Orkla Financial Investments

Orkla Financial Investments' pre-tax profit was NOK 5,480 million, compared with NOK 4,375 million in 2006. The Share Portfolio's market value was NOK 17,513 million at the end of 2007. The Share Portfolio realised gains and received dividends worth a total of NOK 4,703 million, which was NOK 673 million more than in 2006. Return on the share portfolio was 16.2 %, while MSCI Nordic climbed 11.7 % and OSEBX returned 11.5 %. Orkla Finans saw good demand for its investment products in 2007, particularly in the field of alternative investment and operating revenues were 22 % higher than in 2006. Orkla Eiendom divested from real estate development projects at Fornebu at a gain of NOK 261 million.

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Share portfolio

Profit
The Share Portfolio achieved a return of 16.2 % in 2007. Pre-tax profit was NOK 4,862 million, compared with NOK 4,026 million in 2006. Of this figure, realised portfolio gains accounted for NOK 3,627 million and dividends received for NOK 1,076 million. Unrealised gains were reduced by NOK 1,837 million to NOK 3,810 million, following realisation of gains. The real profit, measured as the change in the share portfolio?s net asset value, was NOK 2,274 million.

Shares worth NOK 1,821 million, net, were sold in 2007. Together with dividends received, this produced a cash flow of NOK 2,897 million from the Share Portfolio.

At year-end 45 % of the Share Portfolio was invested in Norwegian securities, compared with 49 % at the end of 2006.

Market situation
2007 proved to be another year of high growth in the world economy, driven essentially by the economies in Asia. Good growth in earnings was seen in most sectors. Key central bank rates were raised in Asia and lowered in the US, and bond rates were on a downward trend worldwide towards the end of 2007. Expectations of the world economy also receded towards year-end due to spreading credit problems in the US.

Despite this turbulence, global stock markets showed a positive return for the fifth year running, with the FTSE World Local Currency Index rising 6.9 % in 2007. The European and American stock markets were up, respectively, 6.5 % (dividend-adjusted MSCI Europe) and 5.5 % (dividend-adjusted S&P 500), while MSCI Emerging Markets rose 36.5 %. Nordic stock exchanges were driven by still strong export markets, high raw material prices and strong growth in earnings. The US dollar depreciated considerably against most currencies. Oil prices and other manufacturing commodity prices rose substantially over the year. The dividend-adjusted MSCI Nordic climbed 11.7 % in the course of the year, while SBX (Stockholm) fell 3.8 % and OSEBX (Oslo) rose 11.5 %.

Investment strategy
The main strategy is to identify and invest in value-creating independent companies. The Share Portfolio is expected to take clear positions and the weightings employed will therefore be skewed in relation to a market portfolio. It will further focus on how it contributes to, and makes use of the expertise in, Orkla's other business areas.

Efforts are made to pursue an active investment strategy with focus on sizeable equity interests in listed companies coupled with a livelier investment stance in relation to unlisted companies. Establishing industrial options for the Group is an important rationale in this strategy.

Orkla finans

Orkla Finans achieved strong growth in its customer base, turnover and profit in 2007. Operating revenues totalled NOK 599 million, up 22 % from 2006. The company has about 140 employees dispersed across offices in Oslo, Bergen, Trondheim, Stavanger, Kristiansand, T?nsberg, Hamar and Sandvika. Demand for the company's investment products was good, above all for alternative investment products. Orkla Finans strengthened its position in the asset classes of property and hedge funds in 2007, and also launched its first-ever products in the shipping and energy segments. Moreover, several large international real estate projects were launched, including in Sweden and Germany. The company provided investment products worth a total of more than NOK 8 billion.

Orkla Finans's ambition is to build Norway's strongest group of experts in the field of alternative investments, and in 2007 it strengthened its analysis and product expertise by hiring additional experienced staff. Euromoney Magazine ranked Orkla Finans as the top Norwegian non-bank investment firm in the field of hedge funds and structured products and as number two in the real estate segment, thereby confirming Orkla Finans's position as the best Norwegian actor in this field.

In 2008 the company will continue its focus on alternative investments and plans to strengthen its product expertise as well as further expand its products and services to private and institutional investors. Orkla Finans also plans to open two new branch offices to strengthen distribution.

The insurance broking business was sold to Aon Grieg in the first quarter of 2007.

Orkla Eiendom

Orkla Eiendom's (real estate) main focus is on property development, whereas activity in property management is limited. The most important development projects are Ringnes Park and Idun where overall development potential runs to about 75,000 m², measured by Orkla's stake. Orkla Eiendom sold its interest in the development projects at Fornebu to Scandinavian Property Development in March 2007.

Orkla Eiendom also owns 40 % of Utstillingsplassen AS and Rygge Sivile Lufthavn AS. Utstillingsplassen AS develops and manages commercial and residential properties in the Mjøsa region and the Trondheim area. In 2007 the Armed Forces received a licence to operate civil air traffic at the airport at Rygge, with Rygge Sivile Lufthavn AS as the airport owner and operator. Scheduled services started in February 2008.

Borregaard Skoger

Borregaard Skoger develops and manages Orkla's forest properties. These properties total 1,080,000 decares, of which 780,000 decares are productive forest. The main activities are forestry, property management and nature conservation. The volume of timber harvested totalled about 96,000 m³, which was marginally lower than the previous year. Operating revenues were NOK 213 million compared with NOK 160 million in 2006.