Business Plan XFinans

BUSINESS PLAN – X-FINANS – PAGE 2 OF 86
TABLE OF CONTENTS
Executive summary 7
New business venture – X-Finans 10
Introduction 10
Corporate information 10
Business address 10
Ownership 10
Board of directors 10
X-Finans – Vision 11
Vision 11
Mission statement 11
Strategy 11
Unique Selling Points 14
Products 14
Distribution 15
Organisation and operations 15
Founder and management team 16
Strategic analysis 20
The market – COMPETITIVE ANALYSIS 20
Market description 21
Market trends 22

Competitive environment 22
Competitor analysis 23
Competitor response 24
SUSTAINABLE COMPETITIVE ADVANTAGE 24
Product offering 26
Product guidelines 26
Product offering overview 26
White labelling 27
Commission strategy 27
Portfolio based commission pay-out policy 28
Fee based commission pay-out policy 30
Vendor reporting 31
Products in depth 32
Car leasing 32
Car loan 37
PRODUCT COMPARISON 42
Car Leasing 42
Car Loan 42
Marketing, sales and distribution 44
Marketing objectives 44
Sales forecast and assumptions 44
Portfolio build up and growth strategy 45
Market share of new sales 46

Vendor count 46
Marketing costs / commissions 47
Customer-relations = number of cases count 47
Sales (volume) 48
Quarterly margin revenues 50
Total portfolio own balance 51
Marketing plan 52
Operational strategy 53
Overview 53
Business process automation 53
Key business processes 54
High level business processes explained 55
Origination process / Vendor service 55
Portfolio Management / Customer service 58
Technology / IT Strategy 60
Business driven 60
In the forefront of utilizing technology 60
Evaluation and timing of new systems 60
System portfolio and technologies 60
Risk management 64
Risk Management Principles 64
Risk Management Organization 64
Credit Risk Management 66

Credit policy 66
Human resources 68
Organizational objectives 68
Outsourcing strategy 68
Core-business organizational functions – Internal resources 69
Management 69
Business and product development 69
Sales and marketing / Vendor service 69
Credit / Finance / Risk Management 69
Customer service 69
Non-core organizational functions – External resources 70
Bad debt management 70
Accounting 70
IT operations 71
Organizational values 72
Human resources strategy 73
Organizational structure chart 74
Organizational budget 75
Financial data 76
Introduction 76
Key principles 77
Growth strategy 79
Company financing, capital requirements and cash flow 80

Income, cost base and operating results 83
Business risk assessment 85
Risk matrix 85

Executive summary
This business plan presents a business opportunity for X-Finans to establish
itself as a financial lending and leasing institution in the Norwegian car finance
market.
X-Finans is set up, having Stein A. Solstrand and Tomas Larsen as well as
qualified suppliers/partners as major contributors.
X-Finans will succeed focusing on working with dealers with high sales
volumes, using fully automated and integrated business processes both
internally and externally.
A “Car loan” and a “Car leasing” product on X-Finans own balance will be
introduced. See product sheets per product for more info.
X-Finans will introduce a new and simplified commission strategy, “Fee and
portfolio based profit sharing”, as a primary tool in acquiring and keeping
vendors. The key is that vendors will be paid monthly, a fixed share of fees
and the interest-component of the generated portfolio, as opposed to
competing with annuity-based or pay-once-regimes. The fact that the interest
component of an annuity based loan is relative high early in the life cycle and
some loans are terminated before maturity date, make this payment schedule
more attractive. X-Finans does not take any credit risk related to
commissions. X-Finans will provide vendors with best in class commission
reporting and information.
Stein A. Solstrand has solid and proven market experience and existing
relations in the financial business. In 1994 he started Vesta Finans AS’s office
in Stavanger. The company changed name to SkandiaBanken Bilfinans in

1999. In 2006 Stein A. Solstrand left the company as head of SkandiaBanken
Bilfinans AS (Car finance) and SkandiaBanken Bolig (Mortgage). During Stein
A. Solstrand’s leadership the turnover and sales pace was increased
significantly each year. For the fiscal year 2005 the turnover grew to:
SkandiaBanken Bilfinans AS: 2,625 MNOK, which means 350 % growth over 5.5
years
SkandiaBanken Bolig: 6,000 MNOK , which means 10 % growth over 1.0 year
As a newly started business without any legacy systems, X-Finans will build a
lean and highly scalable organization, consisting of 12 employees by EOP year
One, growing to 19 employees EOP year Four.
In order to achieve high scalability and lowest in business transaction costs all
relevant business processes will be automated using best-of-breed software in
the Nordic market. High end IT system portfolio consisting of a origination
system, a core receivables system, a document handling system and a task
tracking system will enable a very high level of automated business processes
in the operational strategy.
The complete system portfolio and IT operations will be outsourced to one
preferred IT partner taking the complete responsibility for all IT operations.
The preferred IT partner is well-known, business oriented, proven and
professional partner focusing in the financial segment at the Nordic level.
New and fully automated business processes based on a best of breed system
portfolio completely supported by one professional IT partner will create a
sustainable competitive advantage for X-Finans.

The estimated complete cost structure of X-Finans will be stable over time.
Monthly cost base estimated in year 1 to nearly 2 MNOK, marginally increased
to 2.3 MNOK/month in year 2 and 2.6 MNOK/month in year 4.
Estimated income will be linear and tied to running promoted and lending
portfolio making sales and distribution force key success factors. Estimated
income will be increased every month giving an average for year 2 of approx
2.4 MNOK/month. Estimated average income for year 3 is 3.6 MNOK/month
and for year 4 in the range of 5.3 MNOK/month.
Monthly break even is expected around year 2 and accumulated break even is
expected around Q2 Year 4. For the fiscal year of year 5 we expect a result
before tax of approx 24 MNOK.

New business venture – X-Finans
Introduction
With respect to the competitive landscape and market potential in Norway X-
Finans will seek to achieve the position of approved vendors’ preferred
supplier of sales finance products.
The concept is based on state of the art technology and business models in
the fields of car financing.
Corporate information
The final marketing name of the company will be decided later. X-Finans will
be used throughout this business plan as a working title for the new company.
Business address
t.b.a.
Ownership
t.b.a.
Board of directors
t.b.a.

X-Finans – Vision
Vision
“We will be innovators in sales financing, defining a new standard through
smart use of technologies”
Mission statement
X-Finans will set the standard of a 21st century financial services company
through non-stop business development and the use of state of the art
technological solutions for distribution and customer service. X-Finans will
redefine the business models of the sales finance industry through strong
vendor relationship management, product development, value chain
development and technology leadership.
Strategy
Market research suggests that 20% of the vendor groups in the various
regions of Norway accounts for 80% of the supplied sales finance business. X-
Finans will focus on establishing and maintaining a strong relationship to the
largest and most financially sound vendors in the Norwegian marketplace. The
reason for focusing on these are primarily residual value exposure on leasing
contracts, as well as focusing the energy of the company’s sales efforts on the
vendors that has the largest distribution potential.

In 2007 DnB NOR finans purchased Skandiabanken Bilfinans. Skandiabanken
was often seen as the differentiator and challenger in the market. It is
expected that it will be difficult for DnB NOR Finans to hold on to this position,
based on the current market situation. During 2008 and 2009 the dominance
of the two major players in the market (DnB NOR Finans and Santander
Consumer Bank (Elcon)), have increased even more. This indicates that there
is room for a new innovative competitor in the market.
Additionally there have been a significant consolidation in the car sales
industry. Larger vendor groups have been formed, shifting the power balance
from the distributors to the vendors. Many distributors work with captive
finance companies, making franchised vendors difficult to approach. As the
focus is more on earnings and the service provided, one can expect that it will
be possible to sell X-Finans’ products even to franchised vendors that
previously used captive companies.
Focusing on the earnings the vendors can achieve, rather that the old way of
doing business (often described as wining&dining business), X-Finans should
be able to get a significant share of the business from the franchised vendors
and vendor groups focusing on increasing their F&I income.
The financial services industry has on several occasions launched relationship
marketing initiatives with a varying degree of success. To maximize the value
of the relationship building efforts of the company we need to identify our
prime customers. This will be derived from the following set of criteria:
 Customer present value (revenues pr. contract)
 Vendor sales potential (based on annual sales)
X-Finans will

 Utilize CRM-systems to collect, analyze and act on vital customer data
based on the following assumption: ”he who wins the customers is he
who knows most about their preferences”.
 Utilize the distribution network and business development potential of
partners to create tailored financial services products within an existing
distribution network.
 Constantly collect feedback from customers.
 Involve customers in business- and product development processes.
The ultimate goal of X-Finans is to be able to, with the help of Internet-based
technology, to acquire customers and configure products and price in real
time based on the customers’ preferences.
This goal is reflected in a vendor and distributor oriented attitude based on
mutual benefit. X-Finans will provide concepts preserving the individual
vendors own needs and preferences related to sales financing. For example:
 Relational cooperation (relationship building)
 A flexible system for commissions
 Branding solutions for providing X-Finans’ products as white labels
 Efficient business processes (through use of Internet technology)
 Collaboration on product development
Based on previous experience, the single most important competitive edge is
gained by customizing one’s products and services allowing them to be
tailored to each individual vendor. The basic concept can be illustrated as
follows:

X-Finans will be the leading supplier of sales finance products in Norway with
respect to web based interactive solutions for processing credit applications
from vendors and the direct market.
Unique Selling Points
Products
 Fee and portfolio based profit sharing
 Vendor tailored product attributes and packaging

Distribution
 Strong and motivated sales and distribution team in the car sales
finance industry
 Unique and attractive commission strategy based on portfolio and fee
profit sharing
Organisation and operations
 Extremely low cost base
o Lean organisation
o No cost driving operational history and portfolio of people and
infrastructure
 Fully automated business processes with homogenous and state of the
art IT infrastructure

Founder and management team
Stein A. Solstrand General/Sales manager - X-Finans
Age 43
Title General/Sales Manager
Profile Generates high sales and strong distribution
Stein A. Solstrand will focus on assuring that X-Finans achieve estimated sales
volumes pr product by establishing a strong distribution organisation.
Stein A. Solstrand started June 1999 in SkandiaBanken Bilfinans AS as
responsible for sales. At the time of startup the sales pace in yearly turnover
for SkandiaBanken Bilfinans was 750 MNOK.

Stein A. Solstrand left SkandiaBanken in March 2006 as head of the business
unit consisting of SkandiaBanken Bilfinans AS (Car finance) and
SkandiaBanken Bolig (Mortgage).
During Stein A. Solstrand’s leadership the turnover and sales pace was
increased significantly each year. For the fiscal year 2005 the turnover grew
to:
SkandiaBanken Bilfinans AS: 2,625 MNOK, which means 350 % growth over 5.5
years
SkandiaBanken Bolig: 6,000 MNOK , which means 10 % growth over 1.0 year

Tomas Larsen CFO - X-Finans
Age 34
Title CFO
Profile Economical, technological and administrative knowledge and
experience
Tomas Larsen will focus on assuring that the administrational processes works
smoothly, that the backoffice personell are efficient, and that procedures and
routines are developed and followed.
Tomas Larsen is educated at the Norwegian School of Ecoomics (NHH), and
has a degree as “Siviløkonom”. He finished his education in 2002 and has
gained experience within the area of marketing, economy in general, and
administration/HR.
Tomas Larsen currently works as a consultant and General Manager in a
consulting company in Stavanger.

Strategic analysis
The market – COMPETITIVE ANALYSIS
The finance market in Norway being targeted by X-Finans is related to the
following sales finance products:
 Car loan
 Car leasing
In terms of the size of the markets for these products, the total car finance
market is around 50 BNOK (new sales).
On each of the products above a range of auxiliary products are sold. These
are mainly insurance products and additional services related to the item
financed.
The car finance market is mainly served by finance companies, most of which
provide both loan and leasing products. The market is dominated by the 2 big
players (DnB NOR Finans and Santander Consumer Bank(Elcon)) sharing
almost 2/3 of the market. The rest of the market is captured by captive
companies such as Volkswagen Møller Bilfinans (Volkswagen, Audi, Skoda),
Toyota Financial Services, Forso Nordic (Ford, Volvo). DnB Nor Finans
acquired SkandiaBanken Bilfinans in 2007, which was the biggest independent
player.
.

Market description
Car Finance:
The car finance market in Norway is relatively stable. The players in the
market are stable, and there are few new entrants to the market. The last
major entrants to the market were that of captive finance companies like
Toyota Financial Services, Møller Bilfinans and BMW Financial Services
established in the late nineties. The last major movement in the car finance
market was the purchase of Skandiabanken Bilfinans by DnB NOR Finans.
The new entrants have not shaken the market significantly; most companies
have seen an increase in their portfolio as a result of an increasing market,
which have allowed the few new entrants to build their portfolio in a stable
manner. The competition in the market is fierce on a local level, but from an
overall point the market does not have the characteristics of a very
competitive market as margins have been stable or increasing over the last
few years. As a result of the credit crisis in 2008 and 2009, the companies in
the market have increased their margins significantly, without experiencing
significantly increased losses.
Based on the experiences of key resources and research done, it is clear, that
to be able to penetrate the market, distribution is one of the key factors.
Distribution is achieved by using a dedicated and motivated sales force in X-
Finans. In this market, relationships with vendors, and being able to work
with vendors to come up with suitable solutions is one of the drivers behind
sales. As a rule of thumb every person in the sales force should be able to
bring in around 200 MNOK annually in car finance new sales. This is in line
with the numbers achieved by the other independent finance companies in
Norway. Captive finance companies achieve even higher sales per person.

Additionally there has been a slight shift in the market in terms of car finance
being partly done over the internet. So far though, this is only visible in
buying and selling cars between private persons, which requires extensive
manual handling of documents and processes, and therefore will not be
pursued by X-Finans. It is not possible to quantify the share of these finances,
but it is safe to say that it is currently significantly below 10% of the financed
volume.
Market trends
The main trends in the marketplace for finance are firstly a strong growth in
all market segments. Some of the growth is probably fuelled by increased
house prices and low interest rates, but even before the interest rates
dropped to the current level, car finance was increasing significantly.
There seems to be an increasing acceptance of funding consumer spending by
borrowing, which may explain the growth even when interest rates where
high.
Another indication of this is the incredible growth in the credit card/sales
finance marketplace, even though the interest rates paid on this type of
lending are very high.
Competitive environment
The competitive environments for the markets X-Finans are looking at are
dominated by different players depending on the markets. The analysis will

look at the competition in each market segment separately to get a better
overall representation of the market.
Only the key players in the market have been shown.
Competitor analysis
Car Loan
Company Market share 2008 Market Share 2009
DNB NOR Finans 29% 30%
Elcon Finans/Santander 34% 36%
BMW Financial Service 4% 3%
Nordea Finans 8% 8%
Møller Bilfinans 5% 5%
Toyota Kreditbank 4% 3%
Forso Nordic (Ford/Volvo) 2% 2%

Car Leasing
Company Market share 2008 Market Share 2009
DNB NOR Finans 22% 21%
Elcon Finans/Santander 14% 17%
Forso Nordic (Ford/Volvo) 5% 7%
Leaseplan 15% 13%
Møller Bilfinans 10% 10%
Nordea Finans 5% 6%
SG Finans 2% 2%
BMW Financial Services 3% 5%
Toyota Kreditbank 7% 8%
Competitor response
The market shares expected for X-Finans, especially in the most important
market for car loans and lease, are so small that X-Finans does not expect
competitors to take significant measure to hinder X-Finans’ growth.
The current market is growing quite significantly. Thus, it is expected that
even though X-Finans will be a new entrant to the market, the other
competitors will also experience a growth in their markets.
SUSTAINABLE COMPETITIVE ADVANTAGE
X-Finans will succeed because of the following:

 The company commands a strong and motivated distribution force
capable of building strong and lasting vendor relationships
 Unique and attractive commission strategy based on portfolio and fee
profit sharing
 The company will rely on state of the art technology providing business
agility
 The company will focus on outsourcing all non core business processes
providing for increased focus on core operations and business
development
 Strong team of committed people

Product offering
Product guidelines
X-Finans will offer financial services products that share the following
characteristics:
 Distributable via vendors
 Electronically distributed (internet based)
 Capable of credit application automation
 Capable of high level of process automation in calculating, signing and
operating the individual contract (product)
 Commissionable
Product offering overview
X-Finans’ products will be simple, profitable and predictable. This applies both
to vendors and with respect to X-Finans’ own organization.
From year 1 a “Car loan” and a “Car leasing” product on X-Finans own balance
will be introduced. Please review the attached product sheets product for
more detailed information on each product.
The company will strive to continuously provide the financial product mix to
satisfy the needs and preferences of each individual vendor with which the
company conducts business.

In the competitive and sophisticated Norwegian financial services market we
expect that agile product development will be a prime competitive parameter
and X-Finans intends to use this to its advantage. X-Finans projects that the
demand for vendor tailored products will increase substantially in the years to
come.
White labelling
X-Finans will be committed to offering all its products as white label solutions
enabling the vendor to use its own brand name in selling and distributing the
products. We believe that state of the art technology and the lack of legacy
systems will enable the company to outperform its competitors with respect to
creating considerable value for the vendor in offering white label financial
products.
Commission strategy
X-Finans strongly believes that vendor relationships built around a
commission strategy is the primary tool in acquiring and keeping vendors and
distributors.
Success in recruiting vendors depends on focusing the company’s energy on
tailoring the commission incentive parameters to each individual vendor. The
system is based on being true to the philosophy of establishing a mutual
beneficial sales finance relationship between X-Finans and the vendors. In
short the concept is as follows:

Funding interest rate 2,20% (Money
market rate)
+ Margin X-Finans 1,80%
= Base interest (wholesale interest rate) 4,00%
+ Flexible vendor margin 1,00%
= Customer interest rate 5,00%
The X-Finans interest rate margin is added to the funding interest to provide
the vendor with a wholesale interest rate. The vendor can then freely (within
predefined limits) offer a customer interest rate differing from the wholesale
interest rate, creating a margin between the customer interest rate and the
wholesale interest rate which is paid out during the lifecycle of the loan. This
concept is marketed as “Profit sharing”. Commission payments are linked to
continuously providing new loans to X-Finans which makes for building a
strong mutually beneficial relationship between the vendor and X-Finans.
X-Finans will pay out vendor commission upon receiving payment from the
end customer, leaving X-Finans risk-free with respect to commission’s
payment.
Portfolio based commission pay-out policy
The Commission calculation is based on that the vendor who has sold the
loan, gets paid the share of the interest that exceeds the vendors ”Base rate”.
This differs from other finance companies way of doing this in Norway, in the
way that it is the actual difference in interest earned, rather than the
difference in the annuity amount each month.

The result is that a larger share of the commission is paid early in the loan, a
clear advantage for the vendors. The total commission on a contract running
until the contract end, will only differ marginally, but as few contracts run the
entire loan period, this will end up being a positive factor for the vendors.
An example of the effect can be seen below:
Loan Amount (NOK)
Interest X-
Finans Interest Vendor Months
Annuity amount Customer
(NOK)
250000 4,00 % 5,00 % 60 4 718
Term
Commission MPSS
(NOK)
Commission ”Regular”
(NOK) Difference (NOK)
1 208 114 94
2 205 114 91
3 202 114 88
4 199 114 85
5 196 114 82
29 117 114 3
30 114 114 0
31 110 114 3
32 107 114 6

Fee based commission pay-out policy
Start up fee
Additionally the vendor will receive an up front commission for all contracts
with a start up fee.
Invoice fee
The vendor will receive a commission based on collected invoice fees.

Vendor reporting
X-Finans is committed to providing industry leading real time commission
reporting to each of its vendors.

Products in depth
Car leasing
PRODUCT CAR LEASING
Customer types Private
Corporate
Self employed
Interest Calculation method Annuity, interest calculated in advance
Payment Periods Monthly
Commission Method Multi Profit Sharing System (MPSS)
Public fees Optional document fee (Tinglysingsgebyr)
(if residual value is set to 0)
Other Fees Term fee
(Income) Start up fee
Additional Products Payment protector insurance
Possible number of payments 60
Residual Value guarantee Provided by dealer who sells car
Commission Calculation:
lease, gets paid the share of the interest that exceeds the vendors ”Base
rate”. This differs from most other finance companies way of doing this in
Norway, in the way that it is the actual difference in interest earned, rather
than the difference in the annuity amount each month.

The result is that a larger share of the commission is paid early in the lease, a
clear advantage for the vendors. The total commission on a contract running
until the contract end, will generate significantly more income for the vendor
on any lease where there is a residual value.
Residual value – Operational leasing
X-Finans will explore the possibility to offer the vendors to sell Car leasing
where X-Finans will be responsible for the residual value.
This will handle the issues where the vendor residual value portfolio has
grown to be too large to include new sales for X-Finans.
In addition it will give X-Finans a unique selling point for signing on new
vendors.
Distribution
Car Leasing is distributed through car dealers (vendors). It is expected that
in the short term, Car Leasing will be a significant product for X-Finans.
Mainly this is because of X-Finans’s expected ability to build a very strong
distribution network, which in a short time span can produce profitable
vendors.
The market for car leasing has been relatively stable for the last 10 years.
The reason for this market being fairly stable in a market where other finance
forms of cars have increased rapidly is probably due to the fact that it is a
mature market and the new sales volumes is currently following the new car
sales market..
The last 4 years, the leasing market has seen a growth partly fuelled by
private leasing. After a push in the market towards private leasing in 2005

and 2006, there were a decline in private leasing in 2007, followed by a new
increase in 2008 and 2009.
The total market for new sales of passenger car leasing is expected to be
around 7 BNOK in 2010. (The figure for 2009 was 6,5 BNOK).
Market prices
X-Finans will have a pricing policy based on competitive rates, without being a
price leader. Experiences from the market indicate that the end customers
often emphasise the monthly payment, mainly affected by the residual value,
but have a relatively large tolerance for fees. This indicates that the pricing
policy should place the interest rates in the lower end of the scale, but the
fees should be in the higher end of the scale.
As can be seen from the shown chart from The Association of Norwegian
Finance Houses, it can be expected that the total interest margin achieved by
the members (including fee income) is 3-4%. The margin referred to here is
the net margin achieved by finance companies, thereby excluding
commissions paid to vendors.
As interest rates are rarely published for car leasing the loan figures have
been used to provide a measurement of the margins that can be achieved.
Experience tells us that normally they are quite similar.

Numbers from The Association of Norwegian Finance Houses.
Risk of loss
The risks of loss on car leases have historically been low, although higher than
for car loans. With the exception of a few years in the end of the 1980’s the
losses have been stabile and relatively small in Norway. In 2008 finance
companies that operate in the Norwegian finance market experienced losses
of about 1% of average lending.
As the figure above includes both loan and lease, it can be expected that the
leasing losses are higher, although not significantly higher than for loans.
With a targeted and active credit policy, it should be possible to achieve such
low average losses on leasing, even for a newly started finance company.

With the rise of private leasing the loss potential may increase. This is mainly
because of 2 factors;
 A private customer is able to terminate a lease contract during the
financed period, currently it looks like 6 months notice is the maximum
that can be imposed. This increases the risk of VAT losses (on any lease
running for less than 36 months on a passenger car, the finance
company must repay a relative share of the VAT deduction claimed on
the car, this risk can not be transferred to a private customer).
 The increase in private leasing may push the car dealer residual value
guarantees so far that some dealers may be in risk of going bankrupt.
Included in the losses described above are any losses resulting from fraud.
Compared to many European markets, losses from fraud have been low in
Norway. It may be expected that fraud may be an increasing problem also in
Norway, but so far it has not manifested itself in higher losses.

Car loan
Product Car Loan
Customer types Private
Corporate
Self employed
Interest Calculation method Annuity, interest calculated in arrears
Payment Periods Monthly
Commission Method Multi Profit Sharing System (MPSS)
Public fees Document fee (Tinglysingsgebyr)
Other Fees Term
(income) Startup fee
Additional Products Payment protector insurance
Possible number of payments 120
Commission Calculation
loan, gets paid the share of the interest that exceeds the vendors ”Base rate”.
This differs from most other finance companies way of doing this in Norway,
in the way that it is the actual difference in interest earned, rather than the
difference in the annuity amount each month that is the base for the
commision calculation.
The result is that a larger share of the commission is paid early in the contract
period of the loan, a clear advantage for the vendors. The total commission on
a contract running until the contract end, will only differ marginally, but as
few contracts run the entire loan period, this will end up being a positive
factor for the vendors.

Distribution
Car Loans are distributed through car vendors. It is expected that in the short
term, Car Loan will be the most important product for X-Finans. Mainly this is
because of X-Finans’s expected ability to build a very strong distribution
network, which in a short time span can produce profitable vendors.
The market for car loans has increased rapidly the last 10 years.
Source: Association of Norwegian Finance Houses.
The strong growth is partly as a result of an increased average purchase price
of cars the last 10 years, however the popularity of loans with collateral in a
car have also increased. The other main method of financing a car purchase is
financing the car by using available equity in a house, by topping up the
mortgage.

The total market for new sales of car loans in 2009 was around 19 BNOK. In
2010 a small increase is expected as a result of the increasing new car sales.
Market prices
X-Finans will have a pricing policy based on competitive rates, without being a
price leader. Experiences from the market indicate that the end customers
often emphasise the nominal interest rate, but have a relatively large
tolerance for fees. This indicates that the pricing policy should place the
interest rates in the lower end of the scale, but the fees should be in the
higher end of the scale.
As can be seen from the shown chart from The Association of Norwegian
Finance Houses, it can be expected that the total interest margin achieved by
the members (including fee income) is 3-4%. The margin referred to here is
the net margin achieved by finance companies, thereby excluding
commissions paid to vendors.

Risk of loss
The risks of loss on car loans have historically been low. With the exception of
a few years in the end of the 1980’s the losses have been stabile and low in
Norway. In 2008 finance companies that operates in the norwegian loan
market experienced losses of about 1% of average lending.
With a targeted and active credit policy, it should be possible to achieve such
low average losses on lending, even for a newly started finance company.
Included in the losses described above are any losses resulting from fraud.
Compared to many European markets, losses from fraud have been low in
Norway. It may be expected that fraud may be an increasing problem also in
Norway, but so far it has not manifested itself in higher losses.

PRODUCT COMPARISON
Car Leasing
Attribute X-Finans Competitors
Maintenance included in principal X X
Start up fee included in principal X
Yearly government fee included in monthly lease X X
Portfolio based commission X
Fee based commission X X
Fleet management X X
Real time commission reporting X
Real time termination cost calculation X
Car Loan
Attribute X-Finans Competitors
Maintenance included in principal X
Start up fee included in principal X X
Portfolio based commission X
Fee based commission X X
Real time commission reporting X

Marketing, sales and distribution
Marketing objectives
The basis for growing the venture is reflected in the following strategies and
guidelines:
 X-Finans will focus on acquiring vendors with high business ethical
standards
 Priority 1: Focus the attention of the company on top selling car
vendors
o Establish 15 major car vendors (at least MNOK 5 in annual
financial product sales) or 25 average sized car vendors or a
relevant combination in the following regions:
 Oslo, Bergen, Stavanger, Trondheim, Tromsø
 Priority 2: Continue to develop new and innovative products to meet
the company’s vendors current and future needs.
Sales forecast and assumptions
Based on the market research undertaken, strategies developed and existing
customer relationships, the attached “XF Budget” was developed.
The Excel based “XF Budget” contains sales forecasts and portfolio estimates
per product and complete specifications of the cost base for X-Finans.

The following executive summary extracts are included below to give a brief
overview. For more detailed information and relevant assumptions, please see
“XF Budget”
Portfolio build up and growth strategy
The growth strategy of X-Finans is based on the following guidelines:
 Phased introduction of new products over time
 Estimated build up per product over time
 Estimated total portfolio build up over time is compared to a time line
where all major events with respect to company setup, IT system, legal
requirements, X-Finans organization and operational processes are
included
o Estimated total portfolio build up is regarded viable
Following these guidelines the estimated portfolios build up is:
ENDING PORTFOLIO (NOK 000) Year 1 Year 2 Year 3 Year 4
Secured loans 130 500 583 700 999 300 1 440 500
Car leasing 88 000 409 600 761 200 1 100 900
Portfolio on balance sheet 218 500 993 300 1 760 500 2 541 400

Please see the XF Budget for a more detailed setup
Market share of new sales
The market share of new sales is computed as X-Finans’s estimated new sales
compared to the new sales volume for the Norwegian market for the relevant
product.
MARKET SHARE YEAR 1 YEAR 2 YEAR 3 YEAR 4
SECURED LOANS 1,72 % 2,81 % 2,83 % 3,53 %
CAR LEASING 3,00 % 6,25 % 7,50 % 9,25 %
NEW SALES YEAR 1 YEAR 2 YEAR 3 YEAR 4
SECURED LOANS 150 000 635 000 800 000 1 010 000
CAR LEASING 100 000 430 000 600 000 720 000
TOTAL 250 000 1 065 000 1 400 000 1 730 000
Vendor count
A forceful distribution, represented by a vendor count, is a key factor to
achieve estimated sales. The following table represents the estimated vendor
count over time which is believed to be consistent with the estimated portfolio
build up.

VENDOR COUNT Type Year 1 Year 2 Year 3 Year 4
Car loan / leasing Car dealers 90 200 310 430
Marketing costs / commissions
The marketing costs are estimated to NOK 400.000 per quarter for all
products.
Note that this figure does not include commissions to vendors. Commissions
to vendors will be “funded” directly by end consumers and is only “routed” via
X-Finans accounting books with equal amounts in / out.
For simplicity, the commissions income / pay-out is not included in the XF
Budget on either side.
Customer-relations = number of cases count
This graphic shows the number of customer relations = number of cases
divided by products. The actual number of customers is expected to be lower
as some customers will have several products at the same time.
TOTAL NUMBER OF CASES = CUSTOMER
RELATIONS
YEAR 1 YEAR 2 YEAR 3 YEAR 4
SECURED LOANS 725 3 243 5 552 8 003
CAR LEASING 383 1 781 3 310 4 787
TOTAL 1 108 5 024 8 862 12 790

Sales (volume)
Amount based on total new sales each quarter divided by product

No of cases based on total new sales each quarter divided by product

Quarterly margin revenues

Total portfolio own balance

Marketing plan
X-Finans’ main target audience is:
 Car vendors
X-Finans’ marketing efforts will be directed towards acquiring new and
keeping existing vendors. A substantial amount of the marketing budget will
be spent on vendor relationship management and vendor competitions. It is
our experience that in addition to a commission scheme, sales competitions
between vendors and salespeople are one of the primary tools in generating
sufficient volumes from each vendor. X-Finans will put a strong emphasis on
sales competitions and reward successful vendors substantially. X-Finans’
distribution force will focus strongly on vendor relationship building and will
spend most of their time in the field catering to vendors’ needs and building
lasting business relationship. X-Finans’ sales management has a strong track
record in acquiring and servicing vendors in the car industry.
As X-Finans strongly believes that commissions are a central vendor incentive,
the company will create a “My Commission Account” concept in its sales
systems continuously providing the salesperson with an overview of his/her
accrued commissions along with a projection of future portfolio commissions.
X-Finans believes that the company will gain a strong top of mind share
through stimulating its vendors to log on to its sales systems regularly to keep
up with the latest profit sharing figures.
It is very important for X-Finans that all individual salesperson incentive,
commission and reward schemes will be organized with the approval of the
employer (vendor).

Operational strategy
Overview
As a newly started business without any cost driving legacy systems, X-
Finans will be committed to build a cost effective and highly scalable
operational strategy.
Business process automation
To ensure that all major business processes will be cost effective and scalable
the following guidelines will be applied:
 One process and one rule for all
o No special customer cases will be allowed
o No special vendor agreement will be allowed
o No special commission fees will be allowed
o No special handling of cases will be allowed
 All operational business processes will be built with best-in-business IT
systems portfolio to comply with a very high degree of complete
automation
o Achieved by tight cooperation with proven and specialized IT
partner
 Few, clean and simple products
o Provide only clean and operational characteristics per product
 Legal accept from customers allowing all end customer interaction to be
done electronically and thus automated

 The company will focus on outsourcing all non core business processes
Key business processes
The key business processes of X-Finans are:
Process Description Responsible
Sales and
marketing
The sales and marketing processes consist of acquiring new vendors
and servicing existing ones
Sales manager
and sales
team
Origination –
offer
The origination – offer process relates to calculating financial
products, submitting offers to the client/vendor, and issuing legal
documents. The process is fully automated through the use of an
origination system
Sales manager
Origination –
credit risk
management
The origination – application process deals with credit risk
management. The process is automated through the use of an
origination system complying to X-Finans credit risk management
parameters
Credit
manager
Origination –
document control
The origination – document control process deals with controlling the
formalities of documents (contracts) submitted by the customer
and/or vendor.
Risk manager
Portfolio – payout The portfolio – payout process handles the transfer of funds to the
customer
Customer
Service
Portfolio – risk
assessment
Process to comply with regulatory requirements of measuring
portfolio risk
Credit
manager
Portfolio –
customer service
The portfolio – customer service process deals with all incoming
requests from current customers. The process will be automated
through the core receivables system and through a request
management system
Customer
Service
Portfolio – bad
debt
The portfolio – bad debt process handles all payments missed and
implements an automated process for initiating legal steps to
retrieve assets
Credit
manager

High level business processes explained
Origination process / Vendor service
The high level origination process for all products
Starting with and including Initial client dialog / application
Ending with and including Initial product payout to Client
New Application, Calculation Account creation and backend integration
Document production
Scoring and underwriting
Data collection and
verificationOrigination
Agent Web
- Calculation
- New Application
Xfinans.no
- Calculation
- New application
Data entered
into Origination
External data
sources
External
information Scoring
Approved
Check formalities
(document control)
Transfer to core receivables
Rejected
Chain of approval
Client
Vendor
End Consumer
Additional
information
retrieval
Core
receivables
Scoring
system
XF Repr
Pay out
End ConsumerVendor
X Finans
Key Account Manager
External
Internal – phase 2
Legend: Signed documents
Document production
Document
system
Fax
Phone
Dialog
High level process
Key characteristics of the origination process:
 Fully automated handling at the single application level
o Highly scalable

o Relevant control and checkpoints of the process
 Complete process could be performed with minimal X-Finans personnel
involvement
o If necessary - Key Account Manager to provide support to
Vendors
o If necessary – Manual scoring performed by X-Finans personnel
 Fully automated external data collection to complete applications
o Interfaces with several external sources to provide solid basis for
scoring
 Fully automated scoring performed by external scoring system
o Scoring system enforces established credit policy
o Focus and tuning related to relative percentage of applications
scoring green, yellow and red.
 Automated additional Client dialog if necessary
o I.e. email to request additional information
 Fully automated production of product specific complete document
packages
o High quality documents both with respect to substance and look
and feel
 Signed and returned documents scanned into a Document system
 System supported document control and formalities check

www.Xfinans.no
(Applikator)
Customer
XFinans
advisor
XFinans
Customer
Service
Bank
Funding
partner
1. Calculate loan
2. Send application
3. Receive application
4. Promote application 5. Receive
application
6. Credit rating
7. Feedback
credit rating
8. Issue
loan documents
9. Print loan
documents
10. Distribute
loan documents
11. Sign
loan documents
12. Send
loan documents
13. Pay out
14. Recieve pay out
Credit Comittee
Funding partner

Portfolio Management / Customer service
The high level “Portfolio Management” process for all products
Starting with and including Client request
Ending with and including Customer feedback of
implemented change
Data collection Request handling
Data entered
Origination
Core Receivables
Client
Agent
XFinans
Key Account Manager
External
Legend:
Fax
Phone
Dialog
Portfolio Management
Core
receivables
Type of
request
Automated tasks
Automated
decision
Manual
decision
Approved
Must be
processed
manually
Approved
Always
automated
client feedback
Client
Always
automated
client feedback
Client
Xfinans Customer
Support
Xfinans Customer
Support
Phone Fax
Agent Web
Loan
Agent Web
Leasing
Key characteristics of the “Portfolio Management” process:

 Clients expected to contact Vendor or X-Finans Customer Support
depending on product
o Key Account Manager support the Vendors
 “Vendor web for leasing” should provide Vendor with the ability to
calculate premature payments to leasing contracts.
o Vendor web for loans and other products will be provided in
phase 2
 Customer Support will use Origination system and Core Receivable
system depending of the request type
 Strong and persistent focus on automating the handling of as many
request types as possible
o Automate common and task-consuming request based on
experience
o Provide strong system support also for request with manual
interaction
 Fully automated customer feedback based on SMS / email
o Customer approval of such feedback as legally binding included
in initial contract

Technology / IT Strategy
Business driven
The IT strategy for X-Finans will be derived from and based on genuine
business needs and not on technology itself. Technology and IT should serve
as a tool to achieve defined business goals.
In the forefront of utilizing technology
X-Finans will be in the forefront of utilizing new technology in general and
extending already proven financial IT systems in particular to make relevant
business processes fully automated and thus scalable and cost efficient.
The company will make heavy use of technology to provide both vendors and
customer with good support with a quick and correct response and up-to-date
information.
Evaluation and timing of new systems
The timing for when to replace manual operations with automated IT solutions
will be based on cost / benefit analysis taken into account the company
growth and the lead to get an IT system in production.
System portfolio and technologies
The IT system portfolio should be based on world leading, up-to-date,
homogenous technologies and open standards.
This will assure that know-how and personnel for regular operations,
maintenance and updates of the system portfolio always can be found at
competitive prices in the marketplace. This will assure further development of

the core technologies over time and a rich flora of third parties add-on and
utilities.
In order to centralized control and to ensure easy deployment to a large
number of geographically separated vendors and other sales personnel the
origination system will be web-based.
The system portfolio should enable X-Finans to be in the forefront of
technology. This implies a module-based “best of breed” system portfolio. This
would allow X-Finans to replace, upgrade or introduce new systems to support
its business needs at all times.
A module-based “best of breed” strategy implies that X-Finans should not
implement an expensive wall-to-wall / “all inclusive” standard system to cover
all processes at all times. Even though these systems also might support a
high level of automation for processes in scope of the system, they will not
allow X-Finans to take advantage of new technologies and possibilities before
the market in general. Many business processes out-of-scope for such
systems are often hard and expensive to integrate.
X-Finans should not implement the traditional IT system portfolio used by
banks for its core receivable. These systems tend to be expensive, having a
very old code base, be proprietary and having a lack of inner know-how from
today’s support organizations.
The module based “best of breed” initial IT system portfolio for X-Finans will
include the following major IT systems:

ORIGINATION SYSTEM
Web based origination system, based on Microsoft technologies, covering the whole origination process, as
described above. The system supports and relies on fully automated business processes based on best
practice.
System status: Proven and operational for mortgage, loan and leasing products.
ACCOUNTS RECEIVABLE SYSTEM
A new Accounts receivable system based on an existing and proven, world leading accounting system from
Microsoft would allow for an extremely cost-effective and flexible solution. The system database is MS SQL
Server and development necessary will be conducted based on Microsoft technologies.
System status: Proven and well known accounting system foundation (MS Dynamics). System
development to allow for a complete “Accounts receivable” for a financial institution
completed.
DOCUMENT HANDLING SYSTEM
A top class scanning, OCR and document handling system based on or tight integrated with Microsoft
technologies / web services. This would allow X-Finans to create and utilize a rich system interface between
the document handling system and other systems. This would stimulate to further support and
enhancements of relevant business processes.
System status: System evaluation initiated and ongoing.
TASK TRACKING SYSTEM
Vendors, Key account managers, Customer service and auditors will rely on a task-tracking-system to keep
track of all customer requests and create a document audit trail in all cases. Such a system will also provide
valuable information about how and which business process to improve next.
System status: System included in Origination system

As fully automation of complete business processes is regarded a competitive
advantage the systems should have complete and documented interfaces
exposed as web-services. This would allow easy integration and help to create
a clear line of responsibility for each system.
The system portfolio used will support web-services for integration purposes.

Risk management
Risk Management Principles
The following key principles underpin our approach to risk management:
 The Board will provide overall risk management supervision for the
company. The Board will regularly monitor the risk profile of the
company.
 X-Finans will manage credit, market, liquidity, operational, business
and reputational risk in a coordinated manner at all relevant levels
within the organization.
 The structure of our risk management function will be set to be
closely aligned with the structure of the organization.
 The risk management function shall be independent of all other
company functions, and will report directly to the managing director,
and to the Board.
Risk Management Organization
The Controller, in close cooperation with the Managing Director will be
responsible for our credit, market, operational and business risk management
activities within the company. As a small and newly established company, X-
Finans will not employ a single person for these purposes, as the management
team already involved, are highly skilled and experienced in risk management
operations.
At start up, and during the first year of the company, it is not intended to
establish a separate risk-committee, except for the credit risk policy. The

Board will ensure that the following mandate is carried out by the Managing
Director:
 That the business conducted is consistent with the risk appetite the
Board has set.
 Formulate and implement risk policies, procedures and
methodologies that are appropriate to the business.
 Develop and implement risk management infrastructures and
systems that are appropriate.
The Controller will be responsible for the management of liquidity risk status
as well as policies relating to the identification, measurement and
management of liquidity risk are reviewed on a regular basis by the Managing
Director and the Board.
The Market and Sales Director will review and makes final determinations in
all reputational risk issues, if and where escalation of such issues is deemed
necessary by senior management members, or required under the policies.
Our internal audit department (outsourced) and our legal department
(outsourced) will support our risk management functions. They operate
independently of the management functions. The role of the internal audit
department and the controller will be to quantify the risk we assume and
ensure the quality and integrity of our risk-related data. The audit department
reviews the data of our internal control procedures with internal and
regulatory standards.

Credit Risk Management
Credit Risk defined as risk that customers may not be able to meet their
contractual payment obligations. Credit risk includes default risk and
settlement risk.
The Credit Risk will be conducted in accordance with the principles outlined
under the chapter “Risk Management” above. A Credit Risk Committee will be
established, consisting of (minimum and always) the Managing Director, the
Credit Manager and one of the Board members.
The Credit Risk Committee will:
 Approve credit risk and market risk limits
 Conduct periodic portfolio reviews to ensure that the portfolio of
risks is within acceptable parameters
 Ensure that risk management infrastructures and systems that are
appropriate for credit management is developed and implemented.
 Assign credit approving authorities to individuals or systems, and to
review these.
Credit policy
X-Finans credit policy should reflect the explicit statement of a strict, but fair
credit policy able to deliver on the quantified loss percentages defined in the
financial budget.

X-Finans will establish a balanced scorecard tailored to the different segments
and products. In order to periodically measure the quality of the running
portfolio X-Finans will perform periodic quality analyses. These analyses will
be reviewed by the Credit Risk Committee.
Running Risk Assessments will be the core element to ensure that X-Finans,
at all times, has a credit policy suitable to balance the need to safeguard and
protect the loan portfolio and at the same time facilitates the company targets
with respect to earnings.
X-Finans will perform yearly revisions of all routines related to the credit
policy. The Credit Risk Committee or the Credit Manager may at any time
require such revisions. Any and all such revision is to be reported to the
Board.

Human resources
Organizational objectives
X-Finans will build a lean organization with a strong focus on core business
processes. All non-core activities will be candidates for outsourcing in order to
keep the organization small, focused and agile.
Outsourcing strategy
In order to make an effective outsourcing decision, one of the first steps is to
identify the needs of the organization and understand why outsourcing may or
may not be appropriate.
Reasons to Use External Resources
 To have access to technology, skills, and knowledge not internally
available
 To improve business processes and enable organizational change
 To provide needed short-term services without adding to ongoing
operational costs
 To focus internal resources on core strategic plans and projects
Reasons to Use Internal Resources
 To retain skilled personnel who are able to respond directly to business
needs
 To obtain needed services at lower overall costs

 To take advantage of employees’ unique insight into a project or the
company’s goals
 To have ownership and control over resource and personnel assets
Core-business organizational functions – Internal resources
Management
Strong and committed management team of experienced and senior
personnel with a proven track record.
Business and product development
The management team will be responsible for continuous business and
product development. The management team prepares and presents new
relevant product offerings to the Board.
Sales and marketing / Vendor service
The sales manager will head the internal sales force / key account managers
and drive the establishment of a solid vendor network as described. He and
his team will be responsible for achieving estimated sales.
Credit / Finance / Risk Management
See Risk Management in chapter 8
Customer service
The customer service unit will be provided with clear and documented
business processes and “best-of-breed” IT systems, including automated

customer feedback. Operational policies ensure clear guidelines to which
customer requests are supported and which is not supported.
The customer service unit is thus highly scalable
Non-core organizational functions – External resources
Non-core functions will be outsourced by X-Finans.
Bad debt management
X-Finans bad debt management will be outsourced to a preferred partner. X-
Finans will establish a SLA – Service Level Agreement ensuring that:
- Fully automated interface for transferring new cases to partner
- Trends and key aggregates related to bad debt management available
to X-Finans management and Risk Management Organization
- Information about all cases daily available to X-Finans
- Cost efficient services
Accounting
All transactional data from X-Finans products will be automatically accounted.
X-Finans remaining internal accounting will be outsourced to a preferred
accounting bureau. X-Finans will establish a SLA – Service Level Agreement
ensuring that:
- All accounting will be done directly in the core receivable system daily
available
- Accounting backlog should not be longer than 10 working days

- Relevant and consistent reports available for management team and
the Board
- Cost efficient services
IT operations
As X-Finans operational strategy will be based on a “best of breed” IT system
portfolio the IT operations should be respected as a key success factor.
In order to have access to technology, skills, and knowledge not internally
available X-Finans will outsource IT operations and work in tight co-operation
with a professional and proven IT partner focusing on the financial sector.
In order to ensure that X-Finans don’t end up in-the-middle-of or between
different IT suppliers it is important that the outsourcing partner should be
able to develop / deliver, implement, manage and support all the major
systems in the system portfolio.
One IT partner with full control and know-how about the whole picture also
ensures that X-Finans could take advantage of new opportunities /
technologies and business processes even though it might require coordinated
updates to several systems.
The IT partner is expected to be business oriented and contribute to establish
and maintain X-Finans business processes as best-in-business with respect to
scalability, quality, cost base and overall efficiency.

The preferred IT partner is expected to represent X-Finans interest with
respect to IT and handle all technical dialogs with other minor IT suppliers and
existing IT resources.
The responsibility could not be outsourced, but the preferred IT partner is
expected to represent X-Finans interest in order to plan for and ensure that X-
Finans will fulfill relevant legal and official regulations with respect to IT.
X-FINANS HAS CHOSEN REAKTOR AS A PREFERRED IT PARTNER
Reaktor is a Norwegian privately held IT company founded in 1995 focusing on providing best of breed
software for the financial services sector in the Nordic region.
Reaktor has during the last 10 years built several key applications, based on Microsoft technologies, for use
in the financial sector. These key applications are proven and mature and in daily operations for customers.
Customers include SkandiaBanken, DnB NOR Finans, BMW Financial Services Scandinavia and Volkswagen
Møller BilFinans.
Reaktor’s thorough knowledge of these products combined with ownership to their code base enable
Reaktor to provide X-Finans with the next generation of cost effective software to fully automate X-Finans
business processes.
Reaktor is financially solid and has experienced continued growth every consecutive year. The company has
per end of 2009 approx. 106 highly skilled and educated employees within areas such as project managers,
solution architects, software developers, testers, designers and so on.
Organizational values
X-Finans will recruit people that share the company’s primary organizational
values:

- Transparency in all dealings with key stakeholders
- Commitment to customers
o The foundation of the existence of the company is the customer.
X-Finans is committed to high quality customer service in every
part of its organisation
- Collaborative approach to new products
o Borderless product development through the involvement of
customer, vendors and employees in product development
initiatives
Human resources strategy
X-Finans will focus on recruiting highly competent personnel and will be willing
to pay for competence. The company believes strongly in rewarding winners
and employees that contribute to the success of the company.
In order to recruit and motivate key personnel X-Finans will intend to initiate
a share-option program at startup.

Organizational structure chart
Personnel build up Year 1 Yearly salary FTE Avg Year 1 Avg Year 2 Avg Year 3 Avg Year 4 Avg Year 5
Org - Management / Credit 1 500 000 0 2 2 2 2
Org - System Coordiantor 600 000 - 1 1 1 1
Org - Sales and marketing 700 000 - 2 5 5 6
Org - CFO/Senior Controller 800 000 - 1 1 1 1
Org - Vendor Service 500 000 - 1 2 2 2
Org - Marketing asisstent / Backoffice 500 000 - 1 2 2 2
X-Finans organization 0 8 13 13 14
Please see XF Budget for a complete and detailed overview
MANAGEMENT
RISK
MANAGEMENT
FINANCE &
ACCOUNTING
VENDOR
SERVICE
CREDIT
SALES &
MARKETING
CUSTOMER
SERVICE

Organizational budget
Based on these figures all personnel-related costs have been estimated give
this overview:
Direct personnel related costs Avg Year 1 Avg Year 2 Avg Year 3 Avg Year 4 Avg Year 5
Wages employees 4 475 000 9 900 000 9 900 000 10 600 000 10 600 000
Pension 89 500 198 000 198 000 212 000 212 000
Allocation holiday allow ance 537 000 1 188 000 1 188 000 1 272 000 1 272 000
Bonus - 1 000 000 2 000 000 3 000 000 4 000 000
Directors fee - 100 000 100 000 100 000 100 000
Payroll tax 707 000 1 719 000 1 860 000 2 111 000 2 252 000
Other personell related costs - - - - -
X-Finans personnel related costs 5 808 500 14 105 000 15 246 000 17 295 000 18 436 000
A complete and detailed overview of all personnel related cost could be found
in XF Budget.

Financial data
Introduction
A complete and detailed operational budget and a corresponding cash flow
budget for X-Finans have been developed.
The budget is established using the following structure:
 A detailed sales/portfolio/income focused budget per product
o Includes and specifies relevant assumptions per product
o Shows estimated sales forecast pr month pr product
o Shows total portfolio, number of cases
o Shows both own products in own balance and promoting
products
o Includes a sensitivity analysis per product with respect to loss
percentage and margin
 A complete budget for X-Finans
o Includes and specifies relevant assumptions
o Gives an overview over total portfolio build up, based on product
sheets
 Divided in own balance and promoted portfolio
o Gives an overview over total income, based on product sheets

o Shows build up of X-Finans organization over time
o Shows complete overview of estimated personnel related costs
o Shows all other cost elements, such as marketing and IT
o Shows a total cost base for X-Finans over time
 Cash flow and capital requirements with respect to:
o X-Finans estimated equity over time
o Equity versus capital coverage, based on product mix and
estimated portfolio
o Complete cash flow budget taken into account
 Capital requirements for lending, based on estimated
portfolio
 Investments in operations
 Cash flow effect of operational income / costs
To give an overview, some major extracts and statements derived from the
budget is included below. For more detailed information and specifications of
relevant assumptions, please refer to the “XF Budget”
Key principles
The budget is based on the following key principles or guidelines:
 The budget period is from year 1 to year 4, divided in quarters of a
year

 The budget itself and corresponding cash flow elements are consistent
since estimated data is only entered once and all derived effects are
taken into account
 The complete model is set up so that estimates are centered around
well-known figures such as interest margins, new sales, loss percentage
and capital coverage.
 All estimates and so the budget express a “Normal case” scenario
o A “Best case scenario” would clearly outperformed current
budget
o A “Worst case scenario” would clearly under-perform current
budget
 A relative high number of different people with different backgrounds
have participated in the estimation process to ensure different
perspectives and to average out estimates
 Portfolio build up is estimated explicit per product per time unit based
on hands on experience from several key personnel, expected vendors
to join in, total market size and other elements
 “Budget” is made with an accounting focus and represents what X-
Finans would expect to see in its P/L
o Including i.e. depreciation of investments and allocation for
holiday allowance
o Capital coverage is based on estimated portfolio and measured
against recorded equity in the balance sheet
 “Cash flow” is made with a cash flow focus and represents the
corresponding cash flow effect of all elements to be able to verify
capital requirements for both lending and operations
o Capital requirements is measured against available funds

Growth strategy
The growth strategy of X-Finans is based on the following guidelines:
- Phased introduction of new products over time
- Promoting products to funding partner before handling products in own
balance
- Estimated build up per product over time
- Estimated total portfolio build up over time is compared to a time line
where all major events with respect to company setup, IT system, legal
requirements, X-Finans organisation and operational processes are
included
o Estimated total portfolio build up is regarded viable
Following these guidelines the estimated portfolios build up is:
Ending Portfolio (NOK 000) Year 1 Year 2 Year 3 Year 4
Secured loans 130 000 584 000 999 000 1 440 000
Car leasing 88 000 410 000 761 000 1 101 000
Portfolio on balance sheet 218 000 994 000 1 760 000 2 541 000

Company financing, capital requirements and cash flow
A clear understanding of the cash flow and capital requirements that could be
derived from the operational, investments and sales budgets assumptions is
vital for any company in a build up phase.
The following major extracts could be derived from the current analysis of
cash flow and capital requirements:
Capital (NOK 000) Year 1 Year 2 Year 3 Year 4 Year 5
Equity based funding 120 000 - 50 000 60 000 60 000
Funding balance sheet 125 000 800 000 850 000 700 000 700 000
Investments - - - - -
Cash flow from operations (6 189) (5 999) 949 9 363 17 638
Cash req increased portfolio (218 000) (776 000) (766 000) (781 000) (523 000)
Available funds / credit facility 20 811 38 812 173 761 162 124 416 761

The funding of capital requirements to X-Finans is estimated as follows:

Capital requirement
With respect to capital coverage the estimated X-Finans equity is compared
with legal requirements with and with a self-imposed margin.

Income, cost base and operating results
The financial profile of X-Finans could be characterized as follows:
 The cost base is expected to incur early in the life cycle, but to develop
relatively flat due to scalable business processes and IT systems
 The income profile will be tied to the build up of lending portfolio with a
positive margin
These characteristics could be easily spotted in the graph below where the
piles shows each quearters total income and costbase, while the yellow line
represents period results and the blue line represents accumulated results.

Business risk assessment
Risk matrix
PROBABILITY
CONSEQUENCE
Low Medium High
Medium
High
12
2
3
10
11
9
7
6
5
8
1
4
ID Risk Prob Conseq Mitigation tasks
1 Lack of sales / not enough
distribution force
Low to
medium
High Dedicated personnel with proven results, good
incentive structures, personal relations
2 Generally falling market
trends, ie. drop in new cars
sales
Low Low X-Finans business model is believed to be
robust to general changes in the market place.
Focus on creating processes and systems that
are able to respond quickly to changes in the
marketplace.
3 Competitors response Medium Medium Focus on creating processes and systems that
are able to respond quickly to changes in the
marketplace.
4 Key personnel risk Low High Formalize achieved results early, document
work processes, key incentive structures
5 Recruiting “the right”
personnel
Low Medium Personal relations and business know how. A
list of committed candidates exists.
6 IT system not ready in time
to facilitate estimated
Low to Medium Proven and existing IT system for core
processes. Business focused and proven IT

growth medium partner.
7 Business processes not
ready in time to facilitate
estimated growth
Medium Medium Planned a phased implementation of products
and portfolio build up giving time to learn and
adapt business processes.
8 Funding – Lack of funds
prevent growth
Medium High Tight co-operation with funding partner.
Evaluate other funding regimes.
9 Public / external conditions Medium Low X-Finans is, due to automated processes,
believed to be better able to adjust to changes
in the market place than competitors.
10 Reputation risk Low Medium Focus on high ethical standards, hand-picked
partners and apply accepted business standards
11 Present size presents an
obstacle to development
Low Medium Planned growth and ensuring sufficient capital
inflow
12 Unknown brand does not
support sales estimates
Medium Low An established marketing organisation is
independent of brand

Business Plan XFinans

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