Financial instruments at fair value (continued)

Lending to and deposits with credit institutions (level 2)

Lending to and deposits with credit institutions are primarily relevant for DnB NOR Markets. The valuation is mainly based on agreed interest rate terms measured against a swap curve. The fixed-rate period is relatively short.

Lending to customers (level 3)

Loans consist primarily of fixed-rate loans in Norwegian kroner and parts of the portfolio of margin loans in Norwegian kroner. The value of fixed-rate loans is determined by discounting agreed interest flows over the term of the loan, using a discount factor adjusted for margin requirements. A margin requirement is calculated for margin loans, and the difference between the agreed and the actual margin is discounted over the average expected time to the repricing of the loan.

In addition, DnB NORD has a small portfolio of loans carried at fair value. The value of this portfolio converted into Norwegian kroner will be affected by exchange rate movements when converting the company's balance sheet from local currency.

Commercial paper and bonds (levels 2 and 3)

The valuation under level 2 is primarily based on observable market data in the form of interest rate curves, exchange rates and credit margins related to the characteristics of the individual credit or bond. For paper classified as level 3, the valuation is based on indicative prices from third parties or comparable paper.

The value of DnB NORD's portefolio converted into Norwegian kroner will be affected by exchange rate movements in connection with the conversion of the company's balance sheet from local currency.

Equities including mutual fund holdings and equity-related derivatives related to market-making (levels 2 and 3)

Equities classified as level 2 comprise equity derivatives used in DnB NOR Markets' market-making activities. Most of these derivatives are related to the most traded equities on Oslo Børs, and the valuation is based on the price development of the relevant/underlying equity and observable or estimated volatility. Instruments which are classified as level 3 essentially comprise property funds, limited partnership units, private equity investments, as well as hedge fund units and investments in unquoted equities.

Financial assets, customers bearing the risk (level 1)

The item applies in its entirety to unit-linked products in Vital, and the value development of the underlying funds is available on a daily basis.

Financial derivatives (levels 2 and 3)

The market values classified as level 2 are primarily currency forward contracts and interest rate and currency swaps. The valuation is based on swap curves, and credit margins constitute a minor part of the value. In addition, the item comprises derivatives related to commodities and forward rate agreements. These are valued based on observable market prices. The market values classified as level 3 are primarily connected to currency options, interest rate options in Norwegian kroner, as well as index derivatives. The valuation is based on indicative prices from third parties.

Loans and deposits from credit institutions (level 2)

See "Lending to and deposits with credit institutions" above. The item also includes borrowings from Norges Bank in connection with the Norwegian government's covered bonds exchange scheme. The funding obtained through this scheme totalled NOK 118.1 billion at year-end 2009. See note 46 Information on related parties.

Deposits from customers (level 2)

Deposits carried at fair value include special-term deposits. The valuation is primarily based on measurement in relation to a swap curve, and changes in credit margins have an insignificant effect.

Debt securities issued (level 2)

The valuation is primarily based on observable market data in the form of interest rate curves and credit margins. The item consists mainly of funding in Norwegian kroner. For foreign currency funding, hedge accounting is used. In all other respects, securities are carried at amortised cost.

Subordinated loan capital (level 2)

Subordinated loans carried at fair value consist of two loans in Norwegian kroner, and the valuation is based on observable interest rate curves and credit margins.

Balance as at 31 December 2008 174 012 3 913 5 433 1 792 1 277 Net gains on financial instruments (323) (19) (679) (311) (107)

Additions/purchases 11 094 5 390 880

Sales 0 5 204 535

Settled 34 608 1 123 1 028 821

Transferred from Level 1 or Level 2 0 42 1 066 Transferred to Level 1 or Level 2 0 661 542

Other ²⁾ (282) (157) 0

Balance as at 31 December 2009 149 893 2 180 5 623 453 350 1) Equities classified as level 3 comprise, in addition to pure equity investments, property fund units, limited partnership units, private equity

investments and hedge fund units.

2) Includes exchange rate effects arising from the translation of foreign operations.

Lending to customers

The portfolio of loans carried at fair value consists primarily of fixed-rate loans in Norwegian kroner and a share of margin loans in Norwegian kroner. In addition, DnB NORD has a small loan portfolio which is recorded at fair value.

Fixed-rate loans

The valuation of the loans is based on interest rates agreed with the customers concerned, discounted by a margin requirement based on the market situation at year-end 2009, as evaluated by Retail Banking. Fierce competition and transparency in the form of interest rate barometers within this market segment mean that there is relatively little uncertainty surrounding the margin requirement for such loans.

With respect to these loans, customers have, as a rule, no possibility to withdraw from the agreements without paying compensation for the difference between the estimated and the registered margin. Fixed-rate loans carried at fair value totalled NOK 23 526 million at year-end 2009.

Margin loans carried at fair value

A typical margin loan is a loan with a reference interest rate and a margin add-on. Reference rates will normally be set for a period of three months, but the margin can be determined for considerably longer periods. In times of significant interest rate fluctuations and reduced liquidity in the market, as was the case during the financial turmoil, long-term funding costs increased. This is of significance for the margin requirements used by the bank in its calculations. The margin requirements are measured against agreed margins, and discrepancies are discounted over average periods up until the expected margin adjustment. This period is based on feedback from the Group's business areas, but will require significant judgment based on past experience. The period up until the actual adjustment of the margin represents the largest element of uncertainty in these calculations. Margin loans carried at fair value totalled NOK 126 367 million at year-end 2009.

Commercial paper and bonds

Investments classified as level 3 primarily consisted of municipal and government securities with short fixed-interest terms. The securities were of high quality, but with limited liquidity. NOK 500 million of the portfolio represented investments in savings banks, county municipalities and energy companies. For this part of the portfolio, the value of one basis point was NOK 0.15 million. In total, there was an unrealised loss on commercial paper and bonds classified as level 3 of NOK 22 million at year-end 2009.

Equities including mutual fund holdings

Of the total invested amount of NOK 5 623 million, NOK 2 573 million was invested in private equity funds, NOK 1 020 million in property funds, NOK 17 million in limited partnerships, NOK 1 083 million in unquoted hedge funds and NOK 930 million in unquoted equities. A common denominator for these investments is that there is a lag in the access to information from the units. In times of financial market turmoil, there may be considerable uncertainty related to the valuation of these investments.

Financial derivatives, assets and liabilities

Items classified as level 3 are primarily currency options, interest rate options in Norwegian kroner and derivatives related to developments in the consumer price index.

Note 30 Shareholdings

Investments in shares, mutual funds and equity certificates ¹⁾ DnB NOR Group

Amounts in NOK million 31 Dec. 2009 31 Dec. 2008

Total investments in shares, mutual funds and equity certificates, excluding Vital 13 272 9 875

Total investments in shares, mutual funds and equity certificates, Vital 44 955 26 964

Total investments in shares, mutual funds and equity certificates 58 227 36 839

Specification of the largest investments in shares, mutual funds and equity certificates as at 31 December 2009

Total investments in shares, mutual funds and equity certificates 13 272 450

Vital

Total companies based abroad 15 631 703

Mutual funds

Total investments in shares, mutual funds and equity certificates 44 954 878 1) Primary capital certificates were savings banks' form of "shares", but did not give full ownership rights to equity, as is the case with shares. During

2009, a change was made to primary capital certificates, whereby the name was changed to equity certificates. The main difference between equity certificates and primary capital certificates is that investors' ownership interests in savings banks can now be held stable. This is possible as a larger share of profits can be distributed in the form of gifts. Savings banks can thus avoid dilution effects.

2) Ownership share in per cent is based on the company's total share capital and does not include derivative contracts.

3) Shares and funds carried at fair value in DnB NOR Markets totalled NOK 10 448 million at year-end 2009, and equity-related derivatives represented minus NOK 341 million. DnB NOR Markets' equity investment are mainly an instrument in hedging its equity derivative exposure through the business area's market making activities. Value at Risk for the equity operations in DnB NOR Markets represented approximately NOK 1 million at year-end 2009.

Money market funds 1 636 1 325

Combination funds 2 747 2 549

Bank deposits 2 368 3 631

Total financial assets, customers bearing the risk ¹⁾ 21 337 16 454

Total insurance liabilities, customers bearing the risk 21 337 16 454

1) The figures show a breakdown of customer assets invested in products with a choice of investment profile. For such assets, the customers carry the financial risk.