Statoil Fuel & Retail. Annual report 2011

Transcription

1 Statoil Fuel & Retail Annual report 2011

2 Contents Key figures 1 Dear Shareholder (from the CEO) 2 Board of Directors report 5 Consolidated financial statements 19 Parent company financial statements 83 Statement on compliance 113 Auditor s report 115 Corporate governance Statoil Fuel & Retail ASA

3 Key figures Key figures Financial data (in NOK million unless otherwise indicated) ) ) ) Gross profit 10,035 10,532 10,105 9,263 8,748 EBITDA (unaudited) 2) 3,037 3,645 2,524 1,362 1,657 Adjusted EBITDA (unaudited) 2) 3,021 3,393 2,566 1,325 1,473 Operating profit 1,865 2,342 1,186 (55) (429) Scandinavia 1,866 1, (321) (1,109) Central & Eastern Europe Special Products (41) Corporate (109) 154 (14) (46) 157 Eliminations Adjusted operating profit (unaudited) 2) 1,850 2,186 1, Profit for the period 1,080 1, (534) (357) Capital expenditures 3) 1, ,564 1,862 1,494 Cash flow provided by operating activities 840 4,913 1,972 1, Earnings per share (NOK) n/a n/a n/a Return on capital employed (%) (unaudited) 4) Dividend per share (NOK) ) 3.00 n/a n/a n/a Closing share price at year end (NOK) n/a n/a n/a 1) The figures for 2009, 2008 and 2007 represent the Group s combined financial information derived from the consolidated financial statements of the Statoil group. 2) EBITDA is defined as operating profit adjusted for depreciation, amortisation, impairments and net income/(loss) from associated companies. The adjusted EBITDA and adjusted operating profit are defined as EBITDA and operating profit adjusted for effects that management considers may affect the comparability of the underlying operational per formance in the relevant reporting periods. EBITDA, adjusted EBITDA and adjusted operating profit are non-gaap measures. 3) Capital expenditures include expenditures related to the purchase of intangible assets, property, plant and equipment. 4) ROCE is defined as adjusted operating profit after tax divided by average capital employed for the last twelve months. A tax rate of 25 percent is used in the calculation. Capital employed equals total assets less non-interest bearing liabilities (comprising deferred tax liabilities, pension liabilities, provisions, trade and other payables, trade and other payables related parties, current tax payable and derivative financial instruments). 5) Dividend proposed to the Annual General Meeting 26 April Statoil Fuel & Retail ASA 1

4 Statoil Fuel & Retail annual report 2011 Dear Shareholder, In the face of challenging markets, we have delivered solid annual results. We did this by continuing to offer our customers quality and value and by creating innovative new products and services for them. We also strengthened our grip on the micro market pricing of road transportation fuel and exercised tight control over our costs. Navigating complex markets In Scandinavia, in a year characterised by high refined oil prices and a competitive environment, we further developed our market-leading position and expanded our presence by adding 12 new stations in the region. We continued to streamline our operations, selling the marine business in Denmark. In Central and Eastern Europe, challenging market conditions persisted. This resulted in depressed fuel margins. However, our constant focus on lean operations, micro market pricing and the further development of our convenience and fuel offering kept us in a profitable position in the region. We reconfirmed our long-term growth ambitions in Central and Eastern Europe with the acquisition of the St1 network in Poland, giving us a total growth of 51 new stations in the region in Towards the end of the year we also signed a purchase agreement for the IP network, consisting of seven stations in the St Petersburg area. Optimising the business In 2011 we completed the turnaround of our Lubricants business and initiated a turnaround programme for our Aviation business. We developed a real estate asset management strategy and designed a new shared services centre in Latvia. We established our central distribution planning facility in Riga, which now guides a slimmed-down, efficient and more sustainable fleet of delivery vehicles operating throughout Central and Eastern Europe and Scandinavia. Focusing on our convenience offering, we have delivered strong loyalty concepts and further improved our product mix. Overall, we have refined our strategic objectives and demonstrated excellent cost control, delivering ahead of plan on our cost reduction targets. Establishing our own vision We have established a shared vision for our business that aligns our strategy and the efforts of our entire Group. Together we are committed to becoming a more integral part of our customers lives - to becoming their reliable, responsive and innovative partner in an ever more mobile world. Our vision is: to be the pulse of life. This is why we do what we do. We will engage our customers and make their lives easier. This is our mission. It is what we do each day to move us in the direction of our vision. Maintaining focus The global economic outlook remains uncertain. In Scandinavia the overall demand for fuel is expected to remain stable. Although the Central and Eastern Europe market is highly dependent on the European economic situation, the long-term market fundamentals remain attractive for Statoil Fuel & Retail. Over the next few years we must work hard and concentrate on staying on course. Our goal is to deliver on the specific strategies we have developed for each of our markets, and every one of our functions. I am confident we will achieve that goal. Sincerely, Jacob Schram, CEO Statoil Fuel & Retail ASA Statoil Fuel & Retail ASA

5 We have established a shared vision for our business that aligns our strategy and the efforts of our entire Group. Jacob Schram, CEO Statoil Fuel & Retail ASA

6 Statoil Fuel & Retail annual report Statoil Fuel & Retail ASA

7 Board of Directors report Solid performance, challenging markets

8 Statoil Fuel & Retail annual report 2011 Solid performance, challenging markets Highlights 2011 Statoil Fuel & Retail 1) recorded a robust financial performance in Scandinavia in 2011, driven primarily by the strong execution of micro market pricing of road transportation fuel, stringent cost control and effective cost reduction measures. The Group recorded a positive development in convenience gross profit, driven by innovation, strong brand development, high customer loyalty and strong loyalty concepts. The Group experienced challenging market conditions in Central and Eastern Europe in 2011 with pressure on road transport ation fuel unit margins. This was partly offset by strong convenience sales and high cost efficiency in Statoil Fuel & Retail s operations in the region. Statoil Fuel & Retail continued to expand its service station network in 2011, adding 51 new stations in Central and Eastern Europe. Acting on attractive opportunities, the Group also added 12 new stations to its Scandinavian network during Statoil Fuel & Retail initiated a cost savings programme in The programme progressed ahead of plan, generating savings of NOK 105 million in 2011, an increase of NOK 55 million compared with the initial target for the year. The scope of the total cost savings programme, initially targeting total savings of NOK 400 million by 2015, was increased in 2011 by NOK 50 million to NOK 450 million. The Group established a real estate asset management strategy in 2011, aimed at maximising customer and shareholder value. The strategy is based on three focused areas related to improving the company s network and market position, creating value through optimising real estate asset management and providing capital flexibility and efficiency. Gross profit for the full year 2011 was NOK 10,035 million compared with NOK 10,532 million in Operating profit was NOK 1,865 million compared with NOK 2,342 million in This translates into an annual return on capital employed (ROCE) of 10.7 percent, compared with 11.1 percent in Earnings per share were NOK 3.60, compared with NOK 5.29 the previous year. The Board of Directors proposes to pay a dividend of 50 percent of 2011 earnings per share, amounting to NOK 1.80 per share. The dividend proposal is based on the dividend policy, which states an ambition of distributing at least 50 percent of earnings per share and considering expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. The dividend proposal reflects balancing capital structure and solidity with focusing on shareholder returns. The Group announced its medium term financial targets in 2011, including an after tax return on capital employed above 13 percent, to be achieved through organic growth of new stations per year, delivering on the cost saving programme of NOK 450 million and an ambition to reduce working capital by NOK 500 million. The financial targets also include maintaining a capital structure in line with an investment grade profile. Statoil Fuel & Retail targets the ratio of total debt to adjusted EBITDA in the interval The ratio may be higher or lower for limited periods of time. Separation from Statoil Statoil Fuel &Retail ASA was established in May 2010 as a separate legal entity within the Statoil Group. In October 2010 Statoil ASA transferred all activities relating to the fuel and retail business to Statoil Fuel & Retail. Following an initial public offering, shares of Statoil Fuel & Retail ASA were listed on the Oslo Stock Exchange on 22 October Statoil ASA is the majority shareholder in Statoil Fuel & Retail, holding 54 percent of the shares as of 31 December The business Statoil Fuel & Retail is the leading Scandinavian road transportation fuel retailer with more than 100 years of operations and experience in Scandinavia and approximately 20 years in Central and Eastern Europe. The Group has a broad retail network across Scandinavia, Poland, the Baltics and Russia with 2,305 fuel stations at the end of December 2011, including full-service (fuel and convenience) and automated (fuel only) stations. In addition, Statoil Fuel & Retail is involved in the sale of stationary energy (LPG, heating oil and 1) Statoil Fuel & Retail ASA (or the Company ) is a public limited company with a governance structure based on Norwegian law. Its shares are listed on the Oslo Børs (the stock exchange in Oslo, OSE) with the ticker SFR. Statoil Fuel & Retail ASA is the parent company of the group comprising Statoil Fuel & Retail ASA and its subsidiaries ( Statoil Fuel & Retail or the Group ) Statoil Fuel & Retail ASA

9 Board of Directors report kerosene) and marine fuel (marine gasoil and heavy fuel) as well as aviation fuel, lubricants and chemicals. The Group s operations are organised and report under three business areas (or segments ) and three business drivers (or functional units) which drive development, improvement initiatives and the application of best practice across the business areas. Further descriptions of Statoil Fuel & Retail s business operations are available in Statoil Fuel & Retail s 2012 corporate brochure, TouchPoint, which can be found at Strategic Platform In 2011, Statoil Fuel & Retail established a corporate vision that aligns its strategy and the efforts of the entire Group. Its vision, To be the pulse of life, states the commitment of the Group to become a more integral part of its customer s lives, a responsive and innovative partner in an ever more mobile world. The Group s mission states what it needs to do every day in order to deliver on its vision. Its mission is: To engage customers and make their lives easier. Statoil Fuel & Retail inherited a set of four corporate values from Statoil ASA. To better align these values with its standalone retail business, in 2011 the Group adjusted one of the values, changing hands on to passionate. Statoil Fuel & Retail s values are now: Courageous; Open; Passionate; and Caring. The Group revised its strategic objectives in 2011, reflecting the strong customer and retail orientation of Statoil Fuel & Retail. Its new near- and medium-term strategic objectives are: Grow the Statoil Fuel & Retail business and optimise shareholder value. Be recognised by our customers as an innovative, European fuel retailer. Become a leading European retailer within sales. Create a culture of simplification, lean operations and cost efficiency. Improve capital efficiency. Attract, retain and develop passionate fuel and retail professionals. The Group aims to continue to build on its vision, mission, values and strategic platform to be a leading fuel retailer in Scandinavia and Central and Eastern Europe, with road transportation fuel retail as its core business and an associated convenience offering providing operating synergies and a significant contribution to gross profit. Market conditions The retail road transportation fuel business primarily involves the sale of various gasoline fuels, diesel fuels, biofuels (such as gasoline/ethanol blends and biodiesel blends) and, in some markets, LPG for use in private and commercial cars, motorcycles and trucks ( LPG autogas ). These fuels are dispensed from pumps located at fuel stations which can either be manned, full-service stations that generally have an integrated convenience store, or self-service automated fuel stations with limited or no sales personnel on site and no integrated convenience store. In some markets there may be an additional network of truck stops dedicated to the needs of commercial vehicles which may be automated or part of full-service fuel stations, but which have dedicated lanes with high-speed pumps and other infrastructure to cater for large vehicles. The non-retail road transportation fuel business involves bulk sales of some or all of the road transportation fuels described above to industrial and commercial customers such as car rental fleets, road construction crews, bus services and factories, and to independent resellers or retailers. Non-retail road transportation fuel sales frequently involve delivery of fuel directly to the end-user s own in-house fuel storage facilities, although a number of Statoil Fuel & Retail s wholesale customers also purchase products directly from the company s terminals and depots using their own transportation systems. With respect to customers, road transportation fuel is sold both to customers purchasing road transportation fuel in their individual capacity for personal use (business-to-consumer or B2C customers) and to business or commercial customers purchasing road transportation fuel related to their work or profession (business-to-business or B2B customers). In addition to the sale of road transportation fuel, the retail road transportation fuel business also involves sales of a broad range of convenience products and services from convenience stores that are an integrated part of full Statoil Fuel & Retail ASA 7

10 Statoil Fuel & Retail annual report 2011 service fuel stations. The range of convenience products and services provided at fuel station convenience stores includes candy, snacks, drinks and tobacco and may include a wider range of products, such as fast food and vehicle-related products, as well as the provision of certain vehicle-related services such as air and water, car wash and car rental. The fuel station convenience offerings vary between the fuel station operators and occasionally between different fuel stations of the same operator. Some fuel station operators focus mainly on car accessories and car-related products and services while others focus more on food-related products such as fast food, coffee, baked goods and beverages. Competition in the retail road transportation fuel business in the various countries in which Statoil Fuel & Retail operates largely consists of price competition at the pump and customer offer and product differentiation. The fuel price charged (net of tax) is important for a fuel retailer as this is a key determinant of the unit margin obtained on fuel sales. Statoil Fuel & Retail has a leading market position by volumes sold in the road transportation fuel business in all the Scandinavian countries. Market development in Scandinavia in 2011 was characterised by a small decline in overall fuel volumes due to a slightly lower demand from the B2C segment. Diesel sales increased, though not sufficiently to offset the decline in demand for gasoline. Sales efforts and initiatives targeted towards B2B customers, offering a wide, quality Scandinavian network, proved successful, resulting in higher demand from the segment. Statoil Fuel & Retail has the market-leading position in fuel retailing in Estonia and Latvia, and second place in Lithuania. In addition, the Group has an attractive position in Poland, being the fifth largest player in a market characterised by a promising growth outlook. The Group also has a presence in Russia. Encouraging fundamental demand drivers in Central and Eastern Europe and the potential in a cross-border network offering to B2B customers represent an attractive opportunity for Statoil Fuel & Retail. Market conditions in the region during 2011 were challenging, with pressure on road transportation fuel unit margins. The major players in Poland and Russia held back pump prices despite higher refined oil product prices, resulting in deteriorating fuel unit margins during the year. However, the pressure in the market alleviated at the end of the year, and the fuel unit margin improved during the fourth quarter. A domestic price war in the Estonian fuel retail market during the second quarter also put pressure on fuel unit margins during Statoil Fuel & Retail has a solid market position for lubricants in Scandinavia, a competitive region with international and regional players. In Central and Eastern Europe, Statoil Fuel & Retail has an attractive position, with a particularly positive development within metalworking fluids and total fluid management for industrial customers. Statoil Fuel & Retail has a leading market position within aviation fuel in Scandinavia, with a presence at the majority of Scandinavian airports. The Group also has a presence at several airports in Europe. The aviation fuel markets are characterised by strong competition, being served by national, regional and international players. Financial statements Going concern In the opinion of the Board of Directors of Statoil Fuel & Retail ASA, the consolidated financial statements in this Annual Report provide a true and fair view of the Group s financial performance during 2011 and its financial position at 31 December According to section 3-3 of the Norwegian Accounting Act, the Board confirms that the consolidated financial statements and the financial statements of the parent company have been prepared based on the going-concern assumption and that it is appropriate to use this assumption. Gross profit Total revenue and other income increased from NOK 65,830 million in 2010 to NOK 73,691 million in 2011, driven by higher underlying refined oil product prices, which also led to an increase in the cost of goods sold from NOK 55,298 million in 2010 to NOK 63,657 million in Gross profit for 2011 was NOK 10,035 million, a decrease of 4.7 percent compared with 2010 as gross profit improvements from road transportation fuel and convenience were offset by a decline in gross profit from other products and fees and services Statoil Fuel & Retail ASA

11 Board of Directors report The growth in road transportation fuel gross profit was driven by an increase in the road transportation fuel unit margin, achieved primarily by strong micro market pricing management in Scandinavia and the favourable development of refined oil product prices in the second quarter. Volumes remained on par with 2010, as Statoil Fuel & Retail maintained its strong position in the Scandinavian fuel market and increased the number of its stations in Central and Eastern Europe. Statoil Fuel & Retail expanded its network by 63 stations during 2011, of which 51 were in Central and Eastern Europe and 12 in Scandinavia. A total of 41 low-throughput stations were closed down during the year. Gross profit from convenience for 2011 improved compared with 2010, primarily driven by higher sales and an improved product mix. With a focus on sales and continued product development, in addition to successful campaigns, destination categories such as MADE TO GO food line products and car wash increased in Scandinavia and Central and Eastern Europe. The decline in gross profit from other products was due to divestment of non-core businesses in 2010 and lower heating oil volumes in In addition, lower margins and volumes within Aviation offset a gross profit improvement for Lubricants. The reduction in unit margins for Aviation was caused by foreign exchange effects from supply contracts which had a negative impact in the first six months of Changes to the supply contracts limiting these foreign exchange effects were successfully implemented from 1 July Gross profit from Lubricants improved compared with 2010, driven by increased volumes following successful expansion in Central and Eastern Europe. Gross profit from fees and services (consisting mainly of income from cards, car rentals, other rental income, corporate and Group eliminations) declined due to reduced income from exchange and throughput agreements in Scandinavia, carve out adjustments and reduced gross profit from sales of services to Statoil ASA. Distribution and administrative costs Distribution costs in 2011 declined 3.7 percent to NOK 7,935 million, despite standalone and separation costs increasing the Group s cost base post IPO, inflationary pressure and costs related to network expansion. The decline was a result of focusing on lean operations and tight cost control, the divestment of businesses in the Scandinavian segment during 2010 and 2011, and lower depreciation and generated savings from the ongoing cost savings programme. Increased eliminations and reduced sales of services to Statoil ASA from the corporate segment also contributed to the cost reductions. The cost savings programme targets cost elements across Statoil Fuel & Retail s value chain, aiming at reducing the cost of goods sold as well as distribution costs and administrative expenses. The targeted total savings are NOK 450 million by Depreciation, amortisation and impairment decreased by NOK 130 million compared with 2010, primarily due to an impairment of NOK 96 million in Administrative expenses in 2011 increased by 22.5 percent to NOK 272 million mainly due to increased headquarter costs as Statoil Fuel & Retail operated as a standalone Group. Other gain/(loss), net In 2011, the net gain of NOK 38 million primarily comprised a net gain from the sale of fixed assets and divested business in Scandinavia. Operating profit Operating profit for 2011 was NOK 1,865 million, a decrease of NOK 477 million compared with The decrease was primarily explained by the gain of NOK 264 million from the sale of Swedegas in 2010 and a decrease in gross profit from fees and services. The reduction in distribution costs partly offset the decline in gross profit. Net finance expenses Net finance expenses for 2011 decreased by NOK 51 million compared with 2010, to NOK 368 million, mainly due to lower interest expenses and foreign exchange losses. Interest expenses were lower in 2011 due to lower average financial liabilities than in Income tax expense For 2011, the effective income tax rate was 28 percent. The effective income tax rate was equal to the nominal tax rate in Norway but higher than the nominal tax rate in the other countries in which Statoil Fuel & Retail operates. This is due to permanent differences, taxable losses in countries where the local tax rate is lower than 2012 Statoil Fuel & Retail ASA 9

12 Statoil Fuel & Retail annual report 2011 the nominal tax rate and tax related to previous years. For 2010, the effective income tax rate was 17.7 percent. The tax rate was primarily influenced by the utilisation of tax losses and temporary differences in Denmark. The sale of Swedegas in the first quarter of 2010 resulted in a non-taxable gain. Cash flow Cash flow provided by operating activities for the year ending 31 December 2011 was NOK 840 million, a decrease of NOK 4,073 million from the year ending 31 December In 2011, changes in working capital had a negative effect on cash flow from operating activities of NOK 1,436 million, compared with a positive effect of NOK 1,907 million in Net cash used in investing activities was NOK 1,209 million in the year ending 31 December 2011, compared with NOK 10 million in In 2010, investment activity was low due to group-wide restrictions on capital expenditure imposed by Statoil ASA. In 2011, Statoil Fuel & Retail spent NOK 1,497 million on investments in and acquisition of property, plant and equipment and intangible assets. The Group recorded total proceeds from the sale of property, plant and equipment of NOK 268 million, compared with NOK 297 million in In 2011 net proceeds from the sale of business and equity securities was NOK 20 million compared with net NOK 518 million in In 2010 the main proceeds came from the sale of Swedegas and the domestic heating gas business in Norway. Cash used in financing activities was NOK 1,057 million in 2011, compared with NOK 5,026 million in In 2011 Statoil Fuel & Retail paid a dividend of NOK 900 million and utilised NOK 200 million of its short-term revolving loan facility. In 2010, long-term loans and short-term intra-group bridging loans from Statoil ASA were replaced by a new bank facility agreement after the listing of Statoil Fuel & Retail ASA. Balance sheet During 2011, total assets were reduced by approximately NOK 900 million to NOK 22,825 million. At year-end 2011, net debt was NOK 5,714 million, consisting of cash and cash equivalents of NOK 641 million, current interest bearing liabilities of NOK 1,450 million, non-current interest bearing liabilities of NOK 4,132 million and net pension liabilities of NOK 775 million. In 2011 net pension liabilities increased by NOK 500 million, primarily due to net actuarial losses of NOK 515 million. Actuarial losses have been recognised in other comprehensive income. Statoil Fuel & Retail s capital flexibility for future investments and growth through undrawn borrowing facilities stood at NOK 2,800 million at the end of The Group s equity ratio at 31 December 2011 was 32.3 percent. Statoil Fuel & Retail issued bonds of NOK 1,500 million in the Norwegian market on 15 February The purpose of the bond issuance is to refinance parts of Statoil Fuel & Retail s current bank financing, increase the number of funding sources and extend its debt maturity structure. In 2012 changes were made to the pension plans that will reduce net pension liability by approximately NOK 300 million. Further information is disclosed in note 35 to the consolidated accounts. Segment reporting Statoil Fuel & Retail has three formal reporting segments: Scandinavia, Central & Eastern Europe and Special Products. Scandinavia Scandinavia recorded a solid performance in 2011, in a year characterised by high refined oil prices and a competitive environment. Statoil Fuel & Retail continued to hold the leading position among fuel retailers in Scandinavia, opening 12 new stations during the year. Strong micro market pricing management, lean operations and stringent cost control resulted in a robust result for the segment. Continued efforts in sales, innovation and product development resulted in higher profit from convenience. A positive development in the health, safety and environment (HSE) results contributed to operational excellence in Gross profit for the full year 2011 at NOK 7,683 million was on par with 2010, with positive contributions from road transportation fuel and convenience. Gross profit from other products and fees and services declined compared with Foreign exchange fluctuations, mainly related to the depreciation of the Swedish Krone, had a negative impact on gross profit. Gross profit from road transportation fuel increased as a result of improved fuel unit margins compared Statoil Fuel & Retail ASA

13 Board of Directors report with 2010, following strong micro market pricing management and the favourable development of refined oil product prices in the second quarter. Transportation fuel volumes remained on par with 2010 as the Group maintained its leading position in the Scandinavian fuel market. Gross profit from convenience rose due to higher profitability and reclassifications compared with The product mix developed positively with a higher share of high margin products such as car wash and MADE TO GO food line products. Gross profit from other products declined due to lower sales of heating oil and the divestment of non-core businesses. Gross profit from fees and services decreased compared with The main drivers for the decrease were carve out adjustments, the separation from Statoil ASA, reduced income from exchange and throughput agreements and other incomes in 2010, partly offset by an increase in gross profit from continued operations. Distribution costs for 2011 were slightly lower than in 2010 due to stringent cost control and cost reduction measures offsetting standalone costs, separation and inflationary pressures. The divestment of businesses also contributed to the decline. Depreciation of the Swedish Krone had a positive impact on the cost base in Depreciation, amortisation and impairment declined compared with 2010 due to a lower asset base. Operating profit for 2011 was NOK 1,866 million, an increase of NOK 31 million compared with This improvement was mainly related to lower distribution costs and gains related to the sale of non-core businesses. Central & Eastern Europe Central & Eastern Europe experienced a challenging retail fuel market in 2011, with a competitive environment particularly in Poland, and a domestic price war in Estonia during the first half of 2011, resulting in depressed road transportation fuel unit margins. B2B road transportation fuel sales were strong and new stations showed volume growth during the year. Statoil Fuel & Retail s growth strategy in Central and Eastern Europe remained intact, with 51 new stations opened in the region in Despite a challenging fuel market, the convenience side of the business continued its positive development. Focusing on lean operations secured an efficient cost base. Gross profit declined by 12.0 percent to NOK 1,532 in 2011, due to lower contributions from road transportation fuel and other products. Gross profit from convenience increased, while gross profit from fees and services was stable. Foreign exchange fluctuations, primarily related to appreciation of the Norwegian Krone against the Polish Zloty, also had a negative impact on gross profit. Gross profit from road transportation fuel was negatively impacted by a decline in fuel unit margins. Major players holding back fuel prices at the pumps put pressure on fuel unit margins in Poland and Russia. A domestic price war in Estonia during the second quarter also put pressure on fuel unit margins. Fuel volumes were slightly higher, with lower B2C volumes compensated by higher B2B volumes. Gross profit from convenience increased as a result of higher sales and increased profitability, following successful marketing campaigns for MADE TO GO food line products and car wash. Gross profit from other products declined due to changes in the product mix, lower heating oil volumes and an operational focus prioritising margins over volumes. Gross profit from fees and services was in line with Distribution costs declined in 2011 despite standalone, separation and station network expansion costs as well as inflationary pressure. A continuous focus on lean operations and foreign exchange fluctuations contri buted positively. Depreciation, amortisation and impairment were down year-on-year due to the impairment recorded in Operating profit for 2011 was NOK 57 million, compared with NOK 230 million in The decrease was mainly related to lower gross profit from road transportation fuel, partly offset by an increase in convenience gross profit and lean operations. Special Products Special Products underwent turnaround processes in 2011, partly recognised in the 2011 results. Operating profit was lower for 2011, driven by lower unit margins and volumes in Aviation. Lubricants recorded higher results driven by volume increases, though unit margins declined as a result of a change in the geographical mix and higher costs of goods. Lubricants' expansion in Central and Eastern Europe added to the cost base, which together with standalone and separation costs 2012 Statoil Fuel & Retail ASA 11

14 Statoil Fuel & Retail annual report 2011 resulted in higher costs and contributed to the decline in operating profit. Gross profit declined 3.6 percent to NOK 850 million, as improved gross profit from Lubricants and a stable development within fees and services were offset by a gross profit decline from Aviation compared with The gross profit improvement from Lubricants in 2011 was driven by a volume growth which more than offset a unit margin decline compared with The volume growth was driven by expansion into Central and Eastern Europe, with more than 400 new customers gained in The unit margin decrease was due to an increased share of volume from Central and Eastern Europe, a rise in raw material prices and intensified competition. These factors more than offset the positive effects from the cost savings programme, which has increased efficiency within production, introduced new product packaging and consolidated the product range within Lubricants. The gross profit decline within Aviation followed lower volumes and a unit margin weakened by foreign exchange effects in the supply contracts. Changes in the supply contracts limiting this currency effect were implemented from 1 July 2011, mitigating the negative impact from the second half of Aviation volumes, mainly at European airports, decreased due to intensified competition and customer portfolio optimisation. Gross profit from fees and services, consisting of chemicals, service agreements and miscellaneous items was on par with Distribution costs for 2011 increased compared with 2010 mainly driven by the reclassification of costs and increased activity in Central and Eastern Europe, combined with standalone and separation costs. These factors more than offset effects from the turnaround programmes and reduced impairment charges. Depreciation, amortisation and impairment of NOK 34 million were down by NOK 20 million compared with last year, primarily due to impairment charges in Operating profit for 2011 was NOK 51 million, a decrease from the NOK 122 million in operating profit in Gross profit from Lubricants contributed positively compared with 2010, but was more than offset by a gross profit decline within Aviation and increased distribution costs. Innovation and R&D One of Statoil Fuel & Retail s six strategic objectives is to be recognised by our customers as an innovative European fuel retailer. Statoil Fuel & Retail launched several initiatives in Based on industry best practice, a dedicated unit has been put in place to establish a structured process for innovation and to manage new ideas from capture to implementation. Those ideas will be captured from customers and suppliers as well as employees in a systematic approach that will further strengthen Statoil Fuel & Retail s innovation culture. In addition to the innovation unit, an innovation team was mobilised in 2011 with participants from across the business. The team focuses on business model innovation, examining and developing disruptive ideas outside Statoil Fuel & Retail s established core business. Innovations implemented in 2011 include the use of mobile applications to improve the customer experience in locating service stations and planning journeys; the use of mobile QR codes in marketing campaigns; testing ipads for collecting customer feedback at stations; the pre-order and collection of dinner kits at test sites in Sweden; and the piloting of a new concept for fresh sandwich production at Statoil stations. Statoil Fuel & Retail undertakes specific research and development in automotive, industrial and marine lubricants and metalworking fluids. One area of competence is Environmentally Considerate Choice (ECC), where the Group has a strong position in selected industries including hydro power, offshore and special marine applications. Statoil Fuel & Retail works closely with its customers, helping them drive technical development through dedicated cooperation in long-term partnerships. In November 2011 Statoil Fuel & Retail launched a new premium diesel in Latvia and Lithuania. The premium diesel - developed with partners - has enhanced performance, cleaning up waste deposits and reducing fuel consumption. The product has been well received in the market, showing record high conversion rates from the standard offer Statoil Fuel & Retail ASA

15 Board of Directors report Risk and risk management Statoil Fuel & Retail is, through its activities in the transportation fuel retail industry, exposed to various financial, operational and market-related risk factors. The Group s total risk exposure is analysed and evaluated at corporate level and integrated in all business activities. Below is a list of the most important risk factors for the Group. Financing Statoil Fuel & Retail is dependent on current financing agreements, the refinancing of these and/or on obtaining new financing agreements to fund its operations, acquisitions, working capital or capital expenditures. An increase in the Group s level of debt financing and/ or adverse changes in the terms for its current financing agreements, such as changes in the interest rate, may increase financing costs and reduce the Group s profitability. Currency risk Statoil Fuel & Retail operates internationally and is exposed to currency risks arising from various currency exposures, such as the translation of operating subsidiaries financial statements into NOK for reporting purposes. Exchange rate risk also arises when subsidiaries enter into transactions denominated in currencies other than their own functional currency and through assets and liabilities related to working capital and monetary items being denominated in various currencies. The Group is managed as a NOK company for currency management purposes, with primary focus on NOK cash flow. Subsidiaries with functional currencies other than NOK do not hedge NOK positions versus their own functional currency. The Group has limited activity related to currency trading on its own account. Credit risk Credit risk is the risk that the Group s customers or counterparties will cause the Group financial loss by failing to honour their obligations. Credit risk mainly arises from credit exposures with customer accounts receivables and deposits with financial institutions. Prior to entering into transactions with new counterparties, the Group s credit policy requires all counterparties to be formally identified, approved, and assigned internal credit ratings as well as exposure limits. Once established, all counterparties are monitored continuously and re-assessed at least annually. Liquidity risk Liquidity risk is the risk that Statoil Fuel & Retail will not be able to meet obligations associated with financial liabilities when due. The Group focuses on liquidity and short-term borrowing as a means of managing its exposure to this risk and maintains a considerable liquidity reserve through undrawn revolving credit and overdraft facilities. Operational risk Statoil Fuel & Retail s operations primarily involve the storage, transportation and sale of fuel products. Such activities expose it to certain risks, particularly at its terminals and other storage facilities where large quantities of fuel are stored, and at its service stations. Statoil Fuel & Retail offers a range of convenience products, including food and beverage products. Although it has implemented guidelines such as its food safety programme, the products may be mishandled at the service stations or be spoilt or contaminated before reaching the service stations. Statoil Fuel & Retail has both an extensive health, safety and environmental programme and extensive insurance arrangements, but if accidents or incidents occur and the Group is not adequately insured, significant costs may be incurred. Additionally, such accidents may affect Statoil Fuel & Retail s reputation which could lead to a decline in the sales of its products and services. Macroeconomic risk Statoil Fuel & Retail s performance depends on the demand for its key products and services. General economic and market conditions in the countries in which the Group sells its products and services influence consumer confidence and consumer purchasing power and thereby demand for the Group s products and services. The effect of economic conditions on demand is particularly relevant to the convenience business, whose products are generally available to price-sensitive customers at lower prices at other retail outlets, such as grocery stores or supermarkets Statoil Fuel & Retail ASA 13

16 Statoil Fuel & Retail annual report 2011 Product price risk Prices of crude oil and refined oil products are volatile and depend upon many factors that are beyond the Group s control and which could have a materially adverse effect on the Group s profitability. While Statoil Fuel & Retail seeks to pass on any increases in purchase costs to its consumers, its margins are also driven by industry dynamics and other factors that affect crude oil and refined oil product prices. These factors include the supply of, and demand for, crude oil and any other feedstock for the Group s products as well as the supply and demand for gasoline, diesel and other refined oil products generally in the market. Statoil Fuel & Retail operates in a highly competitive industry and competitive pressures may materially and adversely affect its results. Structural changes in the retail road transportation fuel market may increase levels of competition in the Group s markets. Corporate responsibility Statoil Fuel & Retail wishes to promote sustainable development through business operations that emphasise environmental, ethical and social considerations. It is committed to ensuring that human and labour rights, environmental considerations and the fight against corruption are respected in its business activities and by its suppliers. Statoil Fuel & Retail has clearly defined its corporate responsibility and focused its activities: it will strive to limit the negative effect on the environment of its own operations, those of its suppliers and of the products and services it sells to its customers; it is passionate and strives to develop its people, engage its customers and create win-win situations in the wider community. With these focus areas in mind, Statoil Fuel & Retail has defined the principles and objectives of corporate responsibility as they apply for Statoil Fuel & Retail. Further details are available in the Group s 2012 corporate brochure, TouchPoint, available at Health, safety and the environment (HSE) Statoil Fuel & Retail emphasises HSE. The Group has adopted HSE policies to comply with applicable regulations and to maintain and develop its HSE standards. In 2011 Statoil Fuel and Retail introduced its first HSE award, a tradition inherited from Statoil ASA. As Statoil ASA s Fuel and Retail business, Statoil Fuel & Retail won many Statoil HSE prizes. In 2011, Statoil Fuel & Retail s first standalone HSE prize was won by the Danish business unit for improvements in food safety. In August 2011 the Corporate Executive Committee of Statoil Fuel & Retail approved and launched an HSE strategy that aims at making HSE a competitive edge in the way we do business. The task of tailoring the strategy to fit the Group s vision, mission and values involved all of Statoil Fuel & Retail s business areas, business drivers and its HSE network. The strategy established a number of ambitions and targets for performance reaching to In addition to its HSE strategy, in 2011 the corporate Corporate Executive Committee approved new guidelines for the investigation of serious incidents in Statoil Fuel & Retail. The purpose of those investigations is to harvest learning opportunities, to identify remedial actions and to reduce similar incidents in the future. During 2011, Statoil Fuel & Retail further developed the HSE requirements it applies in its procurement processes in relation to working safely with suppliers and contractors. Additional improvement of this process is the core HSE ambition for the Group in Statoil Fuel & Retail focuses on delivering transport fuel responsibly. The Group takes its share of responsibility for the well-being of its employees, customers and the environment. Despite this, on 13 September 2011 a fatal accident occurred in which an employee of one of Statoil Fuel & Retail s contractors died. For the year ending 31 December 2011 the Group s serious incident frequency (SIF, the number of serious incidents per million manhours worked) was 1.8, reflecting 49 serious incidents. This compares with an SIF of 2.0, reflecting 53 serious incidents, in Driving down robberies, enhancing food safety The positive development in the SIF in 2011 is primarily due to a reduction in the number of serious robberies in Scandinavia compared with During 2011, Statoil Fuel & Retail has continued its focus on an anti-robbery policy which includes robbery prevention training for all employees and improved external communication Statoil Fuel & Retail ASA

17 Board of Directors report In 2011, Statoil Fuel & Retail s project developing common standards for ensuring food safety throughout its supply chain continued. The project has developed standards and procedures for securing food safety when working with suppliers and strengthened the requirements applied in the procurement of food products. Environmental impact of our own operations All of Statoil Fuel & Retail s activities, from the purchase of refined oil products, foodstuffs and the manufacture of lubricants and chemicals, through transportation and ultimately sales to customers, have the potential to impact the environment and the communities in which the Group operates. That impact may be the result of controlled or uncontrolled emissions, discharges or land usage threatening biodiversity or cultural heritage. It is Statoil Fuel & Retail s ambition to engage with its customers and partners and, through operating its business responsibly, to enable them to make environmentally responsible choices every day. The Group has established a set of environmental principles to guide the work: Statoil Fuel & Retail will act according to the precautionary principle. Statoil Fuel & Retail will assess all relevant environmental and social issues and minimise its negative impact on the environment, whilst continuing to address health, safety and economic issues. Measures to enhance the positive impact of the Group s operations on environment and society shall be evaluated. Statoil Fuel & Retail will comply with applicable legislation and regulations. Statoil Fuel & Retail will set specific targets and improvement measures based on relevant knowledge of the area affected, and by applying risk analyses to assess environmental and health effects. Statoil Fuel & Retail will consult and cooperate with relevant stakeholders and strive for solutions acceptable to all affected parties. Statoil Fuel & Retail will make its policy available to the public, openly report its performance and use a competent and independent body to verify its reported data. Statoil Fuel & Retail will work actively to limit the effects of fossil fuels on climate by addressing energy efficiency and bioproducts. Statoil Fuel & Retail will continuously improve its energy efficiency, environmental performance and products. Statoil Fuel & Retail will seek to minimise the generation of waste and to minimise the health and environmental impacts of every stage of its value chain. Statoil Fuel & Retail has implemented many practices aimed at reducing the carbon footprint of the Group s own operations, including: an HSE declaration to be signed by each supplier, secured by periodic audits. a specification for the upgrade of tanker trucks to the best EU standard engines. training for truck and company car drivers in defensive driving. videoconferencing facilities installed or upgraded in all Statoil Fuel & Retail headquarters to reduce travel needs. carbon offsetting for employees air journeys Statoil Fuel & Retail ASA 15

18 Statoil Fuel & Retail annual report 2011 Energy consumption and CO2 emissions from all activities, including transport, the heating of service stations, terminals, factories and offices, and electricity supply to service stations, terminals, factories and offices Energy consumption (MWh) Central & Eastern Europe 238, , , ,161 Scandinavia 671, , , ,443 Special Products 11,368 16,686 16,503 24,849 Total 920, , , ,453 Carbon dioxide emissions (tonnes of CO 2 ) Central & Eastern Europe 18,050 30,302 28,511 39,848 Scandinavia 55,551 32,017 37,111 38,785 Special Products 1,487 1,893 2,056 2,333 Total 75,088 64,212 67,678 80,966 Accidental oil spills to sea/water or land in all activities, including service stations, terminals, factories and offices. Net follows clean-up and remediation. Accidental oil spills Number of spills (net volume>0) Gross volume (m³) Net volume (m³) Various initiatives addressing energy efficiency have been carried out during 2011, featuring reductions in energy consumption, costs and emissions. In Sweden, Statoil Fuel & Retail s terminal operations reduced their CO2 emissions by 50 percent compared with 2010 thanks to energy efficiency initiatives. The installation of LED lighting at two pilot stations in Denmark delivered energy cost reductions of approximately 60 percent. Activities focusing on energy efficiency will continue in the Group during People and the organisation As of 31 December 2011, Statoil Fuel & Retail employed approximately 8,400 people on a full-time equivalent basis in eight countries. Over 10,000 more people are employed at the Group s franchise stations. The requirement for good working conditions is included in Statoil Fuel & Retail s corporate responsibility principles. All employees are guaranteed a high level of safety in their work. The Group offers competitive working conditions, a positive physical and psychological working environment, and opportunities for personal and career development. Statoil Fuel & Retail is committed to ensuring diversity in the Group and to offering a workplace with no discrimination due to gender, ethnicity, national origin, skin colour, language, religion, age, faith or functional ability. The Group is actively ensuring there is no discrimination in its recruitment, salary or working conditions, promotion or development opportunities and is working to prevent harassment. The working environment in Statoil Fuel & Retail is considered to be healthy and stable. Sickness absence in Statoil Fuel & Retail was 3.96 percent in 2011, comprising a total of 80,220 sick absence days. Total recordable incidents in 2011 were 107, of which 86 affected own employees and 21 contractors. The total recordable incident frequency (TRIF) in 2011 was 4.0 and the lost time incident frequency (LTIF) was 2.8 (including contractors) Statoil Fuel & Retail ASA

19 Board of Directors report The reward system in Statoil Fuel & Retail is nondiscriminatory and supports equal opportunities. However, due to differences between types of positions and number of years experience, there are some differences in compensation when comparing the general pay levels of men and women in the Group. The ratio of male to female employees in the Group at year-end 2011 was 50:50. In 2011, Statoil Fuel & Retail had female managers in the senior management teams of most subsidiaries. Statoil Fuel & Retail s Corporate Executive Committee in 2011 consisted of eleven persons of whom two were women. Of the eight members of the Board, three are women. Approximately 30 percent of senior managers in the Group are women. The Group continues to work actively to have diversity in all its senior management. No special measures over and above those described here were required to promote anti-discrimination, availability or equal opportunity in the Group in Further details about HR-related issues are available in Statoil Fuel & Retail s 2012 corporate brochure, TouchPoint. Board and executive management The management of Statoil Fuel & Retail is the responsibility of the Company s Board of Directors and the Group s senior management. In accordance with Norwegian law, the Company s Board of Directors is responsible for, among other things, supervising the general and day-to-day management of the Group s business; ensuring proper organisation; preparing plans and budgets for its activities; ensuring that the Group s activities, accounts and asset management are subject to adequate controls; and undertaking investigations necessary to perform its duties. Statoil Fuel & Retail has agreed with its employees not to establish a corporate assembly (a supervisory body under the Norwegian Public Limited Companies Act). As a result of the decision not to have a corporate assembly, the Company s Board of Directors will, in accordance with Norwegian law, be elected at general meetings of the shareholders of the Company and will assume all responsibilities otherwise attributable to the corporate assembly. Corporate governance Statoil Fuel & Retail s corporate governance principles are based on, and comply with, the Corporate Governance Code. Further information about Statoil Fuel & Retail s corporate governance is available in the Corporate governance section of this annual report. Statoil Fuel & Retail ASA Statoil Fuel & Retail ASA is the parent company in the Group. The Company was established on 18 May 2010 to serve as the parent company for the Group and has no operations other than headquarter functions and providing of financing to its subsidiaries. Statoil Fuel & Retail ASA derives its revenues primarily from the allocation of headquarter costs to its subsidiaries. Total revenue for the year 2011 was NOK 908 million compared with NOK 232 million in In addition there was income from Group contributions and dividends from its subsidiaries of NOK 1,148 million in In 2011 Statoil Fuel & Retail converted its additional paid-in capital to retained earnings. Statoil Fuel & Retail ASA has 220 employees, an increase of 174 since 2010 reflecting increased activity in the Company during 2011, following the stock listing on 22 October Profit for the year is NOK 814 million and the Board of Directors proposes the following allocations: Transferred to retained earnings: NOK 274 million Proposed dividend: NOK 540 million Dividend In 2011, Statoil Fuel & Retail recorded a profit of NOK 1,080 million. The Board of Directors proposes to pay a dividend of 50 percent of 2011 earnings per share, amounting to NOK 1.80 per share. The dividend proposal is based on Statoil Fuel & Retail s dividend policy, stating an ambition to distribute at least 50 percent of its earnings per share and considering expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. The dividend proposal reflects balancing capital structure and solidity with focusing on shareholder returns Statoil Fuel & Retail ASA 17

20 Statoil Fuel & Retail annual report 2011 Distributable equity in Statoil Fuel & Retail ASA amounted to NOK 5,184 million at year end Outlook The global economic outlook remains uncertain. The current economic conditions in Scandinavia give reason to expect further increases in B2B demand for road transportation fuel. Coupled with improved fuel efficiency, and thus slightly lower demand from the B2C segment, overall demand for fuel in Scandinavia is expected to remain stable in a competitive market. Statoil Fuel & Retail aims to further enhance its leading position in Scandinavia, expanding its network with new stations at strategically important locations. Both full service and automat formats will be considered, covering white spots with attractive return prospects. Portfolio management of the station network will continue, closing unprofitable stations. In the convenience market, Statoil Fuel & Retail will continue its efforts in sales, innovation and product development, aiming at maintaining an attractive and profitable product offering. The economic development of Central and Eastern Europe is highly dependent on the European economic situation. The long-term outlook for market fundamentals in the region remains attractive. Statoil Fuel & Retail will continue to focus on offering strong loyalty schemes, a differentiated convenience offering and a comprehensive station network across the region. The price-sensitive nature of consumer fuel demand in the region calls for a cautious outlook for the B2C segment in the short term. Based on attractive drivers for the region, Statoil Fuel & Retail maintains the ambition of expanding its station network in Central and Eastern Europe. Development of its convenience offering to meet customer preferences will continue to be in focus. The fourth quarter financial performance for Special Products was a setback. Several decisions have been made during 2011 that will improve profitability both in Aviation and in Lubricants, including closing down one blending plant, centralising warehousing, optimising the supply chain, reducing foreign exchange exposure and improving the customer mix. The full year effects of the turnaround programmes have not yet materialised. The focus is to continue the turnaround efforts and to improve the value of the Special Product business. Statoil Fuel & Retail will continue to emphasise lean operations and cost savings, aiming at total savings of NOK 450 million by One of the next large projects generating savings within the cost savings programme is the company s newly established shared services centre in Latvia. Initiatives related to working capital will also be implemented, targeting a reduction of NOK 500 million by The real estate project will continue to progress, concentrating on improving market position, creating value through optimising real estate asset management and providing capital flexibility and efficiency. Given its key priority of maintaining a robust dividend capacity, Statoil Fuel & Retail will continue to focus on capital efficiency and cash flows. Oslo, 12 March 2012 The Board of Directors of Statoil Fuel & Retail ASA Birger Magnus Chair Ann-Charlotte Lundén Jon Arnt Jacobsen Per Bjørgås Marthe Hoff Board member Board member Board member Board member Anne Martha Støver Ketil Johannessen Petter Vådal Jacob Schram Board member Board member Board member CEO Employee representative Employee representative Employee representative Statoil Fuel & Retail ASA

21 Consolidated financial statements

22 Statoil Fuel & Retail annual report 2011 Financial statement and notes Consolidated Consolidated statement of income 21 Consolidated statement of comprehensive income 22 Consolidated statement of financial position 23 Consolidated statement of changes in equity 25 Consolidated statement of cash flow 26 Note 1 General information 27 Note 2 Significant accounting policies 27 Note 3 Operating segments 39 Note 4 Financial risk management 42 Note 5 Capital management 44 Note 6 Business combinations 45 Note 7 Other gain/(loss), net and disposals 45 Note 8 Restructuring costs 46 Note 9 Salaries and personnel expenses 46 Note 10 Other expenses 53 Note 11 Net financial expenses 53 Note 12 Income tax 53 Note 13 Earnings per share 55 Note 14 Property, plant and equipment 56 Note 15 Intangible assets 57 Note 16 Impairment testing 58 Note 17 Investments in associated companies 60 Note 18 Retirement benefit obligations 61 Note 19 Financial investments and receivables 66 Note 20 Capital, reserves and shareholder information 66 Note 21 Inventories 68 Note 22 Trade and other receivables 69 Note 23 Derivative financial instruments 69 Note 24 Cash and cash equivalents 70 Note 25 Financial liabilities 70 Note 26 Leases 71 Note 27 Provisions 72 Note 28 Trade and other payables 73 Note 29 Related parties 73 Note 30 Other commitments, contingent assets and contingent liabilities 74 Note 31 Financial instruments by category 75 Note 32 Financial instruments: measurement and market risk sensitivities 77 Note 33 Separation from Statoil ASA 79 Note 34 Reconciling cash flow information 80 Note 35 Subsequent events 82 Parent company Statement of income 84 Statement of financial position 85 Statement of cash flow 87 Note 1 General information 88 Note 2 Significant accounting policies 88 Note 3 Separation from Statoil ASA 91 Note 4 Salaries and other personnel expenses 92 Note 5 Other administrative expenses 97 Note 6 Income tax 97 Note 7 Investments in subsidiaries 99 Note 8 Cash and cash equivalents 100 Note 9 Equity and shareholders 101 Note 10 Financial liabilities and financial market risk 103 Note 11 Retirement benefit obligations 104 Note 12 Trade and other payables 107 Note 13 Related parties 108 Note 14 Reconciling cash flow information 109 Note 15 Intangible assets, property, plant and equipment 111 Note 16 Financial items and derivative financial instruments 111 Note 17 Subsequent events Statoil Fuel & Retail ASA

23 Consolidated financial statements Consolidated financial statements Consolidated statement of income (in NOK million) Notes Revenues 3 73,691 65,830 Cost of goods sold 3, 9, 29 (63,657) (55,298) Gross profit 3 10,035 10,532 Distribution costs 8, 9,16 (7,935) (8,244) Administrative expenses 9,10 (272) (222) Other gain/(loss), net Operating profit 3 1,865 2,342 Interest and other financial income Interest and other financial expenses 11 (426) (460) Foreign exchange rate gain/(loss) 11 (15) (37) Net financial expenses 11 (368) (419) Net income from associated companies Profit before income tax 1,500 1,927 Income tax expense 12 (420) (342) Profit for the period 1,080 1,585 Profit attributable to: Equity holders of the company 1,080 1,586 Non-controlling interest - (1) Basic and diluted earnings per share (NOK) Weighted average number of shares (in million) Statoil Fuel & Retail ASA 21

24 Statoil Fuel & Retail annual report 2011 Consolidated statement of comprehensive income (in NOK million) Notes Profit for the period 1,080 1,585 Foreign currency translation differences (315) (40) Net movement in cash flow hedges Actuarial gain/(loss) 18 (515) 80 Income tax on income and expenses recognised directly in other comprehensive income (22) Other comprehensive income (686) 18 Comprehensive income 394 1,603 Comprehensive income attributable to: Equity holders of the company 394 1,604 Non-controlling interest - (1) Comprehensive income 394 1, Statoil Fuel & Retail ASA

25 Consolidated statement of financial position at 31 December Consolidated financial statements (in NOK million) Notes Assets Intangible assets Deferred tax assets Property, plant and equipment 14 9,901 10,323 Investments in associated companies Pension assets Financial investments and receivables Financial receivables related parties Other non-current receivables Total non-current assets 11,672 12,040 Inventories 21 1,981 1,847 Trade and other receivables 22 8,187 7,857 Trade and other receivables related parties Cash and cash equivalents ,533 Total current assets 11,152 11,685 Total assets 22,825 23, Statoil Fuel & Retail ASA 23

26 Statoil Fuel & Retail annual report 2011 Consolidated statement of financial position at 31 December (in NOK million) Notes Equity and liabilities Equity Share capital 1,500 1,500 Additional paid-in capital 4 5,848 Retained earnings 6, Other reserves (256) 58 Total equity attributable to equity holders of the company 7,375 7,899 Non-controlling interests 1 8 Total equity 20 7,376 7,907 Liabilities Financial liabilities 25 4,132 4,140 Deferred tax liabilities Pension liabilities Provisions Total non-current liabilities 5,608 5,264 Trade and other payables 27, 28 6,089 6,808 Trade and other payables related parties 29 2,135 2,496 Current tax payable Financial liabilities 25 1, Total current liabilities 9,840 10,554 Total liabilities 15,449 15,818 Total equity and liabilities 22,825 23,725 Oslo, 12 March 2012 The Board of Directors of Statoil Fuel & Retail ASA Birger Magnus Chair Ann-Charlotte Lundén Jon Arnt Jacobsen Per Bjørgås Marthe Hoff Board member Board member Board member Board member Anne Martha Støver Ketil Johannessen Petter Vådal Jacob Schram Board member Board member Board member CEO Employee representative Employee representative Employee representative Statoil Fuel & Retail ASA

27 Consolidated financial statements Consolidated statement of changes in equity (in NOK million) Notes Share capital Equity from parent Additional paid-in capital Retained earnings Other reserves Hedging reserve Foreign currency translation SFR shareholders' equity Noncontrolling interest Total At 31 December , (89) 7, ,762 Profit for the period - 1, ,586 (1) 1,585 Foreign currency translation (40) (40) - (40) Actuarial gain/(loss) 18 - (2) Income tax on income and expenses recognised directly in other comprehensive income (22) - - (22) - (22) Total other comprehensive income - (2) (40) Total comprehensive income - 1, (40) 1,604 (1) 1,603 Transfer to Statoil ASA and other changes in equity 33 - (1,641) (1,454) - (1,454) Separation agreements 1 October ,500 (7,460) 5, Dividend to non-controlling interests (4) (4) At 31 December ,500-5, , ,907 At 1 January ,500-5, , ,907 Profit for the period , ,080-1,080 Foreign currency translation (315) (315) - (315) Net movement in cash flow hedges Actuarial gain/(loss) (514) - - (514) - (514) Income tax on income and expenses recognised directly in other comprehensive income (1) Total other comprehensive income (372) 1 (315) (686) - (686) Total comprehensive income (315) Separation agreement 1 October shares that required third party consent (9) - - (9) - (9) Decrease of additional paid-in capital (5,848) 5, Dividend to equity holders of the Company (900) - - (900) - (900) Dividend to non-controlling interests (8) (8) Purchase and allocation of treasury shares to employees (11) - - (11) - (11) Share-based payment At 31 December , ,127 1 (257) 7, , Statoil Fuel & Retail ASA 25

28 Statoil Fuel & Retail annual report 2011 Consolidated statement of cash flow (in NOK million) Notes OPERATING ACTIVITIES Profit before income tax 1,500 1,927 Adjustments to reconcile profit before income tax to net cash flows provided by operating activities Depreciation, amortisation and impairment losses 14, 15 1,169 1,299 Net interest Foreign exchange (gain)/loss on operating activities 7 (59) Pension costs Other changes (157) (115) Cash flows from changes in working capital Inventories 21 (133) (111) Trade and other receivables 22 (226) 328 Trade and other payables 28 (1,077) 1,690 Pension contributions paid 18 (228) (242) Interest received Interest paid 11 (249) (263) Taxes paid 12 (258) (90) Cash flow provided by/(used in) operating activities 840 4,913 INVESTING ACTIVITIES Purchases of property, plant and equipment and intangible assets 14, 15, 34 (1,439) (824) Proceeds from sale of property, plant and equipment Purchase of businesses and equity securities 6, 34 (58) - Proceeds from sales of businesses and equity securities Cash flows provided by/(used in) investing activities (1,209) (10) FINANCING ACTIVITIES Proceeds from long term borrowings 25-3,911 Proceeds from short term borrowings 25 1, Repayment of short term borrowings 25 (1,900) - Proceeds from short term borrowings, related parties 29,33-5,000 Repayment of short term borrowings, related parties 29,33 - (5,000) Proceeds from/(repayments of) financial liabilities related parties, net 29 - (7,633) Repayment of financial liabilities (39) - Proceeds from issuance of new share capital Dividends paid to equity holders of the parent company (900) - Dividends paid to non-controlling interests (8) - Payments for treasury shares (11) - Net equity contribution to Statoil ASA - (2,104) Cash flows provided by/(used in) financing activities (1,057) (5,026) Net increase/(decrease) in cash and cash equivalents (1,426) (123) Effect of exchange rate changes on cash and cash equivalents (28) (22) Cash and cash equivalents at 1 January 931 1,076 Cash and cash equivalents at 31 December 34 (525) Statoil Fuel & Retail ASA

29 Consolidated financial statements Notes to the consolidated financial statement Note 1 General information Statoil Fuel & Retail ASA is incorporated and domiciled in Norway. The address of its registered office is Sørkedalsveien 8, N-0369 OSLO, Norway. Statoil Fuel & Retail ASA was incorporated as a public limited liability company on 18 May 2010 as a wholly-owned subsidiary of Statoil ASA ( Statoil ) to serve as the parent company for the Fuel and Retail business, which historically was a business cluster within the Manufacturing and Marketing reporting segment of Statoil. With effect from 1 October 2010, Statoil transferred all activities and subsidiaries relating to its Fuel and Retail business to Statoil Fuel & Retail ASA. On 22 October 2010, the shares of Statoil Fuel & Retail ASA were listed on the Oslo Stock Exchange. In conjunction with the listing, Statoil sold 46 percent of its shares. At 31 December 2011, Statoil remains the majority shareholder in Statoil Fuel & Retail ASA, owning 54 percent of the shares, and Statoil Fuel & Retail ASA continues to be a subsidiary of Statoil. Statoil Fuel & Retail ASA ( the Company ) and its subsidiaries ( the Group or Statoil Fuel & Retail ) operates fuel service stations both under dealer and franchise operating models, as well as company operated models. Statoil Fuel & Retail sells road transportation fuel, lubricants, stationary energy, chemicals and convenience products in Scandinavia and Central and Eastern Europe, and marine fuel in Norway. In addition, the Group produces and sells lubricant oils and supplies aviation fuel at major airports in Europe. The consolidated financial statements were authorised for issue by the Board of Directors on 12 March Note 2 Significant accounting policies General The Group consists of Statoil Fuel & Retail ASA, its subsidiaries and interests in associated companies. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU). Basis of preparation The consolidated financial statements have been prepared under the historical cost convention, except for defined benefit plan assets and derivative financial instruments that are recognised at fair value. Basis of consolidation The consolidated financial statements include Statoil Fuel & Retail ASA and subsidiaries where the Group holds, directly or indirectly, the majority of voting rights or has control over the financial and operating policy of the entity so as to obtain benefits from its activities. Controlling interest is usually achieved when Statoil Fuel & Retail has more than 50 percent of voting rights. In some situations de facto control of an entity may be achieved through other means than voting rights, such as through contractual agreements. Subsidiaries that are acquired or sold during the year are included or excluded from consolidation when the Group achieves control or ceases to have control. Changes in ownership interest of a subsidiary, without loss of control, is treated as an equity transaction. Transactions and inter-company balances between subsidiaries and associated companies are eliminated. Transactions with associated companies are eliminated according to Statoil Fuel & Retail s share in the associated company Statoil Fuel & Retail ASA 27

30 Statoil Fuel & Retail annual report 2011 Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from Statoil Fuel & Retail s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination (see below) and the non-controlling share of changes in equity since the date of the combination. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. Foreign currencies Translation to Norwegian kroner (NOK) of foreign companies The individual financial statements of a subsidiary company are prepared in the company s functional currency, normally the currency of the country where the company is located. Statoil Fuel & Retail ASA uses NOK as its functional currency, which is also used as the presentation currency for the consolidated financial statements. In preparing the consolidated financial statements, the financial statements of foreign operations are translated using the exchange rates at year-end for statement of financial position items and monthly average exchange rates for statement of income items. Individual transactions with a significant impact on the consolidated statement of income are translated using the transaction date exchange rate. Translation gains and losses are recognised in other comprehensive income, and included in shareholder s equity as a separate component. The translation difference derived from each foreign subsidiary, associated company or joint venture is reversed through the statement of income as part of the gain or loss arising from the divestment or liquidation of such a foreign entity when there is a loss of control, joint control or significant influence, respectively. Transactions and balances in foreign currencies In individual companies, transactions in currencies other than the entity s functional currency are recorded at the exchange rate at the date of transaction. Monetary items denominated in foreign currencies are translated at the exchange rate at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated subsequently. Foreign currency differences arising on translation are included in net finance expenses in the consolidated statement of income. Presentation Expenses are presented on a functional basis in the statement of income in conformity with industry practice. Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to Statoil Fuel & Retail. Goodwill is initially recognised at cost, being the excess of the aggregate of consideration transferred and any amount recognised for the non-controlling interest over the net identifiable assets acquired and liabilities assumed. If, after reassessment, Statoil Fuel & Retail s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated statement of income. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that are deemed to be assets or liabilities in the scope of IAS 39 will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income, depending on the type of financial instrument it is. If the contingent consideration is classified as equity, it will not be re-measured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. The non-controlling interests in the acquiree are initially measured at the non-controlling proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. When Statoil Fuel & Retail acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree Statoil Fuel & Retail ASA

31 Consolidated financial statements If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss. Acquisition costs incurred in connection with a business combination, other than those associated with the issue of debt or equity securities, are expensed as incurred. Acquisition of non-controlling interests When acquiring a non-controlling interest the difference between the cost of the non-controlling interest and the noncontrolling interest s share of the assets and liabilities is reflected in the consolidated statement of financial position at the date of acquisition of the non-controlling interest as an equity transaction. Revenue recognition Revenues from the sale of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the customer, which is normally at the point of delivery of the goods based on the contractual terms of the agreements, if any. In markets where Statoil Fuel & Retail purchases refined oil products excluding excise duties (such as in Scandinavia, Estonia, Latvia and Lithuania), revenues from sales to customers are reported net of duties taxes. In markets where Statoil Fuel & Retail purchases refined oil products including excise duties, such as in Poland and Russia, its revenues and costs of goods sold are reported including these duties. Revenues are presented net of discounts. Statoil Fuel & Retail also has revenues from franchise agreements. Franchise agreements include various arrangements, eg rent for using Statoil Fuel & Retail owned service stations, payment for marketing activities and fees for the right to use Statoil Fuel & Retail brands. The agreements include both fixed and variable considerations. An example of the latter is fees that are calculated as a percentage of revenue. The revenues from the franchise agreements are recognised as the service is provided or as the sales are performed by the franchisees. Cost of goods sold The cost of goods sold is a direct expense related to the products sold by Statoil Fuel & Retail. This includes costs of finished goods and input materials and costs of transportation of fuel products to company owned and operated fuel stations. For Statoil Fuel & Retail s own production, such as production of lubricants, the cost of goods sold also includes direct labour costs, production overheads, production facility operating costs and depreciation related to production facilities. Distribution costs Distribution costs include selling and marketing expenses, payroll costs for Statoil Fuel & Retail s employees involved in sales, marketing and distribution, advertising costs, salespersons expenses, agents commissions payable by Statoil Fuel & Retail, warehouse costs for finished goods, transport costs arising out of the distribution of Statoil Fuel & Retail s products (other than transportation costs of road transportation fuel products to fuel stations operated under models where Statoil Fuel & Retail owns and operate the fuel stations) and costs of insurance purchased by Statoil Fuel & Retail related to items included within distribution costs. Costs associated with the promotion and operation of Statoil Fuel & Retail s loyalty programmes and the branding of Statoil Fuel & Retail s trucks, fuel stations, depots and terminals are also included in distribution costs. Any environmental liabilities arising from the distribution of Statoil Fuel & Retail s products and costs associated with the maintenance of Statoil Fuel & Retail s terminals, depots, transportation network and the storage facilities for Statoil Fuel & Retail s fuel products at its fuel stations are also included in distribution costs. Depreciation, amortisation and impairment charges relating to distribution assets are reflected in distribution costs. Administrative expenses Administrative expenses mainly include salaries related to employees in management, staff and support functions with no or limited direct operational responsibility. In addition, administration expenses include the costs of professional services and allocations from Statoil s shared and corporate services. Other gain/(loss), net This includes gains and losses from sales of assets by Statoil Fuel & Retail, such as sales of subsidiaries or fuel stations, plants, depots or terminals, and impairment of held-for-sale assets. Financial income/(expense) Dividends received Dividends from investments are recognised in the consolidated statement of income when Statoil Fuel & Retail has a right to receive the dividends Statoil Fuel & Retail ASA 29

32 Statoil Fuel & Retail annual report 2011 Interest income/(expense) Interest income/(expense) is recognised in the consolidated statement of income as it is accrued, based on the effective interest method. Income tax Income tax expense comprises current tax and deferred tax. Current tax Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amount for assets to be received (disputed tax positions for which payment has already been made) in each case are recognised within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recorded in the period in which they are earned or incurred, and are presented in net financial expenses in the statement of income. Deferred tax Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the consolidated statement of financial position date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognised based on future taxable profits, convincing evidence is required. Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Current and deferred tax for the period Current and deferred tax are recognised as expense or income in the consolidated statement of income, except where they relate to items recognised in other comprehensive income or directly to equity, in which case the tax is also recognised as other comprehensive income or directly to equity. Intangible assets Intangible assets are stated at cost, less accumulated amortisation and accumulated impairment losses. Intangible assets acquired separately are carried initially at cost. An intangible asset acquired as part of a business combination is recognised separately from goodwill at its fair value if the asset is separable or arises from contractual or other legal rights. Intangible assets with finite useful life are amortised on a straight-line basis over their expected useful life. The expected useful lives of the assets are reviewed on an annual basis and changes in useful life are accounted for prospectively. Goodwill Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill arising on the acquisition of a foreign operation is treated as an asset of the foreign operation, and consequently expressed in the functional currency of the foreign operation. For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units expected to benefit from the synergies of the business combination. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal. Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of a decommissioning obligation, if any, and, for qualifying assets, borrowing costs. Exchanges of assets are measured at the fair value of the asset given up unless the exchange transaction lacks commercial substance or the fair value of neither the asset received nor the asset given up is reliably measurable Statoil Fuel & Retail ASA

33 Consolidated financial statements Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately on a straight-line basis over the estimated useful life of the component. Maintenance expenses are recognised in the statement of income as incurred. The estimated useful lives of property, plant and equipment are reviewed on an annual basis and changes in useful lives are accounted for prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in other gain/(loss), net in the period the item is derecognised. Impairment of intangible assets with definite useful life and property, plant and equipment For impairment of intangible assets and property, plant and equipment, the Company assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Individual assets are grouped to a level that provides separately identifiable and largely independent cash flows. In assessing whether a write-down of the carrying amount of a potentially impaired asset is required, the asset s carrying amount is compared to the recoverable amount. Frequently the recoverable amount of an asset proves to be the Group s estimated value in use, which is determined using a discounted cash flow model. The estimated future cash flows are based on budgets and forecasts for a period of up to five years, and are adjusted for risks specific to the asset and discounted using a post-tax discount rate. Country risk is adjusted for in the discount rate. The use of post-tax discount rates in determining value in use does not result in a materially different determination of the need for, or the amount of, impairment that would be required if pre-tax discount rates had been used. If assets are determined to be impaired, the carrying amounts of those assets are written down to the recoverable amount which is the higher of fair value less costs to sell and value in use. Impairments are reversed to the extent that conditions for impairment are no longer present. Impairment of goodwill and intangible assets with indefinite useful life Goodwill and intangible assets with indefinite useful life are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the acquisition date, any goodwill acquired is allocated to each of the cash generating units expected to benefit from the business combination s synergies. The goodwill acquired in business combinations is allocated to the following cash-generating units: The network of Statoil Fuel & Retail service stations in each country. In total the Company operates in eight countries. The network of JET unserviced stations in each country. The Group operates the JET network of unserviced stations in Sweden and Denmark. At the acquisition date of JET Sweden and JET Denmark the Company allocated all goodwill arising on the acquisitions to the two cash-generating units. Aviation. The assessments at network and country levels are appropriate because each service station plays a role in the network and contributes to the cash flow of the network of service stations. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill or intangible asset with indefinite useful life relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised, first on goodwill and then on a pro-rata basis to the other assets of that unit. Impairments of goodwill are not reversed in future periods. Associated companies Associated companies are entities in which Statoil Fuel & Retail has significant influence but not control, generally accompanying a shareholding of between 20 percent and 50 percent of the voting rights. Investments in associates are accounted for using the equity method. Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus 2012 Statoil Fuel & Retail ASA 31

34 Statoil Fuel & Retail annual report 2011 post-acquisition changes in Statoil Fuel & Retail s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The Group s share of its associated companies post-acquisition profits or losses is recognised in the statement of income on a single line, and its share of post-acquisition other comprehensive income is recognised in the statement of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends received from an associate reduce the carrying amount of the investment. If there is evidence that the investment in the associated company is impaired, the difference between the recoverable amount and the carrying value is recognised in the net income from associated companies line of the consolidated statement of income. Employee benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Group. The accounting policy for share-based payments and pension obligations is described below. Share-based payments Members of the Group s Corporate Executive Committee have received remuneration in the form of a share-based incentive programme. The cost of equity-settled transactions with employees is measured by reference to the estimated fair value at the date at which they are granted and is recognised as an expense over the period that the employees become unconditionally entitled to the awards (vesting period). The amount recognised as an expense is adjusted to reflect the number of awards for which service and any non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet such conditions at the vesting date. For share-based payments with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Statoil Fuel & Retail may also pay the employee s tax in a share-based payment transaction. This is considered to be an employee benefit, and if there are no conditions relating to such a payment, this employee benefit is expensed in full at the grant date. Leases Determining whether an arrangement contains a lease At the inception of an arrangement, Statoil Fuel & Retail assesses whether the arrangement is or contains a lease. The Group distinguishes between lease contracts and capacity contracts. Lease contracts provide the right to use a specific asset for a period of time. Capacity contracts confer the right to and the obligation to pay for availability of certain capacity volumes related primarily to transportation. Such capacity contracts that do not involve specified single assets or that do not involve substantially all the capacity of an undivided interest in a specific asset are not considered by the Group to qualify as leases for accounting purposes. Capacity payments are recognised in the statements of income as an expense for the function for which the capacity is contractually used by the Group. Lease arrangements in which the Group is a lessee Leases for which the Group assumes substantially all the risks and rewards of ownership, are reflected as finance leases within property, plant and equipment and financial liabilities, respectively. All other leases are classified as operating leases and the costs are charged to the statement of income on a straight line basis over the lease term, unless another basis is more representative of the benefits of the lease to the Group. Finance lease assets and liabilities are reflected at an amount equal to the lower of fair value and the present value of the minimum lease payments at inception of the lease. The finance lease assets are subsequently reduced by accumulated depreciation and impairment losses, if any. The assets are depreciated over the shorter of the estimated useful life of the asset or the lease term on a straight-line basis. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability Statoil Fuel & Retail ASA

35 Consolidated financial statements Lease arrangements in which the Group is a lessor Leases in which the Group transfer substantially all the risks and rewards of ownership of an asset are classified as finance leases. The Group recognises assets held under a finance lease in the consolidated statement of financial position and present them as a financial receivable. Lease payments received under finance leases are apportioned between the finance income and reduction of the receivable. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises costs of finished goods and input material costs, cost of production, including direct labour, production overheads and transportation. Financial assets Financial assets are initially recognised at fair value when the Group becomes a party to the contractual provisions of the asset. For additional information on fair value methods, refer to the measurement of fair values section below. The subsequent measurement of the financial assets depends on which category they have been classified into at inception. At initial recognition the Group classifies its financial assets into the following three main categories: financial instruments at fair value through profit or loss; loans and receivables; and available for sale financial assets. Financial assets classified as fair value through profit or loss are carried on the consolidated statement of financial position at fair value, with the change in fair value recognised in the consolidated statement of income. Financial assets classified in the loans and receivables category are carried at amortised cost using the effective interest method. Gains and losses are recognised in the statement of income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Trade and other receivables are carried at the original invoice amount, less a provision for doubtful receivables, which is made when there is objective evidence that the Group will be unable to recover the balances in full. Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Financial assets are presented as current if they contractually will expire or otherwise are expected to be recovered within 12 months after the consolidated statement of financial position date, or if they represent derivative financial instruments held for the purpose of being traded. Other financial assets expected to be recovered more than 12 months after the consolidated statement of financial position date and for which there is no plan of realisation are classified as non-current. Financial assets are derecognised when the contractual rights to the cash flows expire or substantially all risks and rewards related to the ownership of the financial asset are transferred to a third party. Financial assets and financial liabilities are shown separately in the consolidated statement of financial position unless the Group has both a legal right and a demonstrable intention to net settle certain balances payable to and receivable from the same counterparty, in which case they are shown net in the consolidated statement of financial position. Impairment of financial assets For impairment of financial assets, the Group assesses at each statement of financial position date whether a financial asset or group of financial assets is impaired, except for the financial assets classified in the fair value through profit and loss category. If there is objective evidence that an impairment loss has been incurred for assets carried at amortised cost, the carrying amount of the asset is reduced, with the amount of the loss recognised in the consolidated statement of income. Any subsequent reversal of an impairment loss also is recognised in the consolidated statement of income Statoil Fuel & Retail ASA 33

36 Statoil Fuel & Retail annual report 2011 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits with banks and other current highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within trade and other payables in the statement of financial position. For the consolidated statement of cash flows, cash and cash equivalents include bank overdrafts, see note 34. Own shares When own shares are repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity. Gain/loss from the sale of own shares is recognised as a change in equity. Dividends Dividends are recognised as a liability in the period that they are declared by the Annual General Meeting. Financial liabilities Financial liabilities are initially recognised at fair value when the Group becomes a party to the contractual provisions of the liability. For additional information on fair value methods, refer to the measurement of fair values section below. The subsequent measurement of the financial liabilities depends on which category they have been classified into. The categories applicable for the Group are either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost using the effective interest method. Trade and other payables are carried at cost. Financial liabilities classified as fair value through profit or loss are carried on the consolidated statement of financial position at fair value, with the change in fair value recognised in the consolidated statement of income as distribution costs. Financial liabilities are presented as current if the liability is due to be settled within 12 months after the consolidated statement of financial position date, or if they are derivative financial instruments held for the purpose of being traded. Other financial liabilities which contractually will be settled more than 12 months after the consolidated statement of financial position date are classified as non-current. Financial liabilities are derecognised when the contractual obligation expires, is discharged or cancelled. The gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognised either in financial income or in financial expenses in the consolidated statement of income. Hedge accounting The Group applies hedge accounting for hedges that meet the criteria in IAS 39. The Group only has cash flow hedges. At the inception of each hedge relationship, the Group designates and documents the hedge accounting relationship, management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument s effectiveness in offsetting the exposure to change in the hedged item s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Cash flow hedges The Group uses cash flow hedges primarily to hedge forecasted transactions. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect the income statement. The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income, while the ineffective portion is recognised in the income statement. Amounts recognised directly in other comprehensive income are transferred to the income statement when the hedged transaction affects the income statement, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or liability, the gain or loss on the hedge instrument that was recognised in other comprehensive income is reclassified to the income statement in the same period or periods Statoil Fuel & Retail ASA

37 Consolidated financial statements during which the asset acquired or liability assumed affects the income statement. If the forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in other comprehensive income remain in other comprehensive income until the forecast transaction occurs. Pension liabilities The Group has pension plans for employees that either provide a defined pension benefit upon retirement, or a pension dependent on defined contributions. Defined benefit plans For defined benefit plans, the benefit to be received by employees depends on many factors including length of service, retirement date and future salary levels. The Group s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the consolidated statement of financial position date reflecting the maturity dates approximating the terms of the Group s obligations. The calculation is performed by an external actuary. Current service cost is an element of net periodic pension cost and recognised in the consolidated statement of income. The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the consolidated statement of income as a part of the net periodic pension cost. Past service cost is recognised immediately when the benefits become vested or on a straight-line basis until the benefits become vested. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are re-measured using current actuarial assumptions and the gain or loss is recognised in the consolidated statement of income during the period in which the settlement or curtailment occurs. Actuarial gains and losses are recognised in full in the consolidated statement of comprehensive income in the period in which they occur. Defined contribution plans Contributions to defined contribution schemes are recognised in the consolidated statement of income in the period in which the contribution amounts are earned by the employees. Provisions and contingent assets and liabilities Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance expenses in the consolidated statement of income. Contingent liabilities arising from past events and for which it is not probable that an outflow of resources will be required to settle the obligation, if any, are not recognised but disclosed with indication of uncertainties relating to amounts and timing involved, unless the possibility of an outflow in settlement is remote. Contingent assets arising from past events that will only be confirmed by future uncertain events and are not wholly within the Group s control, are not recognised, but are disclosed when an inflow of economic benefits is probable Statoil Fuel & Retail ASA 35

38 Statoil Fuel & Retail annual report 2011 Onerous contracts The Group recognises as provisions the obligation under contracts defined as onerous. Contracts are deemed to be onerous if the unavoidable cost of meeting the obligations under the contract exceeds the economic benefits expected to be received in relation to the contract. Asset retirement obligations Liabilities for decommissioning costs are recognised when the Group has an obligation to dismantle and remove a facility or an item of property, plant and equipment and to restore the site on which it is located, and when a reliable estimate of that liability can be made. For retail outlets, decommissioning provisions are estimated on a portfolio basis for each cash-generating unit in each country of operations. When a liability for decommissioning costs is recognised, a corresponding amount is recorded to increase the related property, plant and equipment. This is subsequently depreciated as part of the costs of the facility or item of property, plant and equipment. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding property, plant and equipment. Restructuring A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the on-going activities of the entity. Measurement of fair values Observable prices quoted in an active market represent the best evidence of fair value and are used by the Group in determining the fair values of assets and liabilities to the extent possible. A financial instrument is regarded as quoted in an active market if the prices quoted are readily and regularly available, normally through an exchange, and the prices quoted by the exchange represent actual and regularly occurring market transactions that in all significant aspects are identical to the instrument being valued. The Group considers both the actual volume and the timing of recent market transactions in determining whether prices are quoted in a sufficiently active market. Where there is no active market, fair value is determined using valuation techniques. These include using recent arm s-length market transactions; reference to other instruments that are substantially the same; discounted cash flow analyses; and pricing models. In the valuation techniques the Group also takes into consideration counterparty and own credit risks. These are either reflected in the discount rate used, or through direct adjustments to the calculated cash flows. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at amortised cost. Key sources of estimation uncertainty, judgements and assumptions General The preparation of consolidated financial statements in accordance with IFRSs and applying the chosen accounting policies requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The accounting policies applied by Statoil Fuel & Retail in which judgements, estimates and assumptions may significantly differ from actual results are discussed below. Revenue recognition gross versus net presentation excise duties Excise duties related to sale of petroleum products represent significant amounts for the Group, and therefore their presentation gross or net in revenues has a significant effect on the consolidated financial statements. Revenues include inflows of economic benefits receivable by the Group. Excise duties computed and collected directly on behalf Statoil Fuel & Retail ASA

39 Consolidated financial statements of authorities in connection with the Group s sales consequently are not reflected as revenues. This applies in markets where the Group purchases refined oil products exclusive of excise duties (Scandinavia and the Baltics). Revenues are reflected gross including excise duties in markets where purchases of refined oil products involve the non-returnable payment of excise duties (Poland and Russia). When applying this policy management has considered the detailed criteria for revenue recognition, in particular assessing the risks related to the applicable excise duties. Presentation of dealer/franchise agreements A number of service stations are operated through dealer/franchise agreements between the Group and various dealers/franchisees. The franchisees activity is not consolidated into the Group s financial statements, based on an assessment of the requirements in IAS 27 Consolidation and separate financial statement, and SIC-12 Consolidation - special purpose entities, and application of the standard s definition of the term control. A subsidiary is defined as an entity, including an unincorporated entity such as a partnership, that is controlled by the parent company. Further the definition of control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activity. Management s judgement is that the franchisees activity is not controlled by the Group as the Group does not obtain the majority of the benefits from that activity. On this basis the franchisees activity is not consolidated into the consolidated financial statement. Franchise fees are recognised in the consolidated statement of income under revenues. Lease arrangements The Group distinguishes between leases, which provide the right to use a specific asset for a period of time, and capacity contracts, which provide the Group the right to and the obligation to pay for certain capacity volume availability, related particularly to transportation agreements. Such capacity contracts are not considered by the Group to qualify as leases for accounting purposes. In determining whether or not an arrangement represents a lease, management determines the substance of the arrangement and assesses whether the fulfilment of the arrangement is dependent on the use of a specific asset, if the arrangement conveys a right to use that asset, and if the right in question is related to an integrated part of a larger asset. Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Group. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments. The Group s activity involves a considerable number of lease agreements, most of which are determined to be operational in nature. The lease accounting evaluations include determining the classification of long term leases of land and separating the assets in multi-component lease arrangements. See note 26 for further details. Impairment of assets The Group has significant investments in property, plant and equipment, as well as goodwill and intangible assets. Changes in the economic environment or expectations of future performance of an individual asset, group of assets or cash generating unit (CGU) may be an indicator that the asset is impaired requiring the book value to be written down to its recoverable amount. Impairments are reversed if the conditions for impairment are no longer present. Estimating recoverable amounts involves judgement and complexity in estimating relevant future cash flows discounted to their present value. Impairment testing requires long-term assumptions be made concerning a number of often volatile economic factors such as future market prices, currency exchange rates, discount rates and political and country risk among others, in order to establish expected future cash flows. Impairment testing frequently also requires judgement to be applied as regards applicable probabilities and probability distributions as well as levels of sensitivity inherent in the establishment of recoverable amount estimates. See note 16 for further details Statoil Fuel & Retail ASA 37

40 Statoil Fuel & Retail annual report 2011 Business combinations and purchase price allocations The Group accounts for business combinations, except for transactions between entities under common control, using the acquisition method of accounting. The acquired identifiable tangible and intangible assets, liabilities and contingent liabilities are measured at their fair values at the date of the acquisition. Any excess of the consideration over the net fair value of the identifiable assets acquired is recognised as goodwill. Determination of the fair value of the acquired assets and liabilities requires judgement and the use of assumptions that, if changed, may materially affect the consolidated statement of income and consolidated statement of financial position. See note 6 for further details. Asset retirement obligations and environmental costs Statoil Fuel & Retail s future asset retirement obligations and environmental costs depend on a number of uncertain factors such as the extent and type of remediation required. Due to uncertainties inherent in the estimation process, it is possible that such estimates could be revised in the near term. In addition, conditions that could require future expenditures may exist for various sites, including stations, facilities and product storage terminals. Such future costs are not determinable due to the unknown timing and extent of corrective actions that may be required. Statoil Fuel & Retail s operations are subject to environmental laws and regulations. These laws and regulations are subject to change, and such changes may require that the Group makes investments and/or incurs costs to meet more stringent standards or to take remedial action related to soil contamination. See note 27 for further details. Employee retirement plans When estimating the present value of defined pension obligations that represent a gross long-term liability in the balance sheet and, indirectly, the period s net pension expense in the statement of income, management make a number of critical assumptions. Most notably, assumptions made about the discount rate to be applied to future benefit payments, the expected return on plan assets and the annual rate of compensation increase have a direct and potentially material impact on the amounts presented. Significant changes in these assumptions between periods can have a material effect on the financial statements. See note 18 for further details. Carve out adjustments prior to 1 October 2010 Prior to 1 October 2010, the fuel and retail business did not constitute an independent reporting segment within the Statoil Group. Consequently, historical consolidated financial information for the Fuel and Retail business was not available. Therefore, financial statements of the Group for the period of 1 January to 30 September 2010 were extracted, or carved-out, from the consolidated financial statements of the Statoil Group and became the historical Group consolidated financial statements. The historical results of operations and carrying amounts of assets and liabilities of the Fuel and Retail business were arrived at by combining the financial information of all entities and of the assets and liabilities that were identified as being within the Fuel and Retail business during the periods presented. See note 2 in the 2010 annual consolidated financial statements for further details related to the carve-out adjustments. Changes in accounting policies due to new and amended standards and interpretations The following new and amended standards and interpretations are effective for the first time from 1 January 2011: IAS 24 Related Party Disclosures (amendment). IAS 32 Financial Instruments: Presentation (amendment). IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment). IFRIC 19 Extinguishing financial liabilities with equity instruments. Improvements to IFRSs (May 2010) Statoil Fuel & Retail ASA

41 Consolidated financial statements The adoption of the new and amended standards and interpretations did not have any significant effect on the consolidated financial statements. Standards issued but not yet effective A number of new and amended standards and interpretations are effective for annual periods beginning after 1 January 2011, and have not been applied in preparing theses consolidated financial statements. The following are relevant for Statoil Fuel & Retail: Amended IFRS 7 Financial Instruments: Disclosures (various effective dates, 1 January 2012 being the first). Amended IFRS 9 Financial Instruments (1 January 2015). IFRS 10 Consolidated Financial Statements. IFRS 11 Joint Arrangements. IFRS 12 Disclosure of Interests in Other Entities. IFRS 13 Fair Value Measurement. IAS 1 Presentation of Financial Statements. Amended IAS 12 Income Taxes (1 January 2012). Amended IAS 19 Employee Benefits. Amended IAS 27 Separate Financial Statements. Amended IAS 28 Investments in Associates and Joint Ventures. Amended IAS 32 Financial Instruments: Presentation (1 January 2014). With some exceptions the changes must be implemented retrospectively. At 12 March 2012 the new and amended standards have not been endorsed by the EU, except for part of the amendments to IFRS 7 Financial Instruments: Disclosures. Evaluation of the new and amended standards potential impact for Statoil Fuel & Retail s financial statements has not been completed. However, based on preliminary analyses, the Group does not expect any significant impact, except for The amendments to IAS 19 Employee Benefits, issued in June 2011 and effective from 1 January 2013, replaces interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). For 2012 this change would have had an estimated negative effect of approximately NOK 32 million on profit before tax.the difference between the net interest income and the actual return will be recognised in other comprehensive income. Past service costs will be recognised immediately in the period of a plan amendment and unvested benefits will no longer be spread over a future service period. The amendments moreover enhance disclosure requirements related to pensions and in particular defined benefits plans. Some of the new and amended standards will require additional disclosures. Statoil Fuel & Retail will consider early adoption of the amendments in IAS 19 during first quarter 2012, provided the amendments are endorsed by the EU. The other changes are expected to be adopted at the effective date. Note 3 Operating segments Reportable segments Statoil Fuel & Retail manages its operations in three operating segments: Scandinavia, Central & Eastern Europe and Special Products. No segments have been aggregated to form these reporting segments. Scandinavia and Central & Eastern Europe The two segments Scandinavia and Central & Eastern Europe derive their revenue primarily from the sale of fuel and convenience products on a retail basis. The Central & Eastern Europe segment includes the Group s business in Estonia, Latvia, Lithuania, Poland and Russia, while the segment for Scandinavia includes Sweden, Denmark and Norway Statoil Fuel & Retail ASA 39

42 Statoil Fuel & Retail annual report 2011 Special Products The Special Products segment derives its revenue primarily from the production and sale of lubricants and the sale of aviation fuel on a wholesale basis to airlines at 85 airports in Europe Corporate Corporate consists of the activities of corporate services, management and finance. Intercompany sales Internal sales are based on terms estimated to approximate those that prevail in arm s-length transactions with third parties. The operating revenue presented for each segment includes sales to both internal and external parties. Sales to internal parties are eliminated in the consolidated accounts. Operating segment information Operating segments align with internal management reporting to the Group s chief operating decision maker, defined as the Corporate Executive Committee (CEC). The CEC assesses the performance of the operating segments based on a measure of gross profit and operating profit. The gross profit measure comprises total revenues less cost of goods sold. The operating profit measure includes distribution costs and administrative expenses as well as the effects of less frequent recurring items from the operating segments such as restructuring costs and goodwill impairments. The measure also includes other gains or losses usually related to the disposal of assets or operations. The CEC does not assess financial items or total liabilities on segment level. The measurement basis for total revenue, gross profit and cost of goods sold follows the accounting principles used in the consolidated financial statement as described in note 2 significant accounting policies (in NOK million) Scandinavia Central & Eastern Europe Special Products Corporate Eliminations Total External revenue 50,499 14,032 9, ,691 Internal revenue (1,370) - Total revenues 50,548 14,044 9, (1,370) 73,691 Cost of goods sold (42,864) (12,512) (8,687) (63,657) Gross profit 7,683 1, (963) 10,035 Operating profit 1, (109) - 1,865 Significant non-cash items: Depreciation and amortisation (884) (222) (34) (27) - (1,169) Total non-current assets 7,456 3, ,296 (1,929) 11,672 Additions to PP&E and intangible assets ,496 Gross profit per product category Road transportation fuel 4, ,103 Convenience 2, ,815 Aviation fuel Lubricants Other products Fees and services (963) 624 Total 7,683 1, (963) 10, Statoil Fuel & Retail ASA

43 Consolidated financial statements 2010 (in NOK million) Scandinavia Central & Eastern Europe Special Products Corporate Eliminations Total External revenue 45,079 12,999 7, ,830 Internal revenue (906) - Total revenues 45,114 13,006 7, (906) 65,830 Cost of goods sold (37,388) (11,263) (6,891) (55,298) Gross profit 7,727 1, (662) 10,532 Operating profit 1, ,342 Significant non-cash items: Depreciation and amortisation (927) (233) (17) (24) - (1,202) Impairment - (72) (24) - - (96) Total non-current assets 7,902 3, ,849 (1,699) 12,040 Additions to PP&E and intangible assets Gross profit per product category Road transportation fuel 4,056 1, ,092 Convenience 2, ,727 Aviation fuel Lubricants Other products Fees and services (662) 1,041 Total 7,727 1, (662) 10,532 Geographical areas In presenting information on the basis of geographical areas, revenues from external customers are attributed to the country of the legal entity. The allocation of property, plant and equipment is based on the geographical location of the assets. Geographical data for the years ended 31 December 2011 and 2010 is presented below. Property, plant External revenue and equipment (in NOK million) Norway 20,864 18,130 2,372 2,390 Sweden 24,622 22,492 2,892 3,035 Denmark 12,548 11,146 1,268 1,347 Poland 9,083 8,361 2,040 2,261 Latvia 2,213 2, Lithuania 1,759 1, Estonia 1, Russia Other countries Total 73,691 65,830 9,901 10,323 Major customers In 2011 and 2010 the Group had no transactions with single external customers where revenues amount to more than 10 percent of the Group s total revenues Statoil Fuel & Retail ASA 41

44 Statoil Fuel & Retail annual report 2011 Note 4 Financial risk management General information relevant to risks Through its business activities Statoil Fuel & Retail is exposed to the following financial risks: Market risk (including commodity price risk, currency risk, interest rate risk and equity price risk) Liquidity risk Credit risk The management of these risks is performed by Statoil Fuel & Retail s finance function. Market risk Statoil Fuel & Retail is exposed to various market risks, including fluctuations in commodity prices, foreign currency rates and interest rates, which can affect the revenues and costs of operating, investing and financing. Commodity price risk Statoil Fuel & Retail s sales of refined oil products, which include road transportation fuel, stationary energy, aviation fuel and lubricants, constitute a material share of its gross profit. As a result, the Group s business, financial position, results of operation and cash flow are affected by changes in the commodity prices of such products. The Group seeks to pass on any changes in purchase prices to its customers by adjusting sales prices to reflect changes in refined oil products prices. The time lag between a change in refined oil products prices and a change of prices of fuel sold by the Group can impact on the gross margin of sales of these products. At 31 December 2011 Statoil Fuel & Retail had entered into commodity-based derivative contracts related to forecast sales of LPG. See note 23 derivative financial instruments for further information. At 31 December 2010, Statoil Fuel & Retail had not entered into any commodity-based derivative contracts to hedge potential market risks, and was therefore not exposed to commodity price risks from derivative financial instruments. Currency risk Statoil Fuel & Retail operates internationally and is subject to currency risks arising from foreign currency transactions and exposures. As the Group reports its consolidated results in NOK, any change in exchange rates between NOK and its subsidiaries functional currencies, primarily with respect to changes in SEK, DKK, EUR, PLN, USD, LTL, LVL and RUB, affects its consolidated statement of income and consolidated statement of financial position when the results of those subsidiaries are translated into NOK for reporting purposes. Exchange rate risk also arises when subsidiaries enter into transactions denominated in currencies other than their own functional currency and through assets and liabilities related to working capital and monetary items being denominated in various currencies. The Group is managed as a NOK company for currency management purposes with primary focus on NOK cash flow. Subsidiaries with functional currency other than NOK do not hedge NOK positions versus their own functional currency. The Group has limited activity related to currency trading on its own account. There were no unrealised trading positions at 31 December 2011 or 31 December For currency risk sensitivities see note 32 financial instruments: measurement and market risk sensitivities. Interest rate risk Statoil Fuel & Retail is exposed to interest rate risk through funding and cash management activities. Liquid assets and interest bearing financial liabilities have primarily floating interest rates. For more information on the Group s financial liabilities, see note 25 financial liabilities. The Group has not entered into any hedging transactions to manage its interest rate risk on interest bearing financial liabilities at 31 December 2011 and For interest risk sensitivities see note 32 financial instruments: measurement and market risk sensitivities Statoil Fuel & Retail ASA

45 Consolidated financial statements Equity price risk Statoil Fuel & Retail holds limited non-listed equity securities which are recognised in financial investments and receivables in the consolidated statement of financial position as available for sale assets. By holding these assets the Group is exposed to equity price risk, defined as the risk of declining equity prices, which can result in a decline in the carrying value of the Group s assets. For more information about the Group s non-listed equity securities see note 19 financial investments and receivables. Liquidity risk Liquidity risk is the risk that Statoil Fuel & Retail will not be able to meet obligations associated with financial liabilities when due. The Group focuses on liquidity and short term borrowing as a means of managing its exposure to this risk and maintains what management believes is a conservative liquidity management policy. Due to monthly payments of significant amounts of VAT and excise duties and payments for product supplies which occur three times each month, the Group experiences significant intra-month fluctuations in liquidity. The Group has established overdraft facilities to provide for its intra-month and inter-month working capital needs. Statoil Fuel & Retail s finance policy provides targets for minimum liquidity reserves and maximum short term borrowing. Non-compliance with these requirements is used as a trigger for long term funding considerations. For information on, and the maturity of, the Group s financial liabilities see note 25 financial liabilities. For information on maturity of the Group s remaining financial liabilities, see note 26 leases and note 27 provisions. Credit risk Credit risk is the risk that Statoil Fuel & Retail s customers or counterparties will cause the Group financial loss by failing to honour their obligations. Credit risk mainly arises from credit exposures with customer accounts receivables and deposits with financial institutions. Theoretically, the Group s maximum credit exposure for financial assets is the aggregated statement of financial position carrying amounts of financial loans and receivables before provisions for bad debt, which equals NOK 8,733 million at 31 December 2011, in addition to the credit risk exposure related to the Statoil/ MasterCard credit cards as described below. Key elements of Statoil Fuel & Retail s credit risk management approach include credit risk policies, credit mandates, an internal credit rating process, credit risk mitigation tools and continuous monitoring and management of credit exposures. Prior to entering into transactions with new counterparties, the Group s credit policy requires counterparties to be formally identified, approved, and assigned internal credit ratings as well as exposure limits. Once established, counterparties are re-assessed according to policy and monitored continuously. Counterparty risk assessments are based on a quantitative and qualitative analysis of recent financial statements and other relevant business information. In addition, the Group evaluates any past payment performance, the counterparties size and business diversification, and the inherent industry risk. The internal credit ratings reflect the Group s assessment of the counterparties credit risk. Statoil Fuel & Retail has pre-defined limits for the minimum average credit rating allowed at any given time on the Group s portfolio level as well as maximum credit exposures for individual counterparties. Statoil Fuel & Retail monitors outstanding balances and individual exposures against limits on a regular basis. The Group offers a variety of transportation fuel loyalty cards to its business-to-business and business-to-consumer customers as a means of attracting and retaining customers. These cards provide for approximately days delayed payment terms depending on applicable credit criteria. The Group also offers various credit or delayed payment terms to its stationary energy (fuel products used for heating or industrial purposes), lubricants and aviation fuel customers. In the Norwegian and Swedish markets, customers can settle their purchases by the use of a combined Statoil/ MasterCard credit card. The Group has entered into agreements whereby the risks and rewards related to the credit cards, such as fee income, administration expenses and bad debt, are shared between the Group and external banks. Outstanding balances are charged to the customers monthly. The Group s exposure at 31 December 2011 relates to receivables of NOK 1,336 million, of which NOK 719 million was interest bearing. These receivables are not recognised in the Group s balance sheet. The expensed losses in 2011 and 2010 were not significant. In light of accurate credit assessments and continuous monitoring of outstanding balances, Statoil Fuel & Retail believes that the credits do not represent any significant risk. The income and risks related to these arrangements with the banks are reported, settled and accounted for on a monthly basis Statoil Fuel & Retail ASA 43

46 Statoil Fuel & Retail annual report 2011 See note 22 for information on the provision for bad debt related to trade receivables. The following table contains the carrying amount of trade and other receivables split by the Group s assessment of the counterparties credit risk at 31 December. (in NOK million) Investment grade, rated A or above 2,832 2,842 Other investment grade 3,320 3,113 Non-investment grade or not rated 1,949 1,681 Trade and other receivables 1) 8,101 7,636 1) The figures do not include prepaid expenses and tax receivables. Note 5 Capital management Capital management Statoil Fuel & Retail s capital management policy is to maximise value creation over time, while aiming to maintain a strong financial position. The Group also aims to have a capital structure which is in line with an investment grade profile and, as such, to have an implicit credit rating which falls within the investment grade category. Management makes regular use of free funds from operations over total debt (FFO/TD), total debt over total capital (TD/ TC) and total debt over adjusted EBITDA ratios in its assessment of the Group s financial flexibility and ability to incur additional debt. FFO is defined as net income added depreciation, amortisation and net impairment losses and adjusted for deferred tax and other gain/loss. TD is defined as the Group s current and non-current interest bearing debt plus current and non current finance lease plus net pension liabilities plus net present value of operating lease obligations. TC is TD as defined above with added equity and added net deferred tax assets. Adjusted EBITDA, a non-gaap measure, is EBITDA adjusted for other gain/loss, net income/loss from associated companies and added implicit leasing interest on operating leases. Statoil Fuel & Retail has launched a target for the ratio of total debt over adjusted EBITDA to be in the range from 1.5 to 2.5. The ratio was 2.57 at 31 December 2011 compared to 2.00 at 31 December Capital distribution Shareholder return consists of dividend payments, share buy-backs and share price development. Statoil Fuel & Retail s ambition is to distribute at least 50 percent of the Group s earnings per share. When deciding the annual distribution level, the Board of Directors will take into consideration expected cash flow, capital expenditure plans, financing requirements and needs for appropriate financial flexibility. In addition to cash dividends, Statoil Fuel & Retail may buy back shares as part of its total distribution of capital to the shareholders. Distribution of dividends is resolved by a majority vote at the Annual General Meeting of the shareholders of Statoil Fuel & Retail ASA, and on the basis of a proposal from the Board of Directors. The Annual General Meeting has the power to reduce, but cannot increase, the dividend proposed by the Board of Directors. Although it is the intention to pay annual dividends on ordinary shares, it cannot be guaranteed that dividends will be paid or the amount of any such dividend. Future dividends will depend on factors prevailing at the time the Board of Directors considers any dividend payment. See note 20 regarding proposed dividend for Statoil Fuel & Retail ASA

47 Note 6 Business combinations Acquisition of the St1 Network in Poland In December 2010 Statoil Fuel & Retail entered into a preliminary purchase agreement to acquire the St1 fuel station Network in Poland from St1 Polska Sp.z.o.o. The agreement was subject to the approval of Polish competition authorities. Following approval from the authorities the purchase agreement was finalised 30 May Consolidated financial statements The acquired St1 fuel station network in Poland consists of 16 operating automat stations and ten undeveloped properties. The acquired stations are 24 hour, unmanned, automated outlets. The consideration paid for the 16 stations and ten properties was NOK 54 million, and has been settled in cash. The transaction is recognised as a business combination in accordance with IFRS 3 Business Combinations as the purchased group of assets is considered to constitute a business. (in NOK million) Notes Fair values Goodwill Intangible assets 15 7 Property, plant and equipment Total identifiable net assets 54 Total purchase consideration (settled in cash in 2011) 54 Acquisition of service station network in Russia In December 2011 Statoil Fuel & Retail entered into a purchase agreement to acquire seven service stations in St. Petersburg and the Leningrad oblast from Ekogasservice JSC. The agreement is subject to the approval of the Russian competition authorities (FAS). The transaction is considered to be a business combination in accordance with IFRS 3 Business combinations as the purchased group of assets is considered to constitute a business. The acquisition date is when the competition authorities approve the acquisition. As of 31 December 2011, such approval had not been obtained and the business combination has not been recognised. Note 7 Other gain/(loss), net and disposals The table below summarises gains and losses related to disposals in 2011 and 2010 included in other gain/(loss), net in the consolidated statement of income. (in NOK million) Notes Gain from sale of marine business in Denmark 19 - Gain from sale of Swedegas AB in Sweden Gain from sale of LPG bottle business - 5 Gain from sale of electricity business in Norway - 20 Adjustment related to loss from sale of wood pellets business in Sweden and Norway in Other 1 (13) Other gain/(loss), net Included in other gain/(loss), net recorded in 2011 is the sale of activities in the marine business together with the assets and employees that support those activities. Proceeds from the sale were NOK 10 million. The carrying amount of the sold assets was NOK 6 million. In addition, a provision for an environmental and asset retirement obligation of NOK 14 million was reversed Statoil Fuel & Retail ASA 45

48 Statoil Fuel & Retail annual report 2011 The gain from the sale was reported as part of the operating profit in the Scandinavia segment Other gain/(loss), net recorded in 2010 mainly comprised the gains associated with the sale of Swedegas AB, a natural gas transmission business involved in the sale of natural gas in Sweden, and gains from the sale of the electricity business in Norway. Total gross consideration received for the sale of Swedegas AB was NOK 436 million. The gain from the sale of Swedegas was reported as part of operating profit in the Corporate segment. Note 8 Restructuring costs The table below summarises the Group s restructuring programmes and associated costs in 2011 and All items have been included in distribution costs in the consolidated statement of income. (in NOK million) Restructuring costs, Norway, Sweden and Denmark (22) - Dismantling cost, Fagerstrand plant - (4) Total restructuring cost (22) (4) 2011 As part of the Group s cost cutting and efficiency programme, it has been decided to establish a shared service centre in Riga, Latvia. In this regard the Group has incurred restructuring costs of NOK 22 million. The costs have been reported as part of the operating profit in the Scandinavia segment In 2010 the Group incurred a restructuring cost of NOK 4 million in relation to the closure of the Fagerstrand lubricants plant. Note 9 Salaries and personnel expenses Total salaries and personnel expenses The salaries and personnel expenses presented below are recognised in cost of goods sold, distribution costs and administrative expenses in the consolidated statement of income. (in NOK million except number of man-labour years) Notes Salaries 2,138 2,043 Pension costs Payroll tax Other compensations and social costs Total payroll costs 2,919 2,746 Number of man labour years 8,847 8, Statoil Fuel & Retail ASA

49 Consolidated financial statements Salaries and personnel expenses for the Corporate Executive Committee 2011 (in NOK thousand except as otherwise disclosed) Salary 1) Annual variable pay 2) Long term variable pay 3) Other benefits 4) Pension costs Loans outstanding 5) Jacob Schram 4,215-5, , Klaus-Anders Nysteen 3,139-3, ,554 - Jan Dahm-Simonsen 2,040-1, Hans-Olav Høidahl 2,348-1, Jørn Madsen 2,044-1,184 2,837 6) DKK Jonas Palm SEK 1,825 - SEK 1,048 SEK 993 SEK Lars Gaustad 2,000-1, Ina Strand 1,979-1, Karl Kristian Mydske 1,837-1, Bård Standal 1,547-1, Karen Romer 1, Morten Michael Jensen 7) 1, ) Including paid out holiday allowance 2) No annual variable pay (AVP) bonuses were paid out in The bonus related to 2010 will be paid out in Accrued, but not paid AVP per 31 December 2011 amounts to NOK 5,284 thousand. The accrual is based on the expected bonus payout. The actual bonus payment may deviate from this estimate. 3) Relates largely to the long-term incentive schemes. See below for further information. 4) Other benefits include benefits such as insurance, free phone, taxable benefit of interest free loan and car allowance 5) The loans mature in a period from three to nine years 6) Including expatriation benefits 7) Morten Michael Jensen is Acting EVP Market Development in the period in which Ina Strand is on maternity leave. An acting increment is included in his salary (in NOK thousand except as otherwise disclosed) Salary 1) Annual variable pay 2) Long term variable pay 3) Other benefits 4) Pension costs Loans outstanding Jacob Schram 4,524 1, , Klaus-Anders Nysteen 5) 2, ,491 - Jan Dahm-Simonsen 2, Hans-Olav Høidahl 2, Jørn Madsen 1, ,283 6) DKK Jonas Palm SEK 1,627 SEK SEK 142 SEK Lars Gaustad 1, Ina Strand 1, Karl Kristian Mydske 1, Bård Standal 1, Karen Romer 1, ) Including paid out holiday allowance. 2) Paid in 2010 based on the fulfilment of 2009 and 2010 performance criteria. Accrued, but not paid AVP at 31 December 2010 amounted to NOK 1,366 thousand. 3) Paid in 2010 based on the fulfilment of performance criteria. 4) Other benefits include benefits such as insurance, free phone, taxable benefit of interest free loan and car allowance 5) Included in salary are one-off payments totalling NOK 1,041 thousand, for loss of compensation from previous employer. 6) Including expatriation benefits 2012 Statoil Fuel & Retail ASA 47

50 Statoil Fuel & Retail annual report 2011 Remuneration for the Board of Directors For information on shares held by members of the Board of Directors, see note 20 shareholder information (in NOK thousand) Position Board remuneration Audit committee Compensation committee Total remuneration Birger Magnus Chair Jon Arnt Jacobsen 1) Board member Marthe Hoff 1) Board member Anne Martha Støver Board member 2) Ketil Johannessen Board member 2) Petter Vådal Board member 2) Per Bjørgås Board member Ann-Charlotte Lundén Board member Odd Arne Rasmussen Deputy board member 2) Ellen Mikalsen Deputy board member 2) Jørn Bjarne Eide Deputy board member 2) Cathrine Henriksen Jørgensen Deputy board member 2) Egle Merkeviciene Deputy board member 2) Rolv Bjørn Jernskau Deputy board member 2) Total 2, ,218 1) The board member is employed by Statoil ASA and does not receive any remuneration 2) Employee representative 2010 In the period commencing 18 May 2010, the date of inception, and until the listing of Statoil Fuel & Retail ASA, the Company had an interim Board with five shareholder-elected members. Three of these members were replaced during the first month after the listing Statoil Fuel & Retail ASA

51 Consolidated financial statements (in NOK thousand) Position Board remuneration Audit committee Compensation committee Total remuneration Birger Magnus (member since ) Chair Jon Arnt Jacobsen (member since ) Board member Marthe Hoff (member since ) Board member Anne Martha Støver (member since ) Board member Ketil Johannessen (member since ) Board member Petter Vådal (member since ) Board member Per Bjørgås (member since ) Board member Ann-Charlotte Lundén (member since ) Board member Paul Piché Board member (member in the period ) Tom Melbye Eide Chair (member in the period ) Eldar Sætre Board member (member in the period ) Helga Nes Board member (member in the period ) Cathrine Støle Board member (member in the period ) Ellen Mikalsen (member since ) Board member Petter Vådal Deputy board member (member in the period ) Odd Arne Rasmussen (member since ) Deputy board member Cathrine Henriksen Jørgensen Deputy board member (member since ) Egle Merkeviciene (member since ) Deputy board member Jørn Bjarne Eide (member since ) Deputy board member Rolv Bjørn Jernskau (member since ) Deputy board member Total Long-term incentive schemes The Group operates various equity-settled share-based schemes for certain employees. 1. Frontloading At 9 December 2010 the Board of Directors agreed to invite members of the Corporate Executive Committee to participate in a one-time equity-settled share-based incentive programme. The incentive programme has certain vesting conditions such as employment within the Group. When the granted member of the Corporate Executive Committee has remained in the Group s employ for a period of three years, 60 percent of the award vests. The remaining 40 percent of the award vests after the fourth year of employment in the Group. The number of shares to be granted to members of the Corporate Executive Committee was calculated based on the salary per 31 December 2010 multiplied by a predefined factor divided by Statoil Fuel & Retail ASA s share price at the time of the Oslo Stock Exchange closure on 9 December The number of shares allocated to the members of the Corporate Executive Committee at 31 December 2011 is disclosed in the following table: 2012 Statoil Fuel & Retail ASA 49

52 Statoil Fuel & Retail annual report 2011 CEC member 1) Base salary LTI% Base salary x LTI% After tax base salary LTI Share price at 9 December 2010 Number of shares Vested shares at 31 December 2011 Jacob Schram 3,500, ,500,000 1,750, ,000 - Klaus-Anders Nysteen 2,700, ,160,000 1,080, ,600 - Hans-Olav Høidahl 2,000, ,400, , ,000 - Jørn Madsen 2,035, ,424, , ,245 - Lars Gaustad 1,750, ,050, , ,500 - Ina Strand 1,700, ,020, , ,200 - Jonas Palm 1,417, , , ,505 - Karl Kristian Mydske 1,600, , , ,600 - Karen Romer 1,200, , , ,000 - Total number of shares 129,650-1) Jan Dahm-Simonsen and Bård Standal have been removed from the grant table, as they leave the Company in 2012 and therefore must repay the value of the granted shares. 2. Long-term incentive scheme In addition to the one-time equity settlement programme described above, the members of the Corporate Executive Committee are participating in an ordinary equity-settled share-based incentive programme. The last grant in this programme was on 31 December 2010 and the grant for 2012 will be allocated in the first quarter The number of shares allocated at 31 December 2011 is disclosed in the table below. CEC member 1) Base salary LTI% Base salary x LTI% After tax base salary LTI Share price at 1 December 2011 Number of shares 2) Vested shares at 31 December 2011 Jacob Schram 3,500, ,225, , ,546 - Klaus-Anders Nysteen 2,700, , , ,634 - Hans-Olav Høidahl 2,000, , , ,184 - Jørn Madsen 2,035, , , ,275 - Lars Gaustad 1,750, , , ,123 - Ina Strand 1,700, , , ,006 - Jonas Palm 1,417, , , ,340 - Karl Kristian Mydske 1,600, , , ,770 - Karen Romer 1,200, , , ,262 - Total number of shares 47,140-1) Jan Dahm-Simonsen and Bård Standal have been removed from the grant table, as they leave the Company in 2012 and therefore must repay the value of the granted shares. 2) The number of granted shares is based on the same principles as described for the frontloading scheme. The fair value of the granted shares of NOK was determined at the date of the Annual General Meeting held 27 April 2011, as both of the incentive programmes were subject to approval at the Annual General Meeting. Since the granted Corporate Executive Committee member is required to complete a specific period of service before the equity instrument vests, the services obtained by the Group are expensed over that period. In 2011, NOK 4 million has been expensed relating to this share-based payment arrangement. Statoil Fuel & Retail also pays the employee tax relating to the granted shares. This employee benefit was expensed in full in Statoil Fuel & Retail ASA

53 Consolidated financial statements Remuneration policy and concept for the accounting year 2012 In accordance with the Norwegian Public Limited Liability Companies Act section 6-16 a) the Board of Directors intends to present the following statement regarding remuneration of the Corporate Executive Committee to the 2012 Annual General Meeting: 1. Remuneration policy and principles Statoil Fuel & Retail is in the process of a long-term review of the remuneration principles and concepts adopted from Statoil following the stock listing of Statoil Fuel & Retail ASA, taking a new competitive situation and market adjustments into account. Statoil Fuel & Retail s policy concerning remuneration of the Corporate Executive Committee is to provide remuneration opportunities which: Are competitive to recruit and retain executives. Reward the performance of the members of the Corporate Executive Committee, measured as their contribution to the overall success of Statoil Fuel & Retail. Support the creation of sustainable shareholder value. 2. Decision-making process The decision-making processes for establishing and changing the remuneration policy and determining salaries and other remuneration of the Corporate Executive Committee are based on the provisions of the Norwegian Public Limited Liability Companies Act sections 5-6, 6-14 and 6-16 a) and the Board s rules of procedure. The Board has established a separate compensation committee, which is a body preparing cases for the Board. The main goal of the committee is to assist the Board in its work on determining the salary and working terms for Statoil Fuel & Retail s chief executive officer (CEO), and the main principles and strategy for remuneration and management development of the Group s top management. 3. Remuneration concept for the Corporate Executive Committee Statoil Fuel & Retail s remuneration concept for the Corporate Executive Committee consists of the following main elements: Fixed salary Variable pay Long-term incentive Pensions and insurance schemes Severance pay Other benefits 3.1 Fixed salary The fixed salary consists of a base salary. The base salary shall be competitive in the markets in which the Group operates and shall reflect the responsibility and performance of each individual. The base salary is normally reviewed once a year. 3.2 Variable pay Statoil Fuel & Retail will in general continue its system for variable pay in Based on performance, the CEO is entitled to an annual bonus with a maximum potential of 50 percent of the fixed salary. Executive vice presidents receive an equivalent annual bonus with a maximum potential ranging from 35 to 45 percent of their annual base salaries. Expected payment based on solid deliveries is two thirds of the maximum potential. 3.3 Long-term incentive Statoil Fuel & Retail has established a long-term incentive (LTI) system for a limited number of senior managers, including members of the Corporate Executive Committee. The LTI system and the annual variable pay system form a remuneration concept focusing on both short-term and long-term goals and results. The long-term incentive helps strengthen the common interests between the Group s top management and shareholders Statoil Fuel & Retail ASA 51

54 Statoil Fuel & Retail annual report Pensions and insurance schemes Statoil Fuel & Retail s pension plan is a performance-based arrangement with a pension level amounting to 66 percent of the final salary, provided at least 30 years service period. Pension from the national insurance scheme is considered in the calculation. The retirement age is 67 years. 3.5 Severance pay If Statoil Fuel & Retail gives the CEO notice of termination, he/she is entitled to severance pay corresponding to 12 months of the base salary calculated from the expiry of the notice period. This also applies if the parties agree that the employment should be discontinued and the CEO gives notice pursuant to a written agreement with the Board. Executive vice presidents are entitled to severance pay equivalent to six months of base salary, excluding the term of notice of six months, when the resignation is at the request of Statoil Fuel & Retail. The same severance pay will also be paid if the parties agree that the employment should be discontinued and the executive vice president gives notice pursuant to a written agreement with Statoil Fuel & Retail. Any other payments earned by the CEO or executive vice president during the period in which severance pay is payable will proportionally reduce the severance pay. This relates to earnings from any employment relationship or business activity in which the CEO or executive vice president has active ownership. The entitlement to severance pay is conditional on the CEO or the executive vice president not being guilty of gross misconduct or gross negligence, disloyalty or other breach of his/her duties. The CEO s or executive vice president s own notice will as a general rule not release any severance pay. 3.6 Other benefits The members of the Corporate Executive Committee receive benefits such as free telephone and car allowance. 4. Special comments for the Corporate Executive Committee Two of the executive vice presidents have signed employment contracts outside Norway (respectively in Denmark and Sweden), which means they are covered by the pension and insurance schemes applicable to the legal entities in those countries. In addition to the pension benefits described above, the executive vice presidents are offered compensation as per Statoil Fuel & Retail s general pension plan, including pensions from the age of 67 based on the relevant national pension scheme. Members of the Corporate Executive Committee are covered by the general insurance schemes applicable within Statoil Fuel & Retail. Conclusion Statoil Fuel & Retail s remuneration policy and the different solutions have been, and are still, undergoing revision in order to establish a remuneration policy fit for Statoil Fuel & Retail and the market conditions relevant for the Company. The remuneration systems and the practices applied are transparent and in line with applicable guidelines and the principles of good corporate governance. Remuneration to the Corporate Executive Committee in 2011 has been in accordance with the guidelines for remuneration presented in the annual report for Statoil Fuel & Retail ASA

55 Consolidated financial statements Note 10 Other expenses Auditors remuneratioan (in NOK thousand, excluding VAT) Audit fee Audit-related fee Total 2011 Ernst & Young - Norway 2,630 1,598 4,228 Ernst & Young - outside Norway 6, ,150 Total 9,158 2,218 11, Ernst & Young - Norway 1,565-1,565 Ernst & Young - outside Norway 7, ,269 Total 9, ,834 Research and development expenditures The Group did not have any significant R&D expenditure in 2011 or Note 11 Net financial expenses The table below specifies financial income and financial expenses recognised in the consolidated statement of income in 2011 and (in NOK million) Interest income Other financial income Financial income Interest expenses (247) (289) Other financial expenses (180) (171) Foreign exchange gains/(losses) (15) (37) Financial expenses (441) (497) Net financial expenses (368) (419) For information on the Group s interest bearing debt, see note 25 financial liabilities. Interest rate risk sensitivity is presented in note 32 financial instruments: measurement and market risk sensitivities. Note 12 Income tax Income tax expence (in NOK million) Current tax expense (252) (247) Change in deferred tax (168) (95) Income tax (expense)/benefit (420) (342) 2012 Statoil Fuel & Retail ASA 53

56 Statoil Fuel & Retail annual report 2011 Reconciliation of Norwegian nominal statutory tax rate to effective tax rate (in NOK million) Profit before income tax 1,500 1,927 Nominal tax rate 28% (420) (540) Tax effect of: Permanent differences 14 (8) Utilisation of previously unrecognised tax losses Non-taxable gain on sale of subsidiary - 67 Tax rates different from nominal tax rate (21) 41 Other 7 (2) Total (420) (342) Effective tax rate (%) For 2011, the income tax expense was NOK 420 million, equivalent to a tax rate of 28 percent. This is equal to the nominal tax rate in Norway but higher than the nominal tax rates in the other countries in which Statoil Fuel & Retail operates. The average nominal tax rate for the Group is therefore lower than the effective tax rate of 28 percent. The effective tax rate was primarily influenced by permanent differences, foreign taxable income where the local tax rate is lower than the nominal tax rate and taxes in previous years. For 2010, the income tax expense was NOK 342 million, equivalent to an effective tax rate of 17.7 percent. The income tax for 2010 was positively influenced by the utilisation of previously unrecognised tax losses in Denmark and the nontaxable gain on the sale of Swedegas. Significant components of deferred tax assets and liabilities (in NOK million) Deferred tax assets Bad debt provision Loss carried forward Property, plant and equipment Other items Offsetting of tax balances 1) (76) (100) Total deferred tax assets Deferred tax liabilities Property, plant and equipment Other items Offsetting of tax balances 1) (76) (100) Total deferred tax liabilities Net deferred tax assets at 31 December ) Deferred tax assets and liabilities are offset to the extent that the deferred taxes relate to the same fiscal authority and there is a legally enforceable right to offset current tax assets against current tax liabilities Statoil Fuel & Retail ASA

57 Consolidated financial statements Specification of tax loss carried forward (in NOK million) Country Loss carried forward Deferred tax asset Loss carried forward Deferred tax asset Denmark Russia Poland Lithuania Total at 31 December Tax loss carried forward in Denmark relates to the refinery business, which was demerged from Statoil Fuel & Retail A/S (Denmark) before the separation from Statoil ASA in However, the tax loss carried forward remained with the legal entity that was transferred to Statoil Fuel & Retail in Except for in Russia, all tax losses can be carried forward indefinitely. In Russia there is a ten year expiration period of loss carried forward. The assessment is that the losses in Russia can be utilised before they expire. The first part expires in Movement in deferred tax (in NOK million) Deferred tax at 1 January Recognised in the consolidated statement of income (168) (95) Deferred tax on actuarial gain/(loss) recognised in other comprehensive income 143 (22) Recognised in equity (1) 117 1) Acquisitions and translation differences and other (10) 84 Net deferred tax at 31 December ) Deferred tax on separation transaction 1 October Note 13 Earnings per share Basic and diluted The calculation of basic and diluted earnings per share at 31 December 2011 is based on the profit/(loss) attributable to equity holders of Statoil Fuel & Retail ASA and a weighted average number of shares outstanding, calculated as follows: (in NOK million) Profit attributable to equity holders of the Company 1,080 1,586 Weighted average number of shares outstanding (in million) 1) Earnings per share for income attributable to equity holders of the Company - basic and diluted (NOK) ) Prior to 1 October 2010, Statoil Fuel & Retail was not an independent reporting entity but part of the Statoil group. The 2010 weighted average number of shares outstanding applied in the calculation above is based on the weighted average number of shares outstanding in the period from 1 October to 31 December See note 1 general information for further details Statoil Fuel & Retail ASA 55

58 Statoil Fuel & Retail annual report 2011 Note 14 Property, plant and equipment (in NOK million) Buildings and land Machinery, equipment and transportation equipment Assets under construction Total Cost at 1 January ,963 8, ,438 Additions and transfers ,239 Acquisitions through business combinations Disposed assets at cost (68) (729) (16) (814) Effect of movements in foreign exchange (376) (100) (22) (497) Cost at 31 December ,807 8, ,400 Accumulated depreciation and impairment losses at 1 January 2011 (4,510) (5,499) (105) (10,113) Depreciation and amortisation for the year (414) (712) (4) (1,130) Impairment losses Accumulated depreciation and impairment, disposed and transferred assets Effect of movements in foreign exchange Accumulated depreciation and impairment losses at 31 December 2011 (4,688) (5,702) (109) (10,499) Carrying amount at 31 December ,118 2, ,901 Estimated useful life (years) Cost at 1 January ,931 8, ,585 Additions and transfers (13) 826 Disposed assets at cost (160) (823) (11) (994) Effect of movements in foreign exchange (22) Cost at 31 December ,963 8, ,438 Accumulated depreciation and impairment losses at 1 January 2010 (4,160) (5,346) (94) (9,600) Depreciation and amortisation for the year (404) (697) (5) (1,106) Impairment losses (46) (30) - (76) Accumulated depreciation and impairment, disposed and transferred assets Effect of movements in foreign exchange (41) (1) (6) (46) Accumulated depreciation and impairment losses at 31 December 2010 (4,510) (5,499) (105) (10,113) Carrying amount at 31 December ,453 3, ,323 Estimated useful life (years) Depreciation and impairment charges are included in distribution costs in the consolidated statement of income. The Group has retail networks across Scandinavia, Poland, the Baltics and Russia with approximately 2,300 full-service (fuel and convenience) or automated (fuel only) stations. Of these 2,033 are owned by the Group. In Europe, the Group operates 12 key terminals, of which installations are owned for all 12 and land is owned for one. Of the Group s 38 depots, installations are owned for 37 and land is owned for 13. The Group owns 84 road tankers. The Group s real estate portfolio consists of directly owned assets and those under finance leases. The book value of assets under finance leases was NOK 174 million in 2011 and NOK 207 million in The net carrying amount of each class of leased asset has been included in buildings and land and machinery, equipment and transportation equipment in the above table. For further details see note 26 leases Statoil Fuel & Retail ASA

59 Consolidated financial statements Significant additions, disposals and impairment losses In 2011, the Group recorded additions of NOK 1,297 million and disposals of NOK 814 million in the normal course of business. In addition, the Group recorded acquisitions through business combinations of NOK 36 million related to the retail network in Poland. See note 6 business combinations for further information. During 2011 the Group has transferred NOK 58 million from property, plant and equipment to financial receivables, relating to finance leases in which Statoil Fuel & Retail is a lessor. No impairment losses for property, plant and equipment were recognised in In 2010, the Group recorded additions of NOK 826 million and disposals of NOK 994 million in the normal course of business. In addition, Group companies impaired assets of NOK 76 million based on management s future forecasts and budgets. For further disclosure on impairment losses, impairment testing and sensitivity analyses see note 16. Note 15 Intangible assets (in NOK million) Goodwill Intangible assets under construction Other intangible assets Total Cost at 1 January ,990-1,090 3,080 Additions and transfers Acquisitions through business combinations Disposed assets at cost - - (5) (5) Effect of movements in foreign exchange (4) - (14) (18) Cost at 31 December , ,081 3,219 Accumulated depreciation and impairment losses at 1 January ,254 - (1,034) (2,288) Depreciation and amortisation for the year - - (39) (39) Accumulated depreciation and impairment disposed assets Effect of movements in foreign exchange Accumulated depreciation and impairment losses at 31 December 2011 (1,253) - (1,053) (2,306) Carrying amount at 31 December (in NOK million) Goodwill Other intangible assets Total Cost as of 1 January ,984 1,086 3,070 Additions and transfers Disposed assets at cost - (11) (11) Effect of movements in foreign exchange 4-4 Cost at 31 December ,990 1,090 3,080 Accumulated depreciation and impairment losses as of 1 January 2010 (1,235) (954) (2,190) Depreciation and amortisation for the year - (96) (96) Impairment losses (20) - (20) Accumulated depreciation and impairment disposed assets Effect of movements in foreign exchange Accumulated depreciation and impairment losses at 31 December 2010 (1,254) (1,034) (2,288) Carrying amount at 31 December Statoil Fuel & Retail ASA 57

60 Statoil Fuel & Retail annual report 2011 Intangible assets under construction at 31 December 2011 related to the new enterprise resource planning solution that is being developed for the Group. The goodwill of NOK 11 million and NOK 7 million in other intangible assets acquired through business combinations relates to acquisitions of the St1 network in Poland. For more information see note 6 business combinations and note 16 impairment testing. Intangible assets with finite useful life are amortised systematically over their estimated economic life, ranging between years. Impairment losses and amortisation costs are included in distribution costs in the consolidated statement of income. Note 16 Impairment testing The Group tests goodwill and other intangible assets with infinite useful life annually or more frequently if there are impairment indicators. As of 31 December 2011 and 2010 the Group had no intangible assets with infinite useful life. Property, plant and equipment and other intangible assets with finite useful life are tested if there are indicators that assets may be impaired. The following table shows the allocation of the total goodwill acquired in business combinations for impairment testing purposes, including which segment the goodwill relates to. The goodwill of NOK 11 million from the acquisition of the St 1 network in Poland in 2011 has been allocated to the Polish retail network cash generating unit. This goodwill, and the Aviation goodwill, is not considered to be significant in comparison with the Group s total carrying amount of goodwill and is not included in the descriptions below. However, both have been subject to impairment testing and no impairment has been recognised. Carrying value of goodwill at 31 December (in NOK million) Business area Statoil Fuel & Retail stations - Norway (retail network) Scandinavia JET stations - Sweden Scandinavia JET stations - Denmark Scandinavia Aviation Special Products Statoil Fuel & Retail stations - Poland (retail network) Central & Eastern Europe 11 - Total at 31 December The recoverable amounts have been determined based on value in use calculations. Estimated future cash flows after tax are discounted using a post-tax nominal discount rate. The estimated cash flows are based on four years of business plans and forecasts that are approved by the Board of Directors, and a terminal value that is calculated based on the EBIT and depreciation forecasts for the fourth year. For the purpose of calculating the terminal value, capital expenditure is set to equal depreciation, and the long term growth rate into perpetuity is set to equal inflation (2 percent). Significant assumptions Based on an overall assessment, the Group has identified the following assumptions as most sensitive to the value in use calculation. Discount rates The discount rates are based on the Weighted Average Cost of Capital (WACC) formula derived from the CAPM model. The parameters included in setting the company-specific WACC are discussed below. Cost of equity and cost of debt is 7.4 percent and 4.4 percent respectively, and a debt ratio of 30 percent has been applied Statoil Fuel & Retail ASA

61 Consolidated financial statements The 10 year Norwegian government bond rate of 2.5 percent has been applied as the risk-free rate A market premium with a long horizon has been applied. Based on a qualitative approach the market premium is set to 6 percent. The trading history of Statoil Fuel & Retail ASA is too short to be used for empirical beta estimation using regression methodology. As an alternative the company-specific levered beta has been calculated by applying the reverse Harris Pringles formula [median asset beta / (1- debt to equity ratio)] on relevant peers. Based on the input available and a subjective perception of the risk profile of a listed entity, the best current estimate is a forward looking equity beta at Country-specific risks are adjusted for in the calculation of cost of equity. There are several ways to estimate country-specific risk, for instance beta of national stock exchange vs. global index, rating of government bonds, corruption ratings etc. We have chosen to use an estimate from Damodaran which ranks countries globally using a qualitative and quantitative index. The index ranks countries on economic risk, structural risk, political risk, access to capital markets, debt levels and credit ratings. Derived from this model we get a country risk factor for each country in which we operate to add to the cost of equity. For the Scandinavian countries the country specific risk is determined to be 0. The basis for calculating cost of debt is the 10 years swap interest rate plus an estimated 10 years credit spread for Statoil Fuel & Retail ASA. Estimated credit spread at year-end 2011 is 2.3 percent. The Norwegian corporate tax rate (28 percent) is used. The applied debt ratio of 30 percent is based on market values. Based on an overall assessment of the quantitative and qualitative factors, the WACC for the Scandinavian countries is set to 6.5 percent per 31 December Growth rate The applied growth rates are consistent with country-specific and business sector forecasts. In the road transportation fuel and fuel station convenience business sector, customer traffic is generally driven by consumer preferences and spending trends, growth rates for automobile and truck traffic and trends in travel and tourism. Changes in economic conditions in the markets in which the Group operates, environmental concerns, nutritional concerns and food safety concerns related to consumption of certain foods, particularly fast foods and snacks, could also adversely affect discretionary consumer spending patterns and travel and tourism in these markets. A decline in the number of potential customers using the Group s fuel stations and convenience stores due to changes in consumer preferences or changes in discretionary consumer spending could have a material adverse effect on the Group s business, financial condition, results of operations, cash flow and prospects. Inflation The expected future inflation rate is set to 2 percent. Forecast figures are used if data is publicly available, otherwise, past actual movements in inflation have been used as an indicator of future movements. Operating profit (EBIT) The future operating profit is dependent on a number of factors, eg fuel margins and volume. The estimated EBIT is based on management s experience from the past and expectations for future market development. Capital expenditure The estimated capital expenditure does not include capital expenditure that relates to new stations or that significantly enhances the performance of the assets. Capital expenditure is equalled to depreciation in the calculation of terminal value as it is assumed depreciation equals capital expenditure in the long run. The recoverable amount for goodwill subject to impairment testing has been calculated based on the following significant assumptions for the year ended 31 December 2011: 2012 Statoil Fuel & Retail ASA 59

62 Statoil Fuel & Retail annual report 2011 (in %) Nominal discount rate, after tax Nominal discount rate, before tax 1) Growth rate/ inflation Statoil Fuel & Retail stations - Norway (retail network) JET stations - Sweden JET stations - Denmark ) Pre-tax discount rate is estimated based on an iterative method. Impairment losses There were no impairment losses in During 2010 the Group incurred an impairment charge of NOK 96 million related to property, plant and equipment and goodwill, which was recognised in distribution costs. The impairment charge comprised impairment in Lithuania of NOK 58 million in relation to fuel station sites and NOK 14 million in relation to land bank sites, NOK 20 million in relation to the loss of a sales contract to supply the Helsinki airport in Finland and NOK 4 million in relation to only partially successful efforts to improve supply costs related to the aviation business in Riga, Latvia. These impairment losses were related to the Central & Eastern Europe and Special Products business areas as disclosed in note 3 operating segments. Sensitivity analysis In connection with the impairment testing of cash generating units containing goodwill, a sensitivity analysis has been performed. The recoverable amount is determined based on future strategies considering expected development in both macroeconomic and company-related conditions. In this regard, a number of likely scenarios are computed. A reasonably possible change in a key assumption on which management has based its determination of the unit s recoverable amount would not cause the unit s carrying amount to exceed its recoverable amount, except for JET Denmark. The table below shows the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value. The recoverable amount of the cash generating unit to which the JET Denmark goodwill relates is approximately NOK 260 million higher than the unit s carrying amount. JET Denmark Discount rate (percentage point increase) 3.7 Long term growth rate (percentage point decrease) (4.8) Annual budgeted operating profit (percentage decrease) (44.8) Annual budgeted capital expenditure (percentage increase) 97.5 Note 17 Investments in associated companies Investments in associated companies include Statoil Fuel & Retail s share of net assets, including profit and loss, based on the Group s ownership interests in the associated companies. At 31 December 2011 the carrying value of associated companies was NOK 49 million. For the year ended 31 December 2010 the carrying value of associated companies was NOK 43 million. In February 2010 Statoil Fuel & Retail sold its 29.6 percent share in Swedegas AB to EQT Infrastructure Fund. The gain from the sale, recognised in the consolidated statement of income for 2010, was NOK 264 million. Net income from associated companies amounted to NOK 3 million for the year ended 31 December 2011 and NOK 4 million for the year ended 31 December Dividends received from associated companies were NOK 1 million in 2011 and zero in Statoil Fuel & Retail ASA

63 Note 18 Retirement benefit obligations Consolidated financial statements The employees of Statoil Fuel & Retail ASA, Statoil Fuel & Retail Norge AS and Svenska Statoil AB are covered by defined benefit plans. Plan benefits are generally based on years of service and final salary level. The cost of defined benefit plans is expensed over the period that the employee renders services and becomes eligible to receive benefits. The obligations related to defined benefit plans are calculated by external actuaries. A majority of employees not covered by defined benefit plans participate in defined contribution pension plans. The period s pension costs are recognised in the consolidated statement of income under distribution cost and administrative expenses. The obligations related to the defined benefit plans were measured at 31 December 2011 and The present values of the projected defined benefit obligation and the related current service cost and past service cost are measured using the projected unit credit method. The assumptions for salary increases, increases in pension payments and social security base amounts have been tested against historical observations. Due to national agreements in Norway, Statoil Fuel & Retail ASA and Statoil Fuel & Retail Norge AS are members of the state agreement-based early retirement plan (AFP). The current AFP scheme was replaced by a new AFP scheme from 1 January The companies will pay a contribution for pension in payment under the current scheme and a premium for both new and old schemes up until 31 December The premium for the new scheme is calculated on the basis of the employees income between 1 and 7.1 G. The premium is payable for all employees until age 62. Pensions from the new AFP scheme will be paid to employees for their full lifetime. The employers have an obligation to pay a percentage of the benefits under the AFP scheme, while the remaining obligation is the Norwegian State s responsibility. In their current early retirement system, Statoil Fuel & Retail ASA and Statoil Fuel & Retail Norge AS offer a supplementary company pension for employees. The companies therefore have a combined early retirement commitment to the employees irrespective of the level of governmental AFP funding. The combined early retirement plan is accounted for as one defined benefit plan, and is included in the liabilities related to the defined benefit plans. Consequently the replacement of the old AFP with a new AFP in 2010 was not viewed as a termination of the plan. New legislation affecting Norwegian pension and insurance schemes was passed during 2010 as part of the Norwegian pension and insurance reform. The legislation requires some adaptations in the company s Norwegian pension scheme, in particular related to increased flexibility of retirement. See note 35 for additional information on the combined early retirement commitment. Actuarial gains and losses are recorded in the consolidated statement of comprehensive income in the period in which they occur. Actuarial gains and losses related to the provision for termination benefits, which are defined contribution plans, are recognised in the consolidated statement of income in the period in which they occur. Social security tax is calculated based on the pension plan s net unfunded status. Social security tax is included in the projected benefit obligation. Net periodic pension cost (in NOK million) Current service cost Interest cost on prior years benefit obligation Expected return on plan assets (126) (119) Actuarial (gain)/loss recognised in the income statement related to termination benefits (1) 4 Defined benefit plans Defined contribution plans Total net pension cost Statoil Fuel & Retail ASA 61

64 Statoil Fuel & Retail annual report 2011 Pension costs include social security taxes. Total net pension cost is included in distribution costs and administrative expenses in the consolidated statement of income. One of the Group s cost cutting and efficiency initiatives in 2008 and 2009 was termination benefits in the form of a gift pension scheme. This pension scheme was open only for a short period of time and was considered a special arrangement. Part of the changes in actuarial gains and losses related to this specific scheme were recognised in the consolidated statement of income. Change in projected benefit obligation (PBO) (in NOK million) Projected benefit obligation at 1 January 2,530 2,419 Current service costs Interest cost on prior years benefit obligation Actuarial (gain)/loss 262 (28) Benefits paid, including payroll tax (105) (108) Foreign currency translation - 30 Projected benefit obligation at 31 December 2,909 2,530 The projected benefit obligation consists of funded and unfunded plans. Change in fair value of plan assets (in NOK million) Fair value of plan assets at 1 January 2,256 2,043 Expected return on plan assets Company contributions Actuarial gain/(loss) (252) 53 Benefits paid (61) (63) Foreign currency translation - 38 Fair value of plan assets at 31 December 2,135 2,256 For pension plans funded in Statoil ASA s Statoil Pensjonskasse, the plan assets consist of statutory required equity funds and retained earnings. Statoil Fuel & Retail s share of retained earnings amounted to NOK 47 million at 31 December 2011 (2010: NOK 76 million). The retained earnings in Statoil Pensjonskasse are distributed across the member entities based on a distribution key. Only companies within the Statoil group are entitled to the retained earnings. Consequently, if Statoil Fuel & Retail exits Statoil group or ceases to be a member of Statoil Pensjonskasse, its share of retained earnings will not be transferred to Statoil Fuel & Retail Statoil Fuel & Retail ASA

65 Consolidated financial statements Change in net pension assets/(liabilities) (in NOK million) Net pension assets/(liabilities) at 1 January (275) (376) Net periodic pension costs - defined benefit plans (96) (98) Net actuarial gain/(loss) recognised in other comprehensive income (515) 80 Company contributions Benefits paid Other changes (including curtailments, settlements and foreign currency translation) - 8 Net pension assets/(liabilities) at 31 December (775) (275) Recognised in the consolidated statement of financial position as Pension assets at 31 December Pension liabilities at 31 December (778) (434) Projected benefit obligations specified by funded and unfunded plans (in NOK million) Funded pension plans (197) 70 Unfunded pension plans (578) (345) Projected benefit obligation at 31 December (775) (275) Actuarial gains and losses recognised in other comprehensive income (in NOK million) Accumulated gain/(loss) in retained earnings at 1 January (491) (571) Recognised gain/(loss) during the year (514) 80 Amount accumulated in retained earnings at 31 December gain/(loss) (1,005) (491) Actual return on plan assets (in NOK million) Expected return on assets Actuarial gain/(loss) (252) 53 Actual return (126) 172 Actual gain and loss on the plan asset is a gross measure, hence it also includes other factors than return that have an impact on the fair value of the plan assets. Assumptions The following actuarial assumptions have been used to determine the present value of the defined benefit obligation at 31 December, and the pension expense the following year Statoil Fuel & Retail ASA 63

66 Statoil Fuel & Retail annual report (in %) Norway Sweden Norway Sweden Discount rate Expected return on plan assets Rate of salary increase Expected rate of pension increase Expected increase of social security base amount (G-amount) Inflation Expected utilisation of the Group s early retirement plan is 50 percent for employees at 62 years and 30 percent for the remaining employees at years. For the population in Norway, the mortality table K including the minimum requirements from The Financial Supervisory Authority of Norway (Finanstilsynet), hence reducing the mortality rate by a minimum of 15 percent for male and 10 percent for female employees - is used as the best mortality estimate. For the population in Sweden, the mortality assumption used follows the Swedish insurance supervisory authority directions FFFS 2007:31. The average remaining service period is 12.8 years as of 31 December Sensitivity analysis The table below shows an estimate of the potential effects of changes in the key assumptions for the defined benefit plans. The following estimates are based on facts and circumstances at 31 December Actual results may materially deviate from these estimates. Discount rate Rate of salary increase Social security base amount Expected rate of pension increase (in NOK million) 0.5% -0.5% 0.5% -0.5% 0.5% -0.5% 0.5% -0.5% Changes in: Projected benefit obligation at 31 December (275) (156) (89) (162) 149 Service cost (22) (20) (12) (10) 11 Pension assets The plan assets related to the defined benefit plans were measured at fair value at 31 December 2010 and The long-term expected return on pension assets is based on the long-term risk-free interest rate adjusted for the expected long-term risk premium for the respective investment classes. A risk-free interest rate is applied as a starting point for calculation of return on plan assets. The return in the money market is calculated by taking a deduction on bond yield. Based on historical data, equities and real estate are expected to give a long term additional return above money market rates. In its asset management, the pension fund aims at achieving long term returns which contribute towards meeting future pension liabilities. Assets are managed to achieve a return as high as possible within a framework of public regulation and risk management policies. The pension fund s target returns require investments in assets with a higher risk than risk-free investments. Risk is reduced through maintaining a well-diversified asset portfolio. Assets are diversified both in terms of location and different asset classes. Derivatives are used within set limits to facilitate effective asset management Statoil Fuel & Retail ASA

67 Consolidated financial statements Pension assets allocated to respective investment classes (in %) Norway Sweden Norway Sweden Equity securities Bonds Commercial papers Real estate Other assets Total at 31 December Contributions to pension plans may either be paid in cash or be deducted from the pension premium fund. The fair value of plan assets amounted to NOK 2,135 million and NOK 2,256 million at 31 December 2011 and 2010, respectively. The decision whether to pay in cash or deduct from the pension premium fund is made on an annual basis. The expected pension contribution/ payment, including both funded and unfunded pension schemes, related to 2012 amounts to NOK 65 million. The expected pension premium for defined contribution plans is NOK 149 million. Historic funding and adjustments to plan liabilities and assets (in NOK million) Projected benefit obligation 2,909 2,530 2,419 2,423 2,270 Fair value of plan assets 2,135 2,256 2,043 1,852 2,004 Net pension asset/(liability) at 31 December (775) (275) (376) (571) (265) Difference between the expected and actual return on plan assets gain/(loss): 1) a) Amount (252) (225) NA b) Percentage of plan assets (%) (11.8) (12.2) NA Experienced (gain)/loss on plan liabilities: 1) a) Amount (112) NA b) Percentage of present value of plan liabilities (%) (3.9) (4.6) NA 1) 2009 and 2008 figures include experience adjustments on plan assets and liabilities for Statoil Fuel & Retail Norge AS and Svenska Statoil AB and 2010 also include Statoil Fuel & Retail ASA. Comparative figures are not available for The difference between the expected and the actual return on plan asset is a gross measure; hence it also includes factors other than return, which have an impact on fair value of the plan assets. Experienced gain and loss on plan liabilities excludes the effect of changed actuarial assumptions compared to previous year-end Statoil Fuel & Retail ASA 65

68 Statoil Fuel & Retail annual report 2011 Note 19 Financial investments and receivables Financial investments and receivables recognised in the consolidated statement of financial position (in NOK million) Financial investments 4 3 Financial receivables 54 3 Financial investments and receivables at 31 December 58 6 Financial investments consist of non-listed securities in companies where the Group does not have significant influence or control. All non-listed securities are classified as available for sale assets recognised in the consolidated statement of financial position at fair value with changes in fair value recognised in other comprehensive income. Significant and prolonged declines in fair value are recognised in the consolidated statement of income. There have not been any significant changes in estimated fair market values over the periods. The increase in financial receivables of NOK 51 million relates to a finance lease in which Statoil Fuel & Retail is a lessor. See note 26 for further details. Note 20 Capital, reserves and shareholder information On 1 October 2010, Statoil ASA transferred the assets, rights and liabilities of its Fuel and Retail business to Statoil Fuel & Retail ASA. As a consideration for the transfer, the Company issued 300 million shares, each with a par value of NOK 5, to Statoil. The initial public offering of Statoil Fuel & Retail ASA took place in conjunction with an offering of existing shares in the Company by Statoil, where Statoil sold 46 percent of its shares in the Company. Statoil Fuel & Retail ASA did not receive any proceeds from this sale. At 31 December 2011, share capital amounted to NOK 1,500 million. All the shares rank in parity with one another and carry one vote per share. The tables below show the largest shareholders of Statoil Fuel & Retail ASA and shares held by Management and Board of Directors at 31 December Name of shareholder Number of shares Shares in % Statoil ASA 162,000, Folketrygdfondet 13,223, JPMorgan Chase Bank 1) 11,459, State Street Bank and Trust CO. 1) 6,825, Morgan Stanley & Co LLC 1) 5,808, State Street Bank and Trust CO. 1) 5,790, State Street Bank & Trust CO. 1) 5,408, Deutsche Bank AG London 1) 4,842, Skandinaviska Enskilda Banken 1) 4,213, KAS Depositary Trust Company 1) 3,840, Goldman Sachs & CO Equity 1) 3,378, Bank of New York Mellon 1) 3,373, Clearstream Banking S.A. 1) 3,133, Total largest shareholders 233,298, Total other shareholders 66,701, Total shares outstanding 300,000, ) Nominee account and similar Statoil Fuel & Retail ASA

69 Consolidated financial statements Board of Directors Number of shares Birger Magnus Chair 2,430 Ann-Charlotte Lundén Board member 3,500 Per Bjørgås Board member 3,000 Jon Arnt Jacobsen Board member 2,050 Marthe Hoff Board member 930 Ketil Johannessen Board member (employee representative) - Petter Vådal Board member (employee representative) - Anne Martha Støver Board member (employee representative) - Odd Arne Rasmussen Deputy board member (employee representative) 2,550 Ellen Mikalsen Deputy board member (employee representative) 250 Jørn Bjarne Eide Deputy board member (employee representative) 250 Cathrine Henriksen Jørgensen Deputy board member (employee representative) - Egle Merkeviciene 1) Deputy board member (employee representative) - Rolv Bjørn Jernskau Deputy board member (employee representative) - Total at 31 December 14,960 1) Egle Merkeviciene s spouse holds 550 shares in Statoil Fuel & Retail ASA Corporate Executive Committee Number of shares Jacob Schram Chief Executive Officer 69,676 Klaus-Anders Nysteen Chief Financial Officer 53,114 Jørn Madsen EVP Central & Eastern Europe 31,860 Hans-Olav Høidahl EVP Scandinavia 24,184 Jonas Palm EVP Special Products 18,395 Karl Kristian Mydske EVP Sales & Operations/Head of Innovation 18,370 Lars Gaustad EVP Transport Fuel 17,823 Jan Dahm-Simonsen 1) EVP Human Resources & Staff 15,486 Ina Strand 2) EVP Market Development 15,486 Karen Romer 3) SVP Communications 10,822 Bård Standal 1) General Counsel 10,402 Morten Michael Jensen 2) Acting EVP Market Development - Total at 31 December 285,618 1) Has left Statoil Fuel & Retail ASA in ) Ina Strand is on maternity leave and Morten Michael Jensen is acting in her position. 3) Karen Romer s spouse holds 930 shares in Statoil Fuel & Retail ASA. Dividend payment On 27 April 2011, the Annual General Meeting of Statoil Fuel & Retail ASA resolved to reduce the Company s additional paid-in capital from NOK 5,848 million to NOK 0. The resolution was subject to a statutory creditor notice period of two months, which ended 28 June NOK 900 million, or NOK 3.00 per share, was distributed to the shareholders 5 July Trading in the Company s shares excluding the right to the distribution of dividend was 29 June 2011 (ex-date). For 2011 the Board of Directors has proposed a dividend of NOK 1.80 per share, totalling NOK 540 million. The share will be traded excluding dividend rights (ex-date) on the day following the Annual General Meeting to be held 26 April Statoil Fuel & Retail ASA 67

70 Statoil Fuel & Retail annual report 2011 Purchase of treasury shares In May 2011 Statoil Fuel & Retail ASA purchased 200,118 of its own shares at an average price of NOK Following the purchase, the shares were allocated to participants in the Group s long-term incentive schemes. Two of the participants are leaving Statoil Fuel & Retail in 2012, and will have to pay back the market price of their allocated shares at the date they leave the Company, limited upwards to the market price at the date the shares were allocated to them. See note 9 salaries and personnel expenses for further details regarding the Company s long-term incentive scheme. Nature and purpose of reserves included in total equity Foreign currency translation reserve The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Additional paid-in capital Additional paid-in capital includes a share-based payment transaction reserve used to recognise the value of equitysettled share-based payment transactions provided to employees, including key management personnel, as part of their remuneration. Hedging reserve The hedging reserve includes value change on derivatives used in the Group s cash flow hedging. Note 21 Inventories Inventories are valued at the lower of cost and net realisable value. Inventories of raw material, work in progress and finished goods are valued under the first-in, first-out (FIFO) method. In 2010 the valuation of inventories on Greenland was one exception, where the inventories were valued at average acquisition cost. The carrying amount of inventory at the beginning of the year has, in all material respects, been recognised as an expense and included in cost of goods sold in the consolidated statement of income. The Group s inventory mainly consists of finished goods and includes refined oil products, lubricants and convenience products. (in NOK million) Road transportation fuel 1,219 1,024 Convenience Lubricant products Aviation fuel Other products Total inventories at 31 December 1,981 1, Statoil Fuel & Retail ASA

71 Note 22 Trade and other receivables Consolidated financial statements The carrying amount for trade and other receivables is measured at cost less provision for bad debt, which approximates the fair value of the assets. Provisions for bad debt are charged to distribution costs in the consolidated statement of income. (in NOK million) Trade receivables 7,798 7,374 Provisions for bad debt (198) (221) Current tax receivables Other current receivables Trade and other receivables at 31 December 8,187 7,857 Provision for bad debt at 1 January Provisions for bad debt expensed during the year Receivables written off or recovered during the year (70) (75) Provisions for bad debt at 31 December The table below presents the aging of trade receivables. (in NOK million) Current 6,845 6, days past due days past due More than 60 days past due Trade receivables at 31 December 1) 7,599 7,374 1) Ageing of trade receivables at 31 December 2010 is presented gross, before provisions for bad debt, and amounts to NOK 7,153 million including such provisions. For more information about the credit quality of the Group s receivables, see note 4 financial risk management. Note 23 Derivative financial instruments Commodity price risk represents a significant market risk. To manage certain commodity risks related to forecast purchases and sales of LPG, the Group has entered into some commodity-based derivative contracts. The hedging instrument is a monthly fix for floating contract and the hedged risk is changes in the LPG price. These have been accounted for using hedge accounting. The commodity price hedge contracts are recognised as derivative financial instruments at fair value in the consolidated statement of financial position with the changes in the fair value recognised in other comprehensive income until the transactions they hedge occur. The derivative financial instruments recognised at fair value are presented on a gross basis in the consolidated statement of financial position as derivative financial instruments assets or liabilities, since the Group did not have the legal right or the intention to offset these cash flows. Changes in the fair value relate to daily changes in market prices of the derivative contracts and the volume of contracts entered into. The fair value of the derivative financial assets was NOK 3 million and fair value of the derivative financial liabilities was NOK 1 million at 31 December The cash flows are expected to occur in the month after the financial contracts have been entered into. After the sale of the electricity business in October 2010, no derivative financial instruments were recognised in the consolidated statement of financial position at 31 December Statoil Fuel & Retail ASA 69

72 Statoil Fuel & Retail annual report 2011 Note 24 Cash and cash equivalents The Group has established an internal bank agreement to fund the net intra-month working capital needs for the subsidiaries in the Group. The cash pool is managed by the Group s subsidiary in Estonia. The subsidiaries in Poland and Russia do not participate in the internal cash pool and provide their working capital needs from external banks. (in NOK million) Note Net cash, cash equivalents and bank overdraft at period end presented in the consolidated statement of cash flow (525) 931 Bank overdraft 25 1, Cash and cash equivalents recognised as current assets in the consolidated statement of financial position at 31 December 641 1,533 Restricted deposits included in cash and cash equivalents at 31 December 5 3 Note 25 Financial liabilities At 26 August 2010, Statoil Fuel & Retail entered into a multicurrency term and revolving loan facility with nine international banks in the aggregate amount of NOK 7,000 million. The purpose of the facility was to finance the Group s general corporate purposes and to repay all amounts outstanding to Statoil ASA under the intra-group bridging loan agreement, five days following the listing. The total amount under the bank facility agreement is split into two facilities: (i) a three year term loan facility available for draw down during a three month period from and including the fifth business day following the listing of Statoil Fuel & Retail ASA s ordinary shares on the Oslo Stock Exchange on 22 October 2010 ( the completion date ) in an amount of up to NOK 4,000 million and (ii) a five year revolving credit facility available from and including the completion date until one month prior to the facility termination date, which will be sixty months after the date of the bank facility agreement, in an amount of up to NOK 3,000 million. In addition to the bank facility agreement, the Group has established overdraft facilities in a number of different currencies to fund their net intra-month working capital needs. In November 2010, NOK 4,000 million was drawn from the three year term loan facility. At 31 December 2011, noncurrent borrowings amounted to NOK 3,972 million. The non-current borrowings are, in their entirety, due for payment in August In addition, as of 31 December 2011, NOK 200 million is drawn from the five year revolving credit facility. This was repaid in January 2012 and shown as current financial liabilities in the consolidated statement of financial position. Included in current financial liabilities are also bank overdrafts of NOK 1,166 million. The interest rate for both facilities is equal to an inter-bank interest rate applicable for specified currencies plus a specified margin. For the three year term loan facility, the loan is split in three tranches, where interest rates at 31 December 2011 were 4.1 percent, 4.2 percent and 4.3 percent respectively. At 31 December 2011, accrued interest costs of NOK 24 million related to the bank facility agreement are included in trade and other payables. At 31 December 2011, there were no financial covenants related to the bank facility agreement Statoil Fuel & Retail ASA

73 Consolidated financial statements (in NOK million) Bank loan 3,972 3,955 Financial lease obligation 1) Non-current financial liabilities at 31 December 4,132 4,140 Current portion lease obligation 1) Five year revolving credit facility Bank overdraft 1, Other current financial liabilities 63 - Current financial liabilities at 31 December 1, ) See note 26 leases for further information on lease obligations Note 26 Leases The Group has entered into various finance and operating lease contracts, mainly related to the rental of service stations, land, equipment and office buildings. The lease terms vary from short term contracts to contracts with durations of up to 100 years. The majority of the lease contracts are renewable at the end of the lease period at market rates. Amounts related to finance leases include future minimum lease payments for assets recognised in the consolidated statement of financial position. Lease payments recognised as expenses relating to operating leases are as follows: (in NOK million) Minimum lease payments Contingent rentals Gross rental expenses Sublease rental income (22) (6) Net rental expenses The information in the table below shows future minimum lease payments under non-cancellable leases: Finance lease (in NOK million) Minimum lease payments Net present value minimum lease payments Thereafter Total future minimum lease payments Statoil Fuel & Retail ASA 71

74 Statoil Fuel & Retail annual report 2011 Operating leases (in NOK million) Buildings and land Equipment Other Total Subleases (1) (2) (3) (3) (3) Thereafter 1, ,405 (24) Total future minimum lease payment 2, ,655 (36) Statoil Fuel & Retail is also a lessor in some finance lease arrangements, mainly concerning equipment utilised in the franchise station network in Poland. The carrying amount of the financial receivable for these arrangements is NOK 51 million at 31 December Future minimum lease payments to be received amount to NOK 51 million, of which NOK 8 million relates to Property, plant and equipment include the following amounts for leases, which were capitalised: (in NOK million) Machinery, equipment and transportation equipment Buildings Total at 31 December Note 27 Provisions (in NOK million) Asset retirement obligations Other provisions Total Non-current portion at 1 January Current portion at 1 January Provisions at 1 January Additional provisions made/revision in estimates (18) 11 (7) Effects of change in the discount rate and the passage of time Unused amounts/provisions paid (34) (57) (91) Currency exchange difference (1) - (1) Non-current portion at 31 December Current portion at 31 December Provisions at 31 December Non-current portion at 1 January Current portion at 1 January Provisions at 1 January Additional provisions made/revision in estimates Effects of change in the discount rate and the passage of time (2) - (2) Unused amounts/provisions paid - (9) (9) Currency exchange difference (1) 3 2 Non-current portion at 31 December Current portion at 31 December Provisions at 31 December Statoil Fuel & Retail ASA

75 Consolidated financial statements Current portion of provisions is included in trade and other payables, see note 28 trade and other payables. Asset retirement obligations consist of provisions related to the removal or closing of service stations and depots. Expenditures related to asset retirement obligations are expected to be paid primarily in the period between 2013 and The timing depends primarily on when service stations and depots are closed down. For further discussion of methods applied and estimates required, see note 2 significant accounting policies. Other non-current provisions mainly consist of provisions for future environmental costs. At 31 December 2011 other current provisions included provisions related to restructuring of NOK 22 million. See note 8 restructuring costs for further information. Note 28 Trade and other payables (in NOK million) Trade payables 2,027 1,530 Withholding tax and accrued holiday pay 3,155 3,949 Other current accrued costs 908 1,329 Trade and other payables at 31 December 6,089 6,808 Accounts payable are due within standard credit terms provided by creditors. Other current accruals include items such as goods received not yet invoiced, rebates, accrued salaries and short term provisions, see note 27 provisions. Note 29 Related parties Statoil Fuel & Retail ASA is a 54 percent owned subsidiary of Statoil ASA, and consequently Statoil and all the entities in the Statoil group are related parties. The Norwegian State is the majority shareholder of Statoil as well as being a major shareholder in certain other Norwegian companies. This means that Statoil and Statoil Fuel & Retail participate in transactions with many parties that are under a common ownership structure and therefore meet the definition of a related party. The transactions with government-related entities comprise the sale of the Group s regular products. The transactions are individually not significant. All transactions with related parties are made on an arm s-length basis. Statoil is both a supplier to and a customer of the Group. The supply of goods from Statoil is recognised in cost of goods sold, while all sales to Statoil are recognised as operating revenue in the consolidated statement of income. The sale of goods is based on estimated market prices. Prices on services are based on their costs plus a mark-up. Receivables from and liabilities to Statoil are included in separate captions in the consolidated statement of financial position. In 2011 and 2010 the current liabilities to Statoil were mainly derived from ordinary business operations such as fuel supply. Sale and purchase of goods and services to/from companies in the Statoil group (in NOK million) Sale of goods 2,872 1,910 Sale of services Purchases of goods 43,920 40,699 Purchases of services 377 1, Statoil Fuel & Retail ASA 73

76 Statoil Fuel & Retail annual report 2011 At year end 2009 the Group had liabilities related to current funding through the Statoil group bank facilities and noncurrent liabilities related to funding from Statoil to the Statoil Fuel & Retail entities. The borrowings were settled in 2010 as part of the separation from Statoil. (in NOK million) Financial income related parties - 24 Financial expenses related parties - (275) Net financial expenses related parties - (251) Note 30 Other commitments, contingent assets and contingent liabilities Statoil Fuel & Retail has commitments and contingencies in respect of guarantees, asset retirement obligations and other obligations arising in the ordinary course of business. For further information on asset retirement obligations and provisions, see note 27 provisions. Guarantees At 31 December 2011 the Group had issued guarantees to and on behalf of third parties with an undiscounted maximum future payment amounting to NOK 142 million. The corresponding amount at 31 December 2010 was NOK 138 million. These guarantees primarily relate to financial guarantee commitments on behalf of retailers in Sweden. Guarantees comprise items such as guarantees towards retailer s car wash, shop inventory and stock buy-back, in addition to guarantees towards suppliers of electricity and heating. The carrying amount and fair value of the guarantee commitments recognised in the statement of financial position at 31 December 2011 and 2010 were immaterial. Other commitments The Group has entered into agreements for the provision of fuel transportation services. The Group has the right to use and the obligation to pay for certain transportation capacity during the contract period, which commenced 1 July 2011 and runs until 30 June A binding commitment for the Group arises when a production plan for the forthcoming month is approved. Consequently, at 31 December 2011 there is a one month commitment which amounts to approximately NOK 40 million. During the fourth quarter of 2010 Statoil Fuel & Retail entities entered into an agreement with ConocoPhillips, which granted the entities license to use and the obligation to pay for the use of the JET trademark. The agreement commenced 1 November 2010 and runs until 31 December Annual licence fee amounts to NOK 23 million. In the Norwegian and Swedish markets, customers can settle their purchases by use of a combined Statoil/MasterCard credit card. Statoil Fuel & Retail has entered into agreements whereby the risks and rewards related to the credit cards, like fee income, administration expenses and bad debt, are shared equally between the Group and external banks. For further information about the credit risk related to these agreements, see note 4 financial risk management. Contractual commitments related to the construction of automated and full service stations amounted to approximately NOK 222 million at 31 December This amount includes the purchase agreement to acquire seven service stations in St. Petersburg and the Leningrad oblast for NOK 156 million. For further details, see note 6. In addition there were ten service stations under construction in Russia, Sweden and Latvia. The connect project, including the development and implementation of a new ERP solution for the Group, was launched in 2011 and will be finalised in Contractual commitments related to connect amounted to approximately NOK 269 million at 31 December Contingent assets and contingent liabilities The operation in Poland is a party in a proceeding concerning excise duty on heating oil. At 31 December 2010, a provision of NOK 10 million was made for this proceeding taking into consideration the risk assessment provided by external tax advisors. Based on events occurring in 2011, an updated risk assessment has been made. The assessment concludes that it is no longer probable that Statoil Fuel & Retail will be liable. The provision has therefore been reversed 31 December Statoil Fuel & Retail ASA

77 Consolidated financial statements On the basis of the Polish Act on Excise Duty, lubricants are treated as excise goods and therefore subject to taxation. The Polish legislation only provides an exemption for lubricants not used as motor or heating fuel. The Company s position is that, based on EU law, it should not have paid excise duty on lubricants whatever they are used for. Thus the Company claimed a refund of the excise duty paid with respect to lubricants sold between 2006 and 2009 in the amount of NOK 31 million. The tax authorities have refused the refund and the case is still pending. The probability of obtaining a positive judgement is assessed to be significantly higher than 50 percent, but not higher than 90 percent. The contingent asset has therefore not been capitalised in the statement of financial position at 31 December At 31 December 2010 other current provisions included NOK 19 million related to a dispute regarding the sale of a pellet factory in Sweden during This matter has been resolved in During the normal course of its business the Group is involved in legal proceedings. There are unresolved claims currently outstanding; however these are not expected to have a significant impact on the Group s financial position or results of operations. The ultimate liability or asset in respect of such litigation and claims cannot be determined at this time. The Group has provided in its financial statements for probable liabilities related to litigation and claims based on the Group s best judgement. Note 31 Financial instruments by category Financial instruments and their carrying amounts recognised in the consolidated statement of financial position at 31 December as defined by IAS 39 categories are presented below (in NOK million) Fair value through profit or loss Loans and receivables Financial liabilities at amortised cost Available for sale Nonfinancial assets/ liabilities Total carrying amount Financial investments and receivables Financial receivables from related parties Other non-current receivables Trade and other receivables 3 8, ,187 Trade and other receivables related parties Cash and cash equivalents Total financial assets 3 9, ,269 Financial liabilities - - 4, ,132 Trade and other payables 1-3,074-3,016 6,089 Trade and other payables related parties - - 2, ,135 Current financial liabilities - - 1, ,450 Total financial liabilities 1-10,791-3,016 13, Statoil Fuel & Retail ASA 75

78 Statoil Fuel & Retail annual report (in NOK million) Fair value through profit or loss Loans and receivables Financial liabilities at amortised cost Available for sale Nonfinancial assets/ liabilities Total carrying amount Financial investments and receivables Financial receivables from related parties Other non-current receivables Trade and other receivables - 7, ,857 Trade and other receivables related parties Cash and cash equivalents - 1, ,533 Total financial assets - 9, ,881 Financial liabilities - - 4, ,140 Trade and other payables - - 3,018-3,790 6,808 Trade and other payables related parties - - 2, ,496 Current financial liabilities Total financial liabilities ,586-3,790 14,375 Available for sale assets consist of non-listed equity securities in companies where Statoil Fuel & Retail does not have significant influence or control. Non-financial assets and liabilities mainly comprise prepaid expenses, taxes and prepayments from customers. The following tables provide a view of revenues and expenses from the consolidated statement of income related to financial instruments (in NOK million) Loans and receivables Financial liabilities at amortised cost Available for sale Nonfinancial assets/ liabilities Total Operating profit/(loss) (67) - - 1,932 1,865 Financial income Financial expenses (47) (287) - (107) (441) Net financial expenses 4 (287) 1 (86) (368) 2010 (in NOK million) Loans and receivables Financial liabilities at amortised cost Available for sale Nonfinancial assets/ liabilities Total Operating profit/(loss) (68) - - 2,410 2,342 Financial income Financial expenses (9) (349) 1 (141) (497) Net financial expenses 56 (349) 2 (128) (419) Statoil Fuel & Retail ASA

79 Note 32 Financial instruments: measurement and market risk sensitivities Consolidated financial statements Fair value measurement of financial instruments Derivative financial instruments The Group recognises all derivative financial instruments in the consolidated statement of financial position at fair value. Changes in the fair value of the derivative financial instruments are recognised in the consolidated statement of income as other gain/(loss), net unless they are used for hedging and fulfil the criteria for hedge accounting. In 2011 the Group entered a cash flow hedge to mitigate the commodity risk in the LPG business. After the sale of the electricity business in Scandinavia in October 2010, no derivative financial instruments were recognised in the consolidated statement of financial position at 31 December For further description of the derivatives, see note 23 derivative financial instruments. Financial investments Statoil Fuel & Retail s financial investments comprise shares in companies where the Group does not have significant influence or control. All financial investments are recognised in the consolidated statement of financial position at fair value and classified as available for sale assets. Changes in fair value are recognised in other comprehensive income, except if there is a significant and prolonged decline in fair value. In the event of a significant and prolonged decline an impairment loss is recognised in the consolidated income statement. A subsequent increase in the fair value is recognised in the consolidated statement of comprehensive income. Fair value hierarchy The following table summarises each class of financial instrument recognised in the consolidated statement of financial position at fair value, split by the Group s basis for fair value measurement. Financial instruments recognised at fair value comprise financial investments, as described in note 19 financial investments and receivables, and derivative financial instruments as described in note 23 derivative financial instruments (in NOK million) Noncurrent financial investments Derivative financial instruments (asset) Derivative financial instruments (liability) Total fair value Fair value based on prices quoted in an active market (Level 1) Fair value based on price inputs other than quoted prices (Level 2) - 3 (1) 2 Fair value based on unobservable inputs (Level 3) Total fair value at 31 December (1) (in NOK million) Noncurrent financial investments Derivative financial instruments (asset) Derivative financial instruments (liability) Total fair value Fair value based on prices quoted in an active market (Level 1) Fair value based on price inputs other than quoted prices (Level 2) Fair value based on unobservable inputs (Level 3) Total fair value at 31 December Fair value in level 1 is based on prices quoted in an active market for identical assets or liabilities. At year end 2011 and 2010 there are no financial instruments measured at fair value within this level. Fair value in level 2 is based on price inputs other than quoted prices, which are derived from observable market transactions. At 31 December 2011 this level included the Group s derivatives. At 31 December 2010 there were no financial instruments measured at fair value within this level. Fair value in level 3 is based on unobservable inputs, mainly internal assumptions. The internal assumptions are only used in the absence of quoted prices from an active market or other observable price inputs for the financial instruments subject to the valuation. Shares in companies in which Statoil Fuel & Retail does not have significant influence or control are included in this level Statoil Fuel & Retail ASA 77

80 Statoil Fuel & Retail annual report 2011 Market risk sensitivities In the following, a sensitivity analysis showing how profit and loss or equity would have been affected by changes in the different types of market risk which the Group is exposed to at 31 December 2011 is presented. For further information related to market risks and how the Group manages these risks, see note 4 financial risk management. The sensitivities have been calculated based on what Statoil Fuel & Retail views to be reasonably possible changes in the commodity prices, the foreign exchange rates, the interest rates and the equity prices for the coming year. Commodity price risk Any changes in fair value of the derivatives are recognised in the consolidated statement of income unless hedge accounting has been applied. The table below contains the fair value and related commodity price risk sensitivities of Statoil Fuel & Retail s commodity-based derivative contracts. For further information related to the type of commodity price risks and how the group manage the risk, see note 4 financial risk management. Price risk sensitivity by the end of 2011 has been calculated assuming a reasonable possible change of 30 percent as follows: (in NOK million) At 31 December 2011 Net fair value 30% -30% Net gain/(loss) 2 32 (26) The Group has derivative instruments designated as cash flow hedging instruments. The cash flow hedges were for forecast transactions. The table below shows the effective and ineffective parts of the Group s cash flow hedges and the amount that has been recognised as other comprehensive income during the period. The ineffective part is recognised in the income statement as other gains and losses. Cash flow hedging relationships (in NOK million) Cash flow hedging equity reserve at beginning of year - - Changes in fair value of derivative - - Ineffective part recognised in the income statement - - Changes in fair value of derivatives recognised as other comprehensive income 2 - Amount reclassified from equity to profit and loss - - Cash flow hedging equity reserve at 31 December 2 - Currency risk By the end of 2011, currency risk sensitivities have been calculated by assuming a +12/-12 percent change in the foreign exchange rates that the Group is exposed to, where a +12 percent change refers to a weakening of the functional currency against the transactional currency and a -12 percent change refers to a strengthening of the functional currency against the transactional currency. For 2010 the currency risk sensitivities were also calculated by assuming a +12/-12 percent change in foreign exchange rates Statoil Fuel & Retail ASA

81 Consolidated financial statements (in NOK million) EUR NOK SEK DKK PLN LTL LVL RUB At 31 December 2011 Net gain/(loss) (-12% sensitivity) (281) (4) (62) (3) Net gain/(loss) (12% sensitivity) (2) (1) (3) (6) At 31 December 2010 Net gain/(loss) (-12% sensitivity) (263) 36 (19) Net gain/(loss) (12% sensitivity) 263 (36) 19 (6) (3) (2) (1) (1) Interest rate risk The Group is exposed to interest rate risk through liquid assets and interest bearing financial liabilities. For further information related to the interest risks and how the Group manages these risks, see note 4 financial risk management. For the interest rate risk sensitivity at 31 December 2011, a +1.5/-1.5 percentage point change in the interest rates has been used in the calculation as reasonable changes. (in NOK million) At 31 December % -1.5% Net gain/(loss) (73) 73 At 31 December % -0.5% Net gain/(loss) (53) 18 For the interest rate risk sensitivity by the end of 2010 a decline of 0.5 percentage points and an increase of 1.5 percentage points in the interest rates were used. Equity price risk For the equity price risk sensitivity at 31 December 2011, a +40/-40 percent change in the equity price for the non-listed equity securities has been used in the calculation. For the sensitivities calculated at the end of 2010, a +35/-35 percent change was used. (in NOK million) At 31 December % -40% Net gain/(loss) 2 (2) At 31 December % -35% Net gain/(loss) 1 (1) Note 33 Separation from Statoil ASA For information on the initial public offering of Statoil Fuel & Retail ASA and the transfer of the Fuel and Retail business from Statoil to the Company, see note 3 separation from Statoil ASA in the separate financial statements of Statoil Fuel & Retail ASA. The section below describes the effects of the separation from Statoil on the consolidated statement of financial position. On 1 October 2010, Statoil transferred its Fuel and Retail business to Statoil Fuel & Retail through a number of separation transactions. These transactions, which were recorded in the fourth quarter of 2010, significantly impacted the consolidated statement of financial position at 31 December The separation transactions resulted in a decrease of NOK 1,850 million in total assets - a reduction in non-current 2012 Statoil Fuel & Retail ASA 79

82 Statoil Fuel & Retail annual report 2011 assets of NOK 650 million and a reduction of current assets of approximately NOK 1,200 million. Non-current assets decreased mainly due to a reduction of financial receivables to Statoil. At 31 December 2009, the Group had financial receivables related to financing activities of NOK 650 million to Statoil. These balances were settled in the separation. Current assets decreased as a result of the settlement of related party receivables. At 31 December 2010 total equity was NOK 7,907 million, an increase of NOK 145 million compared with 31 December Profit after tax of NOK 1,585 million and a capital increase of NOK 500 million were offset by the negative effects of the separation transactions of NOK 1,954 million. The main contributors included: The purchase of the demerged Danish subsidiary Statoil A/S and the purchase of the aviation assets from Statoil. Settlement of carve-out balances. Gain on sale of inventory in primary storage facilities in Norway and Sweden. Gain on sale of the LPG caverns and loading racks. Total non-current liabilities decreased by NOK 4,833 million. The reduction was mainly due to a settlement of noncurrent inter-company debt to Statoil of NOK 8,693 million offset by the draw down of a syndicate loan of NOK 4,000 million. The loans were repaid to Statoil in October 2010 and replaced by a new Bank Facility Agreement, described in note 25 financial liabilities. In addition, certain carve-out balances, mainly related to the demerger of the Danish subsidiary, were settled against equity in the separation. Total current liabilities increased by NOK 2,496 million due to an increase in trade and other payables to related parties as a result of improved payment terms in the new supply agreement. Historically, payables related to purchases of refined oil products have been assumed to be settled every day. Under the new supply arrangement with Statoil, the Group has eight days of credit. The increased number of credit days contributed to an increase in trade and other payables to related parties. Further, certain excise duty and VAT payables related to the Fuel and Retail business had historically not been allocated to Statoil Fuel & Retail by Statoil. After the separation, these balances were allocated to Statoil Fuel & Retail. Note 34 Reconciling cash flow information For the purpose of the consolidated statement of cash flow the following line items have been reconciled. Purchases of property, plant and equipment and intangible assets (in NOK million) Notes Additions and transfers, property, plant and equipment 14 1, Additions and transfers, intangible assets Total additions and transfers 1, Significant non-cash transactions: Finance lease 71 (23) Asset retirement obligation (15) 3 Purchases of property, plant and equipment and intangible assets 1, The figures in the table above do not include acquisitions through business combinations. Significant non-cash items comprise additions of finance lease, assets reclassified to financial receivables relating to finance leases in which Statoil Fuel & Retail is a lessor and asset retirement obligation in Purchases of property, plant and equipment and intangible assets have been grouped into maintaining existing capacity and business development for the purpose of internal reporting Statoil Fuel & Retail ASA

83 Consolidated financial statements (in NOK million) Maintaining existing capacity 1, Business development Total additions, including acquisition through business combinations 1, Proceeds from sales of property, plant and equipment consist mainly of the sale of rental cars (2011 and 2010) and of the Stenungsund depot (2010). Purchase of businesses and equity securities (in NOK million) Notes Purchase of St1 network in Poland 6 (54) - Purchase of shares in associated companies (4) - Purchase of businesses and equity securities (58) - Proceeds from sale of businesses and equity securities (in NOK million) Notes Cash consideration from the sale of Swedegas Cash considerations from the sale of the marine business in Denmark Long-term interest bearing securities - 75 Other 10 7 Proceeds from sales of businesses and equity securities Cash and cash equivalents (in NOK million) Cash and cash equivalents 641 1,533 Bank overdraft (1,166) (603) Total at 31 December (525) 931 Bank overdrafts are recognised as current financial liabilities in the consolidated statement of financial position Statoil Fuel & Retail ASA 81

84 Statoil Fuel & Retail annual report 2011 Note 35 Subsequent events Defined benefit plan curtailment In February 2012 the Boards of Directors of Statoil Fuel & Retail ASA and Statoil Fuel & Retail Norge AS resolved to redesign their companies defined benefit plans. That redesign involved closing the existing defined benefit plan and introducing a defined contribution plan for new employees. In addition, benefits related to the current spouse and children pension would be replaced by insurance coverage for dependents and a gratuity plan related to the companies early retirement scheme would be discontinued. The curtailment will be recognised in first quarter 2012 and is expected to reduce the net pension liability by approximately NOK 300 million. Future service costs will also be reduced. Bond issue Statoil Fuel & Retail completed its issuance of NOK 1,500 million in the Norwegian bond market on 15 February The issuance is split between bonds amounting to NOK 1,100 million, with a coupon of three months NIBOR plus 1.75 percent per annum maturing in February 2017 and NOK 400 million with a coupon of 5.25 percent per annum maturing in February An application will be made for the bonds to be listed on the Oslo Stock Exchange. The purpose of the bond issuance is to refinance parts of Statoil Fuel & Retail s current bank financing, increase the number of funding sources and extend its debt maturity structure. Approval of acquisition of service station network in Russia In February 2012 the Russian competition authorities (FAS) approved the acquisition of seven service stations in St. Petersburg and the Leningrad region from Ekogasservice JSC. For further details, see note 6 business combinations Statoil Fuel & Retail ASA

85 Parent company financial statements

86 Statoil Fuel & Retail annual report 2011 Financial statements Statoil Fuel & Retail ASA Statement of income (in NOK million) Notes 2011 For the period from 18 May to 31 December 2010 Revenues Operating expenses Salaries and other personnel expenses 4 (338) (78) Other administrative expenses 5 (662) (186) Total operating expenses (1,000) (264) Operating profit/(loss) (92) (32) Interest and other financial income 1, Interest and other financial expenses (236) (63) Foreign exchange rate gain/(loss) (20) 1 Net financial income/(expenses) 13, Profit before income tax Income tax expense 6 (23) (25) Profit for the period Distributed Transferred to retained earnings Proposed dividend Total Statoil Fuel & Retail ASA

87 Parent company financial statements Statement of financial position at 31 December (in NOK million) Notes Assets Intangible assets Deferred tax assets Property, plant and equipment Investments in subsidiaries 7 10,569 11,052 Financial receivables related parties Other non-current assets 2 - Total non-current assets 11,659 11,967 Trade and other receivables 37 1 Trade and other receivables related parties 13 1,756 2,372 Cash and cash equivalents Total current assets 1,793 2,373 Total assets 13,453 14, Statoil Fuel & Retail ASA 85

88 Statoil Fuel & Retail annual report 2011 Statement of financial position at 31 December (in NOK million) Notes Equity and liabilities Equity Share capital 1,500 1,500 Additional paid-in capital 4 5,848 Retained earnings 5, Total equity 9 6,831 7,535 Liabilities Financial liabilities 10 3,972 3,955 Pension liabilities Other non-current liabilities 1 - Total non-current liabilities 4,365 4,213 Trade and other payables Trade and other payables related parties Current tax payable Dividend Financial liabilities Financial liabilities related parties 8, 13 1,228 1,686 Total current liabilities 2,257 2,592 Total liabilities 6,622 6,805 Total equity and liabilities 13,453 14,340 Oslo, 12 March 2012 The Board of Directors of Statoil Fuel & Retail ASA Birger Magnus Chair Ann-Charlotte Lundén Jon Arnt Jacobsen Per Bjørgås Marthe Hoff Board member Board member Board member Board member Anne Martha Støver Ketil Johannessen Petter Vådal Jacob Schram Board member Board member Board member CEO Employee representative Employee representative Employee representative Statoil Fuel & Retail ASA

89 Parent company financial statements Statement of cash flow (in NOK million) Notes 2011 For the period from 18 May to 31 December 2010 Operating activities Profit before income tax Adjustments to reconcile profit/(loss) before income tax to net cash flows provided by operating activities Net interest Pension costs Dividends and group contribution from subsidiaries, not received 13 (1,148) (314) Cash flows from/(to) changes in working capital Trade and other receivables (191) Trade and other payables 14 (125) 315 Pension contribution paid (25) (7) Interest received 36 9 Interest paid (238) (30) Taxes paid (221) - Other 20 - Net cash flow provided by/(used in) operating activities (517) 72 Investing activities Purchases of property, plant and equipment and intangible assets 15 (143) (1) Loans to subsidiaries 13 - (800) Dividends and group contribution received 2,154 - Group contribution paid (24) - Investments in subsidiaries 7, 14 - (5,714) Cash flows provided by/(used in) investing activities 1,986 (6,515) Financing activities Proceeds from long-term borrowings 10, 14-3,955 Proceeds from short-term borrowings 10 1, Payment of short term borrowings 10 (1,900) - Payment of dividend 9 (900) - Proceeds from issuance of new share capital Payments for treasury shares (11) - Cash flows provided by/(used in) financing activities (1,011) 4,755 Net increase/(decrease) in cash 458 (1,686) Cash and cash equivalents at 1 January 8, 14 (1,686) - Cash and cash equivalents at 31 December 8, 14 (1,228) (1,686) 2012 Statoil Fuel & Retail ASA 87

90 Statoil Fuel & Retail annual report 2011 Notes to the financial statements Note 1 General information Statoil Fuel & Retail ASA ( the Company ) is incorporated and domiciled in Norway. The address of its registered office is Sørkedalsveien 8, N-0369 OSLO, Norway. Statoil Fuel & Retail ASA was incorporated as a public limited liability company on 18 May 2010 as a wholly-owned subsidiary of Statoil ASA ( Statoil ) to serve as the parent company for the Fuel and Retail business, which historically was a business cluster within the Manufacturing and Marketing reporting segment of Statoil. With effect from 1 October 2010, Statoil transferred all activities and subsidiaries relating to Statoil s Fuel and Retail business to Statoil Fuel & Retail ASA. On 22 October 2010, the shares of Statoil Fuel & Retail ASA were listed on the Oslo Stock Exchange. In conjunction with the listing, Statoil sold 46 percent of its shares. At 31 December 2011, Statoil remains the majority shareholder in Statoil Fuel & Retail ASA, owning 54 percent of the shares, and the Company continues to be a subsidiary of Statoil. Through its subsidiaries, the Company operates fuel service stations both under dealer and franchise operating models, as well as company operated models. Statoil Fuel & Retail (or the Group ) sells road transportation fuel, lubricants, stationary energy, chemicals and convenience products in Scandinavia and Central and Eastern Europe, and marine fuel in Norway. In addition, the Group produces and sells lubricant oils and supplies aviation fuel at major airports in Europe. The financial statements were authorised for issue by the Board of Directors on 12 March Note 2 Significant accounting policies Statement of compliance The financial statements of Statoil Fuel & Retail ASA are prepared in accordance with the Norwegian Accounting Act of 1998 and Norwegian Generally Accepted Accounting Policies (NGAAP). Basis for preparation These financial statements have been prepared on the historical cost basis, except of defined benefit pension assets that are recognised at fair value. The comparable information is for the period from the date of inception (18 May 2010) to 31 December Accounting estimates and judgements In preparing the financial statements, assumptions and estimates that have an effect on the amounts and presentation of assets and liabilities, income and expenses and contingent liabilities must be made. Actual results could differ from these assumptions and estimates. Foreign currency The functional currency and presentation currency of the Company is Norwegian kroner (NOK). In preparing the financial statements, transactions in foreign currencies are translated at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the foreign exchange rate at the balance sheet date. Foreign exchange differences arising on translation are recognised in the statement of income as financial income or financial expenses. Non-monetary assets that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions Statoil Fuel & Retail ASA

91 Parent company financial statements Revenue recognition Statoil Fuel & Retail ASA derives its revenues primarily from the allocation of headquarter costs to its subsidiaries. Revenues from the sale of intercompany services are recognised when the services are delivered. Employee benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Company. The accounting policy for share-based payments and pensions is described below. Interest income and expenses Interest income and expenses are recognised in the income statement as they are accrued, based on the effective interest method. Income tax expense Income tax expense in the statement of income for the year comprises current tax and changes in deferred tax. Income tax expense is recognised in the statement of income. Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amounts for assets to be received (disputed tax positions for which payment has already been made) in each case are recognised within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recorded in the period in which they are earned or incurred, and are presented in net finance expenses in the statement of income. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognised based on future taxable profits, convincing evidence is required. Intangible assets Intangible assets are stated at cost, less accumulated amortisation and accumulated impairment losses. Intangible assets acquired separately are carried initially at cost. Intangible assets are amortised on a straight-line basis over their expected useful life, from the date the assets are taken into use. The expected useful life of the assets is reviewed on an annual basis and changes in useful life are accounted for prospectively. Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation and the initial estimate of a decommissioning obligation, if any. Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately on a straight-line basis over the estimated useful life of the component. The estimated useful lives of property, plant and equipment are reviewed on an annual basis and changes in useful life are accounted for prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is recognised in the statement of income in the period the item is derecognised Statoil Fuel & Retail ASA 89

92 Statoil Fuel & Retail annual report 2011 Investments in subsidiaries Subsidiaries are all entities controlled by Statoil Fuel & Retail ASA. Control exists when the Company has the power, directly or indirectly, to govern the financial and operational policies of an entity so as to obtain benefits from its activities. Subsidiaries are accounted for using the cost method, and are recognised at cost less impairment. The cost price is increased when funds are added through capital increases or when group contributions are made to subsidiaries. Dividends and group contributions to be received are recognised either as income or a reduction of the investment in the subsidiary, at the reporting date of the financial year that the proposal of dividend and group contribution relates to. To the extent that the dividend or group contribution relates to distribution of results from the period Statoil Fuel & Retail ASA has owned the subsidiary, it is recognised as income. Dividends or group contributions that are repayment of invested capital are recognised as a reduction of the investment in the subsidiary. Group contributions to be distributed are recognised as a liability at the reporting date of the financial year that the proposal of group contribution relates to. Financial assets and liabilities Statoil Fuel & Retail ASA assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. For financial assets carried at amortised cost, if there is objective evidence that an impairment loss on loans and receivables has been incurred, the carrying amount of the asset is reduced. Interest-bearing borrowings are initially recognised at cost. After initial recognition, such financial liabilities are measured at amortised costs using the effective interest method. Amortised cost is calculated by taking into account any issue costs. Trade payables are carried at cost. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits with banks and other current highly liquid investments with original maturities of three months or less. Statoil Fuel & Retail ASA is part of an internal bank agreement established to fund the Group s net intra-month working capital needs. Any balances related to this agreement are recognised in the statement of financial position as receivables from or liabilities to related parties, and as cash and cash equivalents in the statement of cash flow. The cash flow analysis presented in the statement of cash flow is derived using the indirect method. Dividends Distribution of dividends is resolved by a majority vote at the Annual General Meeting of the shareholders of Statoil Fuel & Retail ASA, and on the basis of a proposal from the Board of Directors. Dividends are recognised as a liability at the reporting date of the financial year that the proposal of dividend relates to. Pensions Statoil Fuel & Retail ASA has pension plans for employees that provide a defined pension benefit upon retirement. The benefit to be received by employees generally depends on many factors including length of service, retirement date and future salary levels. Statoil Fuel & Retail ASA s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date reflecting the maturity dates approximating the terms of the Company s obligations. The calculation is performed by an external actuary. Current service cost is an element of net periodic pension cost and recognised in the statement of income. The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect Statoil Fuel & Retail ASA

93 Parent company financial statements on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the statement of income as a part of the net periodic pension cost. Past service cost is recognised immediately when the benefits become vested or on a straight-line basis until the benefits become vested. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are re-measured using current actuarial assumptions and the gain or loss is recognised in the statement of income during the period in which the settlement or curtailment occurs. Actuarial gains and losses are recognised in full in equity in the statement of financial position in the period in which they occur. AFP scheme Due to national agreements in Norway, the Company is a member of the agreement-based early retirement plan (AFP). The current AFP scheme was replaced by a new AFP scheme from 1 January The company will pay a contribution for pensions in payment under the current scheme and a premium for both new and old schemes up until 31 December The premium in the new scheme is calculated on the basis of the employees income between 1 and 7.1 G. The premium is payable for all employees until age 62. Pensions from the new AFP scheme will be paid to employees for their full lifetime. The employers have an obligation to pay a percentage of the benefits under the AFP scheme. This obligation is accounted for as a defined benefit plan. In the current early retirement system the Company offers a supplementary company pension for employees. This is also accounted for as a defined benefit plan, and is included in the liabilities related to the defined benefits plans. The Company therefore has a combined early retirement commitment to the employees irrespective of the level of funding from the governmental AFP funding. Hence the replacement of the old AFP with a new AFP in 2010 is not viewed as a termination of the plan. New legislation affecting Norwegian pension and insurance schemes was passed during 2010 as part of the Norwegian pension and insurance reform. The legislation requires some adaptations in the company s Norwegian pension scheme, in particular related to increased flexibility of retirement. Share-based payments Members of the Corporate Executive Committee have received remuneration in the form of share-based incentive programme. The cost of the equity-settled transactions with Statoil Fuel & Retail ASA s employees is measured by reference to the estimated fair value at the date at which they are granted and is recognised as an expense over the period that the employees become unconditionally entitled to the awards (vesting period). The amount recognised as an expense is adjusted to reflect the number of awards for which service and any non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet such conditions at the vesting date. For share-based payments with non-vesting conditions, the grant date fair value of the payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Statoil Fuel & Retail ASA might also pay the employee tax in a share-based payment transaction. This is considered to be an employee benefit, and if there are no conditions relating to such a payment, this employee benefit is expensed in full at the grant date. Note 3 Separation from Statoil ASA Initial public offering (IPO) The listing of the Company took place in conjunction with an offering of existing shares in the Company by Statoil ASA. Pricing and allocation in the offering took place on 21 October Statoil ASA sold 120 million shares at NOK 39 per share in the offering, representing 40 percent of the shares of the Company. In addition, the Joint Global Coordinators 2012 Statoil Fuel & Retail ASA 91

94 Statoil Fuel & Retail annual report 2011 had over-allotted 18 million shares, representing 15 percent of the offering size, and exercised their option to borrow 18 million shares from Statoil ASA for the purpose of covering said over-allotment. Trading in the shares of Statoil Fuel & Retail ASA on the Oslo Stock Exchange commenced on an if delivered basis on 22 October 2010, and unconditional trading in the shares commenced on 27 October Separation from Statoil ASA On 1 October 2010, Statoil ASA transferred the assets, rights and liabilities of the Fuel and Retail business to Statoil Fuel & Retail ASA by means of a series of transfers: transfer of shares in subsidiaries and other equity interests in other entities within the Fuel and Retail business, transfer of Fuel and Retail business corporate staff and other services staff providing services to the Fuel and Retail business, and who were previously employed by Statoil, and related pension liabilities, and an equity contribution in the amount of NOK 500 million. In addition, the following transactions were effected prior to the transactions referred to above in order to separate the Fuel and Retail business from other activities remaining within Statoil ASA and its subsidiaries ( the Statoil group ): transfer of the non-fuel and Retail business of Statoil Fuel & Retail A/S (formerly Statoil A/S), Statoil s main operating subsidiary in Denmark, to another Danish Statoil ASA subsidiary by means of a legal demerger. The principal assets transferred were the refinery in Kalundborg in Denmark and the primary storage facilities including inventory at Hedehusene in Denmark, transfer of an LPG cavern and loading racks in Stenungsund previously owned by Statoil Fuel & Retail Sverige AB (formerly Svenska Statoil AB, a legal entity in the Fuel and Retail business) to a Statoil ASA subsidiary outside the Group, transfer of certain inventories of petrol, diesel and other petroleum products in primary storage from Statoil Fuel & Retail Norge AS (formerly Statoil Norge AS) and Statoil Fuel & Retail Sverige AB (formerly Svenska Statoil AB), two legal entities in the Fuel & Retail business, to Statoil ASA and a subsidiary of Statoil ASA outside the Group. Statoil ASA is retaining ownership of such inventories, transfer of shares and interests in Statoil ASA s Aviation joint ventures, set up in respect of fuel supply to airports, and related customer and other agreements to Statoil Fuel & Retail Aviation AS, a wholly owned subsidiary of Statoil Fuel & Retail ASA. As consideration for the transfer of the assets, rights and liabilities of the Fuel and Retail business, the Company issued 300 million shares, each with a nominal value of NOK 5, to Statoil ASA. In addition, certain transfers to/(from) Statoil ASA were settled with cash contributions/(distributions). As the separation involved entities under common control, the transaction was completed with continuity for accounting purposes. Note 4 Salaries and other personnel expenses All employees in the Fuel and Retail business of Statoil ASA were transferred to Statoil Fuel & Retail ASA with effect from 1 October From the date of the inception of the Company, 18 May 2010, to 30 September 2010 salaries and other personnel expenses were borne by Statoil ASA. The basis for pension costs is described in note 11 retirement benefit obligations. For the period from 18 May to (in NOK million except number of man labour years) Notes December 2010 Salaries and bonuses Pension costs Payroll taxes 33 6 Other benefits and social costs 4 13 Total salaries and other personnel expenses Number of man labour years Statoil Fuel & Retail ASA

95 Parent company financial statements Salaries and personnel expenses for the Corporate Executive Committee 2011 (in NOK thousand unless otherwise stated) Salary 1) Annual variable pay 2) Long term variable pay 3) Other benefits 4) Pension costs Loans outstanding 5) Jacob Schram 4,215-5, , Klaus-Anders Nysteen 3,139-3, ,554 - Jan Dahm-Simonsen 2,040-1, Hans-Olav Høidahl 2,348-1, Jørn Madsen 2,044-1,184 2,837 7) DKK Jonas Palm 6) SEK 1,825 - SEK 1,048 SEK 993 SEK Lars Gaustad 2,000-1, Ina Strand 1,979-1, Karl Kristian Mydske 1,837-1, Bård Standal 1,547-1, Karen Romer 1, Morten Michael Jensen 8) 1, ) Including paid out holiday allowance. 2) No bonuses (AVP) were paid out in The bonus related to 2010 will be paid out in Accrued, but not paid annual variable pay per 31 December 2011 amounts to NOK 5,284 thousand. The accrual is based on the expected bonus payout. The actual bonus payment may deviate from this estimate. 3) Relates largely to the long-term incentive schemes. See below for further information. 4) Other benefits include benefits such as insurance, free phone, taxable benefit of interest free loan and car allowance. 5) The loans mature in a period from three to nine years. 6) Jonas Palm is employed in one of the Group s Swedish subsidiaries and his salary was paid by this company. 7) Including expatriation benefits. 8) Morten Michael Jensen is Acting EVP Market Development in the period in which Ina Strand is on maternity leave. An acting increment is included in his salary. For the period from 1 October 2010 to 31 December 2010 (in NOK thousand unless otherwise stated) Salary 1) Annual variable pay 2) Other benefits Pension costs Loans outstanding Jacob Schram Klaus-Anders Nysteen Jan Dahm-Simonsen Hans-Olav Høidahl Jørn Madsen ) DKK 32 - Jonas Palm 3) SEK 407 SEK 275 SEK 35 SEK 92 - Lars Gaustad Ina Strand Karl Kristian Mydske Bård Standal Karen Romer ) Including holiday pay. 2) Paid in 2010 based on the fulfilment of 2009 performance criteria. 3) Jonas Palm is employed in one of the Group s Swedish subsidiaries and his salary was paid by this company. 4) Including expatriation benefits. The Company has no share-based payment schemes with settlement in cash. No collateral have been given to the members of the Corporate Executive Committee. See note 9 to the consolidated financial statements for details regarding the remuneration policy and severance payment Statoil Fuel & Retail ASA 93

96 Statoil Fuel & Retail annual report 2011 Remuneration for the Board of Directors For information on shares held by the members of the Board of Directors, see note 20 to the consolidated accounts (in NOK thousand) Position Board remuneration Audit committee Compensation committee Total remuneration Birger Magnus Chair Jon Arnt Jacobsen 1) Board member Marthe Hoff 1) Board member Anne Martha Støver 2) Board member Ketil Johannessen 2) Board member Petter Vådal 2) Board member Per Bjørgås Board member Ann-Charlotte Lundén Board member Odd Arne Rasmussen 2) Deputy board member Ellen Mikalsen 2) Deputy board member Jørn Bjarne Eide 2) Deputy board member Cathrine Henriksen Jørgensen 2) Deputy board member Egle Merkeviciene 2) Deputy board member Rolv Bjørn Jernskau 2) Deputy board member Total 2, ,218 1) The board member is employed by Statoil ASA and does not receive any remuneration. 2) Employee representative Statoil Fuel & Retail ASA

97 Parent company financial statements 2010 From 18 May 2010, the date of inception, and until the listing of Statoil Fuel & Retail ASA the Company had an interim board with five shareholder-elected members. Three of these members were replaced during the first month after the listing. (in NOK thousand) Position Board remuneration Audit committee Compensation committee Total remuneration Birger Magnus (member since ) Chair Jon Arnt Jacobsen (member since ) Board member Marthe Hoff (member since ) Board member Anne Martha Støver (member since ) Board member Ketil Johannessen (member since ) Board member Petter Vådal (member since ) Board member Per Bjørgås (member since ) Board member Ann-Charlotte Lundén Board member (member since ) Paul Piché Board member (member in the period ) Tom Melbye Eide Chair (member in the period ) Eldar Sætre Board member (member in the period ) Helga Nes Board member (member in the period ) Cathrine Støle Board member (member in the period ) Ellen Mikalsen Board member (member since ) Petter Vådal Deputy board (member in the period ) member Odd Arne Rasmussen Deputy board (member since ) member Cathrine Henriksen Jørgensen Deputy board (member since ) member Egle Merkeviciene Deputy board (member since ) member Jørn Bjarne Eide Deputy board (member since ) member Rolv Bjørn Jernskau Deputy board (member since ) member Total Long-term incentive schemes The Group operates various equity-settled share-based schemes for certain employees. 1. Frontloading At 9 December 2010 the Board of Directors agreed to invite members of the Corporate Executive Committee to participate in a one-time equity settled share-based incentive program. The incentive program has certain vesting conditions such as employment within the Group. When the granted member of the Corporate Executive Committee has been employed by the Group for a period of three years, 60 percent of the award vests. The remaining 40 percent of the award vests after the fourth year of employment in the Group Statoil Fuel & Retail ASA 95

98 Statoil Fuel & Retail annual report 2011 The number of shares to be granted to members of the Corporate Executive Committee was calculated based on the salary per 31 December 2010 multiplied by a predefined factor divided by Statoil Fuel & Retail ASA s share price at the time of Oslo Stock Exchange closure at 9 December The number of shares allocated to the members of the Corporate Executive Committee at 31 December 2011 is disclosed in the following table: CEC member 1) Base salary LTI% Base salary * LTI% After tax base salary LTI Share price at 9 December 2010 Number of shares Vested shares at 31 December 2011 Jacob Schram 3,500, ,500,000 1,750, ,000 Klaus-Anders Nysteen 2,700, ,160,000 1,080, ,600 Hans-Olav Høidahl 2,000, ,400, , ,000 Jørn Madsen 2,035, ,424, , ,245 - Lars Gaustad 1,750, ,050, , ,500 - Ina Strand 1,700, ,020, , ,200 - Jonas Palm 1,417, , , ,505 - Karl Kristian Mydske 1,600, , , ,600 - Karen Romer 1,200, , , ,000 - Total number of shares at 31 December 129,650-1) Jan Dahm-Simonsen and Bård Standal have been removed from the grant table, as they leave the Company in 2012 and therefore must repay the value of the granted shares 2. Long-term incentive scheme In addition to the one-time equity settlement program described above, the members of the Corporate Executive Committee are participating in an ordinary equity settled share-based incentive program. The last grant in this program was 31 December 2010 and the grant for 2012 will be allocated in the first quarter The number of shares allocated at 31 December 2011 is disclosed in the table below. CEC member 1) Base salary LTI% Base salary * LTI% After tax base salary LTI Share price 1 January 2011 Number of shares 2) Vested shares at 31 December 2011 Jacob Schram 3,500, ,225, , ,546 - Klaus-Anders Nysteen 2,700, , , ,634 - Hans-Olav Høidahl 2,000, , , ,184 - Jørn Madsen 2,035, , , ,275 - Lars Gaustad 1,750, , , ,123 - Ina Strand 1,700, , , ,006 - Jonas Palm 1,417, , , ,340 - Karl Kristian Mydske 1,600, , , ,770 - Karen Romer 1,200, , , ,262 - Total number of shares at 31 December 47,140-1) Jan Dahm-Simonsen and Bård Standal have been removed from the grant table, as they leave the Company in 2012 and therefore must repay the value of the granted shares. 2) The number of granted shares is based on the same principles as described for the frontloading scheme Statoil Fuel & Retail ASA

99 Parent company financial statements The fair value of the granted shares of NOK was determined at the date of the Annual General Meeting held 27 April 2011, as both of the incentive programs were subject to an approval at the Annual General Meeting. Since the granted Corporate Executive Committee member is required to complete a specific period of service before the equity instrument vests, the services obtained by the Company are expensed over that period. In 2011 NOK 4 million has been expensed relating to this share-based payment arrangement. Statoil Fuel & Retail ASA also pays the employee tax relating to the granted shares. This employee benefit was expensed in full in Note 5 Other administrative expenses Auditors remuneration (in NOK thousand, excluding VAT) Audit fee Audit-related fee Other service fee Total 2011 Ernst & Young - Norway 930 1,500-2,430 Total 930 1,500-2,430 For the period from 1 October 2010 to 31 December 2010 Ernst & Young - Norway Total Research and development expenditures The Company did not have any significant R&D expenditures in Note 6 Income tax Income tax expense (in NOK million) 2011 For the period from 18 May to 31 December 2010 Current taxes payable (34) (16) Change in deferred tax 11 (10) Income tax expense (23) (25) 2012 Statoil Fuel & Retail ASA 97

100 Statoil Fuel & Retail annual report 2011 Reconciliation of nominal statutory tax rate to effective tax rate (in NOK million) 2011 For the period from 18 May to 31 December 2010 Income before tax Nominal tax rate 28% (234) (64) Tax effect of: Permanent differences (1) - Dividends not assessable for income tax Total (23) (25) Effective tax rate (%) Significant components of deferred tax assets and liabilities (in NOK million) Deferred tax assets on: Goodwill arising from assembled workforce Pension liabilities Other (1) - Total deferred tax assets at 31 December Income taxes payable in the balance sheet (in NOK million) Current tax in the income statement Current tax on group contribution recognised as reduction/(increase) in investment (9) 218 Income taxes payable at 31 December Movement in deferred tax asset (in NOK million) Deferred tax asset at the beginning of the period Recognised in the statement of income 11 (10) Recognised in equity Reclassification between deferred tax and tax payable (10) - Deferred tax asset at 31 December Statoil Fuel & Retail ASA

101 Note 7 Investments in subsidiaries Parent company financial statements On 1 October 2010, Statoil transferred the shares in subsidiaries within the Fuel and Retail business to Statoil Fuel & Retail ASA. Following the separation from Statoil, the Company has eight directly and wholly owned subsidiaries and a number of indirectly owned companies in which the Company holds minority interests. In total, Statoil Fuel & Retail consists of approximately 60 legal entities. The tables below presents the subsidiaries of Statoil Fuel & Retail ASA and the carrying value of the subsidiaries recognised in the statement of financial position at 31 December 2011, and profit or loss for the period and total equity of the subsidiaries for the year ended 31 December During 2011 investments in subsidiaries have decreased by NOK 583 million due to group contributions and dividends. See note 13 related parties for more information on dividends and group contributions. (in NOK million) Registered office Country of residence Ownership interest Voting power Carrying value at 31 Dec 2011 Carrying value at 31 Dec 2010 Statoil Fuel & Retail Norge AS 1) Sørkedalsveien 8, 0369 Oslo Norway 100% 100% Statoil Fuel & Retail Aviation AS Sørkedalsveien 8, 0369 Oslo Norway 100% 100% Statoil Polen Invest AS Sørkedalsveien 8, 0369 Oslo Norway 100% 100% 2,351 2,348 Statoil AB Stockholm Sweden 100% 100% 2,951 3,322 Statoil Fuel & Retail A/S Borgmester Christiansens Gade 50, PB 900, 0900 København Denmark 100% 100% 1,341 1,361 UAB Lietuva Statoil J. Jasinskio g. 16A, Vilnius Lithuania 100% 100% SIA Latvija Statoil Duntes Street 6, Riga Latvia 100% 100% A/S Statoil Fuel & Retail Eesti 2) Estonia pst 10/Parnu mnt 13 Tallin Estonia 100% 100% 2,366 2,366 Total 10,569 11,052 1) Statoil Norge AS changed its name to Statoil Fuel & Retail Norge AS at the beginning of ) A/S Eesti Statoil changed its name to A/S Statoil Fuel & Retail Eesti at the beginning of Profit/(loss) for the year Total equity (in NOK million) Dec Dec 2010 Statoil Fuel & Retail Norge AS 2) ) 786 1) Statoil Fuel & Retail Aviation AS (28) ) 152 1) Statoil Polen Invest AS 1 (8) 1,660 1) 1,665 1) Statoil AB ,909 1) 2,924 1) Statoil Fuel & Retail A/S ,125 1) 1,211 1) UAB Lietuva Statoil 6 (60) SIA Latvija Statoil A/S Statoil Fuel & Retail Eesti 3) ,403 2,416 Total 1,657 1,884 9,633 9,835 1) After accrual for dividend payment and group contribution. The dividend payments and group contributions for 2010 were approved by the respective companies Annual General Meetings in 2011 and all payments were made after the Annual General Meetings. 2) Statoil Norge AS changed its name to Statoil Fuel & Retail Norge AS at the beginning of ) A/S Eesti Statoil changed its name to A/S Statoil Fuel & Retail Eesti at the beginning of Statoil Fuel & Retail ASA 99

102 Statoil Fuel & Retail annual report 2011 Shares in subsidiaries owned through subsidiaries (ownership 50 percent or more) Subsidiary Subsidiary of Country of residence Ownership interest Statoil Detaljist AS Statoil Fuel & Retail Norge AS 1) Norway 100.0% Norol Norsk Olje AS Statoil Fuel & Retail Norge AS 1) Norway 100.0% Apas Energiteknikk AS Statoil Fuel & Retail Norge AS 1) Norway 50.3% I/S Fællesskiltning Statoil Fuel & Retail A/S Denmark 58.5% Statoil Polen Holding A/S Statoil Polen Invest AS Denmark 100.0% Statoil Sp. Z.o.o Statoil Polen Invest AS Poland 100.0% Statoil Poland Sp.Z.o.o. Statoil Polen Holding A/S Poland 100.0% Premium Club Sp.Z.o.o. Statoil Poland Sp.Z.o.o. Poland 92.0% Motec Lubricants AB Statoil AB Sweden 100.0% Statoil Fuel & Retail Sverige AB 2) Statoil AB Sweden 100.0% HGL AB Statoil AB Sweden 50.0% Statoil Detaljist AB Statoil Fuel & Retail Sverige AB 2) Sweden 100.0% Statoil ICC AB Statoil Fuel & Retail Sverige AB 2) Sweden 100.0% Malmö Fuelling Service AB Statoil Fuel & Retail Sverige AB 2) Sweden 50.0% OOO Statoil Energy & Retail Russia Statoil AB Russia 100.0% OOO Statoil Nefto OOO Statoil Energy & Retail Russia Russia 100.0% OOO Statoil Retail Operations OOO Statoil Nefto Russia 100.0% St1 Avifuels Oy Statoil Fuel & Retail Aviation AS Finland 51.0% Statoil Fuel & Retail Aviation Deutchland GmbH Statoil Fuel & Retail Aviation AS Germany 100.0% 1) Statoil Norge AS changed its name to Statoil Fuel & Retail Norge AS at the beginning of ) Svenska Statoil AB changed its name to Statoil Fuel & Retail Sverige AB at the beginning of Note 8 Cash and cash equivalents Cash and cash equivalents amounted to NOK 35,000 and NOK 27,000 at year end 2011 and 2010 respectively. The Company had no restricted cash. Statoil Fuel & Retail ASA is part of an internal bank agreement established to fund the Group s net intra-month working capital needs. The cash pool is managed by a subsidiary of Statoil Fuel & Retail ASA, and any balances related to this agreement are recognised as related party balances in the statement of financial position. At 31 December 2011 and 2010 the Company s share of the cash pool amounted to NOK 1,228 million and NOK 1,686 million respectively and was recognised as current financial liabilities related parties. See the statement of cash flow for further information on changes in cash and cash equivalents Statoil Fuel & Retail ASA

103 Parent company financial statements Note 9 Equity and shareholders Equity (in NOK million) Share Capital Additional paid in capital Retained earnings Total equity Shareholders equity 18 May 2010 (date of inception) Net income Actuarial gain/(loss) employee retirement benefit plans, net after tax - - (17) (17) Separation agreements 1 October ,499 5,847-7,346 Total at 31 December ,500 5, ,535 Net income Actuarial gain/(loss) employee retirement benefit plans, net after tax - - (73) (73) Decrease of additional paid-in capital - (5,848) 5,848 - Dividend to equity holders of the Company - - (1,440) (1,440) Purchase and allocation of treasury shares to employees - - (11) (11) Share-based payment Total at 31 December , ,327 6,831 On 27 April 2011, the Annual General Meeting of Statoil Fuel & Retail ASA resolved to reduce the Company s additional paid-in capital from NOK 5,848 million to NOK 0 million. The resolution was subject to a statutory creditor notice period of two months, which ended 28 June NOK 900 million, or NOK 3.00 per share, was distributed to the shareholders 5 July Trading in the Company s shares excluding the right to the distribution of dividend was 29 June 2011 (ex-date). In May 2011 the Company purchased 200,118 of its own shares at an average price of NOK Following the purchase, the shares were allocated to participants in the Group s long-term incentive schemes. Two of the participants are leaving Statoil Fuel & Retail in 2012, and will have to pay back the market price of their allocated shares at the date they leave the Company, limited upwards to the market price at the date the shares were allocated to them. For 2011 the Board of Directors has proposed a dividend of NOK 1.80 per share, totalling NOK 540 million. The share will be traded excluding dividend rights (ex-date) on the day following the Annual General Meeting to be held 26 April Distribution of dividends is resolved by a majority vote at the Annual General Meeting of the shareholders of the Company, and on the basis of a proposal from the Board of Directors. The Annual General Meeting has the power to reduce, but cannot increase, the dividend proposed by the Board of Directors. Shareholders On 1 October 2010, Statoil transferred the assets, rights and liabilities of the Fuel and Retail business to Statoil Fuel & Retail ASA. As a consideration for the transfer, the Company issued 300 million shares, each with a par value of NOK 5, to Statoil. The initial public offering of Statoil Fuel & Retail ASA took place in conjunction with an offering of existing shares in the Company by Statoil, where Statoil sold 46 percent of its shares in the Company. Statoil Fuel & Retail ASA did not receive any proceeds from this sale. At 31 December 2011 the share capital amounted to NOK 1,500 million. All the shares rank in parity with one another and carry one vote per share. The tables below show the largest shareholders of Statoil Fuel & Retail ASA and shares held by Management and Board of Directors at 31 December Statoil Fuel & Retail ASA 101

104 Statoil Fuel & Retail annual report 2011 Name of shareholder Number of shares Shares in % Statoil ASA 162,000, Folketrygdfondet 13,223, JPMorgan Chase Bank 1) 11,459, State Street Bank and Trust Co. 1) 6,825, Morgan Stanley & Co LLC 1) 5,808, State Street Bank and Trust Co. 1) 5,790, State Street Bank & Trust Co. 1) 5,408, Deutsche Bank AG London 1) 4,842, Skandinaviska Enskilda Banken 1) 4,213, KAS Depositary Trust Company 1) 3,840, Goldman Sachs & Co Equity 1) 3,378, Bank of New York Mellon 1) 3,373, Clearstream Banking S.A. 1) 3,133, Total largest shareholders 233,298, Total other shareholders 66,701, Total shares outstanding 300,000, ) Nominee account and similar Board of Directors Number of shares Birger Magnus Chair 2,430 Ann-Charlotte Lundén Board member 3,500 Per Bjørgås Board member 3,000 Jon Arnt Jacobsen Board member 2,050 Marthe Hoff Board member 930 Ketil Johannessen Board member (employee representative) - Petter Vådal Board member (employee representative) - Anne Martha Støver Board member (employee representative) - Odd Arne Rasmussen Deputy board member (employee representative) 2,550 Ellen Mikalsen Deputy board member (employee representative) 250 Jørn Bjarne Eide Deputy board member (employee representative) 250 Cathrine Henriksen Jørgensen Deputy board member (employee representative) - Egle Merkeviciene 1) Deputy board member (employee representative) - Rolv Bjørn Jernskau Deputy board member (employee representative) - Total at 31 December ,960 1) Egle Merkeviciene s spouse holds 550 shares in Statoil Fuel & Retail ASA Statoil Fuel & Retail ASA

105 Parent company financial statements Corporate Executive Committee Number of shares Jacob Schram Chief Executive Officer 69,676 Klaus-Anders Nysteen Chief Financial Officer 53,114 Jørn Madsen EVP Central & Eastern Europe 31,860 Hans-Olav Høidahl EVP Scandinavia 24,184 Jonas Palm EVP Special Products 18,395 Karl Kristian Mydske EVP Sales & Operations/Head of Innovation 18,370 Lars Gaustad EVP Transport Fuel 17,823 Jan Dahm-Simonsen 1) EVP Human Resources & Staff 15,486 Ina Strand 2) EVP Market Development 15,486 Karen Romer 3) SVP Communications 10,822 Bård Standal 1) General Counsel 10,402 Morten Michael Jensen 2) Acting EVP Market Development - Total at 31 December ,618 1) Has left Statoil Fuel & Retail ASA in ) Ina Strand is on maternity leave and Morten Michael Jensen is acting in her position. 3) Karen Romer s spouse holds 930 shares in Statoil Fuel & Retail ASA. Note 10 Financial liabilities and financial market risk On 26 August 2010, Statoil Fuel & Retail ASA entered into a multicurrency term and revolving loan facility in the aggregate amount of NOK 7,000 million, with nine international banks. The purpose of the facility was to finance the Group s general corporate purposes and to finance the repayment of all amounts outstanding to Statoil under the intragroup bridge loan agreement, five days following the listing. The total amount under the bank facility agreement is split into two tranches: (i) a three year term loan facility available for draw down during a three month period from and including the fifth business day following listing of the Statoil Fuel & Retail ASA s ordinary shares on the Oslo Stock Exchange 22 October 2010 ( the completion date ) in an amount of up to NOK 4,000 million and (ii) a five year revolving credit facility available from and including the completion date until one month prior to the facility termination date, which will be sixty months after the date of the bank facility agreement, in an amount of up to NOK 3,000 million. In November 2010 NOK 4,000 million was drawn from the three year term loan facility. At 31 December 2011, noncurrent borrowings amounted to NOK 3,972 million. The non-current borrowings are, in their entirety, due for payment in August In addition, as of 31 December 2011, NOK 200 million was drawn from the five year revolving credit facility. This was repaid in January 2012 and shown as current financial liabilities in the statement of financial position. During 2011 NOK 1,800 million was drawn from the revolving credit facility in total, and NOK 1,900 million was repaid. The interest rate for both facilities is equal to an inter-bank interest rate applicable for specified currencies plus a specified margin. For the three year term loan facility, the loan is split in three tranches where interest rates as of 31 December 2011 were 4.1 percent, 4.2 percent and 4.3 percent respectively. At 31 December 2011, accrued interest costs of NOK 24 million related to the bank facility agreement are included in trade and other payables. At 31 December 2011, there were no financial covenants related to the bank facility agreement. Market risk Statoil Fuel & Retail ASA is exposed to interest rate risk. The Company has not entered into any hedging transactions to manage its interest rate risk on interest bearing financial liabilities at 31 December 2011 and For the interest rate risk sensitivity at 31 December 2011 a +1.5/-1.5 percentage point change in the interest rates has been used in the calculation as reasonable changes. For the interest rate risk sensitivity at the end of 2010 a decline of 0.5 percentage point and an increase of 1.5 percentage point in the interest rates was used Statoil Fuel & Retail ASA 103

106 Statoil Fuel & Retail annual report 2011 (in NOK million) At 31 December % -1.5% Net gain/(loss) (69) 69 At 31 December % -0.5% Net gain/(loss) (77) 26 Note 11 Retirement benefit obligations Statoil Fuel & Retail ASA is obligated to follow the Act on Mandatory company pensions. The pension scheme follows the requirement as included in the Act. The employees of Statoil Fuel & Retail are covered by defined benefits plans. Plan benefits are generally based on years of service and final salary level. The cost of defined benefits plans is expensed over the period that the employee renders services and becomes eligible to receive benefits. The obligations related to defined benefits plans are calculated by external actuaries. The obligations related to the defined benefits plans were measured at 31 December The present values of the projected defined benefits obligation and the related current service cost and past service cost are measured using the projected unit credit method. The assumptions for salary increases, increases in pension payments and social security base amount have been tested against historical observations. Statoil Fuel & Retail is a member of the agreement-based early retirement plan (AFP) due to national agreements in Norway. The current AFP scheme was replaced by a new AFP scheme from 1 January The Company will pay a contribution for pensions in payment under the current scheme and premium for both new and old schemes up until 31 December The premium in the new scheme is calculated on the basis of the employee s income between 1 and 7.1 G. The premium is payable for all employees until age 62. Pensions from the new AFP scheme will be paid to employees for their full lifetime. The employers have an obligation to pay a percentage of the benefits under the AFP scheme. This obligation is accounted for as a defined benefits plan. In the current early retirement system the Company offers a supplementary company pension for employees. This is also accounted for as a defined benefits plan, and is included in the liabilities related to the defined benefits plans. The Company therefore has an early retirement commitment to employees irrespective of the level of funding from the governmental AFP funding. Hence the replacement of the old AFP with a new AFP in 2010 was not viewed as a termination of the plan. New legislation affecting Norwegian pension and insurance schemes was passed during 2010 as part of the Norwegian pension and insurance reform. The legislation requires some adaptations in the company s Norwegian pension scheme, in particular related to increased flexibility of retirement. Actuarial gains and losses are recorded directly in the equity in the period in which they occur. Social security tax is calculated based on the pension plan s net unfunded status. Social security tax is included in the projected benefit obligation Statoil Fuel & Retail ASA

107 Parent company financial statements Net periodic pension cost (in NOK million) 2011 For the period from 18 May to 31 December 2010 Current service cost Interest cost benefit obligation 17 4 Expected return on plan assets (8) (2) Total net pension cost Pension cost includes social security tax. Total net pension cost is included in salaries and other personnel expenses in the statement of income. Change in projected benefit obligation (in NOK million) 2011 For the period from 18 May to 31 December 2010 Projected benefit obligation at beginning of period Transferred benefit obligation at 1 October Current service costs Interest cost on benefit obligation 17 4 Actuarial (gain)/loss Benefits paid including payroll tax (3) (1) Projected benefit obligation at 31 December The projected benefit obligation consists of funded and unfunded plans. Change in fair value of plan assets (in NOK million) 2011 For the period from 18 May to 31 December 2010 Fair value of plan assets at beginning of period Transferred fair value of plan assets at 1 October Expected return on plan assets 8 2 Company contributions 25 7 Actuarial gain/(loss) 3 9 Benefits paid including payroll tax (3) (1) Fair value of plan assets at 31 December For pension plans funded in Statoil ASA s Statoil Pensjonskasse, the plan assets consist of statutory required equity funds and retained earnings. Statoil Fuel & Retail ASA s share of retained earnings is NOK 6 million at 31 December 2011 (2010: NOK 0 million). The retained earnings in Statoil Pensjonskasse are distributed across the member entities based on a distribution key. Only companies within the Statoil group are entitled to the retained earnings. Consequently, if Statoil Fuel & Retail ASA exits the Statoil group or ceases to be a member of Statoil Pensjonskasse, their share of retained earnings will not be transferred to Statoil Fuel & Retail. Change in pension liabilities (in NOK million) 2011 For the period from 18 May to 31 December 2010 Net pension assets at beginning of period (258) - Transferred net pension asset/(liability) at 1 October - (230) Net periodic pension costs defined benefits plans (59) (12) Net actuarial gain/(loss) recognised directly in equity (101) (23) Company contributions 25 7 Net pension liabilities at 31 December (392) (258) 2012 Statoil Fuel & Retail ASA 105

108 Statoil Fuel & Retail annual report 2011 Projected benefit obligations specified by funded and unfunded plans (in NOK million) Funded pension plans (150) (132) Unfunded pension plans (242) (126) Projected net benefit obligation at 31 December (392) (258) Actuarial gains and losses recognised in the equity (in NOK million) Amount accumulated in retained earnings at 1 January 2011/1 October 2010 (23) - Recognised during the year (101) (23) Amount accumulated in retained earnings at period end (124) (23) Actual return on plan assets (in NOK million) Expected return on assets 8 2 Actuarial gain/(loss) 3 9 Actual gain/loss on plan assets is a gross measure; hence it also includes other factors than return, which have an impact on fair value of the plan assets. Assumptions (in %) Discount rate Expected return on plan assets Expected rate of salary increase Expected rate of pension increase Expected increase of social security base amount (G-amount) Inflation Expected utilisation of AFP is 50 percent for employees at 62 years and 30 percent for the remaining employees at years. The mortality table K 2005 including the minimum requirements from The Financial Supervisory Authority of Norway (Finanstilsynet) is used as the best mortality estimate. The average remaining service period is 14.3 years as of 31 December Sensitivity analysis The table below shows an estimate of the potential effects of changes in the key assumptions for the defined benefit plans. The estimates are based on facts and circumstances as of 31 December Actual results may materially deviate from these estimates Statoil Fuel & Retail ASA

109 Parent company financial statements Discount rate Rate of salary increase Social security base amount Expected rate of pension increase (in NOK million) 0.5% -0.5% 0.5% -0.5% 0.5% -0.5% 0.5% -0.5% Changes in: Projected benefit obligation at 31 December (74) (63) (31) 33 (36) Service cost (11) (9) (5) 6 Pension assets The plan assets related to the defined benefit plans were measured at fair value at 31 December 2011 and 31 December The long-term expected return on pension assets is based on long-term risk-free interest rates adjusted for the expected long-term risk premium for the respective investment classes. A risk-free interest rate is applied as a starting point for calculation of return on plan assets. The return in the money market is calculated by taking a deduction on bond yield. Based on historical data, equities and real estate are expected to give a long-term additional return above money market. In its asset management, the pension fund aims at achieving long-term returns which contribute towards meeting future pension liabilities. Assets are managed to achieve as high a return as possible within a framework of public regulation and risk management policies. The pension fund s target returns require investments in assets with a higher risk than risk free investments. Risk is reduced through maintaining a well-diversified asset portfolio. Assets are diversified both in terms of location and different asset classes. Derivatives are used within set limits to facilitate effective asset management. Contributions to pension plans may either be paid in cash or be deducted from the pension premium fund. The fair value of plan assets amounted to NOK 166 at 31 December 2011 and NOK 133 million at 31 December The decision whether to pay in cash or deduct from the pension premium fund is made on an annual basis. The expected company contribution related to 2012 amounts to NOK 23 million. Pension assets allocated on respective investment classes (in %) Equity securities Bonds Commercial papers Real estate Other assets Total at 31 December Note 12 Trade and other payables (in NOK million) Trade payables Withholding tax and holiday payments Accrued interest expense Other current accruals 1) Trade and other payables at 31 December ) Other current accruals include accruals such as services received but not yet invoiced, rebates and accrued salaries 2012 Statoil Fuel & Retail ASA 107

110 Statoil Fuel & Retail annual report 2011 Note 13 Related parties Statoil Fuel & Retail ASA is a 54 percent owned subsidiary of Statoil, and consequently Statoil and all the entities in the Statoil group are related parties. Statoil Fuel & Retail ASA is included in Statoil Fuel & Retail s consolidated financial statements, which can be found on the Company s website, or at the head office at Sørkedalsveien 8, 0369 Oslo, Norway. The Company is also included in Statoil ASA s consolidated financial statements. The consolidated financial statements for Statoil ASA can be found on Statoil s website, or at the company s head office at Forusbeen 50, 4035 Stavanger, Norway. The Norwegian State is the majority shareholder of Statoil ASA as well as being a major shareholder in certain other Norwegian companies. This means that Statoil ASA and Statoil Fuel & Retail ASA participate in transactions with many parties that are under a common ownership structure and therefore meet the definition of a related party. All transactions with related parties are on an arm s-length basis. Statoil ASA has provided certain services such as tax, IT and other financial support to Statoil Fuel & Retail ASA. The prices paid for these services have been based on actual cost plus a mark-up, amounting to NOK 92 million and NOK 74 million in 2011 and 2010 respectively. Purchases from other entities in the Statoil group amounted to NOK 1 million in Purchase of services from subsidiaries of Statoil Fuel & Retail ASA amounted to NOK 208 million in 2011 and NOK 24 million in Sales to subsidiaries mainly relate to services and amounted to NOK 906 million and NOK 232 million in 2011 and 2010 respectively. The table below presents net financial expenses to related parties included in financial income and financial expenses in the statement of income. Included in financial expenses are interest expenses related to the internal bank credit facility. Financial income relates to dividends, group contribution and interest from loans to subsidiaries. For more information on dividends and group contributions, see below and note 7 investments in subsidiaries. (in NOK million) 2011 For the period from 18 May to 31 December 2010 Financial income related parties 1, Financial expenses related parties (34) (28) Net finance income/(expenses) related parties 1, Financial income related parties includes dividends and group contributions from subsidiaries of NOK 1,148 million and NOK 314 million for 2011 and 2010 respectively. Receivables from, and payables to, related parties are included in separate captions in the statement of financial position. The table below presents the related party balances at 31 December Statoil Fuel & Retail ASA

111 Parent company financial statements (in NOK million) Non-current loan to Statoil Fuel & Retail Norge AS Financial receivables related parties at 31 December Current trade receivables from subsidiaries Dividends and group contribution 1,661 2,173 Current receivables other related parties - 1 Trade and other receivables related parties at 31 December 1,756 2,372 Group contributions (31) (13) Current liabilities to subsidiaries (1,249) (1,903) Current liabilities to other related parties (13) (20) Total liabilities to related parties at 31 December (1,293) (1,936) At 31 December 2011 and 2010, non-current financial receivables from related parties amounted to NOK 800 million. This is related to non-current loans from Statoil Fuel & Retail ASA to Statoil Fuel & Retail Norge AS. The loans are due for payment in October Other receivables from subsidiaries of NOK 1,661 million consist of dividends from subsidiaries and group contributions for NOK 1,148 has been recognised as financial income in the income statement, while the remaining (net of tax) is considered to be repayment of invested capital and has thus reduced the carrying value on the Company s investment in subsidiaries. Current liabilities to subsidiaries at year end 2011 of NOK 1,249 million included an overdraft on the internal bank credit facility of NOK 1,228 million. The corresponding figures for 2010 were NOK 1,903 million and NOK 1,686 million respectively. For information on the Group s internal bank credit facility, see note 8 cash and cash equivalents. Note 14 Reconciling cash flow information For the purpose of the statement of cash flow the following line items have been reconciled. Trade and other receivables (in NOK million) Notes Trade and other receivables (36) (1) Trade and other receivables related parties (2,372) Changes in trade and other receivables in statement of financial position 580 (2,373) Significant non-cash items: Dividends and group contribution, not received 13 1,661 2,173 Dividends and group contribution received, transferred to investing activities 13 (2,154) - Accrued intercompany interest 2 9 Changes in trade and other receivables 88 (191) 2012 Statoil Fuel & Retail ASA 109

112 Statoil Fuel & Retail annual report 2011 Trade and other payables (in NOK million) Notes Trade and other payables Trade and other payables related parties (185) 250 Changes in trade and other payables in statement of financial position (109) 372 Significant non-cash items: Group contribution, not paid out (31) (13) Group contribution, paid out, transferred to investing activities 13 - Accrued interest expense 2 (28) Other - (16) Changes in trade and other payables (125) 315 Proceeds from long-term borrowings (in NOK million) Notes Long-term loan facility 10-4,000 Up-front fees - (45) Proceeds from long-term borrowings - 3,955 Cash and cash equivalents (in NOK million) Notes Cash and cash equivalents 1) Cash pool 8 (1,228) (1,686) Total at 31 December (1,228) (1,686) 1) Cash and cash equivalents amounted to NOK 35,000 at 31 December 2011 and NOK 27,000 at 31 December 2010 Investments in subsidiaries (in NOK million) Notes Changes in investments in subsidiaries recognised in statement of financial position (732) 11,052 Significant non-cash items: Equity contribution paid in kind - (6,960) Dividends and group contribution, net after tax ,628 Other (translation effects) - (6) Changes in investments in subsidiaries - 5, Statoil Fuel & Retail ASA

113 Note 15 Intangible assets, property, plant and equipment (in NOK million) Property, plant and equipment Parent company financial statements Intangible assets under construction Cost at 1 January Additions and transfers Cost at 31 December Accumulated depreciation and impairment losses at 1 January Depreciation and amortisation for the year - - Accumulated depreciation and impairment losses at 31 December Carrying amount at 31 December Estimated useful life (years) 3-10 Intangible assets under construction relates to the new enterprise resource planning solution currently being developed for the Group. Note 16 Financial items and derivative financial instruments Financial items (in NOK million) Interest income 26 9 Group contributions and dividends 1, Other financial income 10 - Financial income 1, Interest expenses Other financial expenses Financial expenses (236) (58) - (5) (236) (63) Foreign exchange gains/(losses) (20) 1 Net financial income Derivative financial instruments During 2011 Statoil Fuel & Retail ASA entered into commodity-based derivative contracts to mitigate price risks relating to the Group s LPG business in Norway and Sweden. In 2012 Statoil Fuel & Retail ASA will enter into back-to-back agreements with its subsidiaries Statoil Fuel & Retail Norge AS and Statoil Fuel & Retail Sverige AB. The carrying amount and fair value of the derivative financial assets and financial liabilities at 31 December 2011 were insignificant. Assuming a reasonable possible change of +30/-30 percent, the price risk sensitivity by the end of 2011 has been calculated to be NOK 32 million and NOK -26 million respectively Statoil Fuel & Retail ASA 111

114 Statoil Fuel & Retail annual report 2011 Note 17 Subsequent events Defined benefits plan curtailment In February 2012 the Board of Directors of Statoil Fuel & Retail ASA resolved to redesign the Company s defined benefits plans. The redesign involves closing the existing benefits plan and introducing defined contributions plans for new employees. Further, benefits related to existing spouse and children pensions will be replaced by insurance coverage for dependents. A gratuity plan related to the Company s early retirement scheme will be discontinued. The curtailment will be recognised in first quarter 2012 and is expected to reduce the net pension liability by approximately NOK 140 million. In addition, future service cost will be reduced. Bond issue Statoil Fuel & Retail ASA completed its issuance of NOK 1,500 million in the Norwegian bond market on 15 February The issuance is split between bonds amounting to NOK 1,100 million, with a coupon of three months NIBOR plus 1.75 percent per annum maturing in February 2017, and NOK 400 million with a coupon of 5.25 percent per annum maturing in February An application will be made for the bonds to be listed on the Oslo Stock Exchange. The purpose of the bond issuance is to refinance parts of Statoil Fuel & Retail s current bank financing, increase the number of funding sources and extend the Group s debt maturity structure Statoil Fuel & Retail ASA

115 Statement on compliance

116 Statoil Fuel & Retail annual report 2011 Statement on compliance Today the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors report and the Statoil Fuel & Retail ASA consolidated and separate annual financial statements as of 31 December To the best of our knowledge, we confirm that: the Statoil Fuel & Retail ASA consolidated annual financial statements for 2011 have been prepared in accordance with IFRSs and IFRICs issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU), and additional Norwegian disclosure requirements in the Norwegian Accounting Act the separate annual financial statements for Statoil Fuel & Retail ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian Accounting Standards the Board of Directors report for the Group and the parent company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian Accounting Standard no 16 the information presented in the financial statements gives a true and fair view of the Group s and the Company s assets, liabilities, financial position and results for the period viewed in their entirety the Board of Directors report gives a true and fair view of the development, performance, financial position, principle risks and uncertainties of the Group and the Company. Oslo, 12 March 2012 The Board of Directors of Statoil Fuel & Retail ASA Oslo, 12 March 2012 The Board of Directors of Statoil Fuel & Retail ASA Birger Magnus Chair Ann-Charlotte Lundén Jon Arnt Jacobsen Per Bjørgås Marthe Hoff Board member Board member Board member Board member Anne Martha Støver Ketil Johannessen Petter Vådal Jacob Schram Board member Board member Board member CEO Employee representative Employee representative Employee representative Statoil Fuel & Retail ASA

117 Auditor s report

118 Statoil Fuel & Retail annual report Statoil Fuel & Retail ASA

119 Auditor s report 2012 Statoil Fuel & Retail ASA 117

120 Statoil Fuel & Retail annual report Statoil Fuel & Retail ASA

121 Corporate governance

122 Statoil Fuel & Retail annual report 2011 Corporate governance Statoil Fuel & Retail ASA views good corporate governance as a prerequisite for a sound and sustainable company. Thus, the Company s principles for corporate governance are an essential tool in ensuring it runs its business in a justifiable and profitable manner to the benefit of its employees, shareholders, partners, customers and society. 1 Implementation and reporting of corporate governance Statoil Fuel & Retail ASA was established on 18 May 2010 as a separate legal entity within the Statoil group. On 22 October 2010, Statoil Fuel & Retail ASA was listed on the Oslo Stock Exchange. As part of the Statoil ASA group, the Company has inherited a sound, effective system of corporate governance. At the same time, as an independent, standalone company with a profile and activities differing from those of Statoil ASA, it has been important for the Company to create its own policies, tailored to fit the Group and its operations. One of the main focus areas of the Board of Directors of Statoil Fuel & Retail ASA ( the Board ) is to ensure that the Company has sound corporate governance. Thus, corporate governance policies relevant to areas such as risk, financial and non-financial compliance, human resources, recruitment, environment etc. are all dealt with by the Board. The Board uses The Norwegian Code of Practice for Corporate Governance ( the Code of Practice ) actively as a guideline for the Group s corporate Information which Statoil Fuel & Retail is obliged to offer according to the Norwegian law of accounting ( regnskapsloven ) 3-3b follows the system of the Code of Practice where appropriate. Specifically the requested information can be found in the following sections: 1. An account of the recommendation and rules about corporate governance which the company is a part of or otherwise choose to follow - section 1 of this corporate governance report. 2. Information about where recommendations and rules mentioned in nr. 1 is publically available. - section 1 of this corporate governance report. 3. A reason for possible non-compliance from the recommendations and rules which are mentioned in nr. 1 - Statoil Fuel & Retail has no deviations. 4. A description of the main elements in the company, and for companies who deliver consolidated accounts eventually also the group s systems for internal control and risk control - section 10 of this corporate governance report 5. Clauses in the articles of association which totally or partially expand or deviate from clauses in the Public Limited Companies Act chapter 5 - section 6 of this corporate governance report 6. Composition of the board, corporate assembly, board of representatives control committee; potential under committees, and a description of the main elements in current instructions and guidelines for the organs and eventual under committee s work - sections 8 and 9 of this corporate governance report 7. Clauses in the articles of association which regulate the recommendation and substitution of members of the board of directors - section 8 of this corporate governance report 8. Clauses in the articles of association and power of attorneys which gives the board of directors right to decide that the company shall buy back or issue own shares or equity documents - section 3 of this corporate governance report Statoil Fuel & Retail ASA

123 Corporate governance governance practices. The Norwegian Code of Practice for Corporate Governance can be found at Statoil Fuel & Retails core values are: open, courageous, passionate and caring. The Group uses these values actively as a guide for how to do business, how its employees work together and how the Group and its employees shall behave towards other stakeholders. In essence, Statoil Fuel & Retail believes that how it delivers is as important as what it delivers. This is seen as vital if the Group is to succeed over time in a competitive environment. How the Group defines and uses its values is further described in the 2012 corporate brochure, TouchPoint. Statoil Fuel & Retail s approach to ethical business and corporate responsibility, building upon its values, is also set out in this brochure, which can be found at The Statoil Fuel & Retail Book, which addresses all employees and is approved by the Board, sets standards for behaviour, delivery and leadership based on the Group s values. The Group also has a separate Ethics Code of Conduct, a pocket-sized manual describing its policies in relation to ethics and corruption. Statoil Fuel & Retail sets absolute requirements for health, safety and the environment, and safe and efficient operations are one of the Group s first priorities. The Group further aims to meet the growing market demand for transportation fuel and lubricants while showing consideration for the environment. The Group has an expressed policy of contributing to sustainable development in relation to its core activities in the countries in which it operates. It is committed to openness and anti-corruption, as well as respect for human rights and employee rights. That applies both to the Group s own activities and to those parts of the value chain over which it has significant influence. This report follows the system of the Code of Practice, covers every section of the Code and gives an account of Statoil Fuel & Retail s adherence. 2 Business Statoil Fuel & Retail s objectives are set out in the Company s articles of association and specified in its corporate strategy. The Group shall carry out processing, distribution and marketing of petroleum products and products deriving thereof, and activities relating to other energy sources, as well as related activities. Targets and strategies are adopted, both for Statoil Fuel & Retail as a whole and for each business area, to support the Group s objectives. The Group shall continue to build on its strategic platform as a leading fuel retailer in Scandinavia and Central and Eastern Europe. The Company s core business is transportation fuel retail with an associated convenience offering, providing operating synergies and a significant contribution to gross profit. Statoil Fuel & Retail has identified the following near to medium-term strategic objectives: Grow the Statoil Fuel & Retail business and optimise shareholder value. Be recognised by our customers as an innovative, European fuel retailer. Become a leading, European retailer within sales. Create a culture of simplification, lean operations and cost efficiency. Improve capital efficiency. Attract, retain and develop passionate fuel and retail professionals. The full text of Statoil Fuel & Retail ASA s articles of association can be found on the Company s website at 3 Equity and dividends Shareholders equity The Group's shareholders equity as of 31 December 2011 was NOK 7,375 million, which represented 32.3 percent of the Group's total assets. The Board considers this satisfactory given the Group's requirement for solidity in relation to its expressed goals, strategy and risk profile. Dividend policy The Company s ambition is to distribute at least 50 percent of its earnings per share. When deciding the annual dividend level, the Board of Directors will take into consideration expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. In addition to cash dividends, Statoil Fuel & Retail ASA may exercise other available tools such as buying back shares, as part of its total distribution of capital to the shareholders Statoil Fuel & Retail ASA 121

124 Statoil Fuel & Retail annual report 2011 The Board has suggested a payment of dividends for 2011 of NOK 1.80 per share, which constituted 50 percent of its earnings per share. Purchase of own shares Historically, the Company has been part of Statoil ASA s share savings plan for its employees. The Board of Directors acknowledges that such a plan may strengthen the Group s business culture and encourage loyalty through employees becoming part-owners of the Company. Therefore, the Annual General Meeting of 2011 authorised the Board of Directors to acquire Statoil Fuel & Retail ASA shares in the market in order to implement an employees share saving plan. The authorisation is valid until the next Annual General Meeting, but no longer than 30 June At the Annual General Meeting held 26 April 2011, the Company also received authorisation to buy own shares for subsequent deletion. This power of attorney is also valid until the next Annual General Meeting, but no longer than 30 June The Company will request renewal of the above described powers of attorney at the Annual General Meeting to be held 27 April The Board has not given any power of attorney in relation to capital increase. 4 Equal treatment of shareholders and transactions with close associates Equal treatment of all shareholders is a core governance principle in Statoil Fuel & Retail and the Company has only one class of shares. Each share confers one vote at the Annual General Meeting and the articles of association contain no restrictions on voting rights. When buying the Company s own shares in accordance with the power of attorneys described in section 3 above, Statoil Fuel & Retail trades on the Oslo Stock Exchange. This is in line with the Company s policy on this area, and the power of attorney provided at the Annual General Meeting. If a non-immaterial transaction between the Company and shareholders, a shareholder s parent company, members of the Board of Directors, executive personnel or close associates of any such parties should occur, the Board will arrange for a valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the Annual General Meeting pursuant to the requirements of the Public Companies Act. Statoil ASA is the Company's majority shareholder and holds 54 percent of the shares. All transactions between the Company and Statoil ASA are performed on an armslength basis. For more information about the relationship between Statoil ASA and Statoil Fuel & Retail ASA, please see the Company's website at The procedures for the Board further determine that if members of the Board of Directors or executive personnel have any material direct or indirect interest in any transaction into which the Company may enter, they shall notify the Board. 5 Freely negotiable shares The Statoil Fuel & Retail ASA share is freely negotiable. No form of restriction on negotiability is included in the Company s articles of association. 6 General meetings The Annual General Meeting of shareholders (AGM) is Statoil Fuel & Retail s supreme corporate body and serves as a democratic and efficient forum for interaction between the Company s shareholders, Board of Directors and management. Statoil Fuel & Retail strives to ensure that as many shareholders as possible may exercise their rights by participating in the general meetings of the Company. Notice of the meeting and documentation for the AGM are published on Statoil Fuel & Retail s website at least 21 days prior to the meeting. The notice is sent by mail to all shareholders whose address is known no less than 21 days before the AGM. All shareholders who are registered in the Norwegian Central Securities Depository (VPS) will receive an invitation to the AGM. However, it is stated in the Company s articles of association that documents relating to matters to be discussed at the Company s general Statoil Fuel & Retail ASA

125 Corporate governance meeting do not need to be sent to the shareholders if the documents are made available to the shareholders on the Company s website. However a shareholder may request to be sent documents relating to matters that shall be discussed at the general meeting. The articles of association give the Company the opportunity to set a deadline for shareholders to give notice of their intention to attend the AGM to a minimum of five days prior to the AGM. This is seen as being as close to the date of the meeting as possible. Shareholders who are prevented from attending may vote by proxy. Annual General Meetings in Statoil Fuel & Retail ASA shall constitute an effective forum for the views of all shareholders on an equal basis. Shareholders are therefore entitled to have a proposal dealt with at the AGM if the proposal has been submitted in writing to the Board of Directors in sufficient time to allow inclusion in the distributed notice of meeting. All shares carry an equal right to vote. The form of proxy also allows the shareholders to vote for each case separately. Resolutions at AGMs are normally passed by simple majority. However, Norwegian legislation requires a qualified majority for certain resolutions, including resolutions to waive preferential rights in connection with any share issue, approval of a merger or demerger, amendment of the articles of association or authorisation to increase or reduce the share capital. These matters require the approval of at least two-thirds of the aggregate number of votes cast as well as twothirds of the share capital represented at the AGM. Persons to be elected to the Company s corporate bodies are separately elected by the AGM. The nomination committee is present at the relevant general meetings in order to ensure that the AGM receives a thorough account for the background of the election of the proposed persons for the corporate bodies, including composition. The notice of the AGM advises shareholders how they may vote by proxy and that they may assign their proxy to the Chair of the Board or a person authorised by the Chair. The Company strives to make the underlying documents for the AGM thorough and extensive to ensure the shareholders can make a sound evaluation of each case. The AGM is normally opened by the Chair of the Board. The Company makes arrangements to ensure an independent chair for the AGM. However, if there should be a dispute concerning individual matters and the independent chair belonged to one of the disputing parties or the person is for some other reason not perceived as being impartial, another person will be appointed to chair the AGM in order to ensure impartiality in relation to the matters to be considered. For the AGM for 2012, Statoil Fuel & Retail has elected an independent external legal counsel to chair the AGM. This was also done at the AGM in The AGM s tasks include approving the Company s financial statements and the allocation of net income, election of the external auditor and stipulation of the auditor s fee, electing the members of the Board, and electing the members of the nomination committee. Minutes from the AGM are published via the Oslo Børs messaging system at and made available on the Company s website at in both Norwegian and English as soon as practically possible after the AGM. 7 Nomination committee Statoil Fuel & Retail s nomination committee was elected at the AGM held 27 April In accordance with the Company s articles of association, the committee consists of Anne Carine Tanum, Rolf E. Gullestad and Jens R. Jensen. The members are shareholders or representatives of shareholders and are independent of the Board and other leading employees. The duties of the nomination committee are: to present recommendations to the general meeting of shareholders for the election of members to the nomination committee to present recommendations for the election of shareholder-elected members to the Board of Directors to present a proposal for the remuneration of members of the Board of Directors and the nomination committee. The members of the nomination committee are normally elected by the general meeting of shareholders for a 2012 Statoil Fuel & Retail ASA 123

126 Statoil Fuel & Retail annual report 2011 term of two years. The instruction for the nomination committee, which was established at the AGM in 2010, can be found in the corporate governance section of the Company s website The nomination committee has made a recommendation for the election of Board members, including members of the subcommittees, to be elected at the AGM on 26 April The recommendation is justified and will be sent out together with the other underlying documents for the AGM, at least 21 days prior to the AGM. 8 Corporate assembly and Board of Directors - composition and independence Statoil Fuel & Retail has agreed with the Group s employees that it shall not have a corporate assembly. Employee rights under Norwegian law to representation and participation in decision-making have been secured in part through extended representation on the Board of Directors. The Board of Directors consists of eight members who are elected by the Company s AGM for up to two years. The AGM also chooses the Chair of the Board. The Board members are elected separately. In accordance with Norwegian legislation, the Group s employees are entitled to elect three Board members, with deputy members, while the rest (five members) of the Board are elected by the shareholders at the AGM, after recommendation by the nomination committee in accordance with the Company s articles of association 7. Due to the Company not having a corporate assembly, the Board chooses its leader. This is in accordance with applicable legislation. Statoil Fuel & Retail has no deputy members for shareholder representatives on the Board. The present composition of the Board is presented on the Statoil Fuel & Retail website, These presentations also contain an overview of the Board members experience and qualifications. The composition of the Board is designed to ensure that the Company's need for competence, capacity and diversity is attended to. Two of the members of the Board are employed by the majority shareholder, Statoil ASA. Otherwise all of the Board members are independent of the shareholders (the individuals in question have no business, family or other relationships that might be assumed to affect their views or decisions) and none of the Board members are characterised as dependent of the Company s executive personnel or material business partners. The Company is of the opinion that the Board attends to the common interests of all its shareholders. The members of the Board of Directors strive to be able to participate in every Board meeting and this is reflected in the notice of attendance. From thirteen Board meetings to date, only five cases of absence have been noted. All of the shareholder-elected Board members hold shares in the Company. 9 The work of the Board of Directors The Board of Directors of Statoil Fuel & Retail ASA is responsible for the overall management of the Group, and for supervising its activities in general. As a starting point, the Board handles matters of major importance or of an extraordinary nature. However, it may require that any matter may be referred to it. Further, the Board appoints the Company s Chief Executive Officer (CEO), and establishes the working instructions, powers of attorney, and terms and conditions of employment for the CEO. The work of the Board in Statoil Fuel & Retail is further defined in the Board s rules of procedure. The Board also produces an annual plan for its work and evaluates its performance and expertise in the same intervals. The Board of Directors has also issued an instruction for the executive management with particular emphasis on clear internal allocation of responsibilities and duties. Each year the Board sets its strategy, with particular emphasis on objectives, strategy and implementation. In order to ensure a more independent consideration of matters of a material character in which the chair of the Board is, or has been, personally involved, the Board s consideration of such matters is chaired by another member of the Board Statoil Fuel & Retail ASA

127 Corporate governance Statoil Fuel & Retail s Board of directors has two subcommittees: The audit committee consists of three members from the Board, whereof two of the members are independent and one has accounting competence. The audit committee s role is to support the Board in exercising its management and monitoring responsibilities, particularly in respect of accounting and financial reporting, and to ensure that the Company has an independent and effective external and internal audit system. The committee also oversees the implementation of, and compliance with, the Company s ethical requirements. The compensation committee s role is to assist the Board in its work regarding the terms and conditions of employment for the CEO as well as the principles for top management remuneration. The committee consists of Board members who are independent of leading employees. 10 Risk management and internal control The Board of Directors and management attach great importance to the quality of Statoil Fuel & Retail s risk management and control functions. This is reflected in Statoil Fuel & Retail s management and control systems. Risk management Statoil Fuel & Retail manages risk to ensure safe operations and to achieve its corporate objectives in compliance with prevailing requirements. Its overall risk management approach includes continuous assessment and management of risk in all activities. The Company has inherited a very strict and comprehensive risk management system from Statoil ASA. Since listing on the Oslo Stock Exchange, the Company has adjusted and will continue to adjust this system in order to tailor it to meet the requirements of its business. Risk management is divided into three main categories: Tactical risks, which are short-term trading risks based on underlying exposures, are managed by the principle business segment line managers. Operational risks, which cover all major operational goals and underlying risk drivers, are managed as an integral part of line managers responsibilities at all levels. In addition, insurable risks are insured by insurance companies operating in the Norwegian and international insurance markets. Report on internal control of financial reporting The management of Statoil Fuel & Retail is responsible for establishing and maintaining adequate internal control of financial reporting. The Group s internal control of financial reporting is a process designed under the supervision of the CEO and CFO to provide assurance regarding the reliability of financial reporting and the preparation of Statoil Fuel & Retail s financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The accounting policies applied by the Group also comply with IFRS as issued by the International Accounting Standards Board. The management has assessed the effectiveness of internal control of financial reporting based on the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the management has determined that Statoil Fuel & Retail s internal control of financial reporting as of 31 December 2011 was effective. Statoil Fuel & Retail s Ethics Code of Conduct and anti-corruption compliance programme Statoil Fuel & Retail s ability to create value is dependent on applying high ethical standards, and this is something the Group strives to be known for. Ethics are treated as an integral part of the Group s business activities. Statoil Fuel & Retail requires high ethical standards of everyone who acts on its behalf and will maintain an open dialogue on ethical issues, internally and externally. Strategic risks, which are long-term market risks monitored by the Company s corporate risk committee. The corporate risk committee gives advice and makes recommendations to the Corporate Executive Committee based on strategic market risk policies. The Group s Ethics Code of Conduct describes Statoil Fuel & Retail s commitment and requirements in connection with issues of an ethical nature that relate to business practice and personal conduct. In the Group s business activities, it will comply with applicable laws and regulations and act in an ethical, sustainable and 2012 Statoil Fuel & Retail ASA 125

128 Statoil Fuel & Retail annual report 2011 socially responsible manner. Respect for human rights is also an integral part of Statoil Fuel & Retail s values. The Ethics Code of Conduct is valid for everyone working for Statoil Fuel & Retail, including the members of the Board of Directors and the Company s subsidiaries. Business partners are also expected to have ethical standards that are consistent with Statoil Fuel & Retail s ethical requirements. The Chief Executive Officer, the Corporate Executive Committee and the role of the Chief Financial Officer The Chief Executive Officer (CEO) reports to the Board of Statoil Fuel & Retail ASA, and has overall responsibility for the Group as described in the Board s rules of procedure. The CEO is responsible for developing the Group s business strategy and presenting it to the Board for decision, for the development and execution of the business strategy, and for strengthening a performancedriven, values-based culture. As a general rule, issues should first be put to the CEO before they are presented to the Board. The CEO selects the members of the corporate executive committee (CEC). Members of the CEC have a collective duty to safeguard and promote the Group s corporate interests and to provide the CEO with the best possible basis for setting directions, making decisions, ensuring execution and following up business activities. All CEC members take an active part in the deliberations of the CEC with the aim of promoting the collective interests of the Group. The CEC will continuously develop the Group s management system based on the requirements of corporate governance, risk management and the control system, and implement the system across the organisation. The CEC embraces corporate committees for health, safety and the environment (HSE), audits and ethics. Corresponding committees are set up at the business area level with individual mandates. The Chief Financial Officer (CFO) is responsible for activities within finance and controlling and ensures critical follow-up of all business activities in the Group. In relation to risk management The CFO is responsible for: Providing reliable, relevant and sufficient financial information. Establishing an adequate internal control environment for financial reporting. Controlling related to the Group s business activities. Defining the Group s accounting and reporting policies and assuring that financial reporting is based on corporate accounting policies. Chairing the corporate risk committee which handles corporate risk management issues. Controlling and accounting The main responsibilities of the controlling and accounting functions are to: Initiate and coordinate target-setting, planning and follow-up processes. Challenge and support management in business decisions. Set accounting policies and establishing relevant processes and procedures. Oversee financial reporting and ensure quality in reporting and forecasting. Provide commercial quality control and independent assessment of business decisions. The controlling function in corporate and in the business units ensures critical follow up of all commercial activity at every level in both the business areas and business drivers. Controllers report professionally to the corporate performance management and analysis unit, with a right and duty to inform on significant professional issues or matters of principle. The accounting and financial compliance functions in corporate and in the business units are responsible for the quality of accounting. This includes ensuring consistent application of Group accounting policies and contributing to Group financial reporting and compliance. Accounting mangers report professionally to the corporate accounting and financial compliance unit, with a right and duty to inform on significant professional issues or matters of principle. Corporate compliance The responsibilities of the corporate compliance officer in the legal function include establishing the Group s ethics policy and requirements, and the operation of the Group s ethics help-line. This role ensures that compliance Statoil Fuel & Retail ASA

129 Corporate governance activities to counteract corruption are well organised and conducted in a satisfactory manner, and is responsible for preparing reports to the CEC and the Board s audit committee on the progress of compliance work and on the result of any investigation related to corruption. The corporate compliance function in the legal function is responsible for carrying out integrity due diligence. Decision-making authorities The Board authorises the CEO to act in accordance with the Board s rules of procedure and with authorities issued in relation to individual decisions. The CEO may delegate authorisations to other members of the CEC. They may then delegate and describe relevant decision-making mandates in their own organisations. The CEO determines the authority for decision making and responsibility for results on the basis of the organisational mandate, other relevant authorities and the management system. All issues of major importance and issues outside a business area or corporate entity s normal field of operation must be presented to the CEO for approval. Line managers responsible for results and performance are also delegated a certain level of authority. Financial and people authorities are split between task and resource managers. Delegation of financial authorisations and responsibilities is based on the way task responsibility is handled. Each task manager assesses which responsibilities and reporting tasks can be delegated. They can assign responsibility for executing tasks outside their own line. The delegation of authorities and responsibility for people is based on resource responsibility, which follows the line organisation. The resource manager is responsible for selecting, developing and rewarding their people, supported by a task manager. If the task manager has extensive responsibility for an individual over time, the task and resource managers may agree that the task manager assume responsibility for that person for a temporary period. The chief procurement officer has the authority to commit the Group to individual suppliers. They can assign this authority to the manager of a procurement unit. The principle of segregation of duties between line and procurement responsibility applies to all procurement functions. The Board grants power of procuration on behalf of Statoil Fuel & Retail. The management of individual business entities and staff units is duty-bound to ensure compliance with relevant legislation and regulations. It is required to seek assistance and advice from the legal function (and/or external guidance by agreement with the legal function) before entering into major agreements or commitments, or when this is otherwise necessary or required. Governance of subsidiaries Control and management of all organisational entities is based on the same governance principles, whether the entity is organisationally part of the Group s parent company or an independent legal entity in the form of a wholly-owned subsidiary (wholly-owned limited liability company). In the case of partly-owned subsidiaries, the same principles apply concerning control and management of the business. Statoil Fuel & Retail representatives on the boards of such companies must coordinate their points of view and vote in accordance with decisions made in the line. 11 Remuneration of the Board of Directors Members of the Board of Directors receive remuneration in accordance with their individual roles. The remuneration of the Board and the Board's subcommittees are decided by the Annual General Meeting after a proposal by the Company's nomination committee. The Board members' remuneration is not dependent on the Company's performance and the Board members are not awarded share options. The members of the Board do not perform other services for the Company. Information about all remuneration paid by the Company to each member of the Board of Directors is presented 2012 Statoil Fuel & Retail ASA 127

130 Statoil Fuel & Retail annual report 2011 in Note 9 to the consolidated financial statements. The current level of remuneration was set by the AGM on 27 April Remuneration of executive personnel Statoil Fuel & Retail ASA s remuneration policy is strongly linked to the Group s human resources policy and values. The design of the remuneration concept is based on the following key principles: The remuneration concept is an integrated part of a values-based framework for performance management and shall: Reflect the Group s competitive market strategy and local market conditions. Strengthen the common interests of employees and shareholders. Comply with statutory regulations and good corporate governance. Be fair, transparent and non-discriminatory. Reward and recognise delivery and behaviour. Differentiate on the basis of responsibilities and performance. Reward both short-term and long-term contributions and results. Statoil Fuel & Retail s remuneration systems are designed to attract and retain people who perform, develop and learn. The overall remuneration level and composition of the total reward reflect the national and international framework and the business environment in which Statoil Fuel & Retail operates. The Company s decision-making process for implementing or changing remuneration policies and concepts, and for determining salaries and other remuneration for the Group's Corporate Executive Committee, is in accordance with the provisions of the Norwegian Public Limited Liability Companies Act sections 5-6 and 6-16a and the Board's rules of procedure. Statoil Fuel & Retail s remuneration concept for its Corporate Executive Committee is made up of the following main elements: Fixed remuneration Long-term incentive scheme Variable pay Pensions and insurance schemes Severance schemes Other benefits The fixed remuneration consists of a base salary. The base salary levels are aligned with the individual's responsibility and performance and market conditions and are normally subject to annual review. The long-term incentive system is a fixed, monetary compensation calculated as a proportion of the participant's base salary; ranging from 20 percent to 35 percent, depending on the individual's position. The Company acquires shares equivalent to the net annual amount, on behalf of the participant. The grant is subject to a three year lock-in period and then released for the participant's disposal. By ensuring that the Company s top executives are holders of Company shares, the long-term incentive system contributes to the strengthening of the common interest between those executives and the Company s shareholders. Statoil Fuel & Retail will in general continue its system for variable pay in Based on performance, the CEO is entitled to an annual bonus with a maximum potential of 50 percent of fixed salary. Executive vice presidents receive an equivalent annual bonus with a maximum potential ranging from 30 to 45 percent of their annual base salaries. Expected payment, based on solid deliveries, is two thirds of the maximum potential. Statement on remuneration The Board's statement regarding all remuneration of the Corporate Executive Committee, as well as information about all remuneration paid to each member of that committee, is presented in the financial statements, note 9. The AGM adopted guidelines for remuneration of the Group s management at the General Meeting held 27 April Statoil Fuel & Retail ASA

131 Corporate governance 13 Information and communications Statoil Fuel & Retail has established procedures for the Company s reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market. The purpose of these procedures is to ensure the dissemination of timely and correct information about the Company and Group to shareholders and society in general. A financial calendar and shareholder information are published on the Company s website at The Investor Relations function is responsible for coordinating the Group s communication with capital markets and for relations between Statoil Fuel & Retail and existing and potential investors in the Company. Investor Relations is responsible for distributing and registering information in accordance with the legislation and regulations that apply where Statoil Fuel & Retail securities are listed. Investor Relations reports directly to the CFO. The Group s management holds regular presentations for investors and financial analysts and hosted the Company s first Capital Markets Day on 29 November The Company's quarterly presentations are broadcast live on the internet and its quarterly reports, together with other relevant information, are made available on the Company's website at www. statoilfuelretail.com. 14 Take-overs The Board of Directors of Statoil Fuel & Retail ASA has agreed the following policy in case of a takeover attempt of the Company: In a bid situation, the Company s Board of Directors and management have an independent responsibility to help ensure that shareholders are treated equally, and that the Company s business activities are not disrupted unnecessarily. The Board has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer. The Board of Directors will not seek to hinder or obstruct take-over bids for the Company s activities or shares unless there are particular reasons for so doing. In the event of a take-over bid for the Company s shares, the Company s Board of Directors will not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by a general meeting following the announcement of the bid. If an offer is made for the Company s shares, the Company s Board of Directors will issue a statement making a recommendation as to whether shareholders should or should not accept the offer. The Board s statement on the offer will make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the Board have excluded themselves from the Board s statement. The Board will arrange a valuation from an independent expert. The valuation will include an explanation, and will be made public no later than at the time of the public disclosure of the Board s statement. Any transaction that is in effect a disposal of the Company s activities will be decided by a general meeting, given that Statoil Fuel & Retail ASA does not have a corporate assembly. 15 Auditor Pursuant to its instructions, the Board s audit committee is responsible for ensuring that the Group is subject to an independent and effective external audit. The Company s current external auditor, Ernst & Young, is independent of Statoil Fuel & Retail. The Company will elect a new external auditor at the AGM on 26 April The Board has proposed KPMG, which is also independent of Statoil Fuel & Retail. The AGM also approves the auditor s fee. Every year, the auditor shall present a plan for the audit committee for the execution of the auditor s work. The auditor is present at the Board meeting that deals with the preparation of the annual accounts and the 2012 Statoil Fuel & Retail ASA 129

132 Statoil Fuel & Retail annual report 2011 auditor participates in meetings with the Board of audit committee at which the internal control system is discussed. The latter meetings are held at least quarterly and at these meetings the external auditor also goes through the Company s internal control, identifying weaknesses and measures for improvement. The audit committee evaluates and makes a recommendation regarding the choice of auditor, and it is responsible for ensuring that the auditor meets all requirements. The audit committee considers all reports from the auditor before they are considered by the Board of Directors. In the instruction for the audit committee, the Board of Directors has delegated to the audit committee authority to pre-approve assignments to be performed by the auditor. The audit committee has issued guidelines for the management s pre-approval of assignments to be performed by the auditor. All services provided by the auditor must be preapproved by the audit committee. Pre-approval is usually granted at a regular audit committee meeting. The chair of the audit committee has been authorised to pre-approve services in accordance with policies established by the audit committee, specifying in detail the types of services that qualify, and provided that any services pre-approved in this manner are presented to the full audit committee at its next meeting. Some preapprovals may therefore be granted by the chair of the audit committee if an urgent reply is deemed necessary. In the consolidated financial statements and in the parent company s annual financial statements, the auditor s remuneration is split between the audit fee and audit-related and other services fees. The same firm of auditors should, as a general rule, be appointed for all the Company s subsidiaries. If an auditor is appointed for joint ventures operated by the Company, the Company s external auditor must be used. Any deviation from this rule must be approved by the Chief Financial Officer Statoil Fuel & Retail ASA

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134 2012 Statoil Fuel & Retail ASA Board of Directors report Statoil Fuel & Retail TuchPoint 2011 See our vision To be the pulse of life Corporate responsibility Including the environmental impact of our operations and our work in the communities we serve Statoil Fuel & Retail 2012 Meet the people Discover the passion that drives us Innovation powers growth Welcome to Statoil Fuel & Retail 1 See the Statoil Fuel & Retail corporate brochure, TouchPoint 2012 Statoil Fuel & Retail ASA Box 1176 Sentrum Sørkedalsveien 8, 0107 Oslo Norway Registered in Norway NO MVA Copyright and legal notices Copyright in all published material in this report, including photographs, drawings and images, remains vested in Statoil Fuel & Retail ASA and third party contributors as appropriate. Neither the whole nor any part of this publication may be reproduced in any way without the express, prior, written permission of Statoil Fuel & Retail. Articles and opinions appearing in this report do not necessarily represent the views of Statoil Fuel & Retail. While every step has been taken to ensure the accuracy of the published content of this report, Statoil Fuel & Retail does not accept responsibility for any errors or resulting loss or damage whatsoever caused, and readers have the responsibility to thoroughly check these aspects for themselves. Enquiries about reproduction of content from this publication should be directed to corporate communications at Statoil Fuel & Retail. Images: Terje Borud Foto Layout and production: Bolt Communication as sfr_ir@statoilfuelretail.com