2014 Annual report

NOTE 15

PENSION COSTS AND LIABILITIES

FERD'S PENSION PLANS

Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in a defined contriution plan for salaries below 12G.

For salaries exceeding 12 G, Ferd has established a pension scheme implying that the employees earn a pension right each year. The scheme was closed for new hires when established. The right comprises a share of the salary in excess of 12 G together with a return component depending on the employee's chosen risk profile. The pension plan has many similarities with a contribution scheme, but as Ferd is not making current payments to a fund, but has elected to take the risk of return itself, the scheme shall be classified as a benefit scheme for accounting purposes. Ferd has recognised the obligation as a pension liabiity and is expensing the current deposits and the current return as incurred. The liability has not been discounted.

In addition, Group management has an early retirement pension scheme giving them the opportunity to retire at 65 years. This is also a benefit scheme.

Until 2013, all employees wee members of a defined benefit scheme for salaries up until 12 times the base amount of the national insurance (G). Defined benefit pension schemes give the employees a right to speific pension payments. The obligation is an estimate of future benefits earned by the employees on the basis of the number of years of service and the salary level at the retirement. The benefits are discounted to present value, and the recognised obligation is reduced by the fair value of plan assets for funded pension schemes. Changes in assumptions, staff numbers and variations between estimated an actual salary increases and return on assets result in actuarial gain and loss. Actuarial gains and losses are recognised in total comprehensive income. The defined benefit scheme was terminated on 31 December 2013. Paid-up policies were issued in 2014. The effect of the plan change is recognised in the income statement in 2013.

Financial assumptions at 31 December

Discount interest rate

Expected wage growth

Future expected pension regulation

Expected regulation of base amount (G)

DEFINED BENEFIT PLANS

Specification of the recognised liability

NOK 1 000

Present value of unfunded pension liabilities

Present value of wholly or partly funded pension obligations

Total present value of defined benefit obligations

Fair value of pension assets

Total defined benefit obligation recognised in the balance sheet

Movement in the liability for defined benefit pension plans

NOK 1 000

Liability for defined benefit pension plans at 1 January

Present value of the pension earnings of the year

Interest expense on the pension liability

Estimate deviation on the pension liability

Plan changes

Benefits paid

Liability for defined benefit pension plans at 31 December

Movement in fair value of the pension assets for defined benefit pension plans

NOK 1 000

Fair value of pension assets at 1 January

Expected return from pension assets

Estimate deviations on pension funds

Contribution from employer

Administration expenses

Benefits paid

Fair value of pension assets at 31 December

Pension assets include the following:

NOK 1 000

Equity instruments

Government stock

Corporate stock

Other debt instruments, including structured debt

Porperty investments

Bank deposits

Total pension assets

Estimate deviation recognised in total comprehensive income

NOK 1 000

Estimate deviation on the pension obligation (benefit schemes) of the year

Estimate deviation of the pension funds (benefit schemes) of the year

Net estimate deviation for benefit schemes recognised in income statement

Pension costs recognised in the income statement

NOK 1 000

Present value of this year's pension earnings

Plan changes

Administration expenses

Pension costs on contribution schemes

Total pension costs recognised in the income statement as salary expenses

Interest expense on the pension liability

Expected return on pension assets

Total pension costs recognised in the income statement as interest expenses