High High High High

Risk class K contains defaulted loans.

Risk classiﬁ cation of all commitments is carried out each month using the automatic collection of data from internal and external sources. There is also manual monitoring of corporate commitments. The frequency of risk classiﬁ cation assessment depends on the size of the commitmment and the nature of the risk.

Speciﬁ cation within risk groups:

CORPORATE MARKET Write-down on individual basis Commitment 2005 2004 2005 2004 Very Low 1 490 1 518 Low 2 818 3 325 Medium 5 963 5 397 Medium-to-High 2 223 1 956 High 738 712 88 113 13 232 12 908 88 113

RETAIL MARKET Write-down on individual basis Commitment 2005 2004 2005 2004 Very Low 21 028 18 611 Low 9 494 7 797 Medium 4 752 4 231 Medium-to-High 1 657 1 119 High 637 546 25 54 37 568 32 304 25 54

92 Note continues on next page Notes parent bank

A commitment is deﬁ ned as the total of loans and utilised credit facilities, plus unutilised credit facilities and guarantees.

Write-down of group loans are not allocated to individual risk groups. Information about write-downs of loan groups appears in note 10.

No appreciable change in the risk situation is expected in 2006.

COMMERCIAL PAPER, BONDS AND OTHER SECURITIES WITH A FIXED RETURN Note 14

Risk weight 2005 2004 2003 Commercial paper and bonds issued by public authorities 0 % 886 1 151 851 10 % 0 0 100 20 % 1 0 0 100 % 492 256 0 Commercial paper and bonds issued by others 20 % 1 210 761 629 100 % 149 369 451 Total 2 738 2 537 2 031

Distribution of book values at 31 December 2005

Balance Actual Real rate Currency Listed Portfolio sheet value Cost value of return proportion Trading portfolio 107 108 107 2.82 NOK 100 Other short-term investments 1 745 1 745 1 749 2.78 NOK 100 Zero coupon bonds 886 881 886 2.91 NOK 100 Total 2 738 2 734 2 742 2.82

The average real rate of return is calculated by identifying the discount rate which gives a calculated value equal to the stated market value.

INVESTMENTS IN SUBORDINATED LOANS Note 15

2005 2004 2003 Subordinated loans posted under loans to and deposits with credit institutions 43 43 43 Subordinated loans posted under bonds and other interest-earning securities 0 15 19 Total 43 58 62

93 Notes parent bank

Note 16 SHAREHOLDINGS, INVESTMENTS AND OTHER SECURITIES WITH A VARIABLE RETURN (NOK 1 000)

Company Nominal value Ownership (%) Cost Book value value Market No. of shares PCC/share capital capital PCC/share (NOK m)

Trading portfolio Listed shares entered on the basis of the market value principle Royal Caribbean Cruises 4 12 000 12 0.30 3 320 3 642 3 642 Tomra Systems 178 45 000 45 0.03 1 717 2 174 2 174 Stolt Offshore 2 498 35 000 455 0.02 2 419 2 748 2 748 Norsk Hydro ASA 4 739 12 900 236 0.00 6 959 8 940 8 940 Petroleum Geo.Services 600 11 000 110 0.02 1 982 2 288 2 288 Norske Skog 1 899 20 000 200 0.01 1 951 2 145 2 145 Orkla Borregaard 1 302 29 000 181 0.01 4 457 8 106 8 106 Wilh.Wilhelmsen AS 737 8 000 160 0.02 1 032 1 988 1 988 Smedvig ASA. A-aksjer 538 10 000 100 0.02 1 264 1 970 1 970 DnB NOR 13 369 130 000 1 300 0.01 6 409 9 360 9 360 Eltek ASA 32 20 000 20 0.06 1 749 2 235 2 235 Fred Olsen Energy 1 224 10 000 200 0.02 1 540 2 430 2 430 TGS Nopec Geophysical Company ASA 26 5 000 5 0.02 1 242 1 585 1 585 Prosafe ASA 341 5 000 50 0.01 1 166 1 433 1 433 Tandberg Television ASA 149 30 000 20 0.01 2 252 2 678 2 678 Visma ASA 160 10 000 50 0.03 682 1 000 1 000 Storebrand 1 293 50 000 250 0.02 2 351 2 913 2 913 Schibsted ASA 69 9 000 9 0.01 1 563 1 809 1 809 EDB Business Partner ASA 159 30 000 53 0.03 1 262 1 470 1 470 Aker Yards ASA 412 5 000 100 0.02 1 292 1 620 1 620 Aker Kværner ASA 550 10 000 100 0.02 1 834 4 145 4 145 Yara International 535 40 000 68 0.01 2 829 3 930 3 930 Statoil ASA 5 474 60 000 150 0.00 7 783 9 300 9 300 Sinvest ASA 346 15 000 90 0.03 935 1 286 1 286 Telenor ASA 10 239 100 000 600 0.01 4 591 6 625 6 625 Other listed shares 1 992 2 638 2 638 Total listed shares 66 571 90 455 90 455

Other short-term shares entered at the lower of historical cost and market value Epsis AS 0.266 10 902 10 3.76 3 271 3 271 3 271 Rieber & Søn ASA 796 440 000 4 400 0.55 24 912 22 110 22 110 Hardanger Sunnhordlandske 18 8 770 175 0.97 1 657 1 657 2 806 Data Invest AS 2 82 860 41 2.07 2 230 1 450 1 450 Domstein ASA 35 200 000 100 0.29 1 353 1 090 1 090 Petromena ASA 470 220 000 1 100 0.23 1 210 1 100 1 100 Eidesvik Offshore 2 40 000 2 0.10 1 874 1 874 2 020 Lifecare AS 6 5 400 000 540 9.00 3 280 3 280 3 780 Other short-term shareholdings 2 542 1 468 1 480 Total other short-term shareholdings 42 328 37 300 39 107 Total short-term shareholdings 108 899 127 755 129 562

94 Note continues on next page Notes parent bank

Company Nominal value Ownership (%) Cost Book value PCC/share capital capital PCC/share (NOK m) No. of shares

Long-term shareholdings BBS/Bank-Aksept Holding AS 165 239 821 5 996 3.63 3 428 3 428 Teller ASA 8 280 280 3.50 140 140 Åsane Invest AS 21 20 800 2 080 9.77 2 080 2 080 Bergensavisen AS 10 315 840 989 9.83 11 000 10 422 Nygårdstangen AS 4 760 760 20.27 4 439 4 439 Eksportﬁ nans AS 1 594 1 517 15 929 1.00 27 952 27 952 Bergens Tidende AS 16 150 220 1 502 9.39 46 618 46 618 Eiendomskreditt AS 160 123 000 12 300 7.69 12 872 12 792 Kredittforeningen 50 2 760 3 0.01 2 843 2 843 Norsk Tillitsmann ASA 11 4 000 400 3.64 2 445 2 445 Oslo Børs Holding 50 27 581 276 0.55 6 321 6 321 VPS Holding 50 129 400 1 294 2.59 18 018 18 018 Other unlisted companies 1 273 1 090

Venture shareholdings Sagafjord Sea Farm AS 1 8 900 89 10.00 4 681 4 681 Sarsia Innovation AS 31 12 200 1 525 4.91 3 590 3 538 Sarsia Life Science Fund AS 31 1 527 439 1 909 6.18 4 316 4 316 Fjordinvest 78 10 000 10 000 12.76 10 550 10 550 Marin Vekst ASA 13 164 000 1 640 12.62 18 050 18 050 Energivekst AS 3 24 314 24 0.81 2 707 2 707 Other venture shareholdings 100 40

Unit trust investments Holberg Norden 851 38 624 3 862 0.45 4 414 4 414 Holberg Norge 268 11 758 1 176 0.44 1 000 1 000

Total long-term shareholdings 188 838 187 884

Investments in general and limited partnerships etc. Kvernhuset ANS (J&S liability NOK 3.29m) 8.30 21.44 279 K/S Tilﬂ ukten 14.88 174 Total investments in general and limited partnerships etc. 453 Total shareholdings, investments and other securities with a variable return 316 092

Movements in long-term investments Opering balance at 1 January 2005 152 704 Bought 38 267 Sold (4 769) Reversal of previous write-downs 2 635 Write-downs (953) Closing balance at 31 December 2005 187 884

95 Notes parent bank

Note 17 SHAREHOLDINGS IN GROUP COMPANIES (NOK 1 000)

Company Share capital capital Share capital Share Nominal value Ownership (%) Book value

Subsidiaries AS Filialbygg 4 150 4 150 1 000 100,00 4 632 Eiendomsmegler Vest AS 1 200 1 200 1 000 100,00 10 557 Total 15 189

None of the companies classiﬁ ed as subsidiaries have a stock exchange listing.

INVESTMENTS POSTED APPLYING THE EQUITY METHOD.

Subsidiaries: Eiendomsmegler Vest AS, AS Filialbygg

Subsidiaries are posted in the accounts of the parent company on the basis of the equity method, with full consolidation in the consolidated accounts.

Eiendomsmegler Vest AS AS Filialbygg Total

Balance sheet value at 1 January 2005 8 596 3 048 11 644 +/- Share of proﬁ ts 13 155 8 584 21 739 - Dividends / Group contribution (11 194) (7 000) (18 194) Balance sheet value at 31 December 2005, based on equity method. 10 557 4 632 15 189

Paid-up capital 1 200 6 150 7 350 Registered ofﬁ ce Bergen Bergen

Intra-group transactions 2005 2004 2003 Proﬁ t and Loss Account Interest/credit commissions received from subsidiaries 4 946 5 548 9 963 Interest paid on deposits from subsidiaries 1 559 1 026 3 524 Ofﬁ ce rental expenses 54 568 54 486 52 305 Refund of operating expenses 25 372 25 369 24 742

Balance Sheet Loans to subsidiaries at 31 December 147 891 152 759 157 627 Deposits from subsidiaries 43 418 34 665 21 154 Group contribution receivable, gross 25 270 18 056 4 167

96 Note continues on next page Notes parent bank

Main Figures - Subsidiaries

Profi t and Loss Account Eiendomsmegler Vest AS AS Filialbygg Total operating income 83 811 34 737 Total operating expenses 67 168 18 744 Total net interest income/(expenses) 1 623 (4 636) Pre-tax profi t 18 266 11 357 Taxes 5 072 3 183 Profi t for the year 13 194 8 174

Balance Sheet Current assets 35 803 18 017 Fixed assets 5 858 184 275 Total assets 41 661 202 292 Current liabilities 30 998 18 697 Long-term liabilities 64 152 102 Equity 10 599 31 493 Total liabilities and equity 41 661 202 292

Eiendomsmegler Vest AS Bergen The company conducts estate agency activities from 7 ofﬁ ces in the counties of Hordaland and Sogn & Fjordane and at year-end 2005 it had 43 full-time and 6 part-time employees.

AS Filialbygg Bergen The company owns and manages the Group’s properties in the counties of Hordaland and Sogn & Fjordane. The company is funded by the parent bank and pays interest on normal customer terms. At year-end 2005 the company had 10 full-time and 15 part-time employees.

INTANGIBLE ASSETS Note 18

Software developed in-house Goodwill Total Financial year 2004

Cost at 1 January 2004 17 13 30 Additions 17 0 17 Disposals 0 0 Accumulated depreciation at 31 December 2004 9 13 22 Book value at 31 December 2004 25 0 25 Ordinary depreciation 2004 9 1 10 Depreciation rates 20 % 20-50 %

Financial year 2005

Cost at 1 January 2005 34 13 47 Additions 11 0 11 Disposals 0 0 Accumulated depreciation at 31 December 2005 22 13 35 Book value at 31 December 2005 23 0 23 Ordinary depreciation 2005 13 0 13 Depreciation rates 20 % 20-50 %

97 Notes parent bank

Note 19 FIXED ASSETS

Machinery, Buildings and other Total equipment and vehicles real estate Accounting year 2004 Cost at 1 January 2004 374 4 378 Additions 37 37 Disposals 0 1 1 Accumumated depreciation at 31 December 2004 294 2 296 Book value at 31 December 2004 117 1 118

Ordinary depreciation 2004 37 37 Gain on disposal 1 1 Depreciation rates 10-33 % 0-10 %

Accounting year 2005 Cost at 1 January 2005 410 3 413 Additions 23 23 Disposals 1 3 4 Accumulated depreciation at 31 December 2005 327 327 Accumulated depreciation at 31 December 2005 105 0 105

Ordinary depreciation 2005 34 34 Gain on disposal 1 1 Depeciation rates 10-33 % 0-10 %

Note 20 PREPAID EXPENSES AND ACCRUED INCOME

2005 2004 2003 Accrued income 264 31 122 Other prepaid expenses 43 36 18 Total 307 67 140

Note 21 DEPOSITS FROM AND DEBT TO CREDIT INSTITUTIONS

98 Notes parent bank

DEPOSITS FROM AND DEBT TO CUSTOMERS Note 22

2005 2004 2003 Deposits from and debt to customers with no agreed term 17 773 16 777 15 233 Deposits from and debt to customers with an agreed term 9 744 8 129 7 025 Total 27 517 24 906 22 258

Distribution of deposits from and debt to customers 2005 2004

Distribution by sector NOK % NOK % Central government 209 0.76 868 3.48 Local government 974 3.54 846 3.40 Insurance and ﬁ nance 1 606 5.84 541 2.17 Insurance and ﬁ nance 6 842 24.86 6 114 24.55 Wage earners 17 688 64.28 16 326 65.55 Foreign 198 0.72 211 0.85 Total 27 517 100.00 24 906 100.00

Commercial sector Primary industries 370 1.34 286 1.15 Manufacturing and mining 642 2.33 556 2.23 Building and construction, power and water supply 689 2.50 602 2.42 Wholesale and retail trade, hotels and restaurants 825 3.00 804 3.23 International shipping and pipe transportation 452 1.64 368 1.48 Other transportation, post and telecommunications 351 1.28 338 1.36 Real estate operations 954 3.47 945 3.79 Insurance and ﬁ nance 1 606 5.84 541 2.17 Services 2 904 10.55 2 871 11.52 Central / local government 838 3.05 1 058 4.25 Wage earners 17 688 64.28 16 326 65.55 Foreign 198 0.72 211 0.85 Total 27 517 100.00 24 906 100.00

Geographical distribution Hordaland 23 849 86.67 21 148 84.91 Sogn & Fjordane 2 573 9.35 2 485 9.98 Other parts of Norway 897 3.26 1 062 4.26 Norway - total 27 319 99.28 24 695 99.15 Foreign 198 0.72 211 0.85 Total 27 517 100.00 24 906 100.00

Under the Guarantee Act for banks and the public administration etc. of ﬁ nancial institutions, all savings banks are required to be members of the Savings Banks’ Guarantee Fund. The Fund guarantees to cover losses incurred by a depositor on deposits with a member institution for an amount not exceeding NOK 2m of the depositor’s total deposits. By deposit is meant any credit balance with the bank on an account registered by name, as well as commitments under certiﬁ cates of deposit registered by name. The fee payable to the Savings Banks’ Guarantee Fund is determined in accordance with the provisions of the Guarantee Act.

SECURITISED DEBT Note 23

2005 2004 2003 Commercial paper and short-term issues 150 600 2 175 Bond debt 19 603 14 859 10 251 Total 19 753 15 459 12 426

OTHER LIABILITIES Note 24

Note 2005 2004 2003 Unassessed tax payable 7 220 130 108 Other current liabilities 308 219 248 Own pension premium fund 0 30 29 Other liabilities/provision for dividend on PCCs 43 31 32 Total 571 410 417

99 Notes parent bank

Note 25 PENSION COMMITMENTS

Sparebanken Vest’s pension schemes consist of the following: 1. A group pension scheme which provides all the bank’s employees with a pension equal to 70% of the fi nal salary, based on the present level of national insurance but limited to 12 times the national insurance base rate (G). At year-end 2005 the scheme covered 772 persons in employment. A further 235 persons currently receive pensions under the scheme. 2. Contractual pension agreements (CPA) from 62 to 67 years of age, with an expected CPA acceptance rate of 40%. At year-end 2005 there were 58 recipients of pensions under the CPA scheme.2. In its estimated pension commitment in the closing balance for 2005 the acceptance rate for the parent bank has been changed to 50%. 3. A top hat scheme covering 12 employees, with the option of a retirement pension at the age of 64 (managing director at 60). The pension benefi ts correspond to 70% of the fi nal salary until 67 years of age, at which point these persons become members of the group pension scheme. 4. Early retirement schemes. At year-end 2005 there were 2 recipients of early retirement pension.

2005 2004

Balance sheet changes in net pension commitment Total Uninsured Insured Total Uninsured Insured Net pension commitment in balance sheet NRS6 31/12 93 113 (20) Implementation effect of IAS 19 posted against equity at 1.1: Elimination of corridor in closing balance 2003: 38 (22) 60 Estimate divergence due to changed assumptions and difference between estimated and actual return: 61 (1) 62 Net pension commitment in balance sheet under IAS19 at 1.1 175 94 81 192 90 102 Correction of proﬁ t for 2004 posted against equity in opening balance 2005: (4) 1 (5) Costs charged in year 43 14 29 34 7 27 Pension payments and payment of pension premium (7) (7) (47) (4) (43) Net pension commitment in balance sheet under IAS19 at 31.12 212 101 111 175 94 81

2005 2004

Total Uninsured Insured Total Uninsured Insured Profi t and Loss Account Present value of accumulated pension rights 28 4 24 25 4 21 + Interest charge on accrued pension commitments 35 5 30 31 4 27 - Expected return on pension fund assets 29 29 29 29 + Difference between expected and actual return and changes in estimates 0 0 0 + Plan changes posted in the profi t and loss account 4 4 0 0 0 0 Employer’s national insurance contribution posted against profi ts 5 1 4 3 3 Net pension cost for the period 43 14 29 30 8 22 Balance Sheet Gross pension commitment 877 132 745 705 96 609 - Pension fund assets 498 498 490 490 Net pension commitment 379 132 247 215 96 119 - Unposted effect of changed estimates and difference between actual and expected return 2004 1) 58 10 48 62 14 48 - Unposted effect of changed estimates and difference between actual and expected return 2005 2) 135 33 102 Employer’s national insurance contributions 26 12 14 22 12 10 Net pension commitment in balance sheet 212 101 111 175 94 81

1) The bank uses the special “corridor” equalisation method for the accounting treatment of changes in estimates and the difference between the expected and the actual return on pension fund assets, changes in economic assumptions used to cal culate pension commitments and other estimate divergences. The differences increased by NOK 58m at 31 December 2004, mainly due to a change in the discout rate from 5.25% to 5%, a lower return than expected and higher pension payments (CPA).

2) At 31 Decemeber 2005 the bank changed the discount rate used to calculate the gross pension commitment and the assumptions used to calclulate the CPA acceptance rate. The change in the discount rate from 5% to 4% has increased the gross pension commitment by NOK 106m. The change in the CPA acceptance rate from 40% to 50% has increased the gross pension commitment by NOK 29m, all of which has been posted in the corridor. The pension cost for the year is based on underlying assumptions at 1 January 2005.

Assumptions CB 2005 2005 2004 2003 Discount rate 4.00 % 5.00 % 5.25 % 6.00 % Return on pension fund assets 6.00 % 6.50 % 6.50 % Salary growth 3.00 % 3.00 % 3.00 % Change in national insurance base rate 2.50 % 2.50 % 2.50 % Pension adjustment 2.50 % 2.50 % 2.50 % Voluntary withdrawals 1.00 % 1.00 % 1.00 % CPA acceptance rate 50.00 % 40.00 % 40.00 % 40.00 % Actuarial calculations have been used.

100 Notes parent bank

SUBORDINATED LOAN CAPITAL Note 26

Interest rate Redemption right 2005 2004 2003

Subordinated bond loan of NOK 250m issued in November 2000 0 250 250

3mth NIBOR call option + 1.4% 20/12-06 Subordinated bond loan of NOK 147m issued in Dec. 2001 147 147 147

3mth USD call option LIBOR +1% 23/7-07 Subordinated loan of USD 50m issued in July 2002 385 385 385

Fast rente call option 7.30% 1) 30/4-14 Perpetual subordinated bond loan of USD 60m issued in April 2004 1)1) 429 429

Foreign exchange loss on subordinated loan 2) (47) (83) (51) Foreign exchange loss on perpetual subordinated loan 2) (23) (66) Subordinated loan capital 891 1 062 731

1) The loan interest rate is fi xed until 2034. Thereafter it will run at a fl oating rate. The interest rate has been swapped to a 3mth fl oating rate for USD LIBOR + 2.11%

2) The foreign exchange loss is eliminated against corresponding balance sheet positions.

In 2005, costs related to the subordinated loan capital amounted to NOK 48.8m and comprised: Issue costs NOK 0.8 mill. Interest NOK 48 mill.

101 Notes parent bank

Note 27 PRIMARY CAPITAL CERTIFICATES SEC. NO. 6000900 (31/12-05) Proportion of 20 largest owners No. of PCCs PCC capital (%) Sonja Ellinor Steen 93 300 3.73 Frank Mohn AS 85 000 3.40 Bergen Kommunale Pensjonskasse 70 000 2.80 Sparebanken Vest 68 600 2.74 Terra utbytte 55 500 2.22 Nordenfjeldske Bykredittforening 45 000 1.80 Kaare Holmefjord AS 40 000 1.60 MP Pensjon 36 900 1.48 Solvang ASA 35 000 1.40 Aske Finans AS 30 650 1.23 Straen AS 30 000 1.20 G.C. Rieber & Co AS 29 650 1.19 G.C. Rieber & Co AS Pensjonskasse 26 650 1.07 Cubi Eiendom AS 26 300 1.05 Deutsche Bank AG 24 945 1.00 Forsvarets Personellservice 23 800 0.95 Rebekka Ege Hegermanns legat 21 000 0.84 Jan H. Freuchen 20 250 0.81 Tore B. Steen 20 000 0.80 Agda Andrea Bonde Gjøstein 20 000 0.80 Total 802 545 32.11

PCCs owned by the managing director, senior employees, members of the Board of Directors, Board of Governors and Control Committee, and closely related persons as deﬁ ned in section 7-26 of the Accounting Act and section 8-20 of the Supplementary Regulations pursuant to the Act:

No. of PCCs Trond Mohn, member of Board of Governors 10 000 Arne Buanes, member of Board of Governors 20 Siri Birkeland, member of Board of Governors 100 Widar Slemdal Andersen, member of Board of Governors 200 Inger Finne, member of Board of Governors 900 Inger Finne, member of Board of Governors 200 Linda K. Nordeide, member of Board of Governors 100 Margot Dyrdal, member of Board of Governors 100 Liv Erstad, member of Board of Governors 100 Liv Erstad, member of Board of Governors 25 Roald Korsøen, member of Control Committee 100 Tone Mattsson, member of Board of Directors 100 Arve Havnerås, member of Board of Directors 500 Knut Ravnå, member of Board of Directors and Managing Director 100 Monica Salthella, deputy managing director 150 Knut Ravnå, member of Board of Directors and Managing Director 300 Monica Salthella, deputy managing director 100 Jørn Lekve, Director of Information and PR 100 Arne Selle, Divisional Director 200 Jan Erik Kjerpeseth, Market Director 100 Bernt R. Petersen, Head Internal Auditor 500

Distribution by number No. of PCCs No. of PCCs Proportion (%) No. of owners Proportion (%) 1 - 100 65 992 2.64 858 36.84 101 - 1000 498 868 19.95 1 120 48.09 1001 - 5000 579 471 23.18 269 11.55 5001 - 10000 328 374 13.13 45 1.93 10001 - 250000 1 027 295 41.09 37 1.59 Total 2 500 000 100.00 2 329 100.00

102 Notes parent bank

EQUITY MOVEMENTS Note 28 ts Reserve for valuation valuation for Reserve variances Gift fund Other equity not posted proﬁ against earnings Retained Total Equalisation reserve Equalisation reserve PCC capital reserve Premium

Equity at 1 January 2004 250 2 25 2 152 2 429

Pension commitment acc. estimate divergence, net after tax (71) (71) New calculation of equity at 1.1. 2004 after implementing IAS 19 250 4 25 (71) 2 152 2 358

Own PCCs sold 3 3 6 Own PCCs bought (6) (4) (10) Utilisation of gift fund (5) (5) AllocationS 4 25 212 241

Equity at 31 December 2004 247 4 0 4 45 (71) 2 363 2 590

Change in value of lendings amortised cost, net after tax 2 86 88

New calculation of equity at 1.1.2005 after implementing new lending regulations 247 4 2 4 45 15 2 363 2 678

Own PCCs sold 0 (3) (3) Own PCCs bought (4) (4) Allocations 4 55 309 367

Equity at 31 December 2005 243 4 2 8 100 15 2 669 3 038

103 Notes parent bank

Note 29 CAPITAL ADEQUACY 2005 2004 2003

NOK % NOK % NOK % Core capital 3 418 9.94 2 950 9.56 2 320 8.38 Net supplementary capital 485 1.41 699 2.27 731 2.64 Other deductions 0 0.00 (171) (0.55) (151) (0.55) Net capital base 3 903 3 478 2 900 Risk-weighted volume 34 396 30 849 27 695 Capital ratio 11,35 11,27 10,47

Speciﬁ cation of risk-weighted volume - Group Risk- Nominal amount weighted volume

Risk weight:: 0% 10% 20% 50% 100% 31/12-05 31/12-04 31/12-03 Banking portfolio Cash and ordinary bank deposits 328 0 2 839 0 0 568 288 135 Short-term investments in securities 887 0 1 151 0 632 862 898 431 Lendings 871 0 84 28 062 17 907 31 955 29 199 26 759 Other receivables 0 0 19 263 43 178 53 80 Fixed assets 79 0 0 0 308 308 283 266 Total assets 33 871 30 721 27 671 Off-balance sheet items 576 526 424 Total risk-weighted volume, banking portfolio 34 447 31 247 28 095

Trading portfolio Position risk related to equity instruments 136 97 61 Position risk related to instruments of debt 67 92 125 Counterparty risk and other risk 24 26 12 Total risk-weighted volume, trading portfolio 227 215 198 Total risk-weighted volume, banking and trading portfolio 34 674 31 462 28 293 Deductions: Subordinated loans to other ﬁ nancial institutions 0 (171) (151) Use of the equity method in the accounts of the parent bank (7) (3) 0 Loss provisions (271) (439) (447) Basis of calculation of capital adequacy 34 396 30 849 27 695 Currency risk, 8% of basis of calculation, trading portfolio 18 17 16

Note 30 GUARANTEES AND MORTGAGES

Guarantees Note 2005 2004 2003 Guarantees Payment guarantees 402 336 364 Contract guarantees 261 490 484 Loan guarantees 2 2 3 Guarantees for taxes 2 5 7 Other guarantee liabilities 232 182 135 Total customer guarantees 10 899 1 015 993 Guarantees on behalf of Savings Banks’ Guarantee Fund 0 50 50 Total guarantee liability 899 1 065 1 043

Mortgages Bonds and commercial paper - as security for overnight loans from Norges Bank, valued at 2 548 2 506 1 989 Total mortgages 2 548 2 506 1 989

104 Notes parent bank

MAIN REGIONAL FIGURES FOR 2005 Note 31 Gross loans Customer deposits Region Hardanger/ Midthordland 3 992 2 564 Region Nordfjord 3 124 1 768 Region Nordhordland 5 177 3 178 Region Sogn 1 502 772 Region Sunnhordland 6 695 3 434 Region West 5 996 2 364 Bergen South 6 046 3 112 Bergen North 8 857 4 841 Regional total - Retail Market Division 41 389 22 033 Corporate Market Division Bergen 4 788 3 313 Central activities 746 2 171 Sparebanken Vest - Total 46 923 27 517

LIQUIDITY RISK / RESIDUAL MATURITY OF BALANCE SHEET ITEMS Note 32

Residual maturity of balance sheet items at 31 December 2005 0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity

Assets Cash and deposits with central banks NOK 129 0 0 0 0 189 318 Foreign currency 0 0 0 0 0 10 10 Loans to and deposits with credit institutions NOK 785 90 0 0 0 0 875 Foreign currency 1 964 0 0 0 0 0 1 964 Gross customer loans NOK 1 709 515 2 890 9 696 30 452 0 45 262 Foreign currency 77 48 40 370 1 010 116 1 661 Write-down of individual loans NOK 0 0 0 0 0 (111) (111) Foreign currency 0 0 0 0 0 0 0 Write-down of loan groups NOK 0 0 0 0 0 (159) (159) Commercial paper, bonds and other securities with a ﬁ xed return NOK 200 110 1 474 802 152 0 2 738 Foreign currency 0 0 0 0 0 0 0 Other assets NOK 0 0 0 0 0 840 840 Foreign currency 0 0 0 0 0 0 0 Total assets 4 864 763 4 404 10 868 31 614 885 53 398 NOK 2 823 715 4 364 10 498 30 604 759 49 763 Foreign currency 2 041 48 40 370 1 010 126 3 635

Note continues on next page 105 Notes parent bank

Residual maturity of balance sheet items at 31 December 2005 0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity

Liabilities and equity Debt to credit institutions NOK 416 20 10 0 350 0 796 Foreign currency 16 0 0 0 281 0 297 Deposits from and debt to customers NOK 25 535 40 0 1 510 0 0 27 085 Foreign currency 432 0 0 0 0 432 Securitised debt NOK 850 1 006 1 371 11 387 1 550 0 16 164 Foreign currency 0 0 1 404 80 2 005 0 3 489 Other liabilities NOK 0 0 0 0 0 1 206 1 206 Foreign currency 0 0 0 0 0 0 0 Subordinated loan capital NOK 0 0 0 0 147 0 147 Foreign currency 0 0 0 0 744 0 744 Equity NOK 0 0 0 0 0 3 038 3 038 Total liabilities and equity 27 249 0 2 785 12 977 5 077 4 244 53 398 NOK 26 801 0 1 381 12 897 2 047 4 244 48 436 Foreign currency 448 0 1 404 80 3 030 0 4 962 Net liquidity exposure gap on balance sheet items (22 385) 763 1 619 (2 109) 26 537 (3 359) 0 NOK (23 978) 715 2 983 (2 399) 28 557 (3 485) 2 393 Foreign currency 1 593 48 (1 364) 290 (2 020) 126 (1 327) Net liquidity exposure gap on forward foreign currency transactions 0 11 (8) 1 0 0 33 Forward purchases of foreign currency NOK 305 67 282 0 0 0 654 Foreign currency 1 585 958 820 23 0 0 3 386 Forward sales of foreign currency NOK (1 087) (55) (822) 0 0 0 (1 964) Foreign currency (774) (959) (288) (22) 0 0 (2 043) Net total - all items (22 356) 774 1 611 (2 108) 26 537 (3 359) 1 099 NOK (24 760) 727 2 443 (2 399) 28 557 (3 485) 1 083 Foreign currency 2 404 47 (832) 291 (2 020) 126 16

Overdraft facilities are grouped under loans with a residual maturity of up to 1 month. Instalment loans are apportioned in accordance with the loan structure.

106 Note continues on next page Notes parent bank

INTEREST RATE RISK / PERIOD UNTIL INTEREST RATE REGULATION

Agreed/probable time for adjustment of interest on balance sheet items and ﬁ nancial derivataives at 31 December 2005

0 - 1 1 - 3 3 - 12 1 - 5 Over 5 No residual Total month months months years years maturity Assets Cash and deposits with central banks NOK 129 0 0 0 0 189 318 Foreign currency 0 0 0 0 0 10 10 Loans to and deposits with credit institutions NOK 785 90 0 0 0 0 875 Foreign currency 1 964 0 0 0 0 0 1 964 Gross loans to customers NOK 13 186 137 1 065 103 43 758 45 262 Foreign currency 0 0 0 0 0 1 661 1 661 Write-down of individual loans NOK 0 0 0 0 0 (111) (111) Foreign currency 0 0 0 0 0 0 0 Write-down of loan groups NOK 0 0 0 0 0 (159) (159) Commercial paper, bonds and other securities with a ﬁ xed return NOK 554 751 1 392 41 0 0 2 738 Other assets NOK 0 0 0 0 0 840 840 Foreign currency 0 0 0 0 0 0 0 Total assets 3 445 1 027 1 529 1 106 103 46 188 53 398 NOK 1 481 1 027 1 529 1 106 103 44 517 49 763 Foreign currency 1 964 0 0 0 0 1 671 3 635

Liabilities and equity Debt to credit institutions NOK 796 0 0 0 0 0 796 Foreign currency 281 16 0 0 0 0 297 Deposits from and debt to customers NOK 2 0 14 1 519 0 25 550 27 085 Foreign currency 0 432 0 0 0 432 Securitised debt NOK 3 375 4 560 1 372 5 557 1 300 0 16 164 Foreign currency 0 3 489 0 0 0 0 3 489 Other liabilities NOK 0 0 0 0 0 1 206 1 206 Foreign currency 0 0 0 0 0 0 0 Subordinated loan capital NOK 0 147 0 0 0 0 147 Foreign currency 338 0 0 0 406 0 744 Equity NOK 0 0 0 0 0 3 038 3 038 Total liabilities and equity 4 792 8 644 1 386 7 076 1 706 29 794 53 398 NOK 4 173 4 707 1 386 7 076 1 300 29 794 48 436 Foreign currency 619 3 937 0 0 406 0 4 962 Net liquidity exposure gap on balance sheet items (1 347) (7 617) 143 (5 970) (1 603) 16 394 0 NOK (2 692) (3 680) 143 (5 970) (1 197) 14 723 1 327 Foreign currency 1 345 (3 937) 0 0 (406) 1 671 (1 327) Off balance sheet ﬁ nancial derivatives which affect interest rate exposure (3 375) (3 798) (315) 5 837 1 684 0 33 Purchase positions NOK 2 156 12 106 27 561 9 662 1 941 0 53 426 Foreign currency 1 585 1 359 821 23 406 0 4 194 Sales positions NOK (5 935) (16 304) (28 008) (3 826) (663) 0 (54 736) Foreign currency (1 181) (959) (689) (22) 0 0 (2 851) Net interest rate exposure incl. off-balance sheet ﬁ nancial derivatives (4 722) (11 415) (172) (133) 81 16 394 33 NOK (6 471) (7 878) (304) (134) 81 14 723 17 Foreign currency 1 749 (3 537) 132 1 0 1 671 16 Net interest rate exposure of average total assets (12.16) (29.40) (0.44) (0.34) 0.21 42.22 0.08 NOK (16.67) (20.29) (0.78) (0.35) 0.21 37.92 0.04 Foreign currency 4.50 (9.11) 0.34 0.00 0.00 4.30 0.04

Note continues on next page 107 Notes parent bank

Foreign exchange risk Assets and liabilities in foreign currency at 31 December 2005, re-stated in NOK:

Posted in Not posted in Balance Sheet Balance Sheet Net Currency Assets Liabilities Forward purchases Forward sales positions

USD 696 989 721 415 13 EUR 2 221 3 925 2 239 513 22 CHF 604 0 334 933 5 JPY 60 0 6 66 0 GBP 21 38 77 61 (1) DKK 28 1 0 28 (1) SEK 3 8 1 21 (25) Other 2 2 8 5 3 Total 3 635 4 963 3 386 2 042 16

Foreign currency items are secured through corresponding items in the balance sheet or through different off-balance sheet hedging positions.The foreign exchange risk is therefore always limited.

Note 33 FINANCIAL INSTRUMENTS AND DERIVATIVES

Financial instruments Nominal Book Average Market Credit exposed amount 1) value book value value value

31/12-05 31/12-05 2005 31/12-05 2005 Trading portfolio Balance sheet instruments - Commercial paper, bonds etc. 106 107 146 107 - Shareholdings 128 156 130 Off-balance sheet instruments 2) - Forward purchases/sales of foreign currency 1 625 1 637 2 223 16 - Interest rate contracts 3) 38 075 38 074 29 989 23

Ordinary banking activity Balance Sheet - Assets - Commercial paper, bonds etc. 2 643 2 631 2 503 2 635 - Long-term shareholdings 188 166 Balance Sheet - Liabilities - Commercial paper and bond debt in NOK 16 158 16 164 15 376 - Commercial paper and bond debt in foreign currency 3 489 3 489 2 965 Off-balance sheet instruments 2) - Forward purchases /sales of foreign currency 3 775 3 792 5 342 20 Interest rate contracts 3) 12 069 12 154 10 901 68 Options 6 131 6 318 4 807 242

108 Note continues on next page Notes parent bank

1) The nominal amount is the underlying principal which is the basis of calculation of interest income, interest expenses and net gains in the proﬁ t and loss account.

2) Off balance sheet instruments in the columns for “Book value” and “Average book value” are stated at the total amount of pur chases and sales at year-end and at the average for the year. These amounts are included in order to show the bank’s activity in this area.

3) Interest rate contracts in the trading portfolio consist of FRAs and Interest rate swaps in NOK. Interest rate contracts which are included under ordinary banking activities are a part of the bank’s overall risk management and include all the interest rate contracts described below.

Sparebanken Vest has used the following ﬁ nancial derivatives in the course of the year:

Forward foreign exchange transactions These are agreements to purchase or sell a speciﬁ c amount of foreign currency at an agreed exchange rate.

Interest rate contracts comprise: - Forward Rate Agreements (FRA) which stipulate a certain rate of interest on a nominal amount for a future period of time. - Interest rate swaps which are agreements to exchange interest rates (fi xed for fl oating) for a specifi c amount over a given period of time. - Foreign currency interest rate swaps which are agreements to swap both currencies and interest rates for a specifi c amount over a given period of time. - Interest rate (call) options which give the buyer the right to receive from the seller the difference between the market rate and an agreed rate of interest for a specifi c amount over a given period. - Interest rate (putl) options which give the buyer the right to receive from the seller the difference between the market rate and an agreed rate of interest, if the market rate is lower than the agreed rate, for a specifi c amount over a given period.

Market risk The market risk attached to commercial activity is limited under the risk limits which are set by and regularly reported to the Board of Directors. The limuts for foreign currency positions are largely in line with the limitations set by Norges Bank. The limys for interest rate risk are set at a level which limits the risk to a level which ensures that the bank’s core activities do not suffer.

Credit risk The credit risk is expressed by the risk-weighted volume calculated in accordance with capital adequacy regulations laid down by the Financial Supervisory Authority of Norway. The credit risk is the risk that contractual obligations are not met by the bank’s counterparty. Internal regulations regulate the maximum counterparty exposure. The above table shows that no major risk is attached to the above ﬁ nancial derivatives.

DISPUTES Note 34

At year-end 2005 the Sparebanken Vest Group was not involved in any litigation or legal disputes of material economic signiﬁ cance for the Group. The bank is otherwise subject to various claims related to its normal activities. Loss provisions have been made where considered appropriate.

TRANSACTIONS WITH ASSOCIATED COMPANIES Note 35

This information is provided in accordance with the Provisional Norwegian Accounting Standard for “Information about associated companies” in so far as this information does not contravene current legislation related to the bank’s duty of conﬁ dentiality. Sparebanken Vest has deﬁ ned its subsidiaries Filialbygg AS and Eiendomsmegler Vest AS as being associated companies in relation to the accounting standard.

Intra-group balances at year-end 2005 appear in note 17. All intra-group transactions are conducted on the basis of normal commercial terms and principles.

109 Parent Company Key Figures 2001 - 2005

1 January - 31 December

PROFIT AND LOSS ACCOUNT SUMMARY 2005 2004 2003 2002 2001

Interest income etc. 1 859 1 717 2 327 2 704 2 569 Interest expenses etc. 884 752 1 416 1 820 1 780

Net interest income and credit commissions 975 965 911 884 789

Commissions receivable and income from banking services 368 363 333 310 270 Commissions payable and cost of banking services 79 78 89 88 77 Net gain/(loss) on ﬁ nancial instruments 100 80 67 (147) (53) Other operating income 1 1 1 2 1 Net operating income 390 366 312 77 141

Total operating income 1 365 1 331 1 223 961 930

Salaries and general administration expenses 652 609 541 475 498 Depreciation 47 48 41 41 41 Other operating expenses 123 127 134 186 115 Net operating expenses 822 784 716 702 654

Proﬁ t before write-downs and tax 543 547 507 259 276

Loan write-downs and losses on guarantees (75) 60 114 166 86

Proﬁ t before tax 618 487 393 93 190

Taxes 163 174 116 26 53

Proﬁ t after tax 455 313 277 67 137

31 December

BALANCE SHEET SUMMARY 2005 2004 2003 2002 2001

Assets

Cash and deposits with central banks 328 351 229 203 332 Loans to and deposits with credit institutions 2 839 1 441 677 695 920 Gross loans to customers 46 923 41 679 37 161 32 511 29 329 Write-downs on individual loans (111) (165) (197) (292) (195) Write-downs on loan groups (159) (272) (248) (218) (188) Net loans to customers 46 653 41 242 36 716 32 001 28 946 Loans to and deposits with credit institutions 2 2 Commercial paper, bonds and other securities with a ﬁ xed return 2 738 2 537 2 031 1 843 1 312 Shareholdings, investments and other securities with a variable return 316 429 316 240 175 Shareholdings in jointly controlled companies 325 Shareholdings in subsidiaries 15 12 6 35 35 Deferred tax assets 55 72 91 100 37 Other intangible assets 23 25 18 3 4 Fixed assets 105 118 120 119 141 Other assets 19 8 6 1 12 Prepaid expenses and accrued income 307 67 140 259 182

Total assets 53 398 46 302 40 350 35 501 32 423

110 Parent Company Key Figures 2001 - 2005

31 December

BALANCE SHEET SUMMARY cont. 2005 2004 2003 2002 2001

Liabilities and equity

Debt to credit institutions 1 093 1 509 1 793 2 299 2 963 Deposits from and debt to customers 27 517 24 906 22 258 22 257 19 411 Securitised debtr 19 653 15 459 12 426 7 382 6 856 Other liabilities 571 410 417 316 322 Accrued expenses and prepaid income 422 189 200 221 243 Provisions for commitments and expenses 213 177 96 72 57 Subordinated loan capital 891 1 062 731 746 397 Total liabilities 50 360 43 712 37 921 33 293 30 249

Primary capital certiﬁ cates 250 250 250 250 250 Holdings of own PCCs (7) (3) (1) PCC premium reserve 2 2 2 2 2 Paid-up equity 245 249 252 251 252

Reserve for valuation variances 7 4 17 Sparebanken capital fund 2 684 2 292 2 152 1 957 1 905 Gift fund 100 45 25 Equalisation fund 2 Retained earnings 2 793 2 341 2 177 1 957 1 922

Total equity 3 038 2 590 2 429 2 208 2 174

Total liabilities and equity 53 398 46 302 40 350 35 501 32 423

AVERAGE TOTAL ASSETS 49 783 43 785 38 851 34 790 31 560

RESULTS AS A PERCENTAGE OF TOTAL ASSETS

Interest income etc. 3.73 3.92 5.99 7.77 8.14 Interest expenses etc. 1.78 1.72 3.64 5.23 5.64

Net interest income and credit commissions 1.96 2.20 2.34 2.54 2.50

Commissions receivable and income from banking services 0.74 0.83 0.86 0.89 0.86 Commissions payable and cost of banking services 0.16 0.18 0.23 0.25 0.24 Net gain/(loss) on ﬁ nancial instruments 0.20 0.18 0.17 (0.42) (0.17) Other operating income 0.00 0.00 0.00 0.01 0.00 Net operating income 0.78 0.84 0.80 0.22 0.45

Total operating income 2.74 3.04 3.15 2.76 2.95

Salaries and general administration expenses 1.31 1.39 1.39 1.37 1.58 Depreciation 0.09 0.11 0.11 0.12 0.13 Other operating expenses 0.25 0.29 0.34 0.53 0.36 Net operating expenses 1.65 1.79 1.84 2.02 2.07

Proﬁ t before write-downs and tax 1.09 1.25 1.30 0.74 0.87

Loan write-downs and losses on guarantees (0.15) 0.14 0.29 0.48 0.27

Proﬁ t before tax 1.24 1.11 1.01 0.27 0.60

Taxes 0.33 0.40 0.30 0.07 0.17

Proﬁ t after tax 0.91 0.71 0.71 0.19 0.43

111 Parent Company Key Figures 2001 - 2005

2005 2004 2003 2002 2001

Return on investment. earnings and capital structure (%)

1. Return on equity after tax 15.66 12.11 11.80 3.04 6.39 2. Return on total assets before losses and tax 1.09 1.25 1.30 0.74 0.87 3. Net return on total assets 0.91 0.71 0.71 0.19 0.43 4. Ratio of operating costs to operating income 60.22 58.90 58.54 73.05 70.32 5. Funding ratio 58.98 60.39 60.62 69.55 67.06

Balance sheet development (%)

6. Change in gross loans to and receivables from customers 12.58 12.16 14.30 10.85 9.90 7. Change in commercial paper, bonds and other interest-earning securities 7.92 24.91 10.20 40.47 (35.08) 8. Change in deposits from and debt to customers 10.48 11.90 0.00 14.66 8.88 9. Change in total assets 15.33 14.75 13.66 9.49 4.14

Defaults. provisions and loan losses

10. Loan loss ratio (0.16) 0.14 0.31 0.51 0.28 11. Gross default ratio 0.32 0.36 0.43 0.92 0.75 12. Net default ratio 0.26 0.24 0.28 0.35 0.45 13. Percentage write-down of defaulted loans 17.45 32.45 34.81 62.50 40.00 14. Write-down of loan groups as a percentage of gross loans (0.34) (0.65) (0.67) (0.67) (0.64)

Capital adequacy

15. Net capital base 3 903 3 478 2 900 2 700 2 513 16. Basis of calculation 34 396 30 849 27 695 24 488 22 475 17. Capital ratio 11.35 11.27 10.47 11.03 11.18 18. Core capital ratio 9.94 9.56 8.38 8.60 9.41

Primary Capital Certiﬁ cates 2005 2004 2003 2002 2001

19. Primary capital certifi cates (NOK mill.) 250 250 250 250 250 20. Dividend per PCC (NOK) 17.10 12.60 12.60 3.50 9.50 21. Traded price at 31 December 206.00 187.50 162.00 104.00 118.00 22. PCCs as a percentage of capital base 8.36 9.48 10.35 11.39 11.66 23. Book equity per PCC (NOK) 100.00 100.00 100.00 100.00 100.00 24. Profi t (gross) per PCC (NOK) 182.00 123.60 110.80 27.60 54.80 25. Earnings per PCC (NOK) 17.25 12.96 12.62 3.22 6.98 26. Diluted earnings per PCC (NOK) 17.25 12.96 12.62 3.22 6.98 27. Effective rate of return per PCC 16.59 23.52 59.13 (3.81) 0.00 28. Direct rate of return 8.30 6.72 7.78 3.37 8.05 29. Payout ratio 9.40 10.19 11.37 12.68 17.34 30. Provision for dividends as a % of PCC’s share of profi ts 99.13 98.46 99.84 108.74 136.08

Deﬁ nitions:

1. Profi t for the year as a percentage of opening equity + 50% of the profi t for the year. 2. Operating profi t before losses and write-downs as a percentage of average total assets. 3. Operating profi t after tax as a percentage of average total assets. 5. Deposits from and debt to customers as a percentage of loans to and receivables from customers. 6. Change in gross lendings to customers at year-end compared with the previous year-end volume. 7. Change in securities at year-end compared with the previous year-end volume. 8. Change in customer deposits at year-end compared with the previous year-end volume. 10. Losses on loans and guarantees as a percentage of gross loans to and receivables from customers at year-end. 11. Ratio of gross defaults to gross lendings. 12. Ratio of defaulted loans less related specifi ed loss provisions to net lendings. 13. Individual write-downs on defaulted loans as a percentage of the gross volume of such loans. 22. PCCs as a percentage of parent bank’s equity at year-end. corrected for allocations to the reserve for valuation variances. 24. Profi t for the year divided by the number of PCCs. 25. PCCs’ share of the profi t for the year divided by the number of PCCs. 27. Dividend plus change in market price from 1 Jan. to 31 Dec. as a percentage of stock exchange price at 1 Jan. 28. Provision for dividends as a percentage of the stock exchange price at year-end. 30. Dividend as a percentage of the gross operating profi t per PCC.

112 Parent Company Key Figures - Quarterly Results (cum.)

31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Interest income etc. 1 859 1 361 901 441 1 717 1 278 849 432 Interest expenses etc. 884 632 417 200 752 557 373 205

Net interest income and credit commissions 975 729 484 241 965 721 476 227

Commissions receivable and income from banking services 368 266 172 85 363 269 178 95 Commissions payable and cost of banking services 79 57 39 19 78 62 42 21 Net gain/(loss) on ﬁ nancial instruments 100 79 38 10 80 59 51 36 Other operating income 1 1 1 0 1 0 0 0 Net operating income 390 289 172 76 366 266 188 110

Total operating income 1 365 1 018 656 317 1 331 987 664 337

Salaries and general administration expenses 652 467 311 155 609 455 300 154 Depreciation 47 35 23 11 48 36 24 12 Other operating expenses 123 84 55 26 127 91 63 27 Other operating expenses 822 586 389 192 784 582 386 193

Proﬁ t before write-downs and tax 543 432 267 125 547 405 278 144

Write-downs on loans and guarantees (75) (43) 3 (7) 60 48 40 27

Proﬁ t before tax 618 475 264 132 487 357 238 117

Taxes 163 133 73 37 174 99 66 33

Proﬁ t after tax 455 342 191 95 313 258 172 84

AVERAGE TOTAL ASSETS 49 783 49 079 48 516 47 350 43 785 43 193 42 639 42 049

RESULTS AS A PERCENTAGE OF AVERAGE TOTAL ASSETS

Interest income etc. 3.73 3.71 3.75 3.78 3.92 3.95 4.00 4.13 Interest expenses etc. 1.78 1.72 1.73 1.71 1.72 1.72 1.76 1.96

Net interest income and credit commissions 1.96 1.99 2.01 2.06 2.20 2.23 2.25 2.17

Commissions receivable and income from banking services 0.74 0.72 0.71 0.73 0.83 0.83 0.84 0.91 Commissions payable and cost of banking services 0.16 0.16 0.16 0.16 0.18 0.19 0.20 0.20 Net gain/(loss) on ﬁ nancial instruments 0.20 0.22 0.16 0.09 0.18 0.18 0.24 0.34 Other operating income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net operating income 0.78 0.79 0.71 0.65 0.84 0.82 0.89 1.05

Total operating income 2.74 2.77 2.73 2.72 3.04 3.05 3.13 3.22

Salaries and general administration expenses 1.31 1.27 1.29 1.33 1.39 1.41 1.42 1.47 Depreciation 0.09 0.10 0.10 0.09 0.11 0.11 0.11 0.11 Other operating expenses 0.25 0.23 0.23 0.22 0.29 0.28 0.30 0.26 Net operating expenses 1.65 1.60 1.62 1.64 1.79 1.80 1.82 1.85

Proﬁ t before write-downs and tax 1.09 1.18 1.11 1.07 1.25 1.25 1.31 1.38

Write-downs on loans and guarantees (0.15) (0.12) 0.01 (0.06) 0.14 0.15 0.19 0.26

Proﬁ t before tax 1.24 1.29 1.10 1.13 1.11 1.10 1.12 1.12

Taxes 0.33 0.36 0.30 0.32 0.40 0.31 0.31 0.32

Proﬁ t after tax 0.91 0.93 0.79 0.81 0.71 0.80 0.81 0.80

113 Parent Company Key Figures - Quarterly Results (cum.)

QUARTERLY RESULTS 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q (non-cumulative) 2005 2005 2005 2005 2004 2004 2004 2004

Interest income etc. 498 460 460 441 439 429 417 432 Interest expenses etc. 252 215 217 200 195 184 168 205

Net interest income and credit commissions 246 245 243 241 244 245 249 227

Commissions receivable and income from banking services 102 94 87 85 94 91 83 95 Commissions payable and cost of banking services 22 18 20 19 16 20 21 21 Net gain/(loss) on ﬁ nancial instruments 21 41 28 10 21 8 15 36 Other operating income 0 0 1 0 1 0 0 0 Net operating income 101 117 96 76 100 78 78 110

Total operating income 347 362 339 317 344 323 327 337

Salaries and general administration expenses 185 156 156 155 154 155 146 154 Depreciation 12 12 12 11 12 12 12 12 Other operating expenses 39 29 29 26 36 29 36 27 Net operating expenses 236 197 197 192 202 196 193 193

Proﬁ t before write-downs and tax 111 165 142 125 142 126 134 144

Write-downs on loans and guarantees (32) (46) 10 (7) 12 8 13 27

Proﬁ t before tax 143 211 132 132 130 118 121 117

Taxes 30 60 36 37 75 33 33 33

Proﬁ t after tax 113 151 96 95 55 85 88 84

AVERAGE TOTAL ASSETS 50 883 50 187 49 695 47 350 45 548 44 292 43 229 42 049

114 Parent Company Key Figures - Quarterly Results (cum.)

4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 2005 2005 2005 2005 2004 2004 2004 2004

Interest income etc. 3.88 3.64 3.71 3.78 3.84 3.85 3.88 4.13 Interest expenses etc. 1.96 1.70 1.75 1.71 1.71 1.65 1.56 1.96

Net interest income and credit commissions 1.92 1.94 1.96 2.06 2.13 2.20 2.32 2.17

Commissions receivable and income from banking services 0.80 0.74 0.70 0.73 0.82 0.81 0.77 0.91 Commissions payable and cost of banking services 0.17 0.14 0.16 0.16 0.14 0.18 0.19 0.20 Net gain/(loss) on ﬁ nancial instruments 0.16 0.32 0.23 0.09 0.18 0.07 0.14 0.34 Other operating income 0.00 0.00 0.01 0.00 0.01 0.00 0.00 0.00 Net operating income 0.79 0.92 0.77 0.65 0.87 0.70 0.73 1.05

Total operating income 2.71 2.86 2.74 2.72 3.00 2.90 3.04 3.22

Salaries and general administration expenses 1.44 1.23 1.26 1.33 1.34 1.39 1.36 1.47 Depreciation 0.09 0.09 0.10 0.09 0.11 0.11 0.11 0.11 Other operating expenses 0.30 0.23 0.23 0.22 0.31 0.26 0.33 0.26 Net operating expenses 1.84 1.56 1.59 1.64 1.76 1.76 1.80 1.85

Proﬁ t before write-downs and tax 0.87 1.30 1.15 1.07 1.24 1.14 1.25 1.38

Write-downs on loans and guarantees (0.25) (0.36) 0.08 (0.06) 0.10 0.07 0.12 0.26

Proﬁ t before tax 1.11 1.67 1.07 1.13 1.14 1.07 1.13 1.12

Taxes 0.23 0.47 0.29 0.32 0.65 0.30 0.31 0.32

Proﬁ t after tax 0.88 1.19 0.77 0.81 0.48 0.77 0.82 0.80

BALANCE SHEET DEVELOPMENT 31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Cash and deposits with central banks 328 556 400 942 351 204 307 185 Loans to and deposits with credit institutions 2 839 2 717 3 532 951 1 441 676 1 648 1 119 Gross loans to customers 46 923 45 427 44 193 42 998 41 679 41 213 40 058 38 790 Write-downs on individual loans (111) (135) (134) (140) (165) (133) (175) (187) Write-downs on loan groups (159) (159) (159) (283) (272) (299) (293) (283) Net loans to customers 46 653 45 133 43 900 42 575 41 242 40 780 39 590 38 320 Commercial paper, bonds and other securities with A ﬁ xed return 2 738 2 723 2 161 2 707 2 537 2 181 2 194 2 218 Shareholdings, investments and other securities with a variable return 316 304 274 265 429 375 368 326 Shareholdings in subsidiaries 15 30 24 14 12 21 17 9 Deferred tax assets 55 45 45 45 72 91 91 91 Other intangible assets 23 22 28 27 25 33 27 23 Fixed assets 105 106 104 112 118 106 110 113 Other assets 19 10 14 26 8 4 4 3 Prepaid expenses and Accrued income 307 278 179 419 67 157 138 181

Total assets 53 398 51 924 50 661 48 083 46 302 44 628 44 494 42 588

115 Parent Company Key Figures - Quarterly Results (cum.)

BALANCE SHEET DEVELOPMENT cont. 31/12-05 30/09-05 30/06-05 31/03-05 31/12-04 30/09-04 30/06-04 31/03-04

Debt to credit institutions 1 093 381 661 1 541 1 509 1 636 1 741 3 598 Deposits from and debt to customers 27 517 27 372 26 619 24 429 24 906 24 356 24 223 22 928 Securitised debt 19 653 18 813 18 409 17 387 15 459 13 981 14 081 12 228 Other liabilities 571 503 420 489 410 327 298 285 Accrued expenses and prepaid income 422 577 422 321 189 406 307 209 Provisions for commitments and expenses 213 82 82 82 177 95 95 96 Subordinated loan capital 891 1 115 1 118 1 093 1 062 1 145 1 158 741 Total liabilities 50 360 48 843 47 731 45 342 43 712 41 945 41 903 40 085

PCC capital 250 250 250 250 250 250 250 250 Holdings of own PCCs (7) (7) (7) (7) (3) (2) (7) (7) PCC premium reserve 2 2 2 2 2 2 2 2 Paid-up equity 245 245 245 245 249 250 245 245

Reserve for variation variances 7 4 4 4 4 Sparebanken capital fund 2 684 2 437 2 437 2 352 2 292 2 152 2 149 2 149 Gift fund 100 45 45 45 45 23 25 25 Equalisation fund 2 8 8 Retained earnings 2 793 2 494 2 494 2 401 2 341 2 175 2 174 2 174

Total equity 3 038 2 739 2 739 2 646 2 590 2 425 2 419 2 419 Interim proﬁ t. unallocated 342 191 95 258 172 84

Total liabilities and equity 53 398 51 924 50 661 48 083 46 302 44 628 44 494 42 588

Return on investment, earnings and capital structure (%)

Return on equity after tax 15.66 15.68 13.54 13.74 12.11 13.45 13.77 13.67 Return on total assets before losses and tax 1.09 1.18 1.11 1.07 1.25 1.25 1.31 1.38 Net return on total assets 0.91 0.93 0.79 0.81 0.71 0.80 0.81 0.80 Ratio of operating expenses to operating income 60.22 57.56 59.30 60.57 58.90 58.99 58.16 57.27 Ratio of operating expenses to operating income, adjusted for capital gains/(losses) 64.98 62.41 62.94 62.54 62.67 62.76 63.06 64.12 Funding ratio 58.98 60.65 60.64 57.38 60.39 59.72 61.18 59.83

Solvency (%)

Loan loss ratio (0.16) (0.13) 0.01 (0.07) 0.14 0.16 0.20 0.28 Capital ratio 11.35 11.19 11.43 11.46 11.27 10.78 11.07 10.04

Primary Capital Certiﬁ cates

Proﬁ t per PCC (NOK) 17.25 12.97 7.24 3.60 12.96 10.66 7.13 3.48 Diluted proﬁ t per PCC (NOK) 17.25 12.97 7.24 3.60 12.96 10.66 7.13 3.48

For deﬁ nitions, see page 112.

116 Auditor’s Report

Auditor’s Report for 2005

We have audited the annual fi nancial statements of In our opinion, Sparebanken Vest for 2005 which show a profi t for the year of NOK 455 million for the parent company and a profi t for • the accounts of the parent company have been the year of NOK 475 million for the Group. We have also prepared in accordance with the law and regulations audited the information in the directors’ report concerning and are a correct presentation of the fi nancial position the fi nancial statements, the going concern assumption and of the company at 31 December 2005 and of the results the proposal for the appropriation of the profi t for the year. of its operations and its cash fl ows for the year then The annual accounts consist of the accounts for the parent ended, in accordance with accounting standards, bank and the consolidated accounts. The accounts for the principles and practices generally accepted in Norway parent bank comprise the profi t and loss account, balance sheet, statement of cash fl ows and notes to the accounts. The consolidated accounts comprise the profi t and loss • the consolidated accounts have been prepared in account, balance sheet, statement of cash fl ows, an overview accordance with the law and regulations and are of changes in equity and notes to the accounts. a correct presentation of the fi nancial position of the The accounts of the parent bank have been prepared Group at 31 December 2005 and of the results of in accordance with the Norwegian Accountancy Act and its operations and its cash fl ows and changes in equity accounting practices generally accepted in Norway. in the fi nancial year in accordance with International International Financial Reporting Standards as laid down Financial Reporting Standards as laid down by the EU by the EU have been applied to prepare the consolidated accounts. These fi nancial statements are the responsibility of the Company’s Board of Directors and the Managing • the Company’s management have fulfi lled their Director. Our responsibility is to express an opinion on these obligation in respect of registration and documentation fi nancial statements and on other information according of accounting information as required by law and to the requirements of the Norwegian Act on Auditing and accounting standards, principles and practices generally Auditors. accepted in Norway

We have conducted our audit in accordance with laws, regulations and auditing standards and practices generally • the information in the directors’ report concerning the accepted in Norway, including the auditing and accounting fi nancial statements, the going concern assumption, standards adopted by the Association of Norwegian and the proposal for the appropriation of the profi t is Accountants. Those standards and practices require that consistent with the fi nancial statements and complies we plan and perform the audit to obtain reasonable with law and regulations. assurance that the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the information contained in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall content and presentation of the fi nancial statements. To the extent required by law and auditing standards, an audit also comprises a review of the management of the Company’s Bergen, 17 February 2006 fi nancial affairs and its accounting and internal control PricewaterhouseCoopers AS systems. We believe that our audit provides a reasonable basis for our opinion. Jon Haugervåg State Authorised Public Accountant

117 Control Committee’s Report

Control Committee’s Report for 2005

The Committee has held regular meetings In co-operation with the internal auditor, the Committee in Bergen in 2005 and visited Region Sunnhordland. has continuously monitored and considered the development In the performance of its work the Committee has conferred of the bank’s loss position and risk exposure, as well as with the chairman of the Board of Directors, the managing measures taken by the bank to meet this development. director and with those responsible for different areas of activity. The Committee is of the view that the Board of Directors’ assessment of the bank’s ﬁ nancial position, as presented The Committee has worked closely with the internal auditor, in the annual report, is comprehensive. while maintaining contact with the external auditor. The Committee has had two meetings with the chairman The annual report and accounts for 2005 have been reviewed of the Board of Governors in order to discuss the and discussed with the external and internal auditors, Committee’s activities. and with representatives of the bank’s management.

The Committee has carried out the checks considered In the view of the Committee, the annual report and accounts, necessary to comply with the guidelines and directives which including the consolidated accounts, have been prepared in the Committee is required to observe under the Savings Banks accordance with the Savings Banks Act and regulations laid Act and in accordance with the instructions issued to the down by the Financial Supervisory Authority of Norway. Control Committee. The Control Committee has no criticism of the annual report The Control Committee has not found the Bank’s activities and accounts and recommends that the proﬁ t and loss to be in conﬂ ict with the provisions of the Savings Banks Act, account and the balance sheet for 2005, including the the Financing Activity Act, the bank’s Articles of Association, consolidated accounts, as submitted by the Board of Directors, resolutions of the Board of Governors or other provisions be adopted by the Board of Governors as the accounts governing the bank’s activities. of Sparebanken Vest for 2005.

Bergen, 17 February 2006

Lillian Torsvik Kjell Steinsbø Anne Kverneland Bogsnes

Liv Henjum Roald Korsøen

118 Organisational Structure

Organisational Structure - Sparebanken Vest

Board of Directors

Internal Audit Managing Director

Controller Finance Market Risk Management Information/PR Legal/Special Personnel/Development Commitments Equity

Division Division Division Retail Market Corporate market Service

Marine/ CM Payment Insurance Shipping Bergen Services

Customer Bergen Bergen Regions IT Service Procedures Purchases Service North South Centre

Sogn & Fjordane

Nordhordland

Hardanger/Midthordland

West

Sunnhordland

119 Elected Ofﬁ cers

Members of the Board of Governors Einar Nistad Terje Mjelde, following the elections in 2005 Widar Slemdal Andersen Head of Management Accounting Members elected by depositors Birgit Nistad Accounting: Arne Buanes Anne Marit Steen Kari L. Sandal, Head of Accounting Bjørn Kvamme, Finance: Roald Korsøen Board of Directors Egil Mokleiv, General Manager Håkon Østgulen Pål W. Lorentzen, chairman Equity: Bonde Johannes O. Berge Erik Bøckmann, deputy chairman Eirik Eldøy, Margunn Y. Samnøy Jan O. Yttredal Deputy General Manager Magnhild Bjørlo Anne Gine Hestetun Einar Vatne jr. Erling Mjelde Information & PR Jan Tore Eresberg Geir Navarsete Jørn Lekve, Director of Corporate Terje Vidar Vestvik Coach Inger Karin Larsen Communications Jostein Valen Tone Mattsson Anne Grete Ådland Arve Havnerås Information Stein Klakegg Christine Wigand, Members elected by local authorities (from 09.01.06) Head of Information Services Helge Stormoen Investor Relations Mette Nora Sætre Control Committee Karstein Lien, General Manager Merete Andreassen Lillian Torsvik – chairman Visjon Vest/ Rune Bakervik Kjell Steinsbø – deputy chairman Gifts for the public beneﬁ t Kirsten Aase Liv Henjum Gro Reppen, General Manager Brigt O. Gåsdal Anne Kverneland Bogsnes Harald Queseth, General Manager Kari Laila Skrede sjef Roald Korsøen Bernt J. Flæsland Market Bjørn Ness External auditor Jan Erik Kjerpeseth, Market Director Sammy Olsen Jon Haugervåg, State Authorised Public Gunnar Røssland Accountant PriceWaterhouseCoopers Personnel/Development Sigurd Toft DA (PWC) Mona Biering, Acting Personnel Director

Employee-elected members Internal auditor Service Division Stein Tore Davidsen Bernt R. Petersen Arne Selle, Divisional Director Kirsten Gulbrandsen Inger Finne Management EDP/Systems Agathe Bøe Risa Managing Director: Stein Klakegg Inge Ådland, Head of EDP/Systems Kåre Røssland (from 09.01.06) Service Centre Linda K. Nordeide Deputy Managing Director: Rolf Titlestad, Margot Dyrdal Monica Salthella Deputy General Manager Liv Erstad Ofﬁ ce address: Kaigaten 4, 5016 Bergen Procedures Steinar Danielsen Post address: P.O.B. 7999, Svein Havre, Kari Vedøy NO-5020 Bergen Deputy General Manager Eva Nesheim Tel.: +47 815 22 002 Purchases Møyfrid Gaassand Fax: +47 55 21 73 05 Ulf Eide, Deputy General Manager

Members elected by owners of PCCs Legal: Corporate Market Division Tor Johannessen Pål Pedersen, Lawyer Monica Salthella, Divisional Director Finn Haugan Security: Trond Mohn Steinar Søraas, Head of Security Corporate Market Bergen Erik Sture Larre Special Commitments: Bjørn Haukedal, Acting Deputy Manager Siri Birkeland Eyvind Bagge, General Manager Marine/Shipping Rolf W. Karlsen Risk Management: Henning Nordgulen, Ada Kjeseth Frank Johannesen, Director General Manager Jan S. Johannessen Management Accounting: Payment Services

120 Terje Kvamme, Frekhaug, Lindås, Fana Deputy General Manager Masfjorden, Mastrevik, Radøy, Fedje, Nesttunvegen 98, Insurance: Lonevåg, Haus and Valestrandsfossen NO-5221 Nesttun Arne Bakke, General Manager Tel.: +47 55 11 61 20 Region Sunnhordland Fax: +47 55 11 61 21 Retail Market Division Arnt Sortland, Elin Sjødin Drange, Divisional Director Regional Bank Manager Fyllingsdalen P.O.B. 404, NO-5403 Stord Oasen Bydelssenter, Customer Service Tel.: +47 815 22 002 NO-5141 Fyllingsdalen Vibeke Knudsen, Sales Manager Fax: +47 56 34 28 41 Tel.: +47 21 70 00 Branches: Leirvik, Bremnes, Fax: +47 517 54 29 Bergen North Mosterhamn, Frank H. Bjørndal, Sæbøvik, Husnes, Fitjar, Skånevik, Sveio, Sotra General Manager Sagvåg and Haugesund Sartor Senter, Branches: Arna, NO-5353 Straume Åsane, Askøy, Region West Tel.: +47 56 32 34 80 Loddefjord, Laksevåg, Oasen, Trygve Wåge, Regional Bank Manager Fax: +47 56 32 34 81 Allmenningen and Xhibition P.O.B. 152/153, NO-5342 Straume Tel.: +47 815 22 002 Knarvik Bergen South Fax: +47 56 32 34 01 Knarvik Senter, Kate Henriksen, General Manager Branches: Straume, Rong, Skogsvåg, NO-5903 Isdalstø Branches: Os, Lagunen, Sandsli, Storebø, Bekkjarvik and Ågotnes Tel.: +47 56 34 28 78 Nesttun, Sletten, Danmarksplass Fax: +47 56 34 28 75 and Kaigaten. Eiendomsmegler Vest AS Head Offi ce: Førde Region Hardanger/Midthordland Rune Hansen, Managing Director Handelshuset, Oddvar Ystanes, Eiendomsmegler Vest AS NO-6800 Førde Regional General Manager Offi ce Address: Nedre Korskirkeallm. 1 Tel.: +47 57 82 81 70 Post address: Grova 14 P.O.B. 7999, NO-5020 Bergen Fax: +47 57 82 81 61 NO-5600 Norheimsund Tel.: +47 55 21 77 00 Tel.: +47 815 22 002 Fax: +47 55 21 77 14 Stord Fax: +47 56 55 07 01 Borggt. 8, Branches: Norheimsund, Central Bergen NO-5403 Stord Strandebarm, Bjørkheim, Dale, Xhibition Senter Tel.: +47 53 45 68 80 Eikelandsosen, Odda and Røldal Småstrandgaten 3, NO-5014 Bergen Fax: +47 53 45 68 85 Tel.: +47 55 21 77 00 Region Sogn & Fjordane Fax: +47 55 21 77 01 Haugesund Solveig Midtbø, Haraldsgata 162, Acting Regional General Manager Askøy NO-5501 Haugesund P.O.B. 243, NO-6771 Nordfjordeid Kleppestø Senter Tel.: +47 52 70 46 50 Tel.: +47 815 22 002 NO-5300 Kleppestø Fax: +47 52 70 46 59 Fax: +47 57 88 56 01 Tel.: +47 56 15 11 98 Branches: Nordfjordeid, Måløy, Selje, Fax: +47 56 15 11 71 AS Filialbygg Bryggja, Davik and Stadtlandet, Florø, Bernt Aardal, Managing Director Sogndal and Førde in Sunnfjord Åsane Offi ce address: Nedre Korskirkeallm. 1 A Åsane Senter Post address: P.O.B. 7999, Region Nordhordland NO-5116 Ulset NO-5020 Bergen Audun Rebnor, Tel.: +47 55 19 74 50 Tel.: +47 55 21 75 11 Regional General Manager Fax: +47 55 19 74 51 Fax: +47 55 21 76 80 P.O.B. 140, NO-5903 Isdalstø Tel.: +47 815 22 002 Fax: +47 56 34 28 41 Branches: Knarvik Senter,

121 Notes Notes

Notes Group Notes Parent Company

Note 1 Accounting principles 46 Note 1 Accounting principles 81 Note 2 Segment information 49 Note 2 Net interest income and credit commissions 84 Note 3 Net interest income and credit commissions 50 Note 3 Net operating income 84 Note 4 Net operating income 50 Note 4 Salaries and general administration expenses 85 Note 5 Other operating expenses 51 Note 5 Other operating expenses 87 Note 6 Loan write-downs and losses on guarantees 51 Note 6 Loan write-downs and losses on guarantees 87 Note 7 Taxes 52 Note 7 Taxes 88 Note 8 IFRS - Effect on equity and results 53 Note 8 Loans to and receivables from credit institutions 89 Note 9 Loans to and receivables from credit institutions 54 Note 9 Gross loans to customers 89 Note 10 Gross loans to customers 54 Note 10 Distribution of gross loans and guarantees 89 Note 11 Write-down for impaired value of commitments 55 Note 11 Write-down for impaired value of commitments 91 Note 12 Write-downs of commitments posted in the 55 Note 12 Write-downs of commitments posted in the 91 balance sheet balance sheet Note 13 Risk classifi cation of loans and guarantees 56 Note 13 Risk classifi cation of loans and guarantees 92 Note 14 Financial assets at actual value posted in profi t Note 14 Commercial paper, bonds and other and loss account - equities 57 securities with a fi xed return 93 Note 15 Financial assets at actual value posted in profi t Note 15 Investments in subordinated loans 93 and loss account - commercial paper and 59 Note 16 Shareholdings, investments and other 94 Note 16 bondsFixed assets 59 securities with a variable return Note 17 Financial derivatives 60 Note 17 Shareholdings in group companies 96 Note 18 Accrued and amortised income 61 Note 18 Intangible assets 97 Note 19 Debt to credit institutions 61 Note 19 Fixed assets 98 Note 20 Deposits from and debt to customers 61 Note 20 Prepaid expenses and accrued income 98 Note 21 Other liabilities 61 Note 21 Debt to credit institutions 98 Note 22 Securitised debt 62 Note 22 Deposits from and debt to customers 99 Note 23 Pension commitments 63 Note 23 Securitised debt 99 Note 24 Subordinated loan capital 64 Note 24 Other liabilities 99 Note 25 Capital adequacy 65 Note 25 Pension commitments 100 Note 26 Earnings per primary capital certifi cate 65 Note 26 Subordinated loan capital 101 Note 27 Dividebd per primary capital certifi cate 65 Note 27 Primary capital certifi cates 102 Note 28 Guarantees and mortgages 66 Note 28 Equity movements 103 Note 29 Liquidity risk/Residual maturity 66 Note 29 Capital adequacy 104 Note 30 Transactions with associated companies 69 Note 30 Guarantees and mortgages 104 Note 31 Main regional fi gures for 2005 105 Note 32 Liquidity risk / Residual maturity 105 Note 33 Financial instruments and derivatives 108 Note 34 Disputes 109 Note 35 Transactions with associated companies 109

Tel: +4781522002 NO-5020 Bergen-Norway P.O.Box 7999 Sparebanken Vest RETURN ADDRESS: F.nr.: 832554332 F.nr.: +47 815 22002 SPVNOBB Swift: Tel: www.spv.no [email protected]

T16144 - 06 • www.creato.no