Index. In case of discrepancies the Danish version is valid.

Transcription

1 2011 Annual Report

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3 Index Financial highlights... 6 Business concept Summary Group management's review Risk and risk management Good corporate governance Corporate social responsibility Pay polic Management s statement Auditor s report Income statement Balance sheet Statement of changes in equity Cash flow statement Notes Company and shareholder information Company announcements and financial calendar Shareholder meetings and general meeting Board of Directors Board of Executives Shareholders' committees Organisation Danske Andelskassers Bank's branches From cooperative banks to limited liability company In case of discrepancies the Danish version is valid. Frontpage and other pictures Danske Andelskassers Bank is proud to sponsor both the small and the very small activities in the local communities. The pictures and the stories in the Annual Report are examples of these sponsorships Annual Report Danske Andelskassers Bank A/S 3

4 The mill of Heltborg The association The old mill of Heltborg has been responsible for the restoration of the beautiful mill outside Heltborg. The work was carried out by volunteers, but the materials were expensive beyond the means of the association. Danske Andelskassers Bank is glad to sponsor good, local initiatives, and the restoration of the mill is a good example of the banks motto Together we can do more. Consequently the mill is as fine today as in its prime more than 100 years ago.

5 Dear shareholder In many ways, 2011 was a year of two halves. For Danske Andelskassers Bank as well as the global and Danish economies. Before the summer, there was broad agreement that the Danish economy was slowly but surely emerging from the crisis. After the summer, there was similar agreement that the crisis still had both the Danish and the global economy firmly in its grip. And before the summer, Danske Andelskassers Bank was part of the SDA group and owned by the 16 cooperative banks of the Danish Amalgamation of Cooperative Banks. After the summer, the Danske Andelskassers Bank group was largely the same as the SDA group and a listed group owned by 16 foundations, various good business partners and, last but not least, more than 35,000 customers as shareholders. The conversion strengthened the organisation the bank on many fronts. But unfortunately, we too were adversely affected by the slowdown and downward adjustment of the Danish economy. Before the summer, we were anticipating positive business development, as we like other colleagues in the industry saw positive trends in the Danish economy. After the summer, it was apparent that the fundamental economic conditions had changed to such an extent that, when we published the interim financial statements at the end of August, we regrettably had to revise down our expectations for the year. And the negative development in the national economy continued to make its mark for the rest of the year. That development merely confirmed, however, that conversion was the right way to go. And that the redundancies and adjustments of the branch network that were carried out in November were the right thing to do regardless of how disagreeable they were. And that the other measures implemented in the course of the autumn concentrating selected support tasks, concentrating business competencies, concentrating credit competencies and competency development are the right way forward. Banks are facing increasing demands from both legislators and customers, but we too are requiring more of ourselves. We want and have to be an active part of the Danish financial sector and an attractive alternative. If we are to continue to give our customers a good local bank where the staff make a difference, and where the shareholders also enjoy positive development, we need to be there for our customers and local areas. Therefore, this will be the essence of our strategy for the next few years. It is legwork, not fine words, that counts and we are looking forward to a good working relationship with shareholders, customers, business partners etc. Together we can do more. On behalf of the Board of Executives Jan Pedersen, CEO And that development was and is, not to put too fine a point on it, dismal and dreary. Despite the fact that the spring and early summer saw us achieving the historic conversion of our organisation and laying foundations for the years to come, it is the regrettable economic development experienced by both the economy and the bank in the autumn that will be best remembered when the history of 2011 is written Annual Report Danske Andelskassers Bank A/S 5

6 Financial highlights Income statement (Group) DKK ' Interest income 766, , ,133 1,004, ,476 Interest expenses 236, , , , ,234 Net interest income 529, , , , ,242 Share dividend etc. 4,338 1,280 16,755 18,510 35,738 Net fee and commission income 209, , , , ,312 Net interest and fee income 743, , , , ,292 Market value adjustments -51,181 45,592 34, , ,573 Other operating income 13,406 8,191 8,251 7,885 16,293 Staff costs and administrative expenses 505, , , , ,195 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 18,685 18,337 14,963 56,150 45,873 Other operating expenses 50, ,216 83,750 23,098 6,126 Impairment of loans and receivables etc. 377, , , ,197 36,437 Profit/loss from equity investments in associates 6,708 11,364 10,584-15, Profit/loss before tax -240, , , , ,889 Tax -64,216-57,040-79,114-11,644 50,513 Net profit/loss for the year -176, , , , ,376 Balance sheet (Group) DKK ' Receivables from credit institutions etc. 946,641 1,325,115 1,871,981 1,164, ,760 Loans 8,914,017 9,562,394 10,283,414 11,105,802 9,795,443 Bonds and shares 3,360,648 3,316,643 3,719,496 2,303,227 3,290,333 Payables to credit institutions 702,060 1,484,525 2,467,158 2,320,265 2,412,208 Deposits 9,013,842 9,930,589 11,630,765 10,439,838 9,466,233 Bonds issued 2,016,294 1,015,860 17,003 10,425 2,559 Subordinated debt 705, , , , ,418 Equity 1,617,456 1,426,759 1,612,868 1,824,831 2,112,844 Total assets 14,438,224 15,180,556 16,759,700 15,184,196 14,532,922 Guarantees 1,751,417 2,372,568 3,512,821 3,142,931 5,601,016 Solvency ratio 14.2% 12.0% 11.5% 10.3% 12.9% Number of employees Danske Andelskassers Bank A/S 2011 Annual Report

7 Ratios (Group) Solvency ratio 14.2% 12.0% 11.5% 10.3% 12.9% Core capital ratio 14.0% 11.8% 11.6% 10.1% 11.9% Return on equity before tax -15.8% -15.8% -16.2% -15.2% 12.6% Return on equity after tax -11.6% -12.1% -11.6% -14.6% 10.0% Earnings per DKK of cost Interest rate risk 1.6% 2.7% 3.1% 1.8% 0.8% Currency position 2.1% 3.9% 4.6% 3.3% 4.1% Currency risk 0.1% 0.0% 0.1% 0.0% 0.0% Loans relative to deposits 98.9% 106.5% 95.3% 110.4% 106.0% Loans relative to equity Growth in loans for the year -6.8% -7.0% -7.4% 13.4% 14.7% Surplus cover relative to statutory liquidity requirement 159.0% 141.3% 176.4% 55.9% 76.8% Sum of large commitments 18.3% 28.5% 16.5% 29.9% 0.0% Impairment percentage for the year 3.2% 3.8% 3.3% 1.4% 0.3% Highlights are derived from the official and audited annual reports of the SDA group for presented in accordance with the Danish Executive Order on financial reports for credit institutions etc. and audited historical accounting information for 2009 and 2010 for the SDA group presented in accordance with IFRS as adopted by the EU for use in the prospectus dated 6 June 2011 and the present financial statements of Danske Andelskassers Bank A/S Annual Report Danske Andelskassers Bank A/S 7

8 Income statement (Parent company) DKK ' Interest income 768, , ,359 1,004, ,561 Interest expenses 236, , , , ,476 Net interest income 531, , , , ,085 Share dividend etc. 4,338 1,280 16,755 18,510 35,738 Net fee and commission income 209, , , , ,487 Net interest and fee income 744, , , , ,310 Market value adjustments -50,981 45,592 34, , ,573 Other operating income 9,274 5,898 5,487 5,445 13,149 Staff costs and administrative expenses 508, , , , ,972 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 10,082 18,245 14,155 24,038 35,204 Other operating expenses 50, ,195 83,731 23,040 6,018 Impairment of loans and receivables etc. 377, , , ,202 36,443 Profit/loss from equity investments in associates 2,157 11,555 10,966-48,261-37,878 Profit/loss before tax -241, , , , ,517 Tax -65,151-57,439-79,190-11,435 50,141 Net profit/loss for the year -176, , , , ,376 Balance sheet (Parent company) DKK ' Receivables from credit institutions etc. 946,641 1,324,610 1,871,981 1,164, ,760 Loans 8,950,398 9,597,444 10,319,425 11,128,191 9,803,095 Bonds and shares 3,360,648 3,316,643 3,074,841 2,303,227 3,184,761 Payables to credit institutions 702,060 1,484,525 2,467,158 2,320,265 2,412,208 Deposits 9,017,353 9,933,931 11,643,001 10,451,685 9,469,754 Bonds issued 2,016,294 1,015,860 17,003 10,425 2,559 Subordinated debt 705, , , , ,418 Equity 1,617,456 1,426,759 1,612,868 1,824,831 2,112,844 Total assets 14,439,810 15,182,520 16,783,556 15,191,374 14,462,254 Guarantees 1,751,417 2,372,568 3,512,821 3,142,931 5,601,016 Solvency ratio 14.2% 12.0% 11.5% 10.3% 12.9% Number of employees Danske Andelskassers Bank A/S 2011 Annual Report

9 Ratios (Parent company) Solvency ratio 14.2% 12.0% 11.5% 10.3% 12.9% Core capital ratio 14.0% 11.8% 11.6% 10.1% 11.9% Return on equity before tax -15.9% -15.8% -16.2% -15.2% 12.6% Return on equity after tax -11.6% -12.1% -11.6% -14.6% 10.0% Earnings per DKK of cost Interest rate risk 1.6% 2.7% 3.1% 1.8% 0.8% Currency position 2.1% 3.9% 4.6% 3.3% 4.1% Currency risk 0.1% 0.0% 0.1% 0.0% 0.0% Loans relative to deposits 99.3% 106.5% 95.3% 110.4% 106.0% Loans relative to equity Growth in loans for the year -6.7% -7.0% -7.4% 13.4% 14.7% Surplus cover relative to statutory liquidity requirement 159.0% 141.3% 176.4% 55.9% 76.8% Sum of large commitments 18.3% 28.5% 16.5% 29.9% 0.0% Impairment percentage for the year 3.2% 3.8% 3.3% 1.4% 0.3% Net profit/loss for the year per share Book value per share Dividend per share Net asset value/earnings per share Net asset value/book value per share Highlights are derived from the official and audited annual reports of Danske Andelskassers Bank A/S and Sammenslutningen Danske Andelskasser for and the present financial statements of Danske Andelskassers Bank A/S presented in accordance with the Danish Executive Order on financial reports for credit institutions etc Annual Report Danske Andelskassers Bank A/S 9

10 Business concept The Danske Andelskassers Bank group is essentially a full service bank with 44 branches, 529 employees and more than 120,000 customers at the end of The bank mainly operates in Jutland and on Funen, where it has firm local roots and strong local commitment, but it has customers throughout Denmark often as the result of historical links with one of the bank's branches. The bank's clientele consists primarily of private customers, small and medium-sized business customers and institutional customers, particularly in the form of other banks. Danske Andelskassers Bank sees its primary purpose as being to deliver the solutions that strengthen its customers, so its main product for private and business customers is competent advice Financial Overview and Comprehensive Advice while the main product for institutional customers consists of solutions that enable them to offer their customers the services they want. Danske Andelskassers Bank was founded in 1969, but in its present form is the result of the conversion in spring 2011 of the SDA group (the Danish Amalgamation of Cooperative Banks, its 16 cooperative banks and Danske Andelskassers Bank A/S, which was owned by the 16 cooperative banks) into a single limited liability company, which was subsequently on 7 July 2011 admitted for listing on NASDAQ OMX Copenhagen. This is covered in more detail at the end of this annual report. It must be stressed, however, that on conversion the bank retained and will continue to retain the values from the cooperative banks' long history in a new and more market-consistent structure with a view to keeping those values alive as an active part of the Danish financial sector. Requirements for the sector and consolidation The desire to remain a strong local bank is also the basis for Danske Andelskassers Bank's constant focus on preparing the bank for present and future legal requirements for the sector. Vision, mission and values The desire to remain a strong and local bank is the basis for Danske Andelskassers Bank's vision, mission and values. Our vision: We want to be the preferred local bank in our market area Our mission: We create added value for customers, the local area and staff. Our customers experience a positive difference by choosing Danske Andelskassers Bank as their financial partner. The local area benefits from Danske Andelskassers Bank supporting local initiatives. Our staff pursue professional and personal development, making them an important factor in customers experiencing a positive difference. Our values: Collaboration, commitment, trust and stability The conversion in spring 2011 made Danske Andelskassers Bank more consistent with the rest of the Danish financial sector as far as legislation is concerned. And the subsequent share offer strengthened its core capital, which combined with a historical foundation on core capital means that the bank is well equipped for anticipated future legislation, especially the Basel III rules, which will require core capital to make up a larger proportion of equity. It can also be noted that Danske Andelskassers Bank already complies with all five parameters in the Danish Financial Supervisory Authority's so-called Supervisory Diamond, which will come into force at the end of 2012, and has actually satisfied these requirements since the Supervisory Diamond was introduced in June In addition to this, a good balance is maintained generally and constantly between loans and deposits, while there is increasingly positive development in core earnings. Through the conversion in spring 2011, Danske Andelskassers Bank contributed to the consolidation of the Danish financial sector, but the bank wishes to continue to play an active role in this context. The bank will therefore be involved on an ongoing basis in the discussions and dialogue on such matters in the industry, and the 10 Danske Andelskassers Bank A/S 2011 Annual Report

11 The supervisory diamond as of 31 december 2011 Liqidity surplus (> 50 %) DAB: 159 % Funding ratio (< 1) DAB: 0.7 Sum of large engagements (< 125 %) DAB: 18.3 % Exposure towards property (< 25 %) DAB: 7 % Growth in loans for the year (< 20 %) DAB: -6.7 % group is ready to enter into mergers with strong, locally embedded banks with a view to helping safeguard their local character and scope of action. Long-term objectives Looking ahead, Danske Andelskassers Bank's objective is to be a significant player on the Danish financial market and offer competent advice combined with strong local commitment for the benefit of the individual customer and development in local areas. Its ambition is to have a wide coverage with local roots and a strong presence in local areas outside the large urban communities. Against this background, the bank wishes, as previously mentioned, to play an active part in the consolidation expected in the sector through collaboration and mergers with any sound, locally oriented banks that may be interested. Danske Andelskassers Bank wants a long-term, stable financial development. Summary Danske Andelskassers Bank's core earnings for 2011 were DKK 223m against DKK 213m in Core earnings are thus DKK 10m above the 2010-level and in the middle of the forecast range revised up by 26 October The banks loss for 2011 was DKK -240m before tax against a pre-tax loss in 2010 of DKK -241m. The financial results were affected by market value adjustments and impairments, including impairments of DKK 111m due to the Danish Financial Supervisory Authority's routine visit in the fourth quarter of 2011 Danske Andelskassers Bank has an approximate balance between deposits and loans and a satisfying compliance with all five parameters in the Danish Financial Supervisory Authority's socalled Supervisory Diamond The banks solvency at the end of 2011 stood at 14.2% against a solvency requirement of 12.2%. The core capital ratio stood at 14.0 %. Danske Andelskassers Bank wants a long-term, stable financial development and expects core earnings of DKK m in Annual Report Danske Andelskassers Bank A/S 11

12 Cycle race in Randers The cycle race called Fjordløbet is an established part of the annual town fair in the city of Randers and every year Danske Andelskassers Bank sponsors a team of cyclists. The team is called the most spoiled cycle team in Denmark and the last couple of years the team has been the largest of all the participating teams. Fjordløbet is a cosy and fun tradition. In accordance with the values of Danske Andelskassers Bank the event brings joy and solidarity, and due to the banks loyal customers, the bank looks forward to spoiling several hundred of the cyclists with barbecues and reflector waistcoats in the future as well.

13 Group management's review Group chart Danske Andelskassers Bank A/S DAB Invest A/S 100 % DAB Invest 2 A/S 100 % DAB Invest 3 A/S 100 % SDA Invest A/S 100 % SDA Bolig A/S 100 % Principal activities The principal activity of the Danske Andelskassers Bank group is offering banking products to private custo mers, small and medium-sized business customers and financial institutions. Danske Andelskassers Bank's customer offerings are supplied through its 44 branches, which are organised into six regions in Jutland and on Funen, and various self-service facilities. All the bank's branches have a team of skilled staff, who with support from centrally based specialists at the bank's head office offer competent advice and a broad spectrum of banking solutions. The bank's offerings to other financial institutions are supplied and handled by the head office. The Danske Andelskassers Bank group's activities are concentrated around the parent company, while the subsidiaries are only for activities without significance in the overall picture. As at 31 December 2011, SDA Invest A/S and SDA Bolig A/S, for example, have no activities, while DAB Invest A/S s activities consist of letting property within the group, DAB Invest 2 A/S s activities consist of investing in property that Danske Andelskassers Bank has taken over, and DAB Invest 3 A/S s activities consist of owning the property from which the bank's Varde branch does business. It is noted that a merger between several of the subsidiaries are expected to take place in the spring of 2012 thereby reducing the number of subsidiaries to two. The Danske Andelskassers Bank group is the result of a number of mergers, finally completed and approved on 27 May, between the Danish Amalgamation of Cooperative Banks, its 16 cooperative banks and Danske Andelskassers Bank, which prior to the merger had been a wholly owned subsidiary of these cooperative banks. Subsequently, on 7 July 2011, the Danske Andelskassers Bank group was admitted for listing on NASDAQ OMX Copenhagen. In the course of 2011, the group adjusted its branch network by merging 10 branches (two of which were open part time) with nearby branches, creating a smaller number of larger branches and so increasing the potential for flexibility and development. Development in continuing activities and financial affairs Please note that the accounting figures for 2010 and 2009 are the audited financial information for the SDA group in accordance with IFRS for use in Danske Andelskassers Bank's prospectus of 7 June 2011, while the accounting figures for 2007 and 2008 are based on the audited annual reports of the SDA group. The accounting figures are presented in DKK m. without decimal places. The Danske Andelskassers Bank group's loss for 2011 was DKK -240m before tax against a pre-tax loss in 2010 of DKK -241m. This is equivalent to a pretax-return on equity of -16%. The financial results, which were affected to a marked degree by impairment and market value adjustments, are considered unsatisfactory. Danske Andelskassers Bank's core earnings for 2011 were DKK 223m against DKK 213m in This is equivalent to an increase of 5%. The bank revised up its expectations for core earnings to DKK m from the previous DKK m in its financial statements for the third quarter of Fi 2011 Annual Report Danske Andelskassers Bank A/S 13

14 nal core earnings are in the middle of the forecast range, and the development in core earnings throughout the year is considered very satisfactory. Core earnings Danske Andelskassers Bank's total core earnings rose to DKK 223m in 2011 against total core earnings of DKK 213m in Core earnings for the last five years is shown in figure 1. Figure 1: Core earnings ( ) (DKKm) The core earnings are comprised as the pre-tax profits excluding market value adjustments, impairments, expenses for sector solutions and one-time costs relating to the conversion of the organization. Interest and fees income Net interest income fell from DKK 566m in 2010 to DKK 529m in 2011, down 7%. There was an underlying fall in interest income, which stood at DKK 766m in 2011 compared with DKK 790m in 2010, and a rise in interest expenses, which were DKK 237m in 2011 against DKK 224m in On the income side, this development is due in particular to declining income on the bank's bond portfolio, while on the expenses side it is mainly attributable to rising expenses for issued bonds, more specifically for bonds with a total value of DKK 2bn issued with an individual government guarantee. Fees amount to DKK 214m in 2011 compared with DKK 237m in 2010, a fall of 10%. The bank experienced a minor raise in income from securities trading, safe custody accounts and the arrangement of payments. Opposite the bank recorded a fall in income from the loanactivity due to generally low demand and the very slow housing market. Overall, Danske Andelskassers Bank's net interest and fee income amounted to DKK 743m in 2011 against DKK 798m in This is equivalent to a fall of 7%. Costs and depreciation/amortisation Costs, including depreciation and amortisation, for Danske Andelskassers Bank totalled DKK 524m in 2011 against DKK 589m in This is equivalent to a fall of 11% and should be seen in the context of the fall of 2% from 2009 to The bank's staff costs were DKK 309m in 2011 as against DKK 365m in 2010, while its administrative expenses stood at DKK 196m in 2011 compared with DKK 205m in This represents a fall of 15% and 4%, respectively, and is the consequence of a general focus on costs throughout the period combined with major cost streamlining measures in autumn 2010 and autumn 2011, which were regrettable but had the desired effect on the bank's cost levels. The streamlining measures of autumn 2011 isn t expected to have the full effect until sometime in As a result of the cost streamlining measures implemented in November 2011, for example, the number of branches operated by Danske Andelskassers Bank was reduced from 54 at the start of the year to 44 at the end of 2011, while the headcount, converted to full-time employees, was reduced from 602 at the start of the year to 529 at the end. Other operating expenses stood at DKK 51m in 2011 against DKK 101m in This represents a fall of 50%, which is described in more detail later. Danske Andelskassers Bank's rate of cost was 69% for 2011, down 4 percentage points compared with The change in rate of cost over the last five years is shown in figure 2. Figure 2: Rate of cost ( ) 82% 80% 78% 76% 74% 72% 70% 68% 66% 64% Danske Andelskassers Bank A/S 2011 Annual Report

15 In 2011, there was a change in Danske Andelskassers Bank's provisions for pensions and similar obligations, which are DKK 15.5m lower at the end of the year than at the beginning. This change is attributable to an adjustment of life expectancy and discount rate in the actuary calculation. Impairment of loans etc. Danske Andelskassers Bank's impairment of loans amounted to DKK 378m in 2011 against DKK 414m in This represents a fall of 9%, but it must be noted that this impairment level is well above the bank's expectations at the beginning of the year and in mid This is largely attributable to the deteriorating economic situation in the second half of 2011, which is reflected in the fact that impairment of loans was DKK 100m in the first half of 2011 and DKK 278m in the second half. The Danish Financial Supervisory Authority's routine visit in the fourth quarter of 2011, which is covered in more detail later, helped to increase impairment in the second half of the year. The bank has a large number of customers in those segments that have been particularly badly hit by the financial crisis of recent years and/or have found it particularly difficult to emerge from the crisis. This has been especially true of agricultural customers and the small and medium-sized businesses affected by low domestic consumption, while the duration of the crisis means that private customers are also facing growing financial challenges. The distribution of Danske Andelskassers Bank's impairment by sector is shown in table 1. Table 1: Distribution of impairment by industry DKKm Gross exposure % Total impairments % Impairments of the year % Public authorities 0 0% 0 0% 0 0 % Business: Agriculture, hunting and forestry 2,215 19% % % Industry and raw material extraction 282 2% 40 4% 6 2 % Energy supply 82 1% 2 0% 0 0 % Building and construction industry 551 5% 63 6% % Trade 868 7% 56 5% 9 2 % Transport, restaurant and hotel industry 424 4% 34 3% 15 4 % Information and communication 67 1% 6 1% -4-1 % Finance and insurance 850 7% % % Real property 882 7% % 35 9 % Other business 1,192 10% % % Business, total 7,413 63% % % Private 4,382 37% % % Total 11, % 1, % % It should be noted that Danske Andelskassers Bank's agricultural customers too have been adversely affected by the generally difficult economic conditions for this industry, which is why the industry stands out with regard to impairment. The agricultural sector is discussed in more detail on page 24. Danske Andelskassers Bank's impairment percentage for loans and guarantees amounted to 3.2% in 2011 against 3.8% in Danske Andelskassers Bank's total impairment and provision account stood at DKK 1,105m at the end of 2011 Annual Report Danske Andelskassers Bank A/S 15

16 2011. This is equivalent to 9% of its total loans and guarantees. uncertainty in recognition and measurement above and beyond what is described in note 1 of this annual report. On 6 February 2012 the Danish Financial Supervisory Authority's proposed new rules regarding impairment on loans. The rules should they be adopted aren t expected to influence the impairments of Danske Andelskassers Bank, given that a number of the proposed changes are already implemented in the banks policy regarding impairments. The net loss for the year has been affected by several unusual circumstances, including in particular the entire conversion of the SDA group into a single limited liability company, the subsequent listing on NASDAQ OMX Copenhagen, and the streamlining measures implemented in November. Expenses regarding the stock exchange listing are debited directly in the equity. Investment portfolio earnings Danske Andelskassers Bank had negative investment portfolio earnings of DKK -51m in 2011 compared with positive earnings of DKK 46m in Consequently, there was a negative development in the impact on the financial results of DKK 97m. At the end of 2011, the bank's portfolio consisted of shares with a value of DKK 612m, made up of listed shares with a value of DKK 27m, shares in sector enterprises with a value of DKK 582m and other investments with a value of DKK 3m. The majority of the bank's share portfolio therefore consists of sector shares in enterprises with which Danske Andelskassers Bank collaborates in different areas, with the shares being owned mainly for collaborative reasons. At the end of 2011, the bank's bond portfolio stood at DKK 2,748m, with the majority of the portfolio consisting of AAA- to A-rated Danish mortgage credit bonds. Danske Andelskassers Bank pursues a generally prudent portfolio policy. As at 31 December 2011, the bank's interest rate risk was 1.6% as calculated in accordance with the Danish Financial Supervisory Authority's guidelines, which specify the risk of an immediate change in market interest rates of 1 percentage point. This interest rate risk is equivalent to DKK 25m. Owing to the prudent portfolio policy pursued, Danske Andelskassers Bank's investment portfolio earnings will generally reflect national economic development, as was the case in Uncertainty of recognition and measurement and unusual circumstances Danske Andelskassers Bank does not consider there to have been any circumstances in 2011 that give rise to The financial significance of these unusual circumstances is set out in table 2. Table 2: Unusual circumstances DKK 000 Other expenses Equity Total Sector solutions Streamlining measures 14, ,864 Conversion of the organisation 21, ,805 Change-of-control compensations connected to the conversion 14, ,634 Share issue 0 9,471 9,471 I alt 50,571 9,471 60,042 Net profit/loss for the year Danske Andelskassers Bank's pre-tax loss was DKK 240m in 2011 which is almost similar to the pre-tax loss of The loss after tax was DKK -176m in 2011 against DKK -184m in This is equivalent to a return on equity after tax of -11.6% in 2011 compared with -12.1% in Fourth quarter 2011 Seen in isolation, the fourth quarter of 2011 had an impact of DKK -113m on Danske Andelskassers Bank's pre-tax loss for 2011 as a whole. This development was due in particular to impairment of loans in the amount of DKK 111m as a result of the Danish Financial Supervisory Authority's routine visit in the fourth quarter and negative market value adjustments of DKK 35m. 16 Danske Andelskassers Bank A/S 2011 Annual Report

17 Core earnings for the fourth quarter of 2011 are a positive DKK 41m. The decline in loans is essentially attributed to the lower demand for loans experienced owing to a frozen housing market and general uncertainty, for example, while the decline in deposits is attributable in part to increased focus on the Deposit Guarantee Fund's guarantee limit of EUR 100,000 in connection with Amagerbanken's and other indigent banks transfer to the Financial Stability Company, which is supported by the fact that loans were relatively stable in the second to fourth quarters. Highlights for the four quarters of 2011 are shown in table 3. Tabel 3: Highlights for Q1-Q DKKm Q1 Q2 Q3 Q4 Net interest and fees income Staff costs and administrative expenses Impairments Pre-tax profit Core earnings The core earnings for the fourth quarter are negatively affected by e.g. expenses related to redundancy pay and merging of branches as a result of the stream lining measures announced 15 November Without these extraordinary one-time expenses the core earnings amounts to DKK 71m, thereby confirming a rising positive trend in Distribution of net profit/loss for the year The net loss for the year will be covered through equity. Balance sheet Danske Andelskassers Bank's balance sheet total fell from DKK 15,181m at the end of 2010 to DKK 14,438m at the end of The bank's total deposits amounted to DKK 9,013m at the end of 2011, while the bank's loans stood at DKK 8,914m, down 9% and 7% respectively. The bank's total guarantees were DKK 1,751m at the end of 2011, a fall of 26% compared with the end of The bank's customer portfolio consists primarily of small and medium-sized businesses and private customers. Please see the loan report on for a more detailed description of the change in loans, including a breakdown by sector. Liquidity Danske Andelskassers Bank has fundamentally satisfactory liquidity with an approximate balance between deposits and loans, as described above. The bank's deposits are regarded as stable in terms of liquidity, as 95% of total deposits are covered by the Deposit Guarantee Fund guarantee as at 31 December The bank also raised liquidity twice by issuing bonds with an individual government guarantee in accordance with the Danish Financial Stability (Amendment) Act No. 68 of 3 February 2009 (Lov om ændring af lov om finansiel stabilitet nr. 68 af 3. februar 2009). This was done by issuing bonds with a value of DKK 1.0bn on 18 June 2010, followed by a further issue of bonds with a value of DKK 1.0bn on 27 December These issues have a redemption date of 18 June 2013 and 27 December 2013, respectively. In June 2011, Danske Andelskassers Bank repaid the second and last tranche a syndicated loan totalling EUR 153.5m (equivalent to DKK 1,141m at Danmarks Nationalbank's exchange rate on 31 December 2011) with HSH Nordbank A/S as Mandated Lead Arranger. The repayment of the tranche of EUR 69.3m (DKK 515m) were due to a change-of-control clause in the contract, Figure 3: Loans and deposits ( ) (DKKm) The change in Danske Andelskassers Bank's deposits and loans during the last five years is illustrated in figure Deposits Loans Annual Report Danske Andelskassers Bank A/S 17

18 which took effect as a result of the conversion of the Danish Amalgamation of Cooperative Banks, its cooperative banks and Danske Andelskassers Bank into a single bank. Danske Andelskassers Bank has not raised liquidity bey ond what is mentioned above. This means that Danske Andelskassers Bank has not availed itself of the opportunity to raise a loan with Danmarks Nationalbank, secured upon creditworthy loans, which Danmarks Nationalbank made available on 1 October The bank is constantly assessing whether it may be necessary to make use of this facility and has started the initial procedures for assessing its own loan portfolio so as to be ready to make use of the facility if it is considered opportune. The bank's excess liquidity cover in accordance with the Act's requirements was 159% as at 31 December Equity Danske Andelskassers Bank's equity was DKK 1,617m as at 31 December 2011 against DKK 1,427m as at 31 December Equity changed in 2011 owing partly to the proceeds from the capital increase registered on 4 July 2011, which had a positive impact of DKK 366m on equity, and partly to the net loss for the year, which had a negative impact of DKK 176m on equity. Subordinated debt As at 31 December, Danske Andelskassers Bank has total subordinated debt of DKK 705m in the form of hybrid core capital in accordance with the Danish Act on Government Capital Injections in Credit Institutions (Bank Package II) (Lov om statsligt kapitalindskud i kreditinstitutter (Bankpakke II)) of DKK 398m and subordinated debt raised in February 2006 of DKK 307m (NOK 320m translated at Danmarks Nationalbank's exchange rate at the end of 2011 of 95.88). These two subordinated loans mature on 7 February 2014 and 9 October 2014, respectively. Share capital At the start of 2011, Danske Andelskassers Bank's share capital was a nominal DKK 125m, made up of 250,000 shares, each with a nominal value of DKK 500. All the shares were owned by the 16 cooperative banks of the Danish Amalgamation of Cooperative Banks. At the bank's general meeting on 12 March 2011, the decision was taken to increase Danske Andelskassers Bank's share capital to a nominal DKK 375m and change the denomination to a nominal value of DKK 10. Danske Andelskassers Bank's share capital was therefore made up of 37.5m shares with a nominal value of DKK 10 each, which were still owned by the members of the Danish Amalgamation of Cooperative Banks.»The bank's excess liquidity cover in accordance with the Act's requirements was 159% as at 31 December 2011.«In connection with the conversion, registered on 27 May, of the Danish Amalgamation of Cooperative Banks, a foundation was set up for each cooperative bank involved in the merger, with each foundation receiving shares equivalent to the free reserves of the original cooperative bank. Danske Andelskassers Bank's share capital was therefore divided between these 16 foundations as consideration. In the share offer of 7 June 2011, Danske Andelskassers Bank offered the former members of the cooperative banks the opportunity to exchange cooperative share capital totalling DKK 25.8m for shares with a nominal value of DKK 10 each, while other members and customers were offered the opportunity to subscribe shares up to a total of DKK 30,000 per person, and other investors were offered the opportunity to subscribe shares without an upper limit at the Board of Directors' discretion. As a result of this share offer, Danske Andelskassers Bank's share capital was increased on 4 July 2011 by a nominal DKK 175.6m, made up of 17.56m shares with a nominal value of DKK 10 each. 18 Danske Andelskassers Bank A/S 2011 Annual Report

19 Following the share issue, and as at 31 December 2011, Danske Andelskassers Bank's total share capital was a nominal DKK 550.6m, made up of 55.06m shares with a nominal value of DKK 10 each. On 7 July 2011, Danske Andelskassers Bank's total share capital was admitted for listing on NASDAQ OMX Copenhagen, where the bank is included in the MidCap index. At the stock exchange launch, the price of the bank's shares was DKK 25 per share with a nominal value of DKK 10. At the end of 2011, the price was DKK 19.5 per share with a nominal value of DKK 10. Changes in price during the period are shown below. Price per share in Danske Andelskassers Bank A/S 7 July - 31 December July September December 2011 Source: NASDAQ OMX Copenhagen At the end of 2011, shares in Danske Andelskassers Bank had a book value of 29. With a closing price at the end of 2011 of DKK 19.5 per share with a nominal value of DKK 10, the price/book value was 0.7. A total of 68,037 shares in Danske Andelskassers Bank were traded on NASDAQ OMX Copenhagen in 2011, equivalent to a market value of DKK 1.5m. Danske Andelskassers Bank's holding of treasury shares was 1,392,564 shares at the end of 2011, equivalent to 2.53% of total share capital. Its excess solvency cover is therefore 2.0 percentage points at the end of 2011 against 3.1 percentage points at the end of The change in solvency requirement, solvency ratio and therefore excess solvency cover is shown in more detail in figure 4. Figure 4: Solvency requirement and solvency ratio ( ) 16,0% 14,0% Solvency Danske Andelskassers Bank's solvency ratio at the end of 2011 stood at 14.2% on the basis of a capital base after the deduction of DKK 1,587m and risk-adjusted items of DKK 11,815m. At the end of 2010, Danske Andelskassers Bank's solvency ratio was 12.0%. 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% Solvency ratio Solvency requirement At the end of 2011, the bank's solvency requirement amounted to 12.2% against 8.9% at the end of It should be noted in this connection that Danske Andels kassers Bank as enlarged upon under Capital 2011 Annual Report Danske Andelskassers Bank A/S 19

20 structure changed the model for calculating its solvency requirement at the end of With effect from these financial statements, the bank will be using the credit reservation model, which is expected to become standard for the financial sector on 1 January It should be noted that, compared with the average for Danish banks, the bank has a greater solvency burden owing to above-average investments in other financial enterprises. Danske Andelskassers Bank's core capital ratio stood at 14.0 % at the end of 2011 against 11.8% at the end of Core capital therefore represents 72% of the total capital base. Please see the review of capital structure below and the bank's risk report, which is available on for a more detailed survey of the bank's capital structure. Events after the end of the financial year In November and December 2011, the Danish Financial Supervisory Authority paid Danske Andelskassers Bank a routine visit and scrutinised 28% of the bank's commitments, including its 76 largest commitments. By the end of February 2012, as a follow-up to the visit, Danske Andelskassers Bank received a report, in which the Danish Financial Supervisory Authority considered there was a need for further impairment in the order of DKK 112m, which the Board of Directors of Danske Andelskassers Bank decided to comply with on 29 February. together with other recommendations. The specified impairment has been incorporated in this annual report. It should also be noted that, as reported in company announcement no. 1/2012 of 10 January 2012, Danske Andelskassers Bank has signed a market maker agreement with Danske Bank. Outlook for underlined that the financial sector, including Danske Andelskassers Bank, is being strongly affected by Danish and global economic trends. It also underlined that there is considerable uncertainty in the current financial/debt crisis and that growth expectations in both the Danish economy and the rest of the world are at a low level and hedged about with uncertainty is therefore expected to offer only limited growth in the Danish economy, for which reason activity among customers must also be expected to remain at a limited level. In Danske Andelskassers Bank's assessment, however, the measures it has implemented in recent years, both agreeable and disagreeable, have brought it into line with current market conditions. Following the conversion of the organization and due to the market conditions, Danske Andelskassers Bank has initiated various processes to minimize costs and enhance the quality as well as earnings. Among these processes are concentrating and strengthening Group Credit, concentrating support tasks in support centres, concentrating business advisers in business centres and continuously upgrading of employees. These processes together with the streamlining measures regarding staff and branches in November 2011 as well as synergies from the conversion are expected to have a rising positive effect through Danske Andels kassers Bank expects the bank to be in profit in This applies to both pre-tax profit and core earnings. A constant focus on finding the right balance between risk and price will also contribute to this, and core earnings are expected to be well above the DKK 223m of 2011 In concrete terms, Danske Andelskassers Bank expects core earnings of DKK m in Danske Andelskassers Bank A/S 2011 Annual Report

21 Vasehus riding club In the spring of 2011 Vasehus riding club held a large tournament in both dressage and jumping. Danske Andelskassers Bank sponsored the event thereby giving a helping hand to the local riding club. At Christmas time the bank sponsored presents for Vasehus Riding Clubs Christmas calendar, which were sold to gain financial support for the activities of the club.

22 Risk and risk management Danske Andelskassers Bank is exposed to various types of risk. As with other banks, this is seen as a natural part of operations, so Danske Andelskassers Bank has a strong focus on risks, the level of risk taking and risk management in order to ensure the right balance between the bank's long-term wish for stable development, the risk undertaken and the price charged for the risk. Danske Andelskassers Bank's risk can basically be divided into four different types: Credit risk: the risk of loss as a result of a debitor defaulting on his payment obligation completely or partly Market risk: the risk of loss as a result of the fair value of the bank's assets and liabilities changing owing to market conditions Liquidity risk: the risk of the bank not being able to meet its payment obligations from normal liquidity reserves Operational risk: the risk of financial loss as a result of errors in internal processes, human error or system errors, or loss as a result of external conditions. These risks and the details of their management and development are described in Danske Andelskassers Bank's risk report, which is available on the bank's website at A more detailed description of the four types of risk outlined above and risk management at the bank can also be found in notes to these financial statements. In the next two sections, the bank wishes firstly to provide a general description of the bank's risk management and secondly to comment on the risk areas that it considers to be particularly important. Risk management Through the medium of the Section 70 Instruction issued in compliance with the Danish Financial Business Act (Lov om finansiel virksomhed), the Board of Directors of Danske Andelskassers Bank has laid down guidelines for the bank's general activities, including the framework for the risks that the bank wishes to undertake in the four areas referred to above. These guidelines have been laid down on the basis of the bank's business model and adopted policies. The Board of Executives is responsible for day-to-day management in accordance with the guidelines that have been laid down, which are set out in detail in the Section 70 Instruction, including reporting to the Board of Directors on the various risk areas, which as a rule happens at least once a month/at every ordinary board meeting. In addition to this, there is an annual report on the bank's risks. This forms the basis for the Board of Directors' overall assessment of the bank's risks including whether the bank has appropriate human resources, systems and procedures. The Board of Executives has delegated some of its powers to the relevant heads of department in their instructions and there is ongoing independent reporting on risk directly to the Board of Directors by the finance department under Business Development and Management. External auditing, internal auditing and audit committee The group s external independent auditor is elected for one year at a time at the bank's annual general meeting. Danske Andelskassers Bank's internal auditors carry out internal audits on the group and report directly to the Board of Directors. Internal auditing carries out regular spot checks in various areas, for example. The Board of Directors of Danske Andelskassers Bank has appointed an audit committee with the following members: Jens Jørgensen Hald (Chairman), Jakob Fastrup and Preben Arndal (member with accounting expertise). The committee's work is of a preparatory nature and includes monitoring the financial reporting process, monitoring internal control systems and monitoring statutory auditing of the financial statements etc. Chief risk and compliance officers Danske Andelskassers Bank has appointed a chief risk officer in accordance with sections of the Executive Order on Management and Control of Banks etc. 22 Danske Andelskassers Bank A/S 2011 Annual Report

23 (Bekendtgørelse 1325 om ledelse og styring af pengeinstitutter m.fl.) and a chief compliance officer in accordance with section 22 of the same Executive Order. The chief risk officer as well as the chief compliance officer reports to the Board of Executives. The chief risk officer is responsible for risk management at Danske Andelskassers Bank being carried out in a satisfactory manner, including having an overview of Danske Andelskassers Bank's risks and the total risk picture. The chief compliance officer is responsible for Danske Andelskassers Bank having suitable methods and procedures for identifying and reducing the risk of the bank incurring sanctions or suffering loss of reputation, or of the bank or the bank's customers suffering significant financial loss as a result of failure to comply with current legislation, market standards or internal rules. Areas of special risk Danske Andelskassers Bank focuses on all types of risk and is aware that the risk picture for one or more types of risk can change rapidly. Owing to the current market economic situation, the bank considers credit risk to be the most important risk factor, including its particular exposure in relation to agriculture. Lending Lending is based on sound risk-taking and risk diversification, with the willingness to take a risk being precisely matched with the borrower's financial position. This means that local conditions are taken into account so that the local area is developed with sustainable businesses. On the other hand, it is not the bank's intention that a local business that is not sustainable should be kept afloat because of local circumstances. The total credit risk is managed in accordance with policies and frameworks laid down and adopted by the Board of Directors, which ensure a balanced lending system for the Board of Executives through delegation. Responsibility for monitoring, overall risk taking and reporting to the bank's management is located centrally with Group Credit. In December 2011, the Board of Directors adopted a revised credit policy. In view of this revision, a major training programme will be carried out in spring 2012, with all the bank's advisers and managers attending a course on the bank's credit policy. Danske Andelskassers Bank wishes to lend no more than a maximum of 10% of its capital base. As a matter of principle, it does not want future commitments in excess of DKK 50m. It wants to keep the ratio between business and private customers at 50-60% business and 50-40% private. It does not, for example, want lending to any one industry to exceed more than 20% of total lending. As at 31 December 2011, Danske Andelskassers Bank had nine commitments in excess of DKK 50m, while 79% of the bank's lending was spread between customers with loans of less than DKK 10m and a total of 41% of the bank's lending was spread between customers with loans of less than DKK 1m. The bank's lending is therefore spread between a large number of small customers, which helps to spread the portfolio risk. As at 31 December 2011, Danske Andelskassers Bank's lending was made up of 39% private and 61% business, which is outside the desired range, but this is expected to be corrected in the course of No industry represents more than 20% of total lending. Danske Andelskassers Bank is aware that the creditworthiness of its loan portfolio is considered to be lower than the average for Danish banks, while the proportion of unsecured commitments is considered to be higher than the average for Danish banks, see also note 34. This is an important parameter in the bank's current pricing and matching of price and risk. Agriculture Danske Andelskassers Bank has relatively high exposure to agriculture for historical reasons. Many of the bank's agricultural customers are second- or third-generation customers and Danske Andelskassers Bank assesses its agricultural portfolio as 2011 Annual Report Danske Andelskassers Bank A/S 23

24 strong overall in relation to the average for Danish agriculture. Danske Andelskassers Bank can nevertheless say that the difficult market economic conditions for agriculture in recent years has also had a negative impact on the bank's portfolio of agricultural customers, as a result of which this segment, see note 34, represents 25% of the bank's impairment compared with 19% of the bank's total loan portfolio and, in 2011, 39% of the bank's total loan impairment, see table 1 on page15. have been affected in different ways by what is often presented as a general crisis in agriculture, with this being expected to continue. The economic trends for agriculture seem to be improving on the whole. The forecasts for terms of trade in several branches of production have improved, which indicates an improvement in earnings potential for the industry. This does not change Danske Andelskassers Bank's assessment that the bank 1. is very knowledgeable about its agricultural customers 2. has carried out the necessary impairment on an ongoing basis, and 3. has a sensible spread between individual sectors of agriculture. Re 1 As mentioned above, Danske Andelskassers Bank has often known its agricultural customers for many years. It is also the bank's policy to be proactive with agricultural customers who are experiencing financial difficulties so that the right long-term solutions can be found in collaboration with the individual customer. Re 2 Danske Andelskassers Bank has assessed its agricultural commitments in what it considers to be a suitably critical manner on an ongoing basis. In relation hereto it is noted that the land prices quoted by the Danish Financial Supervisory Authority in its Christmas letter of 23 December 2011 didn t give rise to further impairment, as Danske Andelskassers Bank adjusted the valuation of land prices to a level corresponding to or lower than the quoted level as early as Re 3 Within the agricultural sector, Danske Andelskassers Bank has a sensible spread between subsectors such as pig, cattle, fur and arable farming. These sectors 24 Danske Andelskassers Bank A/S 2011 Annual Report

25 Skelund sports club As long as the soccer fields are frost free, Skelund sports club are out trai ning. But training and ambition can t stand alone. The facilities have to be okay as well, and the clubhouse is in need of refurbishment. Thanks to the support of Danske Andelskassers Bank Skelund sports club is able to renovate the clubhouse.

26 Good corporate governance In accordance with the Danish Bankers Association's Recommendations for Good Corporate Governance and External Auditing of 11 December 2008, which all banks were advised to follow, Danske Andelskassers Bank has been publishing corporate governance reports on its website since Executives and Board of Directors Nor has it been considered necessary to publish the procedure for and results of the Board of Directors' self-evaluation The bank's report for 2011 in danish can also be found on the bank's website via the following link: The Danish Bankers Association's recommendations, as mentioned above, are based on the Nørby Committee's report from 2001 together with supplementary recommendations. In April 2010, the Committee on Corporate Governance published new/updated recommendations on good corporate governance, with a point to do with diversity being added in August Danske Andelskassers Bank's most recent report is based on these recommendations together with the Danish Bankers Association's recommendations. Danske Andelskassers Bank attaches enormous importance to good corporate governance both in principle and in practice, and the reports are considered to be a good supplement to the ongoing assessment of compliance with such principles. The bank essentially follows the principles, but diverges from them in some areas. The differences are discussed in more detail in the report, but can be described in brief as follows: Re The Board of Directors considers an election period of two years to offer advantages over the one year recommended in terms of stable management Re The Board of Directors considers the whole Board of Directors to have the necessary insight into the Board of Executives' performance through close collaboration with the Board of Executives and constant evaluation, and so it has not been judged necessary to establish evaluation criteria or a formalised dialogue regarding the Board of Executives and collaboration between the Board of 26 Danske Andelskassers Bank A/S 2011 Annual Report

27 Corporate social responsibility Danske Andelskassers Bank has for many years had principles such as good conduct, ethics and local involvement that are not written down, but are an important element in its business ethos. This is a natural consequence of the bank's history with its local roots and background of mutual ownership through the cooperative banks and still part of the bank's experienced values. These principles and values both written and unwritten form the basis of the bank's corporate social responsibility, which in 2008 was set out in a proper CSR policy, the latest version of which can be found on the bank's website via the following link: This policy provides the basis for annual reporting in this area, and the latest report can be found on the above link as well. Reporting is structured around six different points, and a brief outline of Danske Andelskassers Bank's CSR report for 2011 is given below: 1. Overall policy In 2011, Danske Andelskassers Bank focused on preserving both the democratic and the local element in its structure and considers that it has succeeded in doing so. It also considers this work to be far from complete, with further efforts and adjustments being required in the next few years. 2. Business In 2011, Danske Andelskassers Bank focused on ensuring that customers received the right long-term solutions even at a time of apparent uncertainty in the economy, benefiting both the customer and the bank. The bank considers that this work went satisfactorily, but nevertheless recorded a loss for the year, which is unsatisfactory. The assessment is that lending and the bank's other business were conducted in line with established ethical principles and the bank is delighted that many business partners are also implementing CSR activities of various types. 3. Employees Danske Andelskassers Bank's employees experienced major changes in 2011, including the conversion of the organisation and streamlining of both jobs and branches. Among other things, training in change manage ment was provided in this connection. As regards competencies, there was an increasing emphasis in 2011 on training at or near the individual's workplace, and the results achieved are considered satisfactory. It is also satisfying and pleasing that, by taking on financial management interns, the bank receives new inspiration and can contribute to the interns' education. 4. Customers All in all, Danske Andelskassers Bank enjoyed a good relationship with its customers in 2011, finding the right balance between consideration for the individual and the needs of its customers as a whole. 5. Local community Once again in 2011, Danske Andelskassers Bank conducted its business on the basis of its strong local roots, as manifested through both its relationship with custo mers in the local areas and collaboration with associations and initiatives that make a difference locally. It considers there to have been a satisfactory balance between local and commercial considerations and would point out that the two elements essentially overlap. 6. Climate and environment In 2011, Danske Andelskassers Bank worked internally to reduce both electricity and paper consumption and to make necessary paper consumption as green as possible while externally it worked to give customers the opportunity to exploit the potential of energy improvements, wind turbines and solar energy, for example. Against this background, development can be described as satisfactory. Overall assessment The overall assessment is that CSR activities and results in 2011 can be described as fairly satisfactory especially in a very turbulent year when both conversion and the renewed economic crisis absorbed considerable resources. In terms of local involvement, the view is that development was very satisfactory in 2011, with a great deal being done to safeguard this very element in the new structure. Development was also satisfactory with re 2011 Annual Report Danske Andelskassers Bank A/S 27

28 gard to training, but the failure to establish the desired procedures for measurement and control in the area of climate and the environment as described in the CSR report of must be described as unsatisfactory. In other words, the conclusion is that what can be described as natural focus areas for the bank developed satisfactorily, while the necessary resources were not available for the initiatives outside those areas. Corporate social responsibility 2012 The demands on banks have increased in recent years and taken up an ever larger share of resources. This has also made it necessary to focus more on what a bank's core competencies and core area are. In the case of Danske Andelskassers Bank, there is no doubt that what is "local" the life, the people, the associations and the initiatives that shape the local areas in the places where Danske Andelskassers Bank has branches is and will remain the nucleus. And that is how things will be in 2012 too. Danske Andelskassers Bank's overall focus will therefore be on holding on to the strengths from its previous structure and its local roots in particular including ma king the necessary adjustments and adaptations that are expected to be necessary. Danske Andelskassers Bank also wants to contribute to positive development in its "hinterland", partly through local initiatives, partly by working to put the subject and good stories on the agenda, and partly by contributing to consolidation in the financial sector that preserves the special strengths of local banks. The focus on competency development will also continue and increase in In concrete terms, Danske Andelskassers Bank's activities in 2012 will therefore be concentrated on the local areas and employees, with the objectives being: that Danske Andelskassers Bank will create a positive focus on and contribute to positive development in the local areas where the bank operates that competency profiles and development plans for all the bank's employees will have been drawn up by the end of While the latter is easy to measure, the former is harder to provide quantitative documentation for. The bank would like a survey to be conducted among members of the shareholders' committees and employees at the end of the year with a view to measuring their perception of what has been achieved. 28 Danske Andelskassers Bank A/S 2011 Annual Report

29 Pay policy The pay policy covers the Board of Directors, the Board of Executives and employees, whose activities are considered to influent the risk profile and control functions of the bank significantly. The employees considered by the bank to be important risk takers are: The management of the part of the organization dealing with or approving financial instruments The management of the part of the organization investing the company s own resources Employees in the parts of the organization able to take a risk through financial instruments on behalf of the bank and with the use of the bank s resources as well as employees having granting authorities at group level The management of the part of the organization in charge of controlling compliance with the limits of risk taking Employees able to impose the bank with significant credit risk. It is the Board of Directors, who decides the employees covered by the risk definition. The pay received by the Board of Directors and Board of Executives is based on Danske Andelskassers Bank's pay policy as adopted at the general meeting of the SDA group (prior to conversion) on 9 April The pay policy and need to adjust it are assessed continuously by the remuneration committee appointed by the Board of Directors. The committee's members are Jakob Fastrup (Chairman), Jens Jørgensen Hald and Poul Weber. The committee proposes the remuneration policy to the Board of Directors in accordance with its terms of reference. Pay structure Individual pay is fixed on the basis of a concrete assessment, taking the following factors, among others, into account: 1. Job description, including the complexity of the job 2. Results own and value creation for the bank 3. Performance 4. Competencies including supplementary training. In principle, Danske Andelskassers Bank only uses fixed pay determined in accordance with the collective agreement and the employment contracts under it. The bank uses standardised employment contracts. Therefore, Danske Andelskassers Bank does not use variable pay components such as shares or options at either individual or group level. In the event of an extraordinary performance, employees can be granted a one-off consideration. If a board member, an executive or an important risk taker receives a one-off consideration, the matter will be handled in accordance with Sections 77a and 77b of the Danish Financial Business Act. Remuneration of the Board of Directors, Board of Executives and other important risk takers is set out in note 8 of this annual report. The bank hasn t established stock options- or incentive programs, and the bank doesn t use severance pays or pension schemes not following regulations or collective agreements. As regards former members of the Board of Executives the bank has agreed to benefit pension obligations. Important agreements with management If members of the Board of Executives resign in connection with the group's transfer, Danske Andelskassers Bank is under an obligation to award them special severance pay equivalent to up against their last three years of pay. Otherwise no special agreements of any importance have been entered into with management Annual Report Danske Andelskassers Bank A/S 29

30 Speedway in Grindsted It s expensive to run a speedway club at the highest level. That s why drivers as well as volunteers from Grindsted Speedway Club appreciate the sponsorship from Danske Andelskassers Bank. Among other things the sponsorship enabled the club to buy an airfence an air cushion device placed in the curves of the racetrack thereby minimizing the risk of injuries.

31 Management s statement The Board of Directors and the Board of Executives have on this day considered and adopted the annual report for the financial year 1 January 31 December 2011 of Danske Andelskassers Bank A/S. position as at 31 December 2011 and of the results of the group's and the parent's operations as well as the consolidated cash flows for the financial year 1 January 31 December The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for the annual reports of listed financial companies. The financial statements of the parent have been presented in accordance with the Danish Financial Business Act (lov om finansiel virksomhed). In our opinion, the consolidated financial statements and the financial statements give a true and fair view of the group's and the parent's assets, liabilities and financial In our opinion, the management's review gives a fair review of the development in the group's and the parent's activities and financial affairs, the results for the year and the general financial position of the companies comprised by the consolidated financial statements as well as a description of the most important risks and uncertainty factors to which the group and the parent are exposed. The annual report is submitted for adoption by the general meeting. Hammershøj, 29 February 2012 Board of Executives Jan Pedersen CEO Tomas Michael Jensen Deputy CEO Hammershøj, 29 February 2012 The Board of Directors Jakob Fastrup Jens J. Hald Preben Arndal Chairman Deputy Chairman Chairman of audit committee Chairman of audit committee Jens H. Ladefoged Kenneth Clausen Jens Nørvang Madsen Hans Jørn Madsen Asger Pedersen Poul Weber 2011 Annual Report Danske Andelskassers Bank A/S 31

32 Auditor s report Internal auditors' reports Auditors' report on the consolidated financial statements and financial statements We have audited the consolidated financial statements and the financial statements of Danske Andelskassers Bank A/S for the financial year 1 January 31 December The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for the annual reports of listed financial undertakings. The financial statements are presented in accordance with the Danish Financial Business Act. Basis of opinion Our audit has been performed on the basis of the Danish Financial Supervisory Authority's Executive Order on audits in financial undertakings and financial groups etc. and in accordance with international auditing standards. This requires that we plan and perform our audit to obtain reasonable assurance that the consolidated financial statements and the financial statements are free from material misstatement. Our audit has been performed in accordance with the division of work agreed with the external auditors and has included an assessment of established business procedures and internal controls, including the risk management planned by the management aimed at reporting processes and significant business risks. Based on materiality and risk, we have, on a sample basis, examined the basis of amounts and other disclosures in the consolidated financial statements and the financial statements. An audit also includes evaluating the appropriateness of accounting policies applied by the management and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements and the financial statements. We have participated in the audit of material and risky areas, and we believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion. Our audit has not resulted in any qualifications. Opinion In our opinion, the established business procedures and internal controls, including the risk management planned by the management aimed at the group's and the company's reporting processes and significant business risks, are satisfactory. We also believe that the consolidated financial statements and the financial statements give a true and fair view of the group's and the company's assets, liabilities and financial position as at 31 December 2011 and of the results of the group's and the company's operations and cash flows for the financial year 1 January 31 December 2011 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements of listed financial undertakings as far as the consolidated financial statements are concerned and in accordance with the Danish Financial Business Act as far as the financial statements are concerned. Statement on the management's review We have read the management's review as required by the Danish Financial Business Act. We have not performed any procedures other than the audit performed of the consolidated financial statements and the financial statements. Against this background, we believe that the information in the management's review is consistent with the consolidated financial statements and the financial statements. Hammershøj, 29 February 2012 Jørgen Lautrup Audit Manager Independent auditors' reports To the shareholders of Danske Andelskassers Bank A/S Auditors' report on the consolidated financial statements and financial statements We have audited the consolidated financial statements and the financial statements of Danske Andelskassers Bank A/S for the financial year 1 January 31 December 32 Danske Andelskassers Bank A/S 2011 Annual Report

33 2011, comprising the income statement, highlights, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including accounting policies for the group and the company and the cash flow statement for the group. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for the annual reports of listed financial undertakings. The financial statements are presented in accordance with the Danish Financial Business Act. Management's responsibility for the consolidated financial statements and the financial statements The management is responsible for preparing consolidated financial statements which provide a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for the annual reports of listed financial undertakings and for preparing financial statements which provide a true and fair view in accordance with the Danish Financial Business Act. The management is also responsible for the internal control deemed necessary for preparing consolidated financial statements and financial statements that are free from material misstatement whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on the consolidated financial statements and the financial statements based on our audit. We conducted our audit in accordance with international auditing standards and additional requirements set out in Danish auditing legislation. This requires that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the consolidated financial statements and financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement in the consolidated financial statements and the financial statements, whether due to fraud or error. In making these risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of consolidated financial statements and financial statements. The purpose of this is to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies applied by the management and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements and the financial statements. In our opinion, the audit evidence obtained provides a reasonable and suitable basis for our opinion. Our audit has not resulted in any qualifications. Opinion In our opinion, the consolidated financial statements give a true and fair view of the group's assets, liabilities and financial position as at 31 December 2011 and of the results of the group's operations and cash flows for the financial year 1 January 31 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports of listed financial undertakings. It is also our opinion that the financial statements give a true and fair view of the company's assets, liabilities and financial position as at 31 December 2011 and of the results of the company's operations in the financial year 1 January 31 December 2011 in accordance with the Danish Financial Business Act. Statement on the management's review We have read the management's review as required by the Danish Financial Business Act. We have not performed any procedures other than the audit performed of the consolidated financial statements and the financial statements. Against this background, we believe that the information in the management's review is consistent with the consolidated financial statements and the financial statements. Viborg, 29 February 2012 Beierholm - Statsautoriseret Revisionspartnerselskab Jørgen Jakobsen State Authorised Public Accountant 2011 Annual Report Danske Andelskassers Bank A/S 33

34 The girls run in Esbjerg Tøseturen is a running event for girls of all ages taking place in Esbjerg every year. The event takes place in the beautiful Vognsbøl Park with both lake, f orest and typically fine weather, as the event are held in May. Joggers, athletes, companies, associations and friends a like normally join each other for an active and cosy evening, and Danske Andelskassers Bank isn t just the main sponsor. The bank assists with registration of the runners as well.

35 Income statement Group Parent company DKK '000 Note Interest income 3 766, , , ,371 Interest expenses 4 236, , , ,766 Net interest income 529, , , ,605 Share dividend etc. 4,338 1,280 4,338 1,280 Fee and commission income 5 213, , , ,468 Fees and commission paid 4,169 6,184 4,169 6,184 Net interest and fee income 743, , , ,169 Market value adjustments 6-51,181 45,592-50,981 45,592 Other operating income 13,406 8,192 9,274 5,898 Staff costs and administrative expenses 8 505, , , ,713 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 9 18,685 18,337 10,082 18,245 Other operating expenses 10 50, ,218 50, ,195 Impairment of loans and receivables etc , , , ,270 Profit/loss from investments in associates and group enterprises 17 6,708 11,364 2,157 11,555 Profit/loss before tax -240, , , ,209 Tax 12-64,216-57,040-65,151-57,439 Net profit/loss for the year -176, , , ,770 Proposal for the distribution of net profit Net profit/loss for the year -176, ,770 Total available for distribution -176, ,770 Retained earnings -176, ,770 Total used -176, ,770 Statement of comprehensive income Net profit/loss for the year -176, , , ,770 Other comprehensive income Net revaluation of properties Total other comprehensive income Total comprehensive income -175, , , , Annual Report Danske Andelskassers Bank A/S 35

36 Balance sheet Group Parent company DKK '000 Note Assets Cash balance and demand deposits with central banks 304, , , ,307 Receivables from credit institutions and central banks ,641 1,325, ,641 1,324,610 Loans and other receivables at amortised cost 14 8,914,017 9,562,394 8,950,398 9,597,444 Bonds at fair value 15 2,748,150 2,681,640 2,748,150 2,681,640 Shares etc , , , ,003 Equity investments in associates , , , ,562 Equity investments in group enterprises ,784 48,334 Total land and buildings , ,300 89,171 90,774 Owner-occupied properties 134, ,857 87,505 90,774 Investment properties 20,914 16,443 1,666 0 Properties available for sale 11, Other property, plant and equipment 20 21,232 30,695 21,057 30,436 Current tax assets 1,893 16,482 2,535 16,995 Deferred tax assets , , , ,143 Assets in temporary possession 22 27,847 34,490 27,847 34,490 Other assets 273, , , ,080 Prepayments 16,382 17,702 16,382 17,702 Total assets 14,438,224 15,180,556 14,439,810 15,182, Danske Andelskassers Bank A/S 2011 Annual Report

37 Group Parent company DKK '000 Note Equity and liabilities Payables Payables to credit institutions and central banks ,060 1,484, ,060 1,484,525 Deposits and other payables 24 9,013,842 9,930,589 9,017,353 9,933,931 Bonds issued at amortised cost 25 2,016,294 1,015,860 2,016,294 1,015,860 Liabilities assumed on a temporary basis 6, ,288 0 Other liabilities 325, , , ,835 Deferred income 2,042 2,563 2,042 2,563 Total payables 12,065,854 12,869,535 12,067,440 12,872,714 Provisions 26 Provisions for pensions and similar obligations 27,477 42,972 27,477 42,972 Provisions for guarantee losses 14, ,750 14, ,750 Other provisions 7,970 14,463 7,970 13,248 Total provisions 49, ,185 49, ,970 Subordinated debt Subordinated debt , , , ,077 Total subordinated debt 705, , , ,077 Equity Share capital 550, ,600 - Share capital (cooperative) - 26,381-26,381 Share premium 252, ,652 0 Revaluation reserves 341 3, ,906 Other reserves Retained earnings 813,863 1,396, ,863 1,396,472 Total equity 1,617,456 1,426,759 1,617,456 1,426,759 Total equity and liabilities 14,438,224 15,180,556 14,439,810 15,182, Annual Report Danske Andelskassers Bank A/S 37

38 Statement of changes in equity Group DKK '000 Share Share Share Revaluation Retained capital capital premium reserves earnings Total 2011 Equity, beginning of year 26, ,906 1,396,472 1,426,759 Net profit/loss for the year , ,237 Other comprehensive income: Net revaluation of properties Total other comprehensive income Comprehensive income for the year , ,896 Other changes in equity: Udbetaling af andelskapital Change in connection with company conversion -25, ,906 3,230-26,381 Fondsemission ved selskabsomdannelse - 375, ,000 0 Share issue - 175, , ,162 Other movements in capital, associates Purchase of treasury shares ,325-34,325 Total other changes in equity -26, , ,562-3, , ,593 Equity as at 31 December , , ,953 1,617, Equity, beginning of year 27, ,834 1,580,242 1,612,868 Net profit/loss for the year , ,770 Other comprehensive income: Reversal of net revaluation of properties Total other comprehensive income Comprehensive income for the year , ,698 Other changes in equity: Capital injection/reduction -1, ,411 Total other changes in equity -1, ,411 Equity as at 31 December , ,906 1,396,472 1,426, Danske Andelskassers Bank A/S 2011 Annual Report

39 Parent company DKK '000 Share Share Share Revaluation Retained capital capital premium reserves earnings Total 2011 Equity, beginning of year 26, ,906 1,396,472 1,426,759 Net profit/loss for the year , ,237 Other comprehensive income: Net revaluation of properties Total other comprehensive income Comprehensive income for the year , ,896 Øvrige bevægelser på egenkapitalen Udbetaling af andelskapital Change in connection with company conversion -25, ,906 3,230-26,381 Fondsemission ved selskabsomdannelse - 375, ,000 0 Share issue - 175, , ,162 Other movements in capital, associates Purchase of treasury shares ,325-34,325 Total other changes in equity -26, , ,562-3, , ,593 Equity as at 31 December , , ,953 1,617, Equity, beginning of year 27, ,834 1,580,242 1,612,868 Net profit/loss for the year , ,770 Other comprehensive income: Reversal of net revaluation of properties Total other comprehensive income Comprehensive income for the year , ,698 Other changes in equity: Capital injection/reduction -1, ,411 Total other changes in equity -1, ,411 Equity as at 31 December , ,906 1,396,472 1,426,759 Equity is divided into 55,060,000 shares of DKK 10 each. No shares have special rights, and there are no restrictions in negotiability. No shareholder may cast votes in excess of 1% of total share capital Annual Report Danske Andelskassers Bank A/S 39

40 Treasury sharesr Group Moderselskabet Shares in circulation, number of shares Beginning of year Share issue 55,060,000-55,060,000 - Treasury shares purchased 1,662,462-1,662,462 - Treasury shares sold 269, ,898 - End of year 53,667,436-53,667,436 - Shares issued 55,060,000-55,060,000 - Holding of treasury shares 1,392,564-1,392,564 - Issued shares in circulation, end of year 53,667,436-53,667,436 - Holding, number of shares Number of shares 1,392,564-1,392,564 - Nominal value, DKK '000 13,926-13,926 - Fair value, DKK '000 27,155-27,155 - Percentage of share capital 2.53% % - Holding, fair value DKK '000 Holding, beginning of year Purchase 40,444-40,444 - Sale 6,119-6,119 - Market value adjustment -7, ,170 - Holding, end of year 27,155-27,155 - Treasury shares used as security Number of shares 104, ,460 - Nominal value, DKK '000 1,045-1,045 - Fair value, DKK '000 2,037-2,037 - Percentage of share capital 0.19% % - Treasury shares furnished as security comprise security furnished by customers of Danske Andelskassers Bank A/S. The holding of treasury shares is used for trading with customers and shareholders. 40 Danske Andelskassers Bank A/S 2011 Annual Report

41 Cash flow statement DKK ' Operating activities Profit/loss before tax Impairment of loans/guarantees Depreciation and impairment of property, plant and equipment Market value adjustments of bonds and shares etc Market value adjustments of associates Tax paid Cash flows from operating activities Working capital Change in credit institutions and central banks Change in bond and share portfolio Change in loans Change in deposits Change in other assets and liabilities Cash flows from working capital Investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Sale of equipment Purchase of investments Cash flows from investing activities Financing activities Dividend paid 0 0 Share issue Purchase and sale of own equity investments Bonds issued Subordinated debt 0 0 Cash flows from financing activities Change in liquidity for the year Cash and cash equivalents, beginning of year Change in liquidity for the year Cash and cash equivalents, end of year Cash and cash equivalents, end of year: Cash balance and demand deposits with central banks, end of year Annual Report Danske Andelskassers Bank A/S 41

42 Notes 1. Accounting policies 2. Accounting estimates and assessments 3. Interest income 4. Interest expenses 5. Fees and commission income 6. Market value adjustments/translation adjustments 7. Net financials 8. Staff costs and administrative expenses 9. Depreciation, amortisation and impairment of property, plant and equipment as well as intangible assets 10. Other operating expenses 11. Impairment of loans and guarantees 12. Tax 13. Receivables from credit institutions and central banks 14. Loans at amortised cost 15. Bonds at fair value 16. Shares etc. 17. Investments in associates 18. Investments in group enterprises 19. Land and buildings 20. Other property, plant and equipment 21. Deferred tax assets and liabilities 22. Assets in temporary possession 23. Payables to credit institutions and central banks 24. Deposits 25. Bonds issued at amortised cost 26. Provisions 27. Subordinated debt 28. Contingent liabilities 29. Related parties 30. Information on fair value 31. Security 32. Other commitments 33. Risk management 34. Credit risk 35. Market risk 36. Liquidity risk 37. Operational risk 38. Derivative financial instruments 42 Danske Andelskassers Bank A/S 2011 Annual Report

43 Notes Note 1 Accounting policies 1. Basis for preparation of annual and interim reports Danske Andelskassers Bank A/S is a public company domiciled in Denmark. The annual report for the period 1 January 31 December 2011 comprises the consolidated financial statements of Danske Andelskassers Bank A/S and its subsidiaries as well as the financial statements of the parent. On 26 May 2011, a merger was completed between the Danish Amalgamation of Cooperative Banks and Danske Andelskassers Bank A/S with Danske Andelskassers Bank A/S as the continuing company. As part of the merger, the company's shares were admitted for listing on NASDAQ OMX Copenhagen A/S. As a result, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for the annual reports of listed financial undertakings. The financial statements of the parent are presented in accordance with the Danish Financial Business Act, including the Danish Executive Order on financial reports for credit institutions and stockbroker companies etc. On presentation of the report, the standards and interpretations that apply to financial years beginning on 1 January 2011 have been applied. Upon transition to IFRS, IFRS 1, First-time adoption of IFRS, has been applied. The accounting policies are described below and have been applied consistently with historical accounting information for 2009 and 2010 for the Danish Amalgamation of Cooperative Banks according to IFRS for use in the prospectus dated 7 June 2011 The classification and presentation of the items in the annual report follows the same practice used in 'Historical accounting information according to IFRS for use in prospectus dated 7 June 2011'. There is no difference between the financial results and equity calculated according to IFRS or the Executive Order on financial reports for credit institutions and stockbroker companies etc. On the date of the presentation of the annual report, several new accounting standards (IAS and IFRS) and interpretations (IFRIC) were issued which have not yet become effective. Neither of these is expected to have a significant influence on any financial statements presented by the group in future. Recognition and measurement The annual report is presented in DKK '000. Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the group and the value of such assets can be measured reliably. Liabilities are recognised in the balance sheet when they are likely to occur and can be measured reliably. On initial recognition, assets and liabilities are measured at fair value. However, on initial recognition, property, plant and equipment and intangible assets are measured at cost. Assets and liabilities are subsequently measured as described below for each item. On recognition and measurement, account is taken of gains, losses and risks arising before the annual report is presented and proving or disproving matters arising on or before the balance sheet date Annual Report Danske Andelskassers Bank A/S 43

44 Notes Income is recognised in the income statement as earned. Costs incurred to generate earnings are recognised in the income statement. Market value adjustments of financial assets, financial liabilities and derivative financial instruments are recognised in the income statement. 2. Accounting policies Consolidated financial statements The consolidated financial statements comprise Danske Andelskassers Bank A/S and group enterprises in which the group has a controlling influence on their financial and operating decisions. A controlling influence exists when Danske Andelskassers Bank A/S directly or indirectly holds more than half of the voting rights in an enterprise or otherwise has a controlling influence on managerial or operating decisions. The consolidated financial statements are prepared by combining items of a uniform nature, eliminating internal income and expenses, internal balances as well as income and expenses from intercompany trade. The financial statements used for the consolidation are prepared in accordance with the group's accounting policies and revised according to IFRS. Business combinations and disposal of enterprises Newly acquired or newly founded enterprises are recognised in the consolidated financial statements as from the time of acquisition. Enterprises divested or discontinued are recognised until the date of divestment. Comparative figures are not restated for newly acquired, divested or discontinued enterprises. Discontinued operations are, however, presented separately. Gains or losses on the divestment of subsidiaries and associates are determined as the difference between the disposal consideration and the carrying amount of net assets at the time of divestment, including remaining goodwill, as well as the expected divestment or discontinuation costs. Subsidiaries and associates are recognised in accordance with the purchase method, according to which the assets and liabilities of the newly acquired companies are measured at fair value at the time of acquisition. The tax effect of any reassessments is taken into account. Positive differences (goodwill) between the acquisition price and fair value of assets and liabilities taken over are recognised in the balance sheet. Positive differences are not amortised, but are instead tested regularly for impairment. Transaction costs are recognised as costs as incurred. If control is gained of an enterprise that was previously an associate, the previous ownership share is regarded as sold and repurchased at fair value. The difference between the carrying amount and the fair value is recognised in the income statement. For intercompany business combinations, the uniting-of-interests method is used for the period in which the uniting of interests took place as if the enterprises had been combined as of the earliest period included in the consolidated financial statements. Any adjustments relating to the combination are recognised under retained earnings. 44 Danske Andelskassers Bank A/S 2011 Annual Report

45 Notes Foreign currency On initial recognition, transactions denominated in foreign currencies are translated at the exchange rates applicable at the transaction date. Receivables, payables and other monetary items denominated in foreign currencies which have not been settled at the balance sheet date are translated using the closing price of the particular currency. Exchange rate differences between the exchange rate applicable at the transaction date and the exchange rate at the date of payment or the exchange rate at the balance sheet date, respectively, are recognised in the income statement as foreign currency translation adjustments. Calculation of fair value in connection with measurement and disclosure Derivative financial instruments and unsettled spot transactions are recognised and measured at fair value which is generally based on listed market prices. To the extent the instruments are unlisted, the fair value is determined according to generally accepted principles based on market-based parameters. Bonds traded on the active markets are measured at fair value. The fair value is determined in accordance with the closing price at the balance sheet date. Shares traded on the active markets are measured at fair value. The fair value is determined in accordance with the closing price at the balance sheet date. Unlisted shares in enterprises jointly owned with other banks and other unlisted shares are measured at fair value. If no current market data are available, the fair value is determined using the enterprises' most recently presented and adopted financial statements. Income statement Interest, fees and commission Interest income and expenses are recognised in the income statement in the period to which they relate. Commission and fees, which are an integral part of the effective interest rate on a loan, are recognised as a part of the amortised cost and are thus reported as income over the term of the loan. Interest income on loans which have been either fully or partially impaired is recognised under interest income with only the calculated effective interest rate on the impaired value of the loan. Interest income is also recognised under 'impairment of loans and receivables etc.' Commissions and fees which form part of an ongoing service are accrued over the term of the service. Other fees are recognised in the income statement at the transaction date. Share dividend Share dividend is recognised in the income statement when the group is entitled to the dividend, normally when the dividend has been adopted at the company's general meeting. Market value adjustments/translation adjustments Market value adjustments comprise realised and unrealised market value adjustments of financial assets and other derivative financial instruments as well as adjustments of investment properties at fair value Annual Report Danske Andelskassers Bank A/S 45

46 Notes Other operating income Other operating income includes other income which does not belong under any of the other items in the income statement, including income from the operation of investment properties and gains and losses on the sale of assets acquired on a temporary basis and properties available for sale. Staff costs and administrative expenses Staff costs comprise wages and salaries as well as social contributions and pensions etc. Costs relating to staff payments and benefits, including anniversary bonuses, are recognised as the staff perform the work services entitling them to these payments and benefits. Contribution-based pension schemes have been agreed with the majority of the employees. In the contribution-based schemes, fixed contributions are paid, and there is no obligation to make further contributions. In addition to this, defined benefit schemes have been agreed with former members of the Board of Executives, involving an obligation to pay a defined benefit on retirement. Other operating expenses Other operating expenses comprise expenses which do not belong under any other items in the income statement, including contributions to sector solutions and expenses concerning properties available for sale. Impairment of loans and receivables etc. Impairment of loans and receivables etc. consists of impairment of loans, receivables from credit institutions and central banks and other receivables which may involve a credit risk as well as provisions for guarantees and unutilised credit facilities and subsequent adjustments of the value of such items. Impairment of guarantees is recognised as a provision for guarantee losses under 'Provisions'. Impairment of unutilised credit facilities is recognised as other provisions under 'Provisions'. Tax Tax for the year, which consists of current tax for the year and changes in deferred tax, is recognised in the income statement with the portion attributable to the profit or loss for the year, and directly in other comprehensive income or equity with the portion attributable to these items. Balance sheet Financial assets in general Classification is made only in the consolidated financial statements as per IFRS. The purchase and sale of financial assets are recognised on the settlement date at fair value. Changes in the fair value of the unsettled financial instrument are recognised between the trading day and the settlement day. Transaction costs are added on initial recognition of financial assets that are not subsequently measured at fair value in the income statement. 46 Danske Andelskassers Bank A/S 2011 Annual Report

47 Notes On initial recognition and transition to IFRS, financial assets are attributed to one of the following categories: Trading portfolio comprising shares and bonds held with a view to short-term profit-making and derivative financial instruments which are assets. Financial assets attributable to the fair value in the income statement comprising bonds and shares which do not form part of the trading portfolio, but which are managed and evaluated on a fair value basis. Loans and receivables comprising loans and other receivables, cash balance and demand deposits with central banks, receivables from credit institutions and central banks and other assets besides derivative financial instruments. Financial assets are not reclassified upon initial recognition. Financial assets forming part of the trading portfolio or attributable to the fair value in the income statement are measured at fair value with recognition of fair value changes in the income statement. Loans and receivables are measured at amortised cost which usually corresponds to the nominal value less establishment fees which make up some of the effective interest rate and impairment for bad debts which have occurred, but have not yet been realised. Cash balance and demand deposits with central banks Cash balance and demand deposits consist of the bank's holding of national and foreign notes and coins as well as demand deposits with central banks. Receivables from credit institutions and central banks Receivables from credit institutions and central banks comprise receivables from credit institutions and time deposits with central banks. The receivable is measured at fair value. Loans and other receivables Loans and other receivables comprise loans for customers and other receivables, including mortgages. Impairment of loans and other receivables as well as provisions for guarantees and unutilised credits granted are made individually and collectively. Write-downs for bad debts are made when there is an objective indication of impairment. For individual impairment, an objective indication is at least considered to exist in one or more of the following circumstances: The borrower is in serious financial difficulties The borrower is in breach of contract, e.g. he has failed to pay instalments and interest The borrower is granted reliefs in respect of the loan terms, which would not have been granted if it had not been for the financial difficulties of the borrower The borrower is likely to go bankrupt or be party to some other form of financial reorganisation Impairment is made by an amount corresponding to the difference between the carrying amount before the impairment and the present value of the expected future loan payments. The expected future payments are 2011 Annual Report Danske Andelskassers Bank A/S 47

48 Notes calculated on the basis of probability-weighted scenarios determined by the debtor's ability to pay, realisation of security and any dividend. The effective interest rate is used as the discount rate. Loans which have been impaired individually are included in the group impairment. For loans and receivables which have not been impaired individually, a group assessment is made of whether an objective indication of impairment exists for the group. The group assessment is made of groups of loans and receivables with similar characteristics in terms of credit risk. Eleven groups are used: one group of public authorities, one group of private customers and nine other groups of business customers, the latter being divided into industry groups. The group assessment is based on a segmentation model developed by The Association of Local Banks, Savings Banks and Cooperative Banks in Denmark, which is in charge of the ongoing maintenance and development. The segmentation model defines the relationship between losses realised in the individual groups and a number of significant explanatory macroeconomic variables through a linear regression analysis. The explanatory macroeconomic variables comprise unemployment, housing prices, interest rates, number of bankruptcies/compulsory sales etc. Generally, the calculation of the macroeconomic segmentation model is based on loss data for the entire banking sector. Danske Andelskassers Bank has therefore assessed whether the model estimates reflect the credit risk to which its own loan portfolio is exposed. The assessment has resulted in an adaptation of the model estimates to the bank's own business, after which the adapted estimates form the basis of the calculation of the group impairment. Furthermore, the adapted estimates have been corrected to allow for the changed economic trends. Each group of loans and receivables results in an estimate which reflects the percentage impairment associated with a specific group of loans and receivables at the balance sheet date. By comparing the current loss risk of the individual loan with the original loss risk of such loan and the loss risk of the loan at the beginning of the current accounting period, the contribution of the individual loan to the group impairment is calculated. The impairment is calculated as the difference between the carrying amount and the discounted value of the expected future payments. Shares Shares comprise shares traded on active markets and unlisted shares in companies jointly owned with several other banks as well as other unlisted shares. Shares traded on the active markets are measured at fair value. The fair value is determined in accordance with the closing price at the balance sheet date. Illiquid shares or unlisted equity investments are measured at fair value. Bonds The item comprises bonds traded on an active market. Bonds traded on active markets are measured at fair value. The fair value is determined in accordance with the closing price for the specific market at the balance sheet date. Redeemed bonds are measured at their present value. Leases Leases are classified as finance leases when all significant risks and returns associated with the right of ownership to an asset are transferred to the lessee. All other leases are classified as operating leases. The bank has entered into operating leases only. 48 Danske Andelskassers Bank A/S 2011 Annual Report

49 Notes Equity investments in group enterprises and associates Equity investments in group enterprises and associates are recognised at the proportionate share of the equity value at the balance sheet date. The company's share of the enterprises' profit or loss after tax and after eliminating unrealised internal gains and losses is recognised in the income statement, while shares in items recognised in other comprehensive income in the company are recognised in other comprehensive income. Net revaluation of equity investments is transferred to reserves under equity to the extent the carrying amount exceeds cost. Impairment is recognised and deducted from any positive reserves as long as there are any reserves to offset it against. When buying or disposing of associates, the enterprise's results are included in the income statement from the date of takeover until the date of disposal, respectively. Investment properties Investment properties comprise properties that are mainly owned for the purpose of receiving rent income and/or capital gains in a sale. On initial recognition, investment properties are measured at cost and subsequently at fair value. Adjustment to fair value and rent income are recognised in the income statement under 'Market value adjustments/translation adjustments' and 'Other operating income'. As a general rule, the fair value of investment properties is determined on the basis of the property's expected return and a return percentage fixed individually for each property. The return percentage depends on the location, property type and uses, layout and state of repair as well as the terms of the lease agreement. Domicile properties Domicile properties are properties which the bank uses for administrative functions, as a branch or other service activities. Properties are considered to be domicile properties if most of the building's total floor space is used for banking operations. On initial recognition, domicile properties are measured at cost which comprises the acquisition price and costs directly related to the acquisition until such time as the property is ready for use. The property is subsequently measured at a revalued amount which is the fair value at the date of revaluation less subsequently accumulated depreciation. Revaluations are carried out so frequently that the carrying amount does not differ much from the fair value at the balance sheet date. Fair value is calculated using the ROC method, which takes rent income, costs and return requirements into account. The group applies its own valuation model for the fixing of the fair value. This model is based on a geographic division of properties, including the estimated market rent of the area in question. The return requirement is based on the interest on a mortgage credit bond with a term to maturity of 30 years plus %, depending on the geographical location of the property. In special cases, the fair value is determined by independent surveyors Annual Report Danske Andelskassers Bank A/S 49

50 Notes Increases in the revalued amount of the domicile properties are recognised under other comprehensive income and tied to provisions for revaluations unless the increase corresponds to a reduction in value which was previously recognised in the income statement. A decline in the revalued amount of the domicile properties is recognised in the income statement unless the decline corresponds to an increase in value which was previously recognised in other comprehensive income. In that case, the reduction in value is reversed to other comprehensive income. Depreciation is calculated according to the straight-line method over the expected useful lives of the assets which are years for buildings and years for rebuilding costs. Useful lives and residual values are re-assessed annually. Land is not depreciated. Installations are depreciated according to the straight-line method over a period of 20 years. Properties available for sale Properties available for sale are domicile properties that have been put up for sale because the branch operations have closed down. Operating expenses incurred until the property has been sold are recognised in the income statement under 'Other operating expenses'. Other property, plant and equipment Other property, plant and equipment are measured at cost less accumulated depreciation and impairment. Cost comprises the acquisition price and costs directly related to the acquisition until such time as the asset is ready for use. Depreciation is provided according to the straight-line method over the assets' expected useful lives of 3-5 years and is re-assessed annually. Other property, plant and equipment are assessed for any need for impairment when there is an indication of impairment, and are written down to the recoverable amount which is the higher of the net selling price and the value in use. Assets in temporary possession Assets in temporary possession comprise assets taken over as a result of the settlement of customer commitments where the intention is to sell the assets within 12 months. Assets taken over are measured at the lower of the carrying amount and fair value less costs relating to the sale. Assets in temporary possession are not depreciated/amortised. Other assets Other assets comprise assets which are not placed under other asset items. The item primarily comprises interest and commission measured at amortised cost as well as derivative financial instruments measured at fair value. Prepayments and deferred income Prepayments and deferred income comprise costs incurred in respect of subsequent financial years. Prepayments and deferred income are measured at cost. 50 Danske Andelskassers Bank A/S 2011 Annual Report

51 Notes Financial liabilities Financial liabilities are measured at fair value at the settlement date. Transaction costs are deducted on initial recognition of financial liabilities that are not subsequently measured at fair value. On initial recognition and transition to IFRS, financial liabilities are attributed to one of the following categories: Trading portfolios comprising derivative financial instruments that are liabilities Other financial liabilities comprising the items Other liabilities, except for Derivative financial instruments, Payables to credit institutions and central banks/deposits and Subordinated debt/bonds issued. Financial guarantees Liabilities belonging to the trading portfolio are measured at fair value with recognition of value adjustments in the income statement. Other financial liabilities are measured at amortised cost. When calculating the amortised cost, an estimate is made of the expected future interest payments. If the interest rate changes during the term of the liability in excess of what follows from a floating interest rate, these are included to the extent that the loan is not expected to be repaid prior to the change. Financial guarantees are measured at the higher of the deferred commission income and the provision for guarantee losses. See the 'Loans and receivables' section for a specification of provisions for guarantee losses. Other liabilities The item comprises equity and liabilities which are not placed under other items under equity and liabilities and comprise, among other things, negative market values of spot transactions, derivative financial instruments recognised at fair value and interest due recognised at amortised cost. Deferred income Deferred income recognised under equity and liabilities comprises commission received etc. which concern the subsequent accounting period. Prepayments and deferred income are measured at cost. Payables to credit institutions and central banks/deposits Payables to credit institutions and central banks as well as deposits are valued at amortised cost. Liabilities acquired on a temporary basis Liabilities acquired on a temporary basis comprise mortgage debt in mortgage credit institutions acquired in connection with the realisation of assets as a result of the settlement of customer commitments. Subordinated debt/bonds issued When recognising subordinated debt/bonds issued, any embedded derivatives and equity elements are separated. Embedded derivatives are treated as independent derivatives, while equity elements are recognised directly in equity. Initial recognition is made at fair value, while subsequent recognition is made at amortised cost Annual Report Danske Andelskassers Bank A/S 51

52 Notes Taxes Current tax payable and tax receivable are recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of previous years and for taxes paid on account. Deferred tax is recognised on all temporary differences between the carrying amounts and tax bases of assets and liabilities. Deferred tax assets, including the tax value of tax losses for carryforward, are recognised in the balance sheet at the value at which the asset is expected to be realised either by offsetting against deferred tax liabilities or as net assets. The parent is taxed jointly with all Danish companies in which it exercises a controlling influence. The current Danish income tax is distributed between the jointly taxed Danish companies in proportion to their taxable incomes (full distribution with refund concerning tax losses). Provisions Employee obligations and other liabilities that are uncertain as to size or date of settlement are recognised when it is probable at the balance sheet date that financial resources will flow from the group and such liabilities can be measured reliably. Liabilities are measured using the best estimate of the costs necessary to realise the liability. In connection with the measurement of provisions, discounting is made wherever relevant. Pension provisions comprise only utilised pension obligations towards former members of the Board of Executives and are determined at the present value of the expected future payments in accordance with an actuarial calculation. Equity Costs regarding an increase in the share capital are recognised in equity. If the capital increase is not completed at the balance sheet date, the costs are recognised as described when the completion is likely to happen. Revaluation reserves Revaluation reserves comprise revaluation of the group's domicile properties after recognition of deferred tax. The reserve is dissolved when the domicile properties are impaired, sold or abandoned. In the consolidated financial statements, the item only includes value adjustments of associates. Other reserves In the financial statements of the parent, other reserves comprise value adjustments of equity investments in group enterprises and associates according to the equity method. The reserve is affected by other changes in equity and by full or partial realisation of the equity investments. Proposed dividend Proposed dividend is recognised as a liability at the time of its adoption by the general meeting. Proposed dividend for the year is included in equity until its adoption by the general meeting. 52 Danske Andelskassers Bank A/S 2011 Annual Report

53 Notes Treasury shares Treasury shares are not recognised as assets. Purchase and selling prices as well as dividend from treasury shares are recognised directly in retained earnings under equity. Offsetting of financial assets and liabilities Financial assets and liabilities are offset when it is legally possible to do so, and when it is the bank's intention to offset or settle the asset and the liability at the same time. Hedging No financial instruments meet the criteria for hedging the fair value of a recognised asset or liability. The special accounting provisions applying to hedging instruments are thus not used. Cash flow statement The cash flow analysis is carried out using the indirect method. The cash flow statement shows the cash flows divided into cash flows from operating activities, investing activities and financing activities for the year, changes in cash and cash equivalents for the year and cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are determined using the indirect method as the profit or loss before tax adjusted for non-cash operating items and changes in working capital. Cash flows from investing activities comprise payments relating to the purchase and sale of non-current assets. Cash flows from financing activities comprise dividend paid and changes in equity and the arrangement and repayment of bonds issued and subordinated debts. Cash and cash equivalents comprise cash balance, demand deposits with central banks and receivables from credit institutions and central banks falling due within less than three months. Note 2 Accounting estimates and assessments The carrying amount of certain assets and liabilities is subject to estimates of how future events will affect the value of such assets and liabilities at the balance sheet date. The estimates are based on assumptions which are deemed proper by the management, but which are naturally uncertain. In addition, the group is impacted by risks and uncertainties which may result in the actual results deviating from the estimates. As regards impairment of loans and receivables, significant estimates are made in connection with the quantification of the risk that not all future payments are received. The accounting estimates and assessments have had the most significant effect on the consolidated financial statements and the financial statements of the parent in the following areas: Impairment of loans and provisions for guarantees Fair value of investment properties and domicile properties Fair value of financial instruments Deferred tax assets Contribution to sector solutions 2011 Annual Report Danske Andelskassers Bank A/S 53

54 Notes Impairment of loans and provisions for guarantees Impairment test of individual loans involves estimates of factors which are subject to a high degree of uncertainty. The assessment involves estimates of the most likely cash flow that the customer can generate, including the value of security. Loans where there is no objective indication of impairment are part of a group where any need for impairment is assessed at portfolio level. When testing for impairment of a group of loans, the most important aspect is the management's estimate relating to the credit margins and their development. Impairment is thus made as a combination of individual and group impairment. If, at the balance sheet date, the bank knows that events have occurred which have either worsened or improved the future payment pattern which the models have not taken into account, this is adjusted by means of a qualified management estimate. Fair value of investment properties and domicile properties The measurement of the fair value of domicile and investment properties is subject to accounting estimates and assessments, and also expectations for the future return on the properties and the rates of return set for them. Fair value of financial instruments A number of financial instruments are measured at fair value, including all derivative financial instruments and shares and bonds. Assessments are made when determining the fair value of financial instruments in the following areas: Choice of valuation method Determining when available listed prices do not represent the fair value Quantifying fair value adjustments to take into account relevant risk factors such as credit and liquidity risk Assessing which market parameters are to be observed For unlisted shares, estimates are made of future cash flows and business requirements. Strategic equity investments were acquired as part of operations. These are measured at fair value based on available information about trade in the relevant company's equity investments or alternatively a valuation model based on acknowledged and current market data, which involves an assessment of the expected future earnings and cash flows. The valuation will also be affected by co-ownership, trade and sharehol ders' agreements etc. Deferred tax assets Taxable losses allowed for carryforward are included in the statement of deferred tax assets to the extent that tax profits are likely to be realised within the foreseeable future in which the loss can be used. The recognition of a deferred tax asset therefore requires that the management assesses the likely time and size of future profits. 54 Danske Andelskassers Bank A/S 2011 Annual Report

55 Notes Contribution to sector solutions Danske Andelskassers Bank A/S is covered by the Danish Guarantee Fund for Depositors and Investors, which means that it, together with other banks, is obliged to cover the depositors' deposits etc. of up to EUR 100,000 in banks that are being wound up or have filed for bankruptcy. Danske Andelskassers Bank A/S recognises an obligation to cover our share of the obligation when we receive information about banks that are being wound up or have filed for bankruptcy, and when the information is sufficient for us to be able to recognise the expected obligation reliably. The uncertainty relating to the determination of the dividend percentage and covered amount in banks that are being wound up or have filed for bankruptcy means that the recognised obligation is subject to uncertainty. Note 3 Interest income Group Parent DKK ' Receivables from credit institutions and central banks 12,770 10,185 12,770 10,185 Loans and other receivables 681, , , ,967 Bonds 62,905 91,951 62,905 91,951 Currency, interest rate, share, commodity and other contracts and derivative financial instruments 9,176 6,642 9,176 6,642 Other interest income Total 766, , , ,371 Of which income from genuine sales and repurchase transactions recognised under: Receivables from credit institutions and central banks Loans and other receivables Note 4 Interest expenses Group Parent DKK ' Credit institutions and central banks 10,254 19,135 10,254 19,119 Deposits and other payables 117, , , ,212 Bonds issued 50,550 11,049 50,550 11,049 Subordinated debt 58,922 53,379 58,922 53,379 Other interest expenses Total 236, , , ,766 Of which interest expenses in respect of genuine sales and repurchase transactions recognised under: Credit institutions and central banks Deposits and other payables Annual Report Danske Andelskassers Bank A/S 55

56 Notes Note 5 Fee and commission income Group Parent DKK ' Securities trading and safe custody accounts 68,371 64,544 68,371 64,544 Payment services 17,171 13,576 17,171 13,576 Loan transaction fees 28,226 37,937 28,226 37,937 Guarantee commission 24,373 35,307 24,373 35,307 Other fees and commission 75,439 85,869 75,439 86,104 Total 213, , , ,468 Like other banks, Danske Andelskassers Bank has concluded a cooperation agreement with DLR Kredit under which the bank receives guarantee commission for loss guarantees furnished. Losses on the bank's customers are offset against future guarantee commission, and for each year, DLR Kredit can only offset losses corresponding to the guarantee commission. In 2011, Danske Andelskassers Bank offset an expected loss of DKK 6.5m against the guarantee commission. Any difference between the expected loss and the actual amount offset will affect the income statement for Note 6 Market value adjustments/translation adjustments Group Parent DKK ' Bonds -4,419 32,370-4,419 32,370 Shares etc. -38,539 13,917-38,539 13,917 Currency -5,464-2,854-5,464-2,854 Other assets Currency, interest rate, share, raw material and other contracts and derivative financial instruments, total -2,559 2,159-2,559 2,159 Total -51,181 45,592-51,181 45, Danske Andelskassers Bank A/S 2011 Annual Report

57 Notes Note 7 Net financials (Group) DKK '000 Interest income Interest expenses Market value Net interest adjustments Dividend Total 2011 Net financials at amortised cost: Receivables from and payables to credit institutions and central banks 12,770 10,254 2, ,516 Loans and deposits 681, , , ,231 Bonds issued 0 50,550-50, ,550 Subordinated debt 0 58,922-58, ,922 Other financial items Total 694, , , ,296 Net financials at fair value: Trading portfolio 62, ,905-48,622 4,338 18,621 Financial instruments 9, ,176-2, ,617 Total 72, ,081-51,181 4,338 25,238 Total net income from net financials 766, , ,377-51,181 4, ,534 Net financials (Parent) DKK Interest income Interest expenses Market value Net interest adjustments Dividend Total 2010 Net financials at amortised cost: Receivables from and payables to credit institutions and central banks 10,185 19,135-8, ,950 Loans and deposits 680, , , ,018 Bonds issued 0 11,049-11, ,049 Subordinated debt 0 53,379-53, ,379 Other net financials Total 691, , , ,270 Net financials at fair value: Trading portfolio 91, ,951 43,433 1, ,664 Financial instruments 6, ,642 2, ,801 Total 98, ,593 45,592 1, ,465 Total net income from net financials 789, , ,863 45,592 1, , Annual Report Danske Andelskassers Bank A/S 57

58 Notes Net financials (Parent) DKK '000 Interest income Interest expenses Market value Net interest adjustments Dividend Total 2011 Net financials at amortised cost: Receivables from and payables to credit institutions and central banks 12,770 10,254 2, ,516 Loans and deposits 683, , , ,042 Bonds issued 0 50,550-50, ,550 Subordinated debt 0 58,922-58, ,922 Other net financials Total 695, , , ,107 Net financials at fair value: Trading portfolio 62, ,905-48,622 4,338 18,621 Financial instruments 9, ,176-2, ,617 Total 72, ,081-51,181 4,338 25,238 Total net income from net financials 768, , ,188-51,181 4, ,345 Net financials (Parent) DKK Interest income Interest expenses Market value Net interest adjustments Dividend Total 2010 Net financials at amortised cost: Receivables from and payables to credit institutions and central banks 10,185 19,119-8, ,934 Loans and deposits 681, , , ,755 Bonds issued 0 11,049-11, ,049 Subordinated debt 0 53,379-53, ,379 Other net financials Total 692, , , ,012 Net financials at fair value: Trading portfolio 91, ,951 43,433 1, ,664 Financial instruments 6, ,642 2, ,801 Total 98, ,593 45,592 1, ,465 Total net income from net financials 791, , ,605 45,592 1, , Danske Andelskassers Bank A/S 2011 Annual Report

59 Notes Note 8 Staff costs and administrative expenses Group Parent DKK ' Staff costs 309, , , ,091 Other administrative expenses 196, , , ,622 Total 505, , , ,713 Staff costs Salaries 259, , , ,645 Pension 15,856 40,183 15,856 40,120 Social security expenses 33,790 31,371 33,790 31,326 Total 309, , , ,091 Of which salaries and remuneration for Board of Directors, Board of Executives and important risk takers: Board of Directors: 2011 Directors' Remuneration DKK '000 remuneration Audit committee Nomination committee committee Total Board of Directors: Chairman, Jakob Fastrup Deputy Chairman, Jens J. Hald Preben Arndal, Chairman of audit committee Kenneth Clausen Jens H. Ladefoged Jens Nørvang Madsen Hans Jørn Madsen Asger Pedersen Poul Weber Total 1, , Directors' Remuneration DKK '000 remuneration Audit committee Nomination committee committee Total Board of Directors: Chairman, Jakob Fastrup Deputy Chairman, Jens J. Hald Lasse B. Jørgensen Kenneth Clausen Jens H. Ladefoged Herluf C. Lund Hans Jørn Madsen Asger Pedersen Visti Pedersen Poul Weber Total 1, , Annual Report Danske Andelskassers Bank A/S 59

60 Notes Board of Executives:: DKK ' Jan Pedersen, CEO *) Contractual remuneration 3,195 1,784 Pension Total 3,540 1,978 Vagn T. Raun, CEO **) Contractual remuneration 3,307 3,362 Pension Total 3,581 3,628 *) Jan Pedersen was employed on 1 April **) Vagn T. Raun retired from the Board of Executives on 31 December Tax deduction for pay for Board of Executives 3,563 2,608 Other members of staff whose activities have a major influence on the bank's risk profile: Group Parent DKK ' Contractual remuneration 13,084 12,076 13,084 12,076 Pension 1,419 1,267 1,419 1,267 Total 14,503 13,343 14,503 13,343 Number of persons Pension conditions for Board of Directors, Board of Executives and special risk takers: Bestyrelse Direktion Pension None Defined contribution through pension insurance company, with contributions being expensed on an ongoing basis Annual pension None The bank contributes 11% of salary Særlige risikotagere Defined contribution through pension insurance company, with contributions being expensed on an on going basis The bank contributes 11% of salary The bank also has defined benefit pension obligations for former members of the Board of Executives. The actuarial liability is set out in note 26. Group Parent The average number of employees in the financial year converted to full-time equivalents Danske Andelskassers Bank A/S 2011 Annual Report

61 Notes Administrative expenses: Group Parent DKK ' IT expenses 95, ,288 95, ,288 marketing 13,326 17,759 13,326 17,759 Cost of premises 28,681 31,207 28,681 31,207 Staff, training and travel expenses 12,667 13,547 12,667 13,547 Office expenses 9,752 10,301 9,752 10,301 Other administrative expenses 36,206 31,381 39,331 32,520 Total 196, , , ,622 Auditors' fee: Group Parent DKK ' Total fees to the auditors appointed by the general meeting who perform the statutory audit 3,442 1,317 3,381 1,256 Of which statutory audit 998 1, ,089 Of which fees for other assurance engagements 2, , Of which fees for tax consultancy Of which fees for other services Note 9 Depreciation, amortisation and impairment of property, plant and equipment and intangible assets Group Parent DKK ' Depreciation of owner-occupied properties for the year 1,137 2, ,604 Impairment of owner-occupied properties for the year 9, , Reversals for the year of previous impairment of owner-occupied properties -4, ,569 0 Depreciation of equipment for the year 12,977 15,163 12,893 15,071 Total 18,685 18,337 10,082 18,245 Note 10 Other operating expenses Group Parent DKK ' Contribution to sector solutions (Bank Package I) 0 58, ,149 Contribution to Deposit Guarantee Fund , ,880 Rationalisation costs 29,081 10,700 29,081 10,700 Company conversion 18, ,237 0 Other expenses 4,244 5,489 3,985 5,466 Total 50, ,218 50, , Annual Report Danske Andelskassers Bank A/S 61

62 Notes Note 11 Impairment of and provisions for loans and guarantees Group Parent DKK ' Individual impairment: Impairment, beginning of year 1,107, ,386 1,107, ,386 Impairment and value adjustments during the year 454, , , ,549 Reversal of impairment in respect of previous financial years 193, , , ,207 Bad debts (written off) for which individual impairment/provisions have been made 294, , , ,715 Other changes , ,412 Impairment, end of year 1,073,404 1,107,601 1,073,404 1,107,601 Total loans and guarantee debtors on which individual impairment/provisions have been made (calculated before impairment/provisions) 1,929,121 1,991,148 1,929,121 1,991,148 Group-based impairment: Impairment, beginning of year 33,798 45,575 33,798 45,575 Impairment and value adjustments during the year 13,459 9,520 13,459 9,520 Reversal of impairment in respect of previous financial years 15,405 21,514 15,405 21,514 Other changes Impairment, end of year 31,758 33,798 31,758 33,798 Total loans and guarantee debtors on which groupbased impairment/provisions have been made (calculated before impairment/provisions) 6,101,100 6,338,177 6,101,100 6,338,177 Impairment and provisions Impairment and value adjustments during the year 467, , , ,069 Reversal of impairment in respect of previous financial years 208, , , ,721 Other changes -11,272-12,404-11,272-12,404 Bad debts (written off) for which no individual impairment/provision has been made 132,455 32, ,455 32,459 Received in respect of bad debts previously written off 2,805 2,137 2,805 2,133 Total 377, , , ,270 Note 12 Tax Group Parent DKK ' Calculated income tax for the year 1, ,017 0 Change in deferred tax -60,261-61,571-61,196-61,970 Adjustment of calculated tax in respect of previous years -4,972 4,531-4,972 4,531 Total -64,216-57,040-65,151-57, Danske Andelskassers Bank A/S 2011 Annual Report

63 Notes Group Parent Effective tax rate Current tax rate 25.0% 25.0% 25.0% 25.0% Non-taxable income and non-deductible expenses -0.5% 0.6% -0.5% 0.6% Adjustment of calculated tax in respect of previous years 2.1% -1.9% 2.1% -1.9% Effective tax rate for the year 26.6% 23.7% 26.6% 23.7% Note 13 Receivables from credit institutions and central banks Group Parent DKK ' Receivables at notice from central banks 580, , , ,000 Receivables from credit institutions 366, , , ,610 Total 946,641 1,325, ,641 1,324,610 Broken down by term to maturity: Demand deposits 366, , , ,610 Up to 3 months 580, , , ,000 Between 3 months and 1 year Between 1 and 5 years Over 5 years Total 946,641 1,325, ,641 1,324,610 Note 14 Loans at amortised cost Loans by category Group Parent DKK ' Overdraft facilities 4,512,261 4,831,924 4,548,642 4,866,974 Mortgages 23,674 27,307 23,674 27,307 Other loans 4,378,082 4,703,163 4,378,082 4,703,163 Total 8,914,017 9,562,394 8,950,398 9,597,444 Of which subordinated debt Of which genuine sales and repurchase transactions Loans and other receivables broken down by term to maturity: On demand 2,654,052 2,879,189 2,690,433 2,914,239 Up to 3 months 633, , , ,718 Between 3 months and 1 year 1,212,398 1,323,050 1,212,398 1,323,050 Between 1 and 5 years 2,934,818 3,062,153 2,934,818 3,062,153 Over 5 years 1,479,075 1,523,284 1,479,075 1,523,284 Total 8,914,017 9,562,394 8,950,398 9,597, Annual Report Danske Andelskassers Bank A/S 63

64 Notes Note 15 Bonds at fair value Group Parent DKK ' Government bonds Mortgage credit bonds 2,619,942 2,547,386 2,619,942 2,547,386 Other bonds 128, , , ,208 Total 2,748,150 2,681,640 2,748,150 2,681,640 All bonds are included in the bank's trading portfolio and are measured at fair value. As security for balances with other banks, the bank has deposited bonds with a nominal value of DKK 300m, corresponding to a market value of DKK 306m. Note 16 Shares etc. Group Parent DKK ' Shares/investment funds listed on Nasdaq OMX Copenhagen A/S" 27,866 52,457 27,866 52,457 Shares/investment funds listed on other stock xchanges 62 9, ,566 Unlisted shares recognised at fair value 584, , , ,980 Total 612, , , ,003 Other shares at fair value in accordance with fair value option Total acquisition cost, beginning of year 322, , , ,257 Addition 52,795 3,991 52,795 3,991 Disposal 16,285 14,603 16,285 14,603 Total acquisition cost, end of year 359, , , ,645 Revaluation and impairment, beginning of year 257, , , ,014 Net movements during the year -31,988-11,400-31,988-11,400 Revaluation and impairment, end of year 225, , , ,614 Carrying amount, end of year 584, , , ,259 Trading portfolio 27,717 54,744 27,717 54,744 Other shares at fair value in accordance with the fair value option 584, , , ,259 Total shares 612, , , , Danske Andelskassers Bank A/S 2011 Annual Report

65 Notes Note 17 Equity investments in associates (Group) DKK '000 Domicile Ownership share Activity Equity, end of 2011 Net profit/ loss for the year Value adjustment for the year Garanti Invest A/S *) København 20.19% Financial products 110,523-2, GrønlandsBANKEN *) Nuuk 14.96% Banking 810,213 64,108 5,973 Vinderup Bank *) Vinderup 26.55% Banking 80,734-4,275 1,241 Total 6,708 *) Based on expected equity and net profit/loss DKK ' Value of GrønlandsBANKEN at official closing prices 79, ,923 Value of Vinderup Bank at official closing prices 13,190 - Group Parent DKK ' Cost, beginning of year 84,459 84,457 84,459 84,457 Addition during the year 20, ,128 2 Disposal during the year Cost, end of year 104,587 84, ,587 84,459 Revaluation and impairment, beginning of year 53,103 41,739 53,103 41,739 Value adjustment during the year 6,708 11,364 6,708 11,364 Reversed revaluation and impairment Revaluation, end of year 59,811 53,103 59,811 53,103 Book holding, end of year 164, , , ,562 Of which credit institutions 142, , , ,249 Note 18 Equity investments in associates (Parent) DKK Domicile Activity Ownership share Equity, end of 2011 Net profit/ loss for the year SDA Invest A/S Viborg Investment % 1,554 8 DAB Invest A/S Viborg Properties % 45, DAB Invest 2 A/S Viborg Properties % DAB Invest 3 A/S Viborg Properties % -3,712-4,777 SDA Bolig A/S Viborg Estate agent % Annual Report Danske Andelskassers Bank A/S 65

66 Notes Group Parent DKK ' Cost, beginning of year 62,655 62,655 62,655 62,655 Addition during the year Disposal during the year Cost, end of year 62,655 62,655 62,655 62,655 Revaluation and impairment, beginning of year -14,321-14,511-14,321-14,511 Value adjustment during the year -4, , Reversed revaluation and impairment Revaluation, end of year -18,871-14,321-18,871-14,321 Book holding, end of year 43,784 48,334 43,784 48,334 Of which credit institutions Note 19 Land and buildings Group Parent DKK Owner-occupied properties Reassessed value, beginning of year 155, ,415 90,774 97,568 Addition during the year, including improvements 12,335 1, ,652 Disposal during the year 12,151 11,755 4,968 11,755 Depreciation 1,137 2, ,604 Value changes recognised directly in equity during the year Impairment for the year 9, , Reversals for the year of impairment in respect of previous years 4, ,569 0 Other adjustments 0 7, ,311 Reclassified as investment properties -4, ,666 0 Reclassified as available for sale -11, Reassessed value, end of year 134, ,857 87,505 90,774 Fair value is calculated using the ROC method, which takes rent income, costs and return requirements into account. The group applies its own valuation model for establishing fair value. This model is based on a geographic division of properties, including the estimated market rent of the area in question. The return requirement is based on the interest on a mortgage credit bond with a term to maturity of 30 years plus %, depending on the geographical location of the property. Outside experts are used to establish fair value in special cases. The return requirement for owneroccupied properties is in the 5.5%-10.2% range. 66 Danske Andelskassers Bank A/S 2011 Annual Report

67 Notes Group Parent DKK Investment properties Fair value, beginning of year 16,443 9, Reclassified from assets in temporary possession 5, Addition during the year, including improvements 4, Disposal during the year 0 6,694 1,666 0 Fair value, end of year 108 5, Dagsværdi værdi ultimo 20,914 16,443 1,666 0 Income and costs arising from investment properties comprise: Group Parent DKK ' Rent income 1,083 1, Operating expenses The fair value of investment properties is generally calculated on the basis of the property's expected return and a rate of return fixed individually for each property. The rate of return, which depends on location, property type and possible uses, fitting-up, standard of maintenance and the terms of the lease, is in the 5.5%-10.2% range. Group Parent DKK ' Properties available for sale Cost, beginning of year Reclassified from owner-occupied properties 11, Addition during the year Disposal during the year Carrying amount, end of year 11, Properties available for sale comprise domicile properties where the bank has previously carried out banking activities. Note 20 Other property, plant and equipment Group Parent DKK ' Cost: Total cost, beginning of year 124, , , ,566 Addition during the year 5,146 5,412 5,146 5,412 Disposal during the year 10,493 41,059 10,493 41,059 Total cost, end of year 119, , , , Annual Report Danske Andelskassers Bank A/S 67

68 Notes Group Parent DKK ' Depreciation and impairment: Depreciation and impairment, beginning of year 94, ,195 94, ,195 Depreciation for the year 12,977 14,595 12,893 14,504 Impairment for the year Reversals for the year of impairment in respect of previous years plus reversal of depreciation and impairment of assets sold or withdrawn from operation during the year 8,861 39,133 8,861 38,783 Total depreciation and impairment, end of year 98,340 94,224 98,515 94,483 Book holding, end of year 21,232 30,695 21,057 30,436 Note 21 Deferred tax assets and liabilities Group Parent DKK ' Deferred tax assets/liabilities, beginning of year 179, , , ,833 Change in deferred tax 61,995 61,571 61,851 61,310 Deferred tax assets/deferred tax liabilities, end of year 241, , , ,143 Group DKK '000 Deferred tax assets Deferred tax liabilities Deferred tax, net 2011 Property, plant and equipment 3, ,557 Loans 6, ,215 Investments 0 9,354-9,354 Pension obligations 6, ,869 Tax loss 228, ,643 Other 5, ,226 Total 250,510 9, ,156 DKK '000 Deferred tax assets Deferred tax liabilities Deferred tax, net 2010 Property, plant and equipment 3, ,911 Loans 5, ,007 Investments 0 9,854-9,854 Pension obligations 11, ,019 Tax loss 163, ,697 Other 5, ,381 Total 189,015 9, ,161 It is expected to be possible to use the deferred tax asset in respect of the tax loss within the next 3-5 years based on expectations regarding core earnings. 68 Danske Andelskassers Bank A/S 2011 Annual Report

69 Notes Parent DKK '000 Deferred tax assets Deferred tax liabilities Deferred tax, net 2011 Property, plant and equipment 3, ,557 Loans 6, ,215 Investments 0 9,354-9,354 Pension obligations 6, ,869 Tax loss 227, ,481 Other 5, ,226 Total 249,348 9, ,994 DKK '000 Deferred tax assets Deferred tax liabilities Deferred tax, net 2010 Property, plant and equipment 3, ,911 Loans 5, ,007 Investments 0 9,854-9,854 Pension obligations 11, ,019 Tax loss 162, ,679 Other 5, ,381 Total 187,997 9, ,143 Note 22 Assets in temporary possession Group Parent DKK ' Cost, beginning of year 34,490 25,667 34,490 25,667 Reclassified as investment properties 0-5, ,806 Addition during the year 11,279 31,019 11,279 31,019 Disposal during the year 17,922 16,390 17,922 16,390 Carrying amount, end of year 27,847 34,490 27,847 34,490 Assets in temporary possession encompass property acquired as part of the settlement of customers. It's the intention to sell off this property within 12 months Annual Report Danske Andelskassers Bank A/S 69

70 Notes Note 23 Payables to credit institutions and central banks Group Parent DKK ' Payables to central banks Payables to credit institutions 702,060 1,484, ,060 1,484,525 Total 702,060 1,484, ,060 1,484,525 Broken down by term to maturity: DKK ' Debt payable on demand 702, , , ,308 Up to 3 months Between 3 months and 1 year Between 1 and 5 years 0 516, ,217 Over 5 years Total 702,060 1,484, ,060 1,484,525 Note 24 Deposits Broken down by category: Group Parent DKK ' On demand 7,082,859 7,586,926 7,086,370 7,590,268 With notice 430, , , ,121 Time deposits 201, , , ,820 Special deposit types 1,299,161 1,382,722 1,299,161 1,382,722 Total 9,013,842 9,930,589 9,017,353 9,933,931 Broken down by term to maturity: Group Parent DKK ' On demand 7,316,868 7,822,084 7,320,379 7,825,426 Up to 3 months 480, , , ,290 Between 3 months and 1 year 165, , , ,333 Between 1 and 5 years 417, , , ,034 Over 5 years 633, , , ,848 Total 9,013,842 9,930,589 9,017,353 9,933,931 Note 25 Bonds issued at amortised cost Group Parent DKK ' Bonds falling due within 1 year Bonds falling due within 1-5 years 2,016,294 1,015,860 2,016,294 1,015,860 Total 2,016,294 1,015,860 2,016,294 1,015, Danske Andelskassers Bank A/S 2011 Annual Report

71 Notes Note 26 Provisions Provisions for pensions and similar obligations Group Parent DKK ' Provisions, beginning of year 42,972 35,971 42,972 35,971 Change -14,133 8,106-14,133 8,106 Provisions used 1,362 1,105 1,362 1,105 Provisions, end of year 27,477 42,972 27,477 42,972 The obligation concerns former members of the Board of Executives. The obligation is determined on the basis of actuarial discounting to net present value of the pension obligation. The development in the provision is described in further detail in the management's review. Provisions for guarantee losses Group Parent DKK ' Impairment, beginning of year 123,750 82, ,750 82,849 Impairment and value adjustments during the year 10,558 65,450 10,558 65,450 Reversal of impairment in respect of previous financial years 18,241 24,549 18,241 24,549 Written off in the financial year 101, ,846 0 Impairment, end of year 14, ,750 14, ,750 Of which impairment on Bank Package I 0 101, ,846 Other provisions Group Parent DKK ' Provisions, beginning of year 14,463 5,989 13,248 5,989 Change -6,493 8,474-5,278 7,259 Provisions, end of year 7,970 14,463 7,970 13,248 Other provisions comprise long-term staff payments concerning anniversary bonuses where one month's salary is paid to employees celebrating 25 and 40 years of employment. Anniversary payments amounted to DKK 5,442k at the end of Other obligations comprise costs provided for the closure of the bank's branches in The obligation amounted to DKK 2,528k at the end of Broken down by term to maturity 2011 Between 3 Between 1 Up to months and Over 5 DKK '000 3 months and 1 year 5 years years Total Provisions for pensions 341 1,022 7,151 18,964 27,477 Provisions for guarantee losses 14, ,221 Other provisions 199 2, ,018 7,970 Total 14,760 3,162 7,764 23,982 49, Up to 3 months Between 3 months and 1 year Between 1 and 5 year Over 5 years DKK '000 Total Provisions for pensions ,801 36,067 42,972 Provisions for guarantee losses 101,869 21, ,750 Other provisions 3,089 1,739 2,589 7,046 14,463 Total 105,234 24,448 8,390 43, , Annual Report Danske Andelskassers Bank A/S 71

72 Notes Note 27 Subordinated debt DKK '000 Nominal Interest rate Due Currency NOK 320,000 Nibor , ,060 Bank Package II 399, , ,017 Total 705, ,077 Calculation of the core capital includes 628, ,077 Interest paid DKK 42,885 43,298 NOK 11,423 10,081 Total 54,308 53,379 Interest conditions if loan is not redeemed when due: NOK 320,000: Loan due on and cannot be extended. DKK 399,600: Loan can be redeemed in the period at a rate of 105 and subsequently at a rate of 110. Note 28 Contingent liabilities Guarantees and other liabilities Group Parent DKK ' Guarantees: Financial guarantees 428,002 1,205, ,002 1,205,955 Loss guarantees for mortgage loans 726, , , ,392 Registration and conversion guarantees 161, , , ,939 Other contingent liabilities 435, , , ,282 Total 1,751,417 2,372,568 1,751,417 2,372,568 Operating lease commitments Group Parent DKK ' Danske Andelskassers Bank A/S and the group have concluded a number of operating leases, under which lease payments must be made for a number of years. The leases concern equipment. They have not been recognised in the balance sheet. The maturity distribution of the lease payments is as follows: 0-1 year 2,021 2,218 2,021 2,218 Over 1 year 3,727 1,067 3,727 1,067 Total 5,748 3,285 5,748 3,285 Paid lease commitments for the year 1,596 2,218 1,596 2, Danske Andelskassers Bank A/S 2011 Annual Report

73 Notes Note 29 Related parties DKK '000 Associates Board of Directors Board of Executives 2011 Assets: Receivables from credit institutions Loans 0 42,543 1,600 Equity and liabilities: Payables to credit institutions 333, Deposits 6,017 10,352 2,061 Off balance sheet items Guarantees 0 9, Income statement: Interest income 0 1, Interest expenses 3, Fees 3, Market value adjustment, shares Market value adjustment, associates 6, Unutilised credit facilities 0 12, Collateral, market value 306, DKK '000 Associates Board of Directors Board of Executives 2010 Assets: Receivables from credit institutions Loans 13 20,787 1,618 Equity and liabilities: Payables to credit institutions 152, Deposits 15,161 12,696 1,509 Off balance sheet items Guarantees 0 17,073 1,040 Income statement: Interest income 32 1, Interest expenses 2, Fees 3, Market value adjustment, shares 3, Market value adjustment, associates 11, Unutilised credit facilities 0 12, Collateral 330, All transactions with related parties have been conducted at arm's length. In addition to the above transactions, transactions with the Board of Directors and the Board of Executives and their related parties comprise the customary remuneration which is specified in note Annual Report Danske Andelskassers Bank A/S 73

74 Notes Note 30 Information on fair value Financial assets and liabilities are measured in the balance sheet at fair value or amortised cost. The fair value is the amount at which a financial asset can be traded or the amount at which a liability can be realised between qualified, willing and independent parties. The fair value can be the equity value if the equity value is calculated on the basis of underlying assets and liabilities measured at fair value. The following hierarchy can be used to establish the fair value of financial instruments: Level 1: Level 2: Level 3: Observable prices in an active market for identical financial instruments Valuation methods primarily based on observable market data Valuation methods essentially based on non-observable market data Shares, bonds and derivative financial instruments are measured at fair value so that the recognised values correspond to fair values. For listed shares and bonds the fair value is determined using the closing price at the balance sheet date. Other shares are sector shares in enterprises with which the bank partners in terms of products, payment services and administration etc. Here, the fair value is primarily based on the prices at which the shares, under the shareholders' agreements, were to be traded if they were sold at the balance sheet date. For loans, the impairment is assessed to correspond to changes in the credit quality, and the difference is thus assessed to be fees and commission received as well as interest receivable which does not fall due for payment until after the end of the financial year, and for fixed-rate loans also the interest-level dependent market value adjustment. The fair value of receivables from credit institutions and central banks is determined according to the same method as loans although no impairment has been carried out of receivables from credit institutions and central banks. Bonds issued and subordinated debt are measured at amortised cost. The difference between the carrying amount and fair value is interest due which does not fall due for payment until after the end of the financial year and costs and premium amortised over the term of the loan. For floating-rate financial liabilities such as loans and payables to credit institutions measured at amortised cost, the difference at fair values is interest due which does not fall due for payment until after the end of the financial year. For fixed-rate financial liabilities such as loans and payables to credit institutions measured at amortised cost, the difference at fair value is interest due which does not fall due for payment until after the end of the financial year and the interest-level dependent market value adjustment. 74 Danske Andelskassers Bank A/S 2011 Annual Report

75 Notes Net financials are included in the balance sheet at either fair value or amortised cost. The following table breaks the items down by valuation method Amortised DKK '000 Fair value cost 2011 Financial assets Cash balance and demand deposits with central banks 0 304,052 Receivables from credit institutions and central banks 0 946,641 Loans and other receivables at amortised cost 0 8,914,017 Bonds at fair value 2,748,150 0 Shares etc. 612,498 0 Positive market value of derivative financial instruments 158,438 0 Total 3,519,086 10,164,710 Financial liabilities Payables to credit institutions and central banks 0 702,060 Deposits and other payables 0 9,013,842 Bonds issued at amortised cost 0 2,016,294 Subordinated debt 306, ,430 Negative market value of derivative financial instruments 151,983 0 Total 458,799 12,130,626 DKK '000 Fair value Amortised cost 2010 Financial assets Cash balance and demand deposits with central banks 0 116,307 Receivables from credit institutions and central banks 0 1,325,115 Loans and other receivables at amortised cost 0 9,562,394 Bonds at fair value 2,681,640 0 Shares etc. 635,003 0 Positive market value of derivative financial instruments 161,441 0 Total 3,478,084 11,003,816 Financial liabilities Payables to credit institutions and central banks 0 1,484,525 Deposits and other payables 0 9,930,589 Bonds issued at amortised cost 0 1,015,860 Subordinated debt 305, ,017 Negative market value of derivative financial instruments 169,490 0 Total 474,550 12,828, Annual Report Danske Andelskassers Bank A/S 75

76 Notes Listed prices level 1 Observable prices level 2 Non-observable prices level 3 DKK '000 Total 2011 Financial assets: Bonds at fair value 2,635, , ,748,150 Shares etc. 27, , ,498 Positive market value of derivative financial instruments 0 158, ,438 Total 2,663, , ,570 3,519,086 Financial liabilities: Subordinated debt 0 306, ,816 Negative market value of derivative financial instruments 0 151, ,983 Total 0 458, ,799 Noterede priser niveau 1 Observerbare priser niveau 2 Ikke- observer-bare priser niveau 3 DKK '000 I alt 2010 Financial assets: Bonds at fair value 2,681, ,681,640 Shares etc. 62, , ,003 Positive market value of derivative financial instruments 0 161, ,441 Total 2,743, , ,980 3,478,084 Financial liabilities: Subordinated debt 0 305, ,060 Negative market value of derivative financial instruments 0 169, ,490 Total 0 474, ,550 Financial instruments recognised at amortised cost info on fair value DKK '000 " Carrying amount" Fair value 2011 Financial assets: Cash balance and demand deposits with central banks 304, ,052 Receivables from credit institutions 946, ,641 Loans and other receivables at amortised cost 8,914,017 8,910,999 Total 10,164,710 10,161,692 Financial liabilities: Payables to credit institutions 702, ,060 Deposits and other payables 9,013,842 9,014,519 Bonds at amortised cost 2,016,294 2,016,294 Subordinated debt 398, ,600 Total 12,130,626 12,132, Danske Andelskassers Bank A/S 2011 Annual Report

77 Notes DKK '000 Carrying amount Fair value 2010 Financial assets: Cash balance and demand deposits with central banks 116, ,307 Receivables from credit institutions 1,325,115 1,325,115 Loans and other receivables at amortised cost 9,562,394 9,560,662 Total 11,003,816 11,002,084 Financial liabilities: Payables to credit institutions 1,484,525 1,484,525 Deposits and other payables 9,930,589 9,929,318 Bonds at amortised cost 1,015,860 1,016,967 Subordinated debt 398, ,600 Total 12,828,991 13,135,470 Note 31 Security In connection with the normal execution of trade in financial contracts, the group has assets held in margin accounts with credit institutions. Danske Andelskassers Bank has not furnished its own properties as security. However, security has been furnished for mortgage debt in properties taken over in connection with the settlement of customer commitments. Mortgage debt is entered in the balance sheet under 'Liabilities acquired on a temporary basis'. Danske Andelskassers Bank is a party to various pending lawsuits. The outcome of these lawsuits will not affect the financial position of the Amalgamation. Note 32 Other binding agreements Danske Andelskassers Bank A/S and its subsidiaries are jointly registered for VAT. Jointly registered enterprises are jointly and severally liable for the total payroll tax and VAT. Danske Andelskassers Bank A/S uses Bankernes EDB-Central (BEC) as its supplier of IT solutions. BEC's Articles of Association stipulate that Danske Andelskassers Bank A/S may cancel its BEC membership at five years' notice to expire at the end of a financial year. If the membership is terminated for any other reason on account of Danske Andelskassers Bank A/S, withdrawal compensation must be paid to BEC which is specified in further detail in BEC's Articles of Association. If a bank merges and ceases to operate as an independent bank, its membership of BEC expires without notice. However, it may be possible to arrange for a transitional scheme to be put in place Annual Report Danske Andelskassers Bank A/S 77

78 Notes Note 33 Risk management Danske Andelskassers Bank is exposed to various types of risk. The most important risk types are: Credit risk: the risk of loss as a result of a debtor defaulting on his payment obligation completely or partly Market risk: the risk of loss as a result of the fair value of the group's assets and liabilities changing owing to market conditions Liquidity risk: the risk of the group not being able to meet its payment obligations from normal liquidity reserves Operational risk: the risk of financial loss as a result of errors in internal processes, human error or system errors, or loss as a result of external conditions. Subsequent notes deal with the group's exposures and risks, including credit, market, liquidity and operational risks. Note 34 Credit risk The credit risk is the risk that interest and instalments on a commitment are not paid due to the debtor's unwillingness and inability to repay the loan as agreed. Commitments comprise loans, guarantees and receivables from other credit institutions. One of our core areas is to offer advice on and grant loans, credits and other financial products to private customers and small and medium-sized companies. The bank believes that it has a moral responsibility as a player in society. Therefore, the granting of credit is based on ethical, moral and environmental factors, which means that no loans are granted for purposes in violation of such factors or in non-compliance with statutory requirements. Consequently, there are transactions which we do not want to perform and customers with whom we do not wish to collaborate. Lending is based on sound risk-taking and risk diversification, with the willingness to take a risk being precisely matched with the borrower's financial position. This means that: The bank will only enter into transactions that are compatible with good business practice. The bank will only assume credit risks if it can be demonstrated that the customer has the required ability and willingness to repay the loan. The bank will finance a business' operations and investments, but not several years of losses. The bank will lend funds to private individuals and families with a healthy balance between their assets, disposable income and actual personal expenditure. We will not fund personal expenditure which, over a number of years, is higher than the particular person's income and assets can sustain. The bank will only fund speculative transactions if the customer can understand and handle the transaction himself. The customer must therefore be able to bear any losses resulting from the transaction. Funding of speculative transactions is generally provided on a fully covered basis. Furthermore, as a general rule, the bank takes a cautious approach when lending money to customers who do not bank exclusively with Danske Andelskassers Bank. The total credit risk is managed in accordance with policies and frameworks laid down and adopted by the Board of Directors, which ensure a balanced lending system for the Board of Executives through delegation. Responsibility for monitoring, overall risk taking and reporting to the bank's management is located centrally with Group Credit. Danske Andelskassers Bank wants to spread its credit risk between loans to private customers and loans to business customers by maintaining a healthy balance between these two main customer groups at all times. It wants to keep the ratio between business and private customers at 50-60% business and 50-40% private. The banks wants to spread its credit risk on business loans by spreading the loans across industries as appropriate. It does not, for example, want lending to any one industry to exceed more than 20% of total lending. The bank seeks to reduce lending to industries which have historically affected the loss percentage disproportionately. 78 Danske Andelskassers Bank A/S 2011 Annual Report

79 Notes Credit management and monitoring The overall credit policy lays down the framework for the employees' credit lending to the bank's customers and is aimed at ensuring a healthy balance between lending, earnings and risk. Generally, the quality of the loan portfolio is given higher priority than growth in lending. The credit policy is based on the bank's strategy plan applicable at any time and is continuously revised to reflect economic trends, current legislation and executive orders as well as current guidelines issued by the Danish Financial Supervisory Authority. The objective of the credit policy is to ensure that lending to customers less costs and loss risk generates a satisfactory return on the lended capital. The overall credit policy is supplemented by retail business procedures which contain a detailed and operational description of the current requirements as to establishing creditworthiness, including the ability and willingness to meet existing and future obligations towards Danske Andelskassers Bank. The management and monitoring of the credit policy are handled locally by the bank's Group Credit department which, as the controlling unit, is organisationally separated from the executing units. There is ongoing reporting on the monitoring to the Board of Executives and the Board of Directors at board meetings. Loans and credits are granted locally if the commitment does not exceed the branch's authority. Large commitments are authorised by Group Credit or the Board of Executives and the Board of Directors depending on the size of the commitment. Group Credit is responsible for authorising large commitments and high-risk commitments and for monitoring compliance with the credit policy and the creditworthiness of the loan portfolio etc. Impairment All significant loans with an objective indication of impairment (OII) are reviewed individually, and other loans are reviewed in groups. All loans with OII that are not impaired are transferred to the group assessment along with other loans assessed in groups. Danske Andelskassers Bank A/S uses the segmentation model developed by the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark. The impairment is calculated as the difference between the carrying amount of loans at amortised cost and the present value of future payments where the realisable value of security, dividend and the customer's ability to pay is taken into account. A commitment does not have to be in default to be impaired. When impairing the commitment it is assessed if the interest rate should be reset. Impairment is made of individually assessed loans when there is an objective indication of impairment which affects the expected future payments. An objective indication of impairment of a loan or a guarantee exists when one or more of the following events have occurred: 1) The borrower is in serious financial difficulties 2) The borrower is in breach of contract, e.g. he has failed to pay instalments and interest 3) The borrower is granted a relief in respect of the loan terms, which would not have been granted if it had not been for the financial difficulties of the borrower 4) The borrower is likely to go bankrupt or be party to some other form of financial reorganisation. Danske Andelskassers Bank A/S has not developed any scoring models, but assigns WEAK or OII codes to commitments on the basis of manual and automatic criteria. Based on these registrations, a manual review of marked commitments is carried out in order to isolate commitments for impairment. Group impairment is made when objective indicators show that the expected future losses exceed the loss expected on the date of establishment. Apart from objective indicators for the group, changes in group impairment are primarily brought about by customers moving to other groups or being impaired individually. Commitments for which losses are deemed unavoidable are written off on a continuous basis Annual Report Danske Andelskassers Bank A/S 79

80 Notes Credit risk credit exposure Gross exposure and impairment by industry (Group) Gross exposure % Impairment % DKK ' Public authorities 0 0% 0 0% Business: Agriculture, hunting and forestry 2,214,943 19% 277,639 25% Industry and raw material extraction 281,758 2% 40,248 4% Energy supply 81,748 1% 2,061 0% Building and construction industry 551,069 5% 62,531 6% Trade 868,171 7% 55,622 5% Transport, restaurant and hotel industry 424,184 4% 34,175 3% Information and communication 67,439 1% 5,697 1% Finance and insurance 849,915 7% 203,513 18% Real property 882,096 7% 146,299 13% Other business 1,192,080 10% 114,048 10% Business, total 7,413,403 63% 941,833 85% Private 4,382,054 37% 163,329 15% Total 11,795, % 1,105, % Of which group-based impairment 31,758 Impairment of sector solutions included in total impairment (Bank Package I) 0 Gross exposure % Impairment % DKK ' Public authorities 0 0% 0 0% Business: Agriculture, hunting and forestry 2,481,852 19% 175,130 15% Industry and raw material extraction 337,245 3% 49,499 5% Energy supply 76,669 1% 2,040 0% Building and construction industry 775,984 6% 97,701 9% Trade 970,028 7% 90,525 8% Transport, restaurant and hotel industry 516,725 4% 37,728 3% Information and communication 70,413 0% 10,107 1% Finance and insurance 507,549 4% 214,714 19% Real property 914,657 7% 174,010 15% Other business 1,308,694 10% 107,256 9% Business, total 7,894,845 61% 956,330 84% Private 5,125,052 39% 182,687 16% Total 13,084, % 1,141, % Of which group-based impairment 33,798 Impairment of sector solutions included in total impairment (Bank Package I) 101, Danske Andelskassers Bank A/S 2011 Annual Report

81 Notes Gross exposure and impairment by industry (Parent) Gross exposure % Impairment % DKK ' Public authorities 0 0% 0 0% Business: Agriculture, hunting and forestry 2,214,943 19% 277,639 25% Industry and raw material extraction 281,758 2% 40,248 4% Energy supply 81,748 1% 2,061 0% Building and construction industry 551,069 5% 62,531 6% Trade 868,171 7% 55,622 5% Transport, restaurant and hotel industry 424,184 4% 34,175 3% Information and communication 67,439 0% 5,697 1% Finance and insurance 849,915 7% 203,513 18% Real property 918,477 8% 146,299 13% Other business 1,192,080 10% 114,048 10% Business, total 7,449,784 63% 941,833 85% Private 4,382,054 37% 163,329 15% Total 11,831, % 1,105, % Of which group-based impairment 31,758 Impairment of sector solutions included in total impairment (Bank Package I) 0 Gross exposure % Impairment % DKK ' Public authorities 0 0% 0 0% Business: Agriculture, hunting and forestry 2,481,852 19% 175,130 15% Industry and raw material extraction 337,245 3% 49,499 5% Energy supply 76,669 1% 2,040 0% Building and construction industry 775,984 6% 97,701 9% Trade 970,028 7% 90,525 8% Transport, restaurant and hotel industry 516,725 4% 37,728 3% Information and communication 70,413 0% 10,107 1% Finance and insurance 507,549 4% 214,714 19% Real property 949,707 7% 174,010 15% Other business 1,308,694 10% 107,256 9% Business, total 7,994,866 61% 956,330 84% Private 5,125,052 39% 182,687 16% Total 13,119, % 1,139, % Of which group-based impairment 33,798 Impairment of sector solutions included in total impairment (Bank Package I) 101, Annual Report Danske Andelskassers Bank A/S 81

82 Notes Properties Danske Andelskassers Bank A/S's exposure to the property sector represents 7% of the total exposure, which is considerably below the limit set out in the Danish Financial Supervisory Authority's supervisory diamond. Loans to the property sector are spread between many single commitments and the average commitment amounts to DKK 1.6m. Agriculture Agriculture, hunting and forestry represent 19% of the total loan exposure. Traditionally, Danske Andelskassers Bank has had a relatively large number of loans to agricultural customers on account of the branches' geographical location. The immense crisis in the Danish agricultural sector has led to a considerable increase in losses and impairment of commitments with agricultural customers. The bank works closely with the customer to adapt his agricultural operations to create a basis for positive financial developments which are to ensure the continued existence of distressed agricultural customers in the long term. The economic trends for agriculture seem to be improving on the whole. The forecasts for terms of trade in several branches of production have improved, which indicates an improvement in earnings potential for the industry. Credit exposure is made up of the following balance sheet items and off balance sheet items Group Parent DKK ' Loans and other receivables 8,914,017 9,562,394 8,950,398 9,597,444 Guarantees 1,751,417 2,372,568 1,751,417 2,372,568 Maximum credit risk 10,665,434 11,934,962 10,701,815 11,970,012 Amortisation contribution 24,861 20,026 24,861 20,026 Corrective account, loans 1,090,941 1,017,649 1,090,941 1,017,649 Corrective account, guarantees 14, ,750 14, ,750 Gross exposure, loans and guarantees 11,795,457 13,096,387 11,831,838 13,131,437 Maximum credit risk by creditworthiness Group Parent DKK ' Impaired loans and guarantees 855, , , ,396 Loans with material weaknesses 2,513, ,640 2,513, ,640 Loans with slightly impaired or normal creditworthiness 7,321,141 10,764,952 7,357,522 10,800,002 Total exposure after impairment 10,690,295 11,954,988 10,726,676 11,990,038 Danske Andelskassers Bank A/S has not introduced credit scoring models, so the above division is based on the Danish Financial Supervisory Authority's categorisation. Individually impaired loans etc. Group Parent DKK ' Loans and receivables before impairment 1,929,121 1,746,997 1,929,121 1,746,997 Loans and receivables after impairment 855, , , ,396 Total impairment of loans and receivables, for which an objective indication of impairment exists 1,073,404 1,107,601 1,073,404 1,107, Danske Andelskassers Bank A/S 2011 Annual Report

83 Notes Breakdown by industry of individually impaired loans and guarantees Group Gross exposure Value of collateral Impairment Maximum credit risk after collateral DKK '000 Unsecured 2011 Public authorities Business: Agriculture, hunting and forestry 537, , , ,436 37,941 Industry and raw material extraction 67,683 16,827 50,856 39,395 11,461 Energy supply 1, ,573 1,568 5 Building and construction industry 106,563 37,181 69,382 58,986 10,396 Trade 117,968 53,891 64,077 50,601 13,476 Transport, restaurant and hotel industry 56,400 12,013 44,387 32,358 12,029 Information and communication 8,018 1,242 6,776 5,511 1,265 Finance and insurance 321,147 69, , ,929 48,626 Real property 331, , , ,841 16,438 Other business 180,603 53, , ,786 14,764 Business, total 1,729, ,843 1,085, , ,401 Private 199,466 35, , ,993 10,464 Total 1,929, ,852 1,250,269 1,073, ,865 Comparative figures for 2010 are not available. Parent Gross exposure Value of collateral Impairment Maximum credit risk after collateral DKK '000 Unsecured 2011 Public authorities Business: Agriculture, hunting and forestry 537, , , ,436 37,941 Industry and raw material extraction 67,683 16,827 50,856 39,395 11,461 Energy supply 1, ,573 1,568 5 Building and construction industry 106,563 37,181 69,382 58,986 10,396 Trade 117,968 53,891 64,077 50,601 13,476 Transport, restaurant and hotel industry 56,400 12,013 44,387 32,358 12,029 Information and communication 8,018 1,242 6,776 5,511 1,265 Finance and insurance 321,147 69, , ,929 48,626 Real property 331, , , ,841 16,438 Other business 180,603 53, , ,786 14,764 Business, total 1,729, ,843 1,085, , ,401 Private 199,466 35, , ,993 10,464 Total 1,929, ,852 1,250,269 1,073, ,865 Comparative figures for 2010 are not available Annual Report Danske Andelskassers Bank A/S 83

84 Notes Impairment account for individual impairment broken down by reason for impairment Group Exposure Exposure DKK before impairment Impairment before impairment Impairment Insolvency 53,431 39, ,596 58,982 Debt collection and suspension of payments 15,720 10,899 25,369 17,693 Other financial difficulties 1,859,970 1,023,070 1,621,032 1,030,926 Total 1,929,121 1,073,404 1,746,997 1,107,601 Parent Exposure Exposure DKK before impairment Impairment before impairment Impairment Insolvency 53,431 39, ,596 58,982 Debt collection and suspension of payments 15,720 10,899 25,369 17,693 Other financial difficulties 1,859,970 1,023,070 1,621,032 1,030,926 Total 1,929,121 1,073,404 1,746,997 1,107,601 Debts that are due, but not impaired Group Overdrawn by > DKK 1,000 Overdrawn by > DKK 1,000 DKK '000 Debt balance Debt balance 0-30 days 1,111,001 88,890 1,228, , days 13,496 2,160 41,454 6, days 5, ,168 2,785 > 90 days 1, ,761 22,444 Total 1,131,950 91,589 1,338, ,134 Parent Overdrawn by > DKK 1,000 Overdrawn by > DKK 1,000 DKK '000 Debt balance Debt balance 0-30 days 1,111,001 88,890 1,228, , days 13,496 2,160 41,454 6, days 5, ,168 2,785 > 90 days 1, ,761 22,444 Total 1,131,950 91,589 1,338, , Danske Andelskassers Bank A/S 2011 Annual Report

85 Notes Debts that are due, but not impaired, broken down by industry Group Overdrawn by > DKK 1,000 DKK ' days days days > 90 days Total 2011 Public authorities Business: Agriculture, hunting and forestry 12, ,553 Industry and raw material extraction 1, ,280 Energy supply Building and construction industry 2, ,987 Trade 6, ,318 Transport, restaurant and hotel industry 6, ,629 Information and communication Finance and insurance 8, ,942 Real property 2, ,031 Other business 7, ,819 Business, total 49,663 1, ,384 Private 39, ,205 Total 88,890 2, ,589 Comparative figures for 2010 are not available. Parent Overdrawn by > DKK 1,000 DKK ' days days days > 90 days Total 2011 Public authorities Business: Agriculture, hunting and forestry 12, ,553 Industry and raw material extraction 1, ,280 Energy supply Building and construction industry 2, ,987 Trade 6, ,318 Transport, restaurant and hotel industry 6, ,629 Information and communication Finance and insurance 8, ,942 Real property 2, ,031 Other business 7, ,819 Business, total 49,663 1, ,384 Private 39, ,205 Total 88,890 2, ,589 Comparative figures for 2010 are not available Annual Report Danske Andelskassers Bank A/S 85

86 Notes Description of security Loans and security are assessed on a continuous basis, and the measures available for reducing the risk of the bank's lending activities are used to the widest possible extent. The most common types of security in relation to private customer commitments are mortgages on real property, securities and cars. The most common types of security in relation to business customer commitments are mortgages on real property, securities, operating equipment, inventories, debtors and guarantees. IFRS requires that information is provided about types of security, security amounts and elements with a low degree of security. In connection with the reorganisation of the company and the preparation of the prospectus, it was discovered in April/May 2011 that the consolidated financial statements for 2010 must be revised according to IFRS. However, the bank's data systems supplier, Bankernes EDB-Central (BEC), is not able to restore and determine the historical carrying amounts of security retroactively, and it is therefore not possible to provide accurate information about security, security amounts and elements with a low degree of security for Collateral received and type Group Parent DKK ' Credit exposure 10,690,295-10,726,676 - Value of collateral 4,317,808-4,317,808 - Unsecured 6,372,487-6,408,868 - Unsecured as % of exposure 60% - 60% - Group Parent DKK ' Properties 2,701,666-2,701,666 - Right of subrogation to mortgage on real property 553, ,875 - Securities 202, ,297 - Movables, equipment, vehicles etc. 552, ,650 - Cash 106, ,860 - Other collateral 200, ,460 - Total collateral 4,317,808-4,317,808 - Comparative figures for 2010 are not available. 86 Danske Andelskassers Bank A/S 2011 Annual Report

87 Notes Collateral received broken down by industry Group DKK '000 Properties Right of subrogation to mortgage on real property Securities Movables, equipment, vehicles etc. Cash 2011 Public authorities Business: Agriculture, hunting and forestry 801,033 28,110 23,984 43,599 23,184 32, ,726 Industry and raw material extraction 49,032 27, ,698 1,426 2, ,010 Energy supply 16,046 6,891 1,800 2,247 2,143 15,641 44,768 Building and construction industry 124,815 28,467 7,165 23,397 6,035 14, ,889 Trade 160,073 65,395 33,033 67,226 1,850 9, ,756 Transport, restaurant and hotel industry 71,635 43,901 1,302 52,447 1,541 5, ,021 Information and communication 10,294 1,347 2,688 3, ,013 19,387 Finance and insurance 87,228 7,296 58,024 1,753 16,209 3, ,230 Real property 327,963 82,427 4,136 4,843 3,143 43, ,837 Other business 185,743 53,736 14,293 27,387 19,405 19, ,397 Business, total 1,833, , , ,487 75, ,782 2,802,021 Private 867, ,399 54, ,164 31,769 53,678 1,515,787 Total 2,701, , , , , ,460 4,317,808 Comparative figures for 2010 are not available. Total Parent DKK '000 Other collateral Properties Right of subrogation to mortgage on real property Securities Movables, equipment, vehicles etc, Cash Other collateral 2011 Public authorities Business: Agriculture, hunting and forestry 801,033 28,110 23,984 43,599 23,184 32, ,726 Industry and raw material extraction 49,032 27, ,698 1,426 2, ,010 Energy supply 16,046 6,891 1,800 2,247 2,143 15,641 44,768 Building and construction industry 124,815 28,467 7,165 23,397 6,035 14, ,889 Trade 160,073 65,395 33,033 67,226 1,850 9, ,756 Transport, restaurant and hotel industry 71,635 43,901 1,302 52,447 1,541 5, ,021 Information and communication 10,294 1,347 2,688 3, ,013 19,387 Finance and insurance 87,228 7,296 58,024 1,753 16,209 3, ,230 Real property 327,963 82,427 4,136 4,843 3,143 43, ,837 Other business 185,743 53,736 14,293 27,387 19,405 19, ,397 Business, total 1,833, , , ,487 75, ,782 2,802,021 Private 867, ,399 54, ,164 31,769 53,678 1,515,787 Total 2,701, , , , , ,460 4,317,808 Comparative figures for 2010 are not available. Total 2011 Annual Report Danske Andelskassers Bank A/S 87

88 Notes Credit exposure broken down by unsecured part Group DKK '000 Maximum credit risk Value of collateral Unsecured Unsecured % 2011 Public authorities % Business: Agriculture, hunting and forestry 1,937, , ,578 51% Industry and raw material extraction 241, , ,500 55% Energy supply 79,687 44,768 34,919 44% Building and construction industry 488, , ,649 58% Trade 812, , ,793 59% Transport, restaurant and hotel industry 390, , ,988 55% Information and communication 61,742 19,387 42,355 69% Finance and insurance 646, , ,172 73% Real property 735, , ,960 37% Other business 1,078, , ,635 70% Business, total 6,471,570 2,802,021 3,669,549 57% Private 4,218,725 1,515,787 2,702,938 64% Total 10,690,295 4,317,808 6,372,487 60% Comparative figures for 2010 are not available. Parent DKK '000 Maximum credit risk Value of collateral Unsecured Unsecured % 2011 Public authorities % Business: Agriculture, hunting and forestry 1,937, , ,578 51% Industry and raw material extraction 241, , ,500 55% Energy supply 79,687 44,768 34,919 44% Building and construction industry 488, , ,649 58% Trade 812, , ,793 59% Transport, restaurant and hotel industry 390, , ,988 55% Information and communication 61,742 19,387 42,355 69% Finance and insurance 646, , ,172 73% Real property 772, , ,341 40% Other business 1,078, , ,635 70% Business, total 6,507,951 2,802,021 3,705,930 57% Private 4,218,725 1,515,787 2,702,938 64% Total 10,726,676 4,317,808 6,408,868 60% Comparative figures for 2010 are not available. 88 Danske Andelskassers Bank A/S 2011 Annual Report

89 Notes Gross exposure (loans and guarantees) broken down by size 2011 Group Parent DKK '000 Exposure No. of customers Exposure No. of customers ,730 14, ,111 14, ,886,970 11,695 2,886,970 11, ,000 1,760,988 2,566 1,760,988 2,566 1,000-5,000 3,418,115 1,777 3,418,115 1,777 5,000-10,000 1,146, ,146, ,000-20,000 1,007, ,007, ,000-50, , , > 50, , ,311 9 I alt 11,795,457 31,135 11,831,838 31,138 Relative distribution % 48% 2% 48% % 38% 24% 38% 500-1,000 15% 8% 15% 8% 1,000-5,000 29% 6% 29% 6% 5,000-10,000 10% 1% 10% 1% 10,000-20,000 9% 0% 9% 0% 20,000-50,000 6% 0% 6% 0% > 50,000 6% 0% 6% 0% I alt 100% 100% 100% 100% 2010 DKK '000 Eksponering Antal kunder Eksponering Antal kunder ,354 17,267 97,404 17, ,058,069 12,456 3,058,069 12, ,000 1,899,173 2,777 1,899,173 2,777 1,000-5,000 4,053,418 2,107 4,053,418 2,107 5,000-10,000 1,273, ,273, ,000-20,000 1,058, ,058, ,000-50, , , > 50, , ,585 9 I alt 13,084,868 34,906 13,119,918 34, Annual Report Danske Andelskassers Bank A/S 89

90 Notes Relative distribution % 49% 1% 49% % 36% 23% 36% 500-1,000 15% 8% 14% 8% 1,000-5,000 31% 6% 31% 6% 5,000-10,000 10% 1% 10% 1% 10,000-20,000 8% 0% 8% 0% 20,000-50,000 6% 0% 6% 0% > 50,000 7% 0% 7% 0% Total 100% 100% 100% 100% Credit risk Net financials Group Parent DKK ' Receivables from credit institutions and central banks 946,641 1,325, ,641 1,325,115 Bonds at fair value 2,748,150 2,681,640 2,748,150 2,681,640 Total 3,694,791 4,006,755 3,694,791 4,006,755 Bond portfolio broken down by rating Group Parent DKK AAA 1,570,556 1,465,945 1,570,556 1,465,945 AA 24, ,111 24, ,111 A 752,595 10, ,595 10,395 BBB 286, , , ,964 BB CCC 0 2, ,005 CC Unrated 113, , , ,220 Total 2,748,150 2,681,640 2,748,150 2,681,640 Receivables from credit institutions broken down by product type Group Parent DKK ' Certificates of deposit 580, , , ,000 Periodic payment, Totalkredit 63,434 69,923 63,434 69,923 Deposits 0 290, ,000 Charged accounts (margin accounts) 70,950 85,920 70,950 85,920 Open accounts 232, , , ,272 Total 946,641 1,325, ,641 1,325, Danske Andelskassers Bank A/S 2011 Annual Report

91 Notes Receivables from credit institutions broken down by rating Group Parent DKK AAA 580, , , ,000 AA 6,160 5,031 6,160 5,031 A 352, , , ,578 BBB BB CCC CC Unrated 8, ,908 8, ,908 Total 946,641 1,325, ,641 1,325,115 Note 35 Market risk Trading in shares, bonds, currency and related financial instruments is a major business area. Consequently, the bank assumes market risks on a continuous basis. Market risk is the risk that the market value of the bank's assets and liabilities changes as a result of changes in the market conditions. The market risk occurs in the bank's open positions and can be divided into interest rate risk, currency risk, share risk and liquidity risk. In 2011, no significant changes were made to assumptions, objectives, policies and calculation models compared to last year. The market risk limits are laid down by the Board of Directors. The Board of Executives has transferred parts of the risk limit to the department of investment and international transactions. All risk limits are controlled by a function which is independent of business responsibilities and position management. Any excesses are reported to the Board of Executives and the Board of Directors according to an established frequency. At the end of 2011, the most important limits for the bank's portfolios were as follows: an interest rate risk of 9.5% when measured in relation to the bank's core capital, including deductions, in the event of an increase in the interest rate of 1%. a bond portfolio of DKK 6.8bn. a listed share portfolio of DKK 52.5m. The interest rate risk is calculated in accordance with the rules of the Danish Financial Supervisory Authority as the total loss risk in the event of a general negative change in interest rates of 1 percentage point. The total interest rate risk at the end of 2011 was calculated at 1.6% against 2.7% in Interest rate risk Group Parent DKK ' DKK 24,947 40,654 24,947 40,654 EUR CHF NZD NOK GBP Other Total 25,253 40,417 25,253 40, Annual Report Danske Andelskassers Bank A/S 91

92 Notes Currency risk Group Parent DKK ' Assets in foreign currency 239, , , ,262 Liabilities in foreign currency 361, , , ,777 Exchange rate indicator 1 29,048 59,826 29,048 59,826 Exchange rate indictor in % of core capital, incl. hybrid core capital after deductions Exchange rate indicator Share price exposure Group Parent DKK ' Shares in trading portfolio: Listed shares in trading portfolio 27,717 40,753 27,717 40,753 Unlisted shares in trading portfolio 0 13, ,991 Total 27,717 54,744 27,717 54,744 Shares outside trading portfolio: Credit and financial institutions 337, , , ,852 Management companies and investment funds 74, ,363 74, ,363 Pension institutions 4,305 5,571 4,305 5,571 Data supplier 160, , , ,304 Payment services provider 4,333 4,333 4,333 4,333 Other shares 3,937 3,836 3,937 3,836 Total 584, , , ,259 Sensitivity analysis The information shows the effect of isolated changes in interest rate plus share prices and exchange rates after tax. Change as % of equity Operating effect Interest rate rise of 1 percentage point Interest rate fall of 1 percentage point Share price fall of 10% (of trading portfolio) Change in exchange rate of 2% in unfavourable direction" Danske Andelskassers Bank A/S 2011 Annual Report

93 Notes Note 36 Liquidity risk Liquidity management is based on the provisions laid down in the Danish Financial Business Act with a view to ensuring adequate liquidity at all times in order for the group to meet its obligations. The liquidity management and the associated risks are based on the fact that the group's funding primarily takes place through customer deposits, the money market and by raising subordinated debt. Due to the general liquidity crisis, the continuous monitoring of the cash resources of the group has been intensified in order to ensure that future liquidity changes will not come close to the statutory minimum requirements. Balance sheet items broken down by expected maturity DKK '000 < 1 year > 1 year < 1 year > 1 year Assets Cash balance and demand deposits with central banks 304, ,307 0 Receivables from credit institutions and central banks 366, , , ,020 Loans and other receivables at amortised cost 4,500,124 4,413,893 4,976,957 4,585,437 Bonds at fair value 801,829 1,946, ,910 2,195,730 Shares etc. 30, ,062 59, ,379 Investments in associates 0 164, ,562 Land and buildings Owner-occupied properties 0 134, ,857 Investment properties 0 20, ,443 Properties available for sale 0 11, Other property, plant and equipment 0 21, ,695 Current tax assets 1, ,482 0 Deferred tax assets 0 241, ,161 Assets in temporary possession 27, ,490 0 Other assets 273, ,705 0 Prepayments 16, ,702 0 Total 6,322,274 8,115,950 6,554,272 8,626, DKK '000 < 1 year > 1 year < 1 year > 1 year Equity and liabilities Payables to credit institutions and central banks 702, , ,217 Deposits and other payables 645,726 8,368, ,623 9,026,966 Bonds at amortised cost 0 2,016, ,015,860 Liabilities assumed on a temporary basis 6,288 0 Other equity and liabilities 325, ,998 0 Deferred income 2, ,563 0 Provisions 17,923 31, ,683 51,503 Total 1,699,367 10,416,155 2,440,175 10,610,546 Deposits include demand deposits. Demand deposits have a short contractual term, but are regarded as a stable funding source with expected maturity of over 1 year Annual Report Danske Andelskassers Bank A/S 93

94 Notes Contractual term to maturity of financial liabilities (Group) DKK '000 Carrying amount Contractual cash flow < 1 year 1-5 years Over 5 years 2011 Financial instruments Payables to credit institutions and central banks 702, , , Deposits and other payables 9,013,842 9,267, ,605 7,951, ,161 Bonds issued at amortised cost 2,016,294 2,105,594 47,000 2,058,594 0 Liabilities in temporarily possession 6,288 6, ,362 5,275 Other liabilities, ex. derivative financial instruments 166, , , Subordinated debt 703, ,491 53, ,054 0 Irrevocable credit commitments 2,722,101 2,722,101 2,722, Total 15,330,511 15,767,990 4,382,324 10,747, ,436 Derivative financial instruments Financial instruments used as hedging instruments 158, , , Financial instruments Payables to credit institutions and central banks 1,484,525 1,496, , ,875 0 Deposits and other payables 9,930,589 10,285, ,569 8,551, ,586 Bonds issued at amortised cost 1,015,860 1,055,552 15,489 1,040,063 0 Other liabilities, ex. derivative financial instruments 266, , , Subordinated debt 703, ,738 52, ,827 0 Irrevocable credit commitments 3,118,546 3,118,546 3,118, Total 16,519,105 17,130,555 5,330,331 10,975, ,586 Derivative financial instruments Financial instruments used as hedging instruments 169, , , Note 37 Operational risk Measures have been introduced by way of the group's IT policy in order to minimise breakdowns and unauthorised access to the group's IT systems. The group's primary IT supplier is Bankernes EDB Central (BEC). BEC uses twocentre operations, enabling systems to be executed at one centre in case of the other centre not being operational. The group's operations are largely based on written business procedures describing processes and routines. Backup staff is used in areas which are deemed to be particularly critical. 94 Danske Andelskassers Bank A/S 2011 Annual Report

95 Notes Note 38 Derivative financial instruments Broken down by term to maturity: Up to 3 months DKK '000 Nominal value Net market value Nominal value Net market value Currency contracts Forward contracts/futures, purchase -769,147 13,893-1,063,724 29,159 Forward contracts/futures, sale 786,310-8, ,743-37,230 Currency swaps Options, acquired Options, issued ,740 0 Interest rate contracts Forward contracts/futures, purchase -105, , Forward contracts/futures, sale 5, ,033 8 Interest rate swaps Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total -82,837 5,947-12,241-8,050 Between 3 months and 1 year DKK Nominal value Net market value Nominal value Net market value Currency contracts Forward contracts/futures, purchase -5, , Forward contracts/futures, sale 5, , Currency swaps Options, acquired Options, issued 32, Interest rate contracts Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total 32, Annual Report Danske Andelskassers Bank A/S 95

96 Notes Between 1 and 5 years DKK '000 Nominal value Net market value Nominal value Net market value Currency contracts Forward contracts/futures, purchase Forward contracts/futures, sale Currency swaps Options, acquired Options, issued Interest rate contracts Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total Over 5 years DKK '000 Nominel værdi Netto markedsværdi Nominel værdi Netto markedsværdi Currency contracts Forward contracts/futures, purchase Forward contracts/futures, sale Currency swaps Options, acquired Options, issued Interest rate contracts Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total Danske Andelskassers Bank A/S 2011 Annual Report

97 Notes Total DKK '000 Nominal value Net market value Nominal value Net market value Currency contracts Forward contracts/futures, purchase -775,002 14,754-1,064,773 29,325 Forward contracts/futures, sale 791,929-8, ,792-37,396 Currency swaps Options, acquired Options, issued 32, ,740 0 Interest rate contracts Forward contracts/futures, purchase -105, , Forward contracts/futures, sale 5, ,033 8 Interest rate swaps Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total -50,834 6,743-12,141-8,050 Market value DKK '000 Positive Negative Positive Negative Currency contracts Forward contracts/futures, purchase 16,448 1,694 30,569 1,244 Forward contracts/futures, sale 6,097 14,396 3,021 40,417 Currency swaps 42,796 43,205 63,024 63,329 Options, acquired Options, issued Interest rate contracts Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps 118, ,854 64,704 64,399 Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total 183, , , , Annual Report Danske Andelskassers Bank A/S 97

98 Notes Derivative financial instruments Average market value DKK '000 Positive Negative Positive Negative Currency contracts Forward contracts/futures, purchase Forward contracts/futures, sale Currency swaps 1,585 1,543 1,370 1,347 Options, acquired Options, issued Interest rate contracts Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps 117, ,854 1,703 1,741 Share contracts Forward contracts/futures, purchase Forward contracts/futures, sale Total 119, ,854 3,568 3,822 Market value of contracts without guarantee DKK '000 Positive Negative Positive Negative Currency contracts Forward contracts/futures, purchase 16,448 1,694 30,569 1,244 Forward contracts/futures, sale 6,097 14,396 3,021 40,417 Currency swaps 42,796 43,205 63,024 63,329 Options, acquired Options, issued Interest rate contracts 0 0 Forward contracts/futures, purchase Forward contracts/futures, sale Interest rate swaps 118, ,854 64,704 64,399 Share contracts 0 0 Forward contracts/futures, purchase Forward contracts/futures, sale Total 183, , , ,490 Total after netting 183, , , , Danske Andelskassers Bank A/S 2011 Annual Report

99 Notes Unsettled spot transactions Market value 2011 Nominal DKK '000 value Positive Negative Net Currency transactions, purchase 148, Currency transactions, sale 13, Interest rate transactions, purchase 8, Interest rate transactions, sale 7, Share transactions, purchase 8, Share transactions, sale 7, Total 193, Nominal DKK '000 value Positive Negative Net Currency transactions, purchase 99, Currency transactions, sale 109, Interest rate transactions, purchase 11, Interest rate transactions, sale 11, Share transactions, purchase 7, Share transactions, sale 8, Total 247, Annual Report Danske Andelskassers Bank A/S 99

100 Sailing with Bork Bådelaug In September Danske Andelskassers Bank joined up with the young sailors from Bork Bådelaug and invited everybody interested to an exciting sailing day at the harbour of Bork. The sailors from Bork Bådelaug provided experienced instructors, life jackets and optimist dinghys allowing everybody to experience the speed and the thrill on the water and Danske Andelskassers Bank sponsored sausages, bread and beverages thereby securing the energy level remained as high as the level of fun.

101 Company and shareholder information Danske Andelskassers Bank A/S is a limited liability company with its address at: Baneskellet Tjele, Denmark Tel: Fax: info@dabank.dk Website: The bank is domiciled in the Municipality of Viborg, Denmark. CVR no Reg. no Ticker symbol on NASDAQ OMX Copenhagen: DAB ISIN code: DK Danske Andelskassers Bank was founded in 1969 and admitted for listing on NASDAQ OMX Copenhagen in Auditor Danske Andelskassers Bank's auditor, as elected by the general meeting, is Beierholm Statsautoriseret Revisionspartnerselskab. Share capital and shareholders The total share capital of Danske Andelskassers Bank is a nominal DKK 550.6m made up of 55.06m shares with a nominal value of DKK 10 each. The total share capital has been admitted for listing on NASDAQ OMX Copenhagen, and Danske Andelskassers Bank only has one class of shares. All shares are registered and negotiable. Each share with a nominal value of DKK 10 carries one vote at Danske Andelskassers Bank's general meetings. No shareholder may cast votes in excess of 1% of total share capital, however. The following shareholders have given notice that they own more than 5% of the total share capital: Andelskassen MidtVest Foundation (domiciled in the Municipality of Ikast-Brande) owns 12.71% of total share capital Andelskassen Fyn Foundation (domiciled in the Municipality of Faaborg-Midtfyn) owns 10.42% of total share capital Andelskassen Østjylland Foundation (domiciled in the Municipality of Viborg) owns 7.05% of total share capital Andelskassen Sydjylland Foundation (domiciled in the Municipality of Esbjerg) owns 6.25% of total share capital Andelskassen Himmerland Foundation (domiciled in the Municipality of Vesthimmerland) owns 5.81% of total share capital Andelskassen Varde Foundation (domiciled in the Municipality of Varde) owns 5.78% of total share capital As off % of Danske Andelskassers Bank's share capital is owned by the 16 foundations set up as part of the conversion process in spring 2011, 25% of the share capital is owned by individuals/companies, 5% of the share capital is owned by institutional investors, especially business partners, and 3 % of the share capital was in the banks own treasury. Danske Andelskassers Bank's Articles of Association contain no restrictions on ownership. If an offer is made to acquire the bank's shares, the Board of Directors will respond in accordance with legislation. Investor relations Communication with Danske Andelskassers Bank's shareholders is based on the bank's values collaboration, trust, commitment and stability and the information requirements incumbent on the bank in consequence of its listing on NASDAQ OMX Copenhagen. This means that Danske Andelskassers Bank in its adopted Investor Relations Policy and in practice must give priority to open dialogue and collaboration in its communications with shareholders and other stakeholders, while ensuring that no shareholders or other stakeholders receive information that might affect share prices before it is announced to the market. The open dialogue means that Danske Andelskassers Bank con 2011 Annual Report Danske Andelskassers Bank A/S 101

102 siders a proactive approach, in which both positive and negative news is communicated quickly and accurately, to be an essential part of the bank's relationship with the market. The overall objective is to give shareholders as much information and access to information as possible taking account of the rules in this area. The primary medium for this is the bank's shareholder website at investor.andelskassen.dk, on which the bank publishes news, quarterly reports and annual reports together with presentations from meetings with investors and an electronic version of AktioNÆR, the bank's shareholder magazine. Danske Andelskassers Bank has also supplemented the annual general meeting with six shareholder meetings, one for each of the bank's six shareholder districts, at which information is provided on what has happened at the bank during the year. This is one of the bank's ways of ensuring that all shareholders have ready access to information about the bank. If further information/clarification is required concerning investor relations, please contact: Martin Rask Pedersen, HR and Communications Director Tel: mrp@dabank.dk General meeting The general meeting is Danske Andelskassers Bank's ultimate authority. Notice of a general meeting is published and sent out no more than five weeks and no less than three weeks before the general meeting is to be held. All sharehol ders are entitled to attend, vote at and/or appoint a proxy at the general meeting subject to the voting restriction described elsewhere. All shareholders can also submit proposals for discussion. This must be done in writing to the Board of Directors at least six weeks before the general meeting. Shareholders can appoint the Board of Directors or other parties as proxy for every single point on the agenda. Extraordinary general meetings are held by the decision of the general meeting or at the request of two members of the Board of Directors, the auditor or shareholders representing at least 5% of the share capital. Amendments to the Articles of Association Danske Andelskassers Bank's Articles of Association can be amended by a resolution of the general meeting if the proposal is passed by at least two thirds of both the votes cast and the voting capital at the general meeting. The Board of Directors is authorised to make the changes and additions to the Articles of Association that are demanded by public authorities pursuant to current legislation for limited liability companies and financial enterprises. Authority granted to the Board of Directors regarding share capital, capital increases and trading in treasury shares The general meeting has not granted the Board of Directors special authority to buy back and cancel existing shares or increase the share capital. In 2011, Danske Andelskassers Bank purchased 1,662,462 treasury shares at a cost of DKK 40.4m. This is equivalent to an average acquisition price per share of DKK During 2011, Danske Andelskassers Bank sold 269,898 treasury shares. At the end of 2011 the treasury shareholding 1,392,564 shares, equivalent to 2.53% of the share capital. Dividend policy It is Danske Andelskassers Bank's dividend policy that, over time, a reasonable return should be associated with being a shareholder of the bank. Owing to the loss made in 2011, the current market situation and the market conditions expected in the next few years, the Board of Directors is making a recommendation to the general meeting to the effect that no dividend should be paid for the 2011 financial year. It should be noted in this connection that, as a result of raising hybrid core capital in accordance with the Danish Act on Government Capital Injections in Credit Institutions (Bank Package II), the bank must not pay a dividend unless it can be accommodated within the net profit for the year. 102 Danske Andelskassers Bank A/S 2011 Annual Report

103 It is the bank's assessment and expectation as also described in the bank's prospectus of 7 June 2011 that based on the current market situation and the market conditions expected in the next few years, no dividend will be paid for the 2012 financial year. Important agreements that will be amended or lapse if control of the bank changes Danske Andelskassers Bank has no agreements requiring renegotiation in the event of control of the group changing that is considered to have a material influence on the group's affairs Annual Report Danske Andelskassers Bank A/S 103

104 Amateur theatre in the local hall The local hall in Stenstrup is the setting for many interesting and entertaining events. Among those is the annual amusing play from the talented Stenstrup Amateur Theatre. It isn t much fun to watch theatre in the dark though. But thanks to Danske Andelskassers Bank and other contributors the local hall got the right spotlights to the benefit of the actors, the audience and all the other users of the local hall.

105 Company announcements and financial calendar Company announcements Danske Andelskassers Bank issued the following company announcements in 2011: 7 June Danske Andelskassers Bank A/S publishes prospectus in connection with share offer and application for admission to NASDAQ OMX Copenhagen A/S 7 June Danske Andelskassers Bank publishes prospectus 30 June Result of share offer by Danske Andelskassers Bank A/S 4 July Capital increase by Danske Andelskassers Bank A/S has been registered 7 July Danske Andelskassers Bank A/S Major shareholder announcement 7 July Financial calendar for 2011 financial year 18 July Changes in Board of Executives with effect from 1 August August Interim report for H August Report of transactions by senior employees and related parties in shares and associated securities 2 September Report of transactions by senior employees and related parties in shares and associated securities 26 October Quarterly report for Q1-Q October Report of transactions by senior employees and related parties in shares and associated securities 4 November Report of transactions by senior employees and related parties in shares and associated securities 15 November Danske Andelskassers Bank A/S streamlines its organisation 17 November Financial calendar for December Changes in Board of Executives with effect from 1 January 2012 Financial calendar for 2012 Danske Andelskassers Bank's financial calendar for 2012 is as follows: 29 February Annual report for April Annual general meeting 9 May Interim report for the period 1 January 31 March August Interim report for the period 1 January 30 June November Interim report for the period 1 January 30 September Annual Report Danske Andelskassers Bank A/S 105

106 Shareholder meetings and general meeting Shareholder meetings Danske Andelskassers Bank's shareholders are organised in six shareholder districts, which are defined in appendix 1 to the bank's Articles of Association. An annual shareholder meeting is held for each shareholder district with a view to providing information on Danske Andelskassers Bank's business and activities in the previous financial year and with effect from 2014 electing members to the shareholder district's shareholders' committee, as described in more detail later in this annual report. The shareholder meetings for 2012 have been scheduled as follows: 8 March - Østjylland Shareholder District Hobro Idrætscenter 13 March - Midtjylland Shareholder District Ikast-Brande Arena General meeting Danske Andelskassers Bank is holding a general meeting in accordance with the Articles of Association: Wednesday 25 April 2012, 5 pm, at Tinghallen, Tingvej 1, 8800 Viborg, Denmark As required by the Articles of Association, notice will be sent to those shareholders who have requested it and will be advertised in a national daily newspaper no more than five weeks and no less than three weeks before the general meeting. The agenda, the complete proposals and the audited annual report will be made available on the bank's website at and the bank's head office in Hammershøj at least three weeks before the general meeting. Proposals for the general meeting must be submitted to the Board of Directors in writing by 13 March March - Vestjylland Shareholder District Helle Hallen 15 March - Fyn Shareholder District Midtfyns Fritidscenter 19 March - Sønderjylland Shareholder District Augustenborg Hallen 20 March - Sydjylland Shareholder District Helle Hallen All shareholder meetings will start at 6.30 pm. 106 Danske Andelskassers Bank A/S 2011 Annual Report

107 Board of Directors Composition and function of the Board of Directors Danske Andelskassers Bank's Board of Directors is elected by the annual general meeting. The Board of Directors consists of nine members elected by the general meeting and, with effect from the 2012 general meeting, presumably three members elected by the employees. Candidates for the Board of Directors are recommended by the Board of Directors and any shareholder who is entitled to vote. The Board of Directors recommends the candidate(s) with accounting/audit expertise, however. Members are elected to the Board of Directors for two years at a time and are eligible for re-election. Following Danske Andelskassers Bank's annual general meeting on 12 March 2011, the bank's Board of Directors consists of nine members. The Board of Directors subsequently elected Jakob Fastrup, lawyer, as Chairman and Jens Jørgensen Hald, farmer, as Deputy Chairman. In connection with conversion of the SDA group, its 16 cooperative banks and Danske Andelskassers Bank in spring 2011, an interim arrangement was decided on at the extraordinary general meeting on 26 May 2011 in order to ensure stability during the transition period, with the present Board of Directors remaining in office until the general meeting in 2014, where all members will be up for election, as described above. The Board of Directors has an upper age limit of 70 years, so no one who has reached that age can be elected or re-elected to the Board of Directors. Work of the Board of Directors Danske Andelskassers Bank's Board of Directors looks after the overall strategic management of the bank and ensures that the bank's operations are organised properly in accordance with legislation. The Board of Directors supervises the Board of Executives and sees to it that the bank is managed properly in accordance with legislation, the bank's Articles of Association, the guidelines issued by the Board of Directors etc. In 2011, the Board of Directors held 23 meetings, to which can be added, among other things, a seminar for board members and training activities. It should be noted that the Board of Directors met more frequently than usual in 2011, mainly owing to the conversion in spring The Board of Directors has appointed three standing committees, which are described in more detail later. All the board members are independent in accordance with the Committee on Corporate Governance's definition of the term Annual Report Danske Andelskassers Bank A/S 107

108 Members of the Board of Directors Jakob Fastrup, lawyer Chairman of the Board of Directors Born: 1957 Elected to the Board of Directors: 2006 (Chairman since 2008) Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,955 (all acquired in 2011) Current management posts: Partner, CEO and director of Midtadvokaterne A/S. Director of Garanti Invest A/S Previous management posts held in the last five years: Chairman of the Board of Directors of SDA, I.B & Co. A/S, I.B. Holding ApS, I.B Medier A/S, I.B Facilities A/S, I.B Gruppen Holding A/S and I.B & Co. A/S. Deputy Chairman of Andelskassen MidtVest. Director of Effect Denmark A/S, Capacity Ejendomme A/S, Advokatforum A/S and and B.B.J. Holding ApS. CEO of Advokatforum A/S. Jens Jørgensen Hald, farmer and consultant Deputy Chairman Born: 1946 Elected to the Board of Directors: 2003 (Deputy Chairman since 2010) Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: CEO of JJHald Consulting. Chairman of Kap Water Ltd. and Waterteck Ltd., both of which operate out of Kampala, Uganda. Founder of Ulfix ApS. Previous management posts held in the last five years: Chairman of the Board of Directors of Andelskassen Østjylland. Deputy Chairman of SDA. Preben Arndal, state-authorised public accountant Member with audit expertise Born: 1952 Elected to the Board of Directors: 2011 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: CEO and director of Centrumrevision ApS. Previous management posts held in the last five years: Chairman of the Board of Directors of Oure-Vejstrup Andelskasse. Director of SDA. 108 Danske Andelskassers Bank A/S 2011 Annual Report

109 Kenneth Hyldig Clausen, farmer Current management posts: Manager of own farm. Born: 1966 Elected to the Board of Directors: 2010 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Previous management posts held in the last five years: Chairman of the Board of Directors of Andelskassen Sønderjylland. Director of SDA and Bonusgrisen A.M.B.A. Jens Holt Ladefoged, retired CEO Born: 1950 Elected to the Board of Directors: 2009 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Director of Holtec Automatic A/S. Director of Holt Holding af 7. April 2003 ApS. Previous management posts held in the last five years: Chairman of the Board of Directors of Næsbjerg Andelskasse. Director of SDA. CEO of Holtec Automatic A/S. Jens Nørvang Madsen, retired deputy assistant commissioner of police Born: 1949 Elected to the Board of Directors: 2011 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Director of Flemming Sølvsteen Holding A/S and Flemming Sølvsteen Ejendomme ApS. Previous management posts held in the last five years: Chairman of the Board of Directors of Løgstrup Andelskasse. Deputy Chairman of Andelskassen MidtVest. Director of SDA and A/S Kaj Romby Larsen, Murer- og entreprenørfirma,. Deputy assistant commissioner with Central and Western Jutland Police Annual Report Danske Andelskassers Bank A/S 109

110 Hans Jørn Madsen, CEO Born: 1957 Elected to the Board of Directors: 2006 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Director of Vejrup Maskincenter A/S, LAG-Esbjerg, Vejrup Holding A/S and Hans-Jørn Madsen Holding ApS. CEO of Vejrup Maskincenter A/S, Hans-Jørn Madsen Holding ApS and Vejrup Holding A/S. Previous management posts held in the last five years:: Deputy Chairman of Andelskassen Sydvestjylland. Director of SDA, Andelskassen Sydjylland and Vejrup Holding II ApS. Asger Pedersen, farmer Born: 1955 Elected to the Board of Directors: 2002 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Director of Dansk Landbrugs Grovvareselskab A.M.B.A. (DLG), Danespo Holding A/S, VK Kartofler A/S, Lammefjordens Kartoffelcentral A/S and Dangrønt Products A/S. Tidligere ledelsesposter inden for de seneste fem år: Chairman of the Board of Directors of Outrup Andelskasse. Director of SDA, Agro & Ferm A/S and Outrup Erhvervs Invest ApS. Poul Erik Weber, fruit grower Born: 1949 Elected to the Board of Directors: 2009 Present term ends: 2014 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Chairman of the Vingsted Hotel og Konferencecenter, DGI-Huset Herning A/S and the Council for Socially Disadvantaged Citizens in the Municipality of Svendborg. Director of DGI Huse og Haller, FilmFyn A/S and Værkstedets Skole in Kværndrup Previous management posts held in the last five years: Chairman of Funen County Council. Member of Regional Council for Southern Jutland Region. Chairman of Den erhvervsdrivende fond Cogita and Andelskassen Fyn. Director of SDA, Fyns Erhvervscenter, Erhvervsdrivende fond, Fonden Syddanske Forskerparker and DGI Huse og Haller. 110 Danske Andelskassers Bank A/S 2011 Annual Report

111 Committees of directors The Board of Directors of Danske Andelskassers Bank has appointed three standing committees: the audit committee, the remuneration committee and the nomination committee. Audit committee The Board of Directors of Danske Andelskassers Bank has appointed an audit committee in accordance with Executive Order No. 690 of 23 June 2010 on Audit Committees in Companies and Groups which are subject to the Supervision of the Danish Financial Supervisory Authority (Bekendtgørelse nr. 690 af 23. juni 2010 om revisionsudvalg i virksomheder samt koncerner, der er underlagt tilsyn af Finanstilsynet). The purpose of the audit committee is to prepare for decisions by the Board of Directors regarding accounting- and audit-related matters, including: Monitoring the financial reporting process Monitoring whether the bank's internal control systems, internal auditing and risk management systems are working effectively Monitoring the statutory audit of the financial statements etc. Monitoring and checking auditor independence in accordance with section 24 of the Danish Act on Approved Auditors and Audit Firms (Lov om godkendte revisorer og revisionsvirksomheder), including in particular the performance of additional services for the bank. Danske Andelskassers Bank's audit committee consists of Jens Jørgensen Hald (Chairman), Jakob Fastrup and Preben Arndal. In 2011 the audit committee consisted of the entire Board of Directors. Nomination committee The Board of Directors of Danske Andelskassers Bank has appointed a nomination committee in accordance with the Recommendations for Good Corporate Governance, which were last updated on 16 August The purpose of the nomination committee is to prepare for decisions by the Board of Directors regarding the structure of management bodies, the competencies of the management team etc., including Describing the qualifications required for the two management bodies Assessing the size of the management bodies Assessing the competencies of the management team (individually and as a whole) Considering and recommending candidates for the management bodies Drawing up written job descriptions Preparing proposals for relevant supplementary training for the Board of Directors and Board of Executives. Danske Andelskassers Bank's nomination committee consists of the entire Board of Directors with Jakob Fastrup as chairman. Remuneration committee The Board of Directors of Danske Andelskassers Bank has appointed a remuneration committee in accordance with Executive Order No of 21 December 2010 on Remuneration Policy and Public Disclosure of Salaries in Financial Institutions and Financial Holding Companies (Bekendtgørelse nr af 21. december 2010 om lønpolitik samt oplysningsforpligtelser om aflønning i finansielle virksomheder og finansielle holdingvirksomheder). The purpose of the remuneration committee is to prepare for decisions by the Board of Directors regarding remuneration- and pay-related matters, including: Preparing and recommending remuneration/pay policy and other decisions that could have an influence on the bank's risk management for approval by the Board of Directors prior to approval by the general meeting 2011 Annual Report Danske Andelskassers Bank A/S 111

112 Proposing remuneration for the Board of Directors, Board of Executives and shareholders' committees Ensuring that remuneration is in accordance with the bank's remuneration policy Proposing policies etc. in the area of remuneration Making sure that information in the annual report concerning remuneration of the Board of Directors and Board of Executives is correct, accurate and complete. The election committee that was appointed agreed that up to three employee representatives should be elected to the Board of Directors with a view to assuming office after the annual general meeting on 25 April The election committee also agreed that the two candidates who receive the most votes in the ballot should be elected for a four-year term, with the candidate who comes third being elected for a two-year term. This has been agreed to ensure that not all the employee representatives are elected in the same year. Danske Andelskassers Bank's remuneration committee consists of Jakob Fastrup (chairman), Jens Jørgensen Hald and Poul Weber. Employee elections Danske Andelskassers Bank has not previously had employee representatives on the Board of Directors. Following the conversion in spring 2011, the employees expressed a desire to hold elections for employee representatives for Danske Andelskassers Bank's Board of Directors in accordance with Executive Order No. 806 of 28 June 2010 on Employee Representation in Limited Companies (Bekendtgørelse nr. 806 af 28. juni 2010 om medarbejderrepræsentation i aktie- og anpartsselskaber). This election is being held in spring 2012, with the election date having been set for 30 March with the following timetable: 9 February: Announcement of election date 1 March: Deadline for proposing candidates 15 March: Announcement of candidates 30 March: Election date / Deadline for casting votes 3 April: Latest date for announcing elected board members. 112 Danske Andelskassers Bank A/S 2011 Annual Report

113 Alheden sports club The sports club of Alheden puts a great deal of work into activating both the young and the old ones in the town of Frederiks. Thanks to the sports club the local citizens have a variety of activities to choose from including e.g. soccer, handball, badminton, gymnastics, swimming, fitness or spinning. But bikes for spinning and the other equipment needed aren t cheap. That s why it s appreciated when Danske Andelskassers Bank gives a donation for the sports club and the local welfare Annual Report Danske Andelskassers Bank A/S 113

114 Board of Executives In 2011, Danske Andelskassers Bank carried out a succession process for the Board of Executives, with CEO Vagn T. Raun vacating his post in favour of Deputy CEO Jan Pedersen on 1 August and continuing as Managing Director until the end of the year, when he retired. With a view to retaining a two-strong Board of Executives, Credit Director Tomas Michael Jensen was appointed Deputy CEO on 1 January Work of the Board of Executives The Board of Executives is in charge of the day-to-day management of Danske Andelskassers Bank in accordance with current legislation, the policies adopted by the Board of Directors, the guidelines issued by the Board of Directors and any other verbal or written instructions given by the Board of Directors. Danske Andelskassers Bank's Board of Executives thus consists of CEO Jan Pedersen and Deputy CEO Tomas Michael Jensen, who remains responsible for credit. Members of the Board of Executives Jan Pedersen, CEO Born: 1964 Joined Danske Andelskassers Bank: 2010 Member of the Board of Executives: 2010 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) Current management posts: Director of Bankernes EDB Central (BEC) and member of the Board of Representatives of the Danish Employers' Association for the Financial Sector. Chairman of the Board of Directors and CEO of Komplementaranpartsselskabet Villa Prisme Bargemon. Previous management posts held in the last five years: CEO of Cardif Forsikring. Deputy CEO of SDA. Associate Director with SEB A/S. Viceadm. direktør Tomas Michael Jensen Born: 1970 Joined Danske Andelskassers Bank: 2011 Member of the Board of Executives: 2012 Number of shares held in Danske Andelskassers Bank: 1,200 (all acquired in 2011) 114 Danske Andelskassers Bank A/S 2011 Annual Report

115 Shareholders' committees Danske Andelskassers Bank's shareholders are organised in six shareholder districts, one for each of the bank's six regions, which are defined in appendix 1 to the bank's Articles of Association. Each shareholder district has a shareholders' committee, which, together with a special regional manager for the district/region in question, helps to ensure that Danske Andelskassers Bank is embedded in the local areas. In popular terms, they can be described as the local areas' ambassadors to Danske Andelskassers Bank and Danske Andelskassers Bank's ambassadors to the local areas. In connection with the conversion of the SDA group, its 16 cooperative banks and Danske Andelskassers Bank in spring 2011, an interim arrangement was decided on at the extraordinary general meeting on 26 May 2011 in order to ensure stability in the transition period, with the shareholders' committees consisting of the members (with alternates) of the Boards of Directors of the 16 cooperative banks on the conversion date until the shareholder meetings in With effect from the shareholder meetings in 2014, the members of the shareholders' committees will be elected at the annual shareholder meeting according to the principle of "one person, one vote". Danske Andelskassers Bank's shareholder committees have the following members: Eastern Jutland Shareholders' Committee Niels Kr. Bisgaard, formand Svend Arvesen Hans Bugge Ole Baadsgaard John Frøslev Carlo Bach Greve Inge Greve Jens J. Hald Kresten Hansen Søren Hedegaard Jens Kruse Høgh Gunnar Jensen Hans Toft Jensen Ove Jensen Birgitte Jørgensen Kurt Bisgaard Kjeldsen Connie Skaarup Kloster Herluf Lund Birgitte Nielsen Poul Ejnar Rovsing Henrik Sloth Heinrich Møller Thrane Karen Tolborg Thyssen Middle Jutland Shareholders' Committee Visti B. Pedersen, formand Søren Bay Perry S. Dürr Allan Kirk Jensen Preben Kloster Linda Kranz Kaare Kristensen Knud Hjuler Kristensen Søren Chr. Madsen Jens Nørvang Madsen Anette Lykke Vangsgaard Marx Lars Mogensen Eddy Mortensen Egon Nielsen Niels Viggo Nygaard Poul Pedersen Mads Skræm Jørgen Sølvkjær Søren Søndergaard Ove Bach Sørensen Per Busk Sørensen Carsten Vennevold Western Jutland Shareholders' Committee Holger Thomsen, formand Kurt Bondesen Gunnar Christensen Bent Ole Gelmer Arne Hermansen 2011 Annual Report Danske Andelskassers Bank A/S 115

116 Henning Holst Anders Jensen Ejnar Gammelgaard Jepsen Hans Jepsen Per Jespersgaard Jess Jessen Knud Kristiansen Jens Holt Ladefoged Knud Erik Madsen Tonning Sanddal Nielsen Frede Baldersbæk Nielsen Erik Buhl Nielsen Birgitte Nielsen Peder Pallesen Asger Pedersen Jørn Pedersen Steen Steiner Petersen Bent Østergaard Sørensen Erling Sørensen Kresten Vad Sørensen Bo Kjær Thomsen Erik Thomsen Per Vestbo Southern Jutland (W) Shareholders' Committee Jeanette Obling, formand Kurt Bjerrum Chresten Haugaard Per Jacobsen Jens R. Jessen Henning Jørgensen Henning Kristensen Tommy Skov Kristensen Niels Krogh Hans Jørn Madsen Lise Nielsen Arne Schmidt Peder Søndergaard Henrik Elbæk Sørensen Southern Jutland (E) Shareholders' Committee Kenneth Clausen, formand Tim Andersen Gerhard S. Asmussen Karin Autzen Jørgen Bundgaard Hans H. Carstensen Georg Hansen Steen Iwang Martin Johanning Preben Kallager Keld Lamberts Hans Chr. Lei Holger Lei Kurt P. Lorenzen Svend A. Lyck Kristian Miang Carl Erik Maae Palle Niss Jan Nissen Hans Asmus Paulsen Olaf Petersen Brian Petersen Peter Prag Peter Thomsen Funen Shareholders' Committee Poul Weber, formand Preben Arndal Helle Bæklund Eriksen Lau Christiansen Per Helleskov Søren E. Larsen Poul Møller John Lykkedal Pedersen Annette Rasmussen Kresten Wrang Rasmussen Torben Sæderup Pia Vissing Hansen 116 Danske Andelskassers Bank A/S 2011 Annual Report

117 The music school of Ringkøbing-Skjern The young ballet dancers from the music school in Ringkøbing-Skjern put a great deal of effort in their training and are keen to perform on the stage. But it takes more than enthusiasm and talent to put up a show. Luckily Danske Andelskassers Bank was ready to support the music school thereby enabling the school to stage two performances of the ballet Swan Lake Annual Report Danske Andelskassers Bank A/S 117