Table of contents. Page 1 of 45

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1 Table of contents MANAGEMENT STATEMENT... 5 AUDITOR S REPORT... 7 Internal auditor s report... 7 Independent auditor s statements... 8 MANAGEMENT REVIEW FINANCIAL STATEMENTS INCOME STATEMENT BALANCE SHEET STATEMENT OF CHANGES IN EQUITY NOTES Page 1 of 45

2 CORPORATE INFORMATION Havnegade 21 DK-5500 Middelfart CVR No.: Founded: 1853 Registered office: Middelfart, Denmark Telephone: Internet: Page 2 of 45

3 The Management of Committee of Representatives POSITION NAME ADRESS POSTAL CODE Fisherman Allan Buch Røjlemosevej 61, Strib DK-5500 Middelfart Master baker Bjarne Wetche Langesøvej 69 DK-7000 Fredericia Development consultant and manager Bo Smith Egevej 12 DK-5500 Middelfart Attorney Charlotte Szocska Favstrupvej 26 DK-6070 Christiansfeld Sales manager Dorte Sundall Skovbrynet 11 DK-8722 Hedensted Manager Finn Lund Clausen Ådalsvej 3, Gravens DK-6040 Egtved Master baker Frank J. Nielsen Christian 3 Vej 39 DK-6000 Kolding Shop owner Gitte Hein Røjlemosevej 56, Strib DK-5500 Middelfart Undertaker Hans Boesen Møller Jensens Vej 10 DK-7100 Vejle Former detective inspector Hans Erik Pedersen Kirkestien 53, Ødsted DK-7100 Vejle Head of section Henning Zederkof Telefonvænget 10 DK-5500 Middelfart Police constable Henrik Olesen Gl. Vestergade 53 DK-5500 Middelfart Special consultant, Master of Law Inge Hvilsted Løgitmark 10 DK-7100 Vejle Restaurant owner Jacob Elkjær Brændeskovvej 61, Strib DK-5500 Middelfart Clergyman Jens Backer Mogensen Hessgade 2 DK-5500 Middelfart Shop owner Joan Thorning Vestergade 36, Strib DK-5500 Middelfart Former deputy commissioner Johannes Gregersen Tangmosen 2, Strib DK-5500 Middelfart Dealer in tools Jørgen Andersen Kærvejen 16 DK-7171 Uldum Scrapdealer Jørgen Rasmussen Storebæltsvænget 24 DK-5500 Middelfart Electrician Kenny Bruun Olsen Asser Jensens Vej 41 DK-7000 Fredericia Account manager/deputy director Kurt Espesen Strandgårdsvej 30 A DK-7120 Vejle Øst Consultant Laila Bro Farupvej 10D DK-6760 Ribe Master carpenter Lars J. Jeppesen Strandvejen 201 DK-5500 Middelfart AD/graphic designer Marlene Jørgensen Ravningvej 48, Ravning DK-7182 Bredsten Self-employed Merethe Hjaltelin Nedervej 92 DK-6000 Kolding Partner and consultant Michaela Otto Skovbrynet 21 DK-8722 Hedensted Attorney Niels A. Michaelsen Egernvej 5 DK-6000 Kolding Manager Ole Nikolajsen Herman Bangs Vej 10 DK-7000 Fredericia Printer Ole Olsen Rosenvænget 63 DK-5500 Middelfart Telephone engineer Poul Andersen Drejøvænget 45 DK-5500 Middelfart Attorney Steen F. Kjær Ved Fyret 43, Strib DK-5500 Middelfart Doctor Steen Trabjerg Gl. Strandvej 49 DK-5500 Middelfart Job centre consultant Søren Illum Nielsen H.P. Priorsvej 15 DK-5500 Middelfart Farm owner Søren Moss Rasmussen Haurumvej 7 DK-7171 Uldum Undertaker Tommy Dueholm I P. Hartmanns Vej 15 DK-7000 Fredericia Master smith Uffe Simonsen Gl. Strandvej 155, Strib DK-5500 Middelfart Page 3 of 45

4 Board of Directors Allan Buch, chairman Søren Andersen, deputy chairman Søren Illum Nielsen Åge Almtoft Niels Anker Michaelsen Bo Smith Helle Lund Gregersen Ulrik Sørensen Pia Kjær Nielsen Executive Board Martin Nørholm Baltser, Managing Director Audit Committee Åge Almtoft Risk and Instructions Committee Søren Andersen Allan Buch Niels Anker Michaelsen Pia Kjær Nielsen Remuneration and Nomination Committee Søren Illum Nielsen Helle Lund Gregersen Ulrik Sørensen Corporate Governance Helle Lund Gregersen Bo Smith Niels Anker Michaelsen Bo Smith Ownership is an independent institution. Auditors PwC Statsautoriseret Revisionspartnerselskab Vesterballevej 27 DK-7000 Fredericia Page 4 of 45

5 MANAGEMENT STATEMENT The Board of Directors and the Executive Board have today discussed and approved the annual report of and the for the financial year 1 January 31 December The annual report has been prepared in compliance with the Danish Financial Services Act [lov om finansiel virksomhed], including the Executive Order on Financial Reporting by Credit Institutions and Stockbrokers etc. [bekendtgørelse om finansielle rapporter for kreditinstitutter og fondsmæglerselskaber m.fl.]. In our opinion, the financial statements give a true and fair view of the s and s assets and liabilities, financial position as per 31 December 2011 and the results of the operations of the and the parent company for the financial year 1 January 31 December In our opinion, the management review provides a true and fair presentation of the circumstances reviewed as well as a description of the significant risks and uncertainty factors that may affect the and Middelfart Sparekasse. We submit the annual report to the Committee of Representatives for approval. Middelfart, 13 March 2012 Executive Board: Martin Nørholm Baltser managing director Board of Directors: Allan Buch Søren Andersen Søren Illum Nielsen chairman Åge Almtoft Niels Anker Michaelsen Bo Smith Helle Lund Gregersen Pia Kjær Nielsen Ulrik Sørensen elected by the employees elected by the employees elected by the employees Page 5 of 45

6 Meeting of Committee of Representatives: The annual report 2011 was adopted by the ordinary meeting of the Committee of Representatives, held in Middelfart on 29 March Signature of the chairman of the meeting Page 6 of 45

7 AUDITOR S REPORT Internal auditor s report To the guaranteeing members of We have audited the consolidated financial statements and the financial statements of for the financial year 1 January 31 December The consolidated financial statements and the financial statements have been prepared in compliance with the Danish Financial Services Act. Basis of opinion We have conducted our audit on the basis of the Executive Order on Auditing Financial Undertakings etc. as well as Financial s [bekendtgørelse om revisionens gennemførelse i finansielle virksomheder m.v. samt finansielle koncerner] of the Danish Financial Supervisory Authority and in accordance with Danish auditing standards. This requires that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements and the financial statements are free from material misstatement. The audit has been performed in accordance with the segregation of duties as agreed with the external auditor and has involved evaluating established business procedures and internal control, including the risk management planned by the Board of Directors and the Executive Board as regards reporting processes and significant business risks. Based on an evaluation of materiality and risk we have, on a test basis, examined the basis for the amounts and other disclosures in the consolidated financial statements and the financial statements. The audit also included evaluating the appropriateness of accounting policies applied and the reasonableness of accounting estimates made by the Board of Directors and the Executive Board as well as evaluating the overall presentation of the consolidated financial statements and the financial statements. We have participated in the audit of the significant and risky fields, and we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the established business procedures and internal control, including the risk management planned by the Board of Directors and the Executive Board, designed to regulate the s and the company s reporting processes and significant business risks, are adequate. Moreover, it is our opinion that the consolidated financial statements and the financial statements give a true and fair view of the s and the company s assets, liabilities and financial position as per 31 December 2011 and of the results of the s and the company s operations and the consolidated cash flows in the financial year 1 January 31 December 2011 in compliance with the Financial Services Act. Statement on the management review Pursuant to the Financial Services Act, we have read the management review. We have not performed any other procedures in addition to the audit of the consolidated financial statements and the financial statements. On this basis, we are of the opinion that the information given in the management review is consistent with the consolidated financial statements and the financial statements. Middelfart, 13 March 2012 Susanne Overgaard Nielsen head of internal audit Page 7 of 45

8 Independent auditor s statements To the guaranteeing members of Report on the financial statements We have audited the consolidated financial statements and the financial statements of for the financial year 1 January 31 December 2011, comprising income statement, assets, liabilities, statement of changes in equity and notes, including accounting policies for both the and the company. The consolidated financial statements and the financial statements have been prepared in compliance with the Danish Financial Services Act. Responsibility of the Board of Directors and the Executive Board for the financial statements The Board of Directors and the Executive Board are responsible for the preparation and fair presentation of consolidated financial statements and the financial statements in compliance with the Financial Services Act. The Board of Directors and the Executive Board are furthermore responsible for such internal control that they deem necessary to the preparation and fair presentation of consolidated financial statements and financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the consolidated financial statements and the financial statements based on our audit. We have conducted our audit in accordance with international standards on auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements and the financial statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about amounts and disclosures in the consolidated financial statements and the financial statements. The audit procedures selected depend on the auditor s assessment, 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 such risk assessment, the auditor considers internal control relevant to the undertaking s preparation and fair presentation of the consolidated financial statements and the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the undertaking s internal control. An audit also includes evaluating the appropriateness of the accounting policies applied and the reasonableness of accounting estimates made by the Board of Directors and the Executive Board as well as evaluating the overall presentation of the consolidated financial statements and the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Page 8 of 45

9 Opinion In our opinion the consolidated financial statements and the financial statements give a true and fair view of the assets, liabilities and financial position of the and of the company as at 31 December 2011 and of the results of the operations of the and of the company for the financial year 1 January 31 December 2011 in compliance with the Financial Services Act. Statement on the management review Pursuant to the Financial Services Act, we have read the management review. We have not performed any other procedures in addition to the audit of the consolidated financial statements and the financial statements. On this basis, we are of the opinion that the information given in the management review is consistent with the consolidated financial statements and the financial statements. Fredericia, 13 March 2012 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Peter Hededam Christensen state-authorised public accountant Steffen Kjær Rasmussen state-authorised public accountant Page 9 of 45

10 MANAGEMENT REVIEW Main activity The main activity of the continues to be the provision of financial products to private and corporate customers within the geographical market area of. The wants to be able to offer to its customers a wide range of products combined with personal and competent advisory services. Strong performance and solid financial ratios The results of primary operations of DKK 90.4m (net interest and fee income less staff costs and administrative expenses) have been generated by especially the very significant inflow of customers experienced by in recent years. Net interest and fee income have thus increased by 14.1%. At the same time, the Management regards profit from ordinary activities before tax of DKK 7.5m as approved especially in view of the less positive outlook at the time when the interim report for the first six months was presented as well as the fact that the Danish Financial Supervisory Authority [Finanstilsynet] paid a visit in the autumn of 2011, ordering to write down selected corporate commitments by DKK 32.9m in view of the current economic recession. The results after tax amount to DKK 1.1m. With approx. 45,000 customers, has in recent years created a solid basis for meeting the future challenges. At the same time, the large inflow of customers is the cause of a minor increase in the costs of especially in the form of costs of establishing new branches in Odense and Horsens. As the Management sees it, we at are diligent and competent, and all employees share the sense of being part of a strong and proper working community. There is pride and true affection on the part of all employees towards the community we have established in and around. It is a competitive parameter which is very difficult to copy. And therefore a competitive parameter which the Management is keen to maintain. However, the Management also sees a number of challenges facing over the next years. Generally, the financial sector needs a better financial buffer. This is a consequence of the financial and debt crisis that we, especially in Europe, find very difficult to overcome. Overall, generated positive bottom line results in There is no doubt, however, that the Management expects Middelfart Sparekasse to perform better financially over the next years. In the short term, therefore focuses on strengthening the earnings and capital basis and thereby maintaining the freedom to do all the special things that are so important for in terms of customers, employees and the local community indeed, in terms of the overall identity of. The increased focus on the financial bottom line must therefore, both in the short and in the long term, take place in full harmony with our values and with how we are. Page 10 of 45

11 One of the things that can help improve the financial bottom line is to create an even better balance between the head office and the customer-oriented branches. Therefore has strengthened the customer-oriented branches by quite a number of additional employees including the new branches in Horsens and Odense. At the same time has had to say goodbye to a few employees in administrative positions at the head office. The top management of has also been downsized. It now consists of Peter Møller, vicemanaging director, Alice Ohmeyer, finance and risk manager, and Martin Baltser, managing director. This provides for a slightly different and required team at. A team that is prepared to work pro-actively with continued customer proximity and maintenance of our belief in the close relation between competent employees and our loyal customers who can expect very special and different, personal services from us. On the whole, the Management is satisfied with s situation because of the following factors: The results of primary operations of DKK 90.4m (net interest and fee income less staff costs and administrative expenses). Continued large inflow of customers. s solvency ratio of 17.2% which is significantly above its solvency need of 11.4%. has a liquidity coverage ratio of 232% as compared to the limit of 50% specified in the Danish Financial Supervisory Authority s the Supervisory Diamond. has a large deposit surplus of DKK 866m. Profit generated in 2011 and expectations of positive results in the years to come. complies with the limits in the Supervisory Authority s Supervisory Diamond. The Supervisory Diamond is used for indicating whether a commercial or savings bank is run with the proper level of risks and whether it is financially robust. Solvency and capital adequacy The solvency ratio of was 16.5% at level at the end of December 2011 (13.0% in 2010) and 17.2% at level (13.0% in 2010). In 2011 the solvency ratio was affected by the fact that the basis capital of increased by nearly DKK 900m as the result of an increase in the guarantee capital of DKK 38m. The basis capital now consists of guarantee capital of DKK 262m and retained earnings of DKK 341m and, moreover, of hybrid core capital of DKK 110m from bank rescue package II as well as supplementary capital of DKK 233m with a term to maturity of more than 1 year. In addition, there are a number of statutory deductions which mean that we end up at a total of approx. DKK 900m. At the same time, the risk-weighted assets have been reduced especially as the result of a drop in Middelfart Sparekasse s market risk of approx. DKK 1,000m through reduction of the bond portfolio as well as a drop in s credit risk of DKK 226m. The individual solvency need amounted to 11.4% as per 31 December 2011, leaving with a capital buffer of 5.8 percentage point, which is deemed highly satisfactory. Page 11 of 45

12 The market for financial intermediation to the banking sector has become more difficult. In the light of this,, like a number of other commercial and savings banks, follows a strategic plan for the years until 2019 to make sure that will be able to operate independently of the state guarantees at some point during this period. The Management is of the opinion that the solvency of is sufficient to cover the risk involved in its activities over the coming years. Moreover, is in the process of assessing the effect of the future Basel III rules. The Management is of the opinion that with s strategic plan, we will be fully capable of meeting the requirements under Basel III which are expected to be fully implemented by January When determining its solvency, applies the standard method for credit and market risks as well as the basic indicator method for operational risks, but will currently assess the solvency need and work towards gradual implementation of more advanced models in the risk management. Middelfart Sparekasse also currently assesses its method of determining the individual solvency need. The method applied for determining the solvency need and the assumptions on which such determination is based are described in a separate report which is available at s website, The determination of the solvency need is based on the provisions stipulated in the Executive Order on the Capital Adequacy [kapitaldækningsbekendtgørelsen] and on the guidelines issued by the Supervisory Financial Authority on the determination of the solvency need. Liquidity The liquidity of has been determined in compliance with the Financial Services Act and amounted to DKK 1,979m at the end of 2011, which means a liquidity coverage ratio of 232 per cent. In connection with determination of the liquidity coverage ratio, we are also performing stress tests of our future liquidity. This is done to ensure that our liquidity contingency plan is sufficient to cover more than the planned time horizon in case of a rough stress scenario, in which s funds can no longer be refinanced. Applying this highly pessimistic scenario, s liquidity coverage ratio will still exceed the statutory requirement by more than 185%. In accordance with the Executive Order on Capital Adequacy, is obliged to publish additional information in regard to the risk conditions of. This information is available at our website Liquidity and maturity s liquidity consists mainly of deposits and funding. The list below shows the remaining terms to maturity of deposits and funding compared to remaining terms to maturity of Middelfart Sparkasse s assets in the form of loans, advances and receivables from credit institutions and the Danish central bank as well as bonds and other assets. Overall, the figures illustrate a comfortable liquidity situation in Middelfart Sparekasse. Page 12 of 45

13 DKK Demand deposits Up to and including 3 months More than 3 months and up to and including 1 year More than 1 year and up to and including 5 years More than 5 years In total Cash and demand deposits in central banks 1,316, ,316,915 Receivables from credit institutions and central banks 285, , ,343 Loans, advances and other receivables at amortised cost 18, ,463 1,679, , ,947 3,683,476 Bonds at fair value 0 155, ,496 2, ,067 Other assets 0 28, ,173 In total 1,620, ,698 1,680, , ,769 5,517,974 Payables to credit institutions and central banks 60, ,043 Deposits and other payables 2,734, , , , ,091 4,549,947 Bonds issued at amortised cost 0 1, , ,583 Other liabilities 0 77, ,753 Subordinated loan capital , , ,975 In total 2,794, , , , ,091 5,287,301 Risk management Risk management has been a core element in our business since the foundation of in During times of recession as well as prosperity, it has always been s main goal to make sure that our risk profile is appropriate compared to the basis of capital. The different risks that engages in and the manner in which such risks are monitored and managed are explained in s risk report at As a consequence of both the macroeconomic and financial sector-related turbulence in recent years, also the outside world s focus on risk management in commercial and savings banks has increased. As a result of this, 2011 was the year in which the Danish Financial Supervisory Authority introduced the Executive order on Management and Control of Banks [bekendtgørelse om ledelse og styring af pengeinstitutter] which introduces, among other things, a comprehensive set of provisions on risk management in banks. The provisions range from requirements on the Board of Directors tasks and responsibility at top-management level to requirements for business procedures at the operational level. As part of s compliance with these new requirements, Alice Ohmeyer, finance and risk manager, was in 2011 given responsibility for prudent risk management in, inclusive of currently overseeing s risks as well as the general risk situation. Page 13 of 45

14 The Supervisory Diamond In 2010, the Danish Financial Supervisory Board introduced the Supervisory Diamond which, on the basis of five parameters, provides an indication of whether a commercial or savings bank is run with the proper level of risks and whether it is financially robust. The requirements of the Danish Financial Supervisory Authority concern property exposure, liquidity coverage ratio, annual growth of loans, funding ratio as well as the sum of large commitments. The illustration below shows s Supervisory Diamond as at 31 December 2011 from which it clearly appears that meets the requirements of the Danish Financial Supervisory Board. Supervisory Diamond The sum of large commitments Liquidity coverage ratio Annual growth of loans Funding ratio Property exposure The Financial Supervisory Board s threshold values Middelfart Sparekasse The sum of large commitments Annual growth of loans Property exposure Funding ratio Liquidity coverage ratio Max. 125 % % Max. 20 % % Max. 25 % % Max. 100 % % Min. 50 % % Page 14 of 45

15 Commercial and financial risks s most significant operating risk areas are credit and market risks. The overall framework for risk and capital management has been laid down by the Board of Directors, which on a regular basis receives reports about the risk development and granted credit lines. The day-to-day and current risk management is the responsibility of the credit and finance department. s credit risks are managed in accordance with s credit policy with the aim of ensuring a balance between earnings and risk. s primary customers are a mix of private customers and small and medium-sized businesses. All major customers are individually assessed on a regular basis. When objective criteria render it likely that a customer is unable to fully or partially repay loans or credits, individual impairment charges will be made. Collective impairment charges will be made of portfolios when objective criteria indicate an impairment of the loan groups. focuses on ensuring efficient management of the loan portfolio with the aim of minimizing the credit risk to the greatest extent possible. For each of its market risk areas - liquidity, interest, currency and share risks - has established limits with a balance between return and risk, on which reports are submitted to the Board of Directors on a monthly basis. operates with a contingency plan which is reviewed by the Board of Directors at least once a year. Corporate social responsibility Working with corporate social responsibility has been a natural element for for many years. It is not philanthropy, but merely the only right way for us to run our business. We support and have always supported local association activities in our geographical market area. We want to be an active coplayer in and together with the individual associations because we believe that when our surroundings thrive and develop positively, this will rub off on us, and vice versa. It is not about political correctness, merely about common sense and awareness of the dynamics we are able to create jointly with others. We have developed special products, the MS Focus account and a special Energy Loan supporting our attitude of wanting to behave with propriety towards the community and the world of which we are a part. Please see the financial statements or for further information on s corporate social responsibility. Audit Committee In 2009, established an audit committee consisting of Åge Almtoft, member of the Board of Directors. The audit committee s main tasks include: Supervision of the financial reporting process Supervision of the effectiveness of the internal control system, internal auditing and risk management systems Supervision of the statutory audit of the financial statements etc Supervision and control of the external auditor s independence The committee meets with the auditors and the Executive Board 4 times year. Corporate governance At accounts for its efforts to comply with the Danish Financial Supervisory Authority s recommendations for corporate governance. complies with the recommendations to a wide extent. From the expiry of the financial year and up till today, no events have occurred that change the conclusions in the annual report. Page 15 of 45

16 Remuneration of the Management In order to attract and retain s management capacities, the remuneration of members of the Executive Board and executive officers has been determined in consideration of tasks, value creation and conditions in comparable undertakings. Remuneration of the Management is described in further detail in note 7 in the financial statements. The Management of has worked out a pay policy and practice for remuneration of the Management and other employees with influence on the risk profile of. The pay policy can be seen at Uncertainty in recognition and measuring The most substantial uncertainties in recognition and measuring are related to loan impairment. In the assessment of Management, the uncertainty remains at an acceptable level in relation to the true a fair view of the financial statements. Reference is made to the accounting policies on pages Outlook for 2012 The Management expects that, with its liquidity cover ratio and solvency ratio, continues to have room for new customers. is particularly interested in lending money to private customers and in financing the small and medium-sized business customers throughout its entire market area. The expectations for the 2012 results are a profit before tax of DKK 20 40m which is an indication of the optimism within in terms our customer mix and business opportunities. Page 16 of 45

17 Management and directorships Management and directorships Executive Board Martin Nørholm Baltser, Managing Director, Member of the Board of Directors, Managing Director as from 1 January 2012 in: Leasing Fyn Bank A/S Nem Forsikring A/S Garanti Invest A/S Forsikringssamarbejdet A/S Sparekassekollegiet A/S Hans Erik Brønserud, Managing Director, retired on 1 January 2012 Member of the Board of Directors until 31 December 2011 in: TRIN, chairman Byggeselskabet Middelfart Havnefront A/S I Likvidation, chairman Forsikringssamarbejdet A/S, chairman Leasing Fyn Bank A/S Sparekassekollegiet A/S Garanti Invest A/S Peter Møller, Vice-Managing Director Member of the Board of Directors in: Nem Forsikring A/S, vice-chairman DGI-Huset i Vejle Page 17 of 45

18 Management and directorships Board of Directors Allan Buch, chairman of the Board of Directors Member of the Board of Directors in: Ulykkesforsikring for dansk fiskeri G/S, chairman Danske Fiskeres forarbejdnings industri A/S, vice-chairman Bælternes Fiskeriforening, chairman Middelfart Spildevand Holding A/S, chairman Middelfart Spildevand A/S, chairman Skærbæk Fiskerihavn, vice-chairman Fjord og Bæltcentret, Kerteminde Owner of: Skrillinge Strand Bundgarnsfiskeri Manager of: Bælternes Puljefiskeri Director of: Fiskeriselskabet område 22 ApS Bo Smith, member of the Board of Directors Member of the Board of Directors in: Voldby Vindmøllelaug I/S, chairman Director of: Byskov & Smith ApS Director of: Bo Smith Holding ApS Niels Anker Michaelsen, member of the Board of Directors Member of the Board of Directors in: Trolle Advokatpartnerselskab KIF Erhverv ApS, chairman MELES Insurance A/S Dachser Danmark A/S Locon ApS Komplementarselskabet Vesterballe Vej 25 ApS Åge Almtoft, member of the Board of Directors Member of the Board of Directors in: Dal-Bo Holding A/S Director of: Dal-Bo A/S Director of: Almtoft Invest ApS Helle Lund Gregersen, member of the Board of Directors, elected by the employees Member of the Board of Directors in: Green Network Page 18 of 45

19 FINANCIAL STATEMENTS INCOME STATEMENT Note DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 3 Interest income Interest expenses Net interest income Dividends etc Fees and commission income Fees and commission expense Net interest and fee income Market value adjustments Other operating income Staff costs and administrative expenses Amortisation, depreciation and impairment of intangible and tangible assets Other operating expenses Impairment of loans, advances and receivables etc Return on investments in associated and enterprises Profit before tax Tax Profit for the year To be allocated as follows: Parent company Minority interests Profit for the year Proposal for distribution of profit for the year Carried forward to next year Comprehensive income statement Profit for the year Other comprehensive income: Value adjustment of hedging instruments Tax on value adjustment of hedging instruments Other comprehensive income after tax Comprehensive income for the year Page 19 of 45

20 BALANCE SHEET Assets Note DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 Cash and demand deposits in central banks 1,316, ,933 1,316, , Receivables from credit institutions and central banks 325, , , , Loans, advances and other receivables at fair value 3,990 57,971 3,990 57, Loans, advances and other receivables at amortised cost 3,679,486 3,637,108 3,477,595 3,394,924 Bonds at fair value 164,067 1,849, ,067 1,849,369 Shares etc. 173, , , ,247 Investments in associated enterprises 50,119 3,025 54,640 8,033 Investments in enterprises 44,826 80, Intangible assets ,066 13,167 Land and buildings in total 57,681 44, , , Investment property 55,654 41, , , Owner-occupied property 2,027 2, , , Other tangible assests 21,548 20,223 26,429 26,815 Current tax assets 265 1, ,196 9 Deferred tax assets 19,266 26,049 2,725 10,229 Assets temporarily taken over 0 5, ,515 Other assets 28,173 37,129 68,618 96,732 Prepayments 7,256 5,357 8,019 6,838 Assets in total 5,892,871 6,445,795 6,012,939 6,593,051 Page 20 of 45

21 Liabilities Note DKK 1,000 DKK 1,000 DKK 1,000 DKK 1, Payables to credit institutions and central banks Deposits and other payables Bonds issued at amortised cost Current tax liabilities Other liabilities Deferred income Total payables Provisions Provisions for loss on guarantees Other provisions Provisions in total Subordinated loan capital 19 Subordinated loan capital Equity Guarantee capital Retained earnings Value adjustments of hedging instruments Minority interests Total equity Total liabilities Contingent liabilities 21 summary 22 Capital requirements 23 Financial risks Page 21 of 45

22 STATEMENT OF CHANGES IN EQUITY DKK 1,000 Guarantee capital Retained earnings Change in fair value, hedging instr. Equity as at 1 January Comprehensive income in 2010 Profit for the year Value adjustment of hedging instruments Comprehensive income for the year Transactions with owners Other adjustment New guarantee capital Total transactions with owners in Equity as at 31 December Correction of comprehensive income in Corrected equity as at 31 December Comprehensive income in 2011 Profit for the year Value adjustment of hedging instruments Comprehensive income for the year Transactions with owners Other adjustment New guarantee capital Total transactions with owners in Equity as at 31 December Total DKK 1,000 Guarantee capital Retained earnings Change in fair value, hedging instr. Equity as at 1 January Comprehensive income in 2010 Profit for the year Value adjustment of hedging instruments Comprehensive income for the year Transactions with owners Other adjustment New guarantee capital Total transactions with owners in Equity as at 31 December Correction of comprehensive income in Corrected equity as at 31 December Comprehensive income in 2011 Profit for the year Adjustment of hedging instruments Comprehensive income for the year Transactions with owners Other adjustment New guarantee capital Total transactions with owners in Equity as at 31 December Minority interests included in above item Total Page 22 of 45

23 NOTES 1. Accounting policies In General The consolidated financial statements of have been prepared in compliance with the provisions of the Danish Financial Services Act [lov om finansiel virksomhed] and the Executive Order on Financial Reporting by Credit Institutions etc. [regnskabsbekendtgørelsen]. The annual report has been prepared according to the same accounting policies as the 2010 report. After preparation of the 2010 annual report, the Danish Financial Supervisory Authority has ordered to write down s head-office property by DKK 19,680,000. This property is owned by a fully-owned subsidiary, and therefore the correction is made in the subsidiary s financial statements. The comparative figures in the annual report have been adjusted. If the write-down had been incorporated in the 2010 annual report, s and the s profit for the year and equity would have been DKK 19,680,000 smaller. s investments in enterprises and the s property, plant and equipment would also have been DKK 19,680,000 smaller. General comments on recognition and measurement Assets are recognised in the balance sheet when it is deemed probable that future economic benefits will flow to the and the asset value can be measured reliably. Liabilities are recognised in the balance sheet when, as a consequence of a previous event, the has a legal or actual liability and it is deemed probable that future economic benefits will flow from the and the value of the obligation can be measured reliably. At initial recognition, assets and liabilities are measured at fair value. Tangible and intangible assets, however, are measured at cost at the time of initial recognition. Subsequently, recognition takes place as described for each item below. Anticipated risks and losses appearing prior to presentation of the annual report and confirming or disproving circumstances as per the balance sheet date are taken into account in the recognition and measurement. Income is recognised in the income statement as it is earned, while costs are recognised with the amounts relating to the year under review. However, value increases of owner-occupied property are recognised directly under equity. Purchase and sale of financial instruments are recognised on the trading day, and recognition ends when the right to receive/the obligation to submit cash flows from the financial asset or liability has expired or if it has been sold and the essentially has transferred all risks and dividends attached to the property right. The does not apply the rules for re-classification of certain financial assets from fair value to amortised cost. Determination of fair value Fair value is the price at which an asset can be traded or a liability can be paid under normal trading circumstances between qualified, willing and mutually independent parties. Page 23 of 45

24 The fair value of financial instruments, for which there is an active market, is determined at the closing price on the balance sheet day or if such price is not available, another published price which must be deemed to be the most appropriate. For financial instruments without an active market, the fair value is determined via generally recognised valuation techniques based on current observable market data. Accounting estimates The financial statements are prepared in accordance with certain special preconditions which imply the use of accounting estimates. Such estimates are made by the Management of in accordance with its accounting policies and based on historical experience and preconditions deemed reasonable and realistic by the Management. The areas with a high degree of assessment or complexity or areas where assumptions and estimates are of vital importance for the financial statements are as follows: Impairment of loans, advances and receivables where significant estimates are involved in the quantification of the risk of not receiving all future payments. Moreover, collective impairment continues to be an area of significant uncertainty as possesses only limited historical data on which it can base the calculations. Provisions for guarantees where significant estimates are involved in the quantification of the risk of having to make future payments on the guarantee in question. Listed financial instruments which may be priced in markets with low turnover resulting in some uncertainty in the use of market prices in connection with measuring at fair value. Unlisted financial instruments where significant estimates are involved in the measuring of fair value. Assets temporarily taken over where significant estimates are involved in determination of the sales value of such assets. Consolidation enterprises The consolidated financial statements include and the enterprises in which directly or indirectly holds more than 50 per cent of the voting rights or otherwise holds a controlling interest. A controlling interest exists where is authorised to control the financial and operational decisions of the controlled enterprise with a view to achieving advantages from its activities. Enterprises acquired are included as from the date of acquisition. Enterprises sold are included until the date of transfer. Where the cost, inclusive of transaction costs, exceeds the fair value of the net assets in the enterprise acquired, the remaining positive difference is recognised as goodwill. Where the fair value of the net assets exceeds the cost (negative goodwill), the difference is recognised as income in the income statement as at the date of acquisition. Page 24 of 45

25 Financial statements applied for consolidation are prepared in accordance with the accounting policies of the parent company. Associated enterprises Associates enterprises are enterprises that are not enterprises, but enterprises where the holds interests and exercises a significant, although not controlling influence. The usually classifies enterprises as associated enterprises if directly or indirectly holds voting rights ranging between 20 and 50 per cent. Investments in associated enterprises are recognised at cost at the time of acquisition and are subsequently measured at equity value with the addition of acquired goodwill. The proportionate share of results after tax of the individual enterprises is recognised under the item return on investments in and associated enterprises. Consolidation principles The consolidated financial statements are prepared by adding up items of a uniform nature. Intra- revenue and expenses, intra- shareholdings, accounts and guarantees are eliminated. Proportionately consolidated enterprises are included in the consolidated financial statements at a share equal to the 's ownership interest in the enterprises in question. Intra- transactions Trading between entities is settled on market-based terms or on a cost-coverage basis. Insurance activities in general The insurance activities of the include traditional general insurance. Determination of the results of the insurance activities is based on the Executive Order on Financial Reports for Insurance Companies and Lateral Pension Funds [bekendtgørelse om finansielle rapporter for forsikringsselskaber og tværgående pensionskasser]. Provisions for premiums have been determined at the sum that, at the best estimate, will be required to pay for insurance events which are expected to take place after the balance sheet date under the insurance contracts concluded. Provisions for damages have been determined on a case-by-case assessment and according to an experience estimate of insurance events that have occurred as at the balance sheet date, but have not yet been reported to the insurance company. Foreign currency translation Transactions in currencies other than the Danish krone are translated at the exchange rate as at the transaction date. Foreign currency receivables and payables as well as other foreign currency monetary items which have not been settled on the balance sheet date are translated at the closing exchange rate as at the balance sheet date. Exchange differences that may occur between exchange rate on the date of transaction and the rate on the date of payment or on the balance sheet date, are recognised in the income statement as foreign exchange adjustments. Income statement Interest, fees and commissions Interest income and interest expenses are recognised in the income statement in the period to which they belong. Commissions and fees which are an integrated part of the effective interest on a loan or advance are Page 25 of 45

26 recognised as a part of amortised cost and thus as an integrated part of the financial instrument (loan or advance) under interest income. Commissions and fees which are a part of continuous payments are stated on an accruals basis over the term involved. Other fees are recognised in the income statement as on the date of transaction. Interest income from the part of loans and advances etc. that have been written down is recognised under impairment of loans and advances. Commission and fees for the provision of mortgage loans on behalf of Totalkredit are recognised in accordance with the set-off method. In accordance with this method, commission is recognised at the time of the establishment of the loan, and commission for providing current services to the borrower is recognised as provides the service and thus earns the right to the commission. Totalkredit may set off any loss that is established for the duration of the mortgage loan against future current commission income. Set-off is recognised at the time of the loss event. Staff costs and administrative expenses Staff costs include wages, salaries and remuneration as well as social costs, pensions etc. for Middelfart Sparekasse s staff. Expenses for allowances and benefits for the staff, including anniversary bonuses and severance pay are recognised as the staff perform the work entitling them to the said allowances and benefits. Pension schemes has set up contribution-based pension schemes for the majority of its employees. Under contribution-based schemes, fixed payments are made to an independent pension fund. Middelfart Sparekasse has no obligation to pay any further contributions. Other operating income and expenses Other operating income and expenses include mainly rent income, fee income from property transactions and current premiums as well as non-recurrent premiums from insurance contracts. Tax Tax for the year which includes current tax for the year and changes in deferred tax is recognised in the income statement at the share attributable to the results for the year and directly under equity at the share attributable to items directly under equity. Current tax liabilities and receivable current tax are recognised in the balance sheet as calculated tax on the taxable income for the year adjusted for tax paid under the tax prepayment scheme. Deferred tax is recognised on all temporary differences between the book value and the tax value of assets and liabilities. Deferred tax assets are recognised in the balance sheet at the value at which the asset would be expected to be realized, either as set-off in deferred tax liabilities or as net assets. is subject to joint taxation with its subsidiaries. The current Danish corporation tax is divided between the jointly taxed Danish group entities in proportion to their taxable incomes (full division with refund of tax loss). Page 26 of 45

27 Balance sheet Receivables from and payables to credit institutions and central banks Receivables from credit institutions and central banks include receivables from and time deposits in other credit institutions and central banks. Payables to credit institutions and central banks include payables to other credit institutions. Receivables are measured at fair value. Payables are measured at amortised cost. Loans and advances This item consists of loans and advances paid directly to the borrower. Listed loans and loans in a trade portfolio are measured at fair value. Other loans and advances are measured at amortised cost which is usually equal to nominal value less establishment fees etc. and less impairment charges for covering incurred, but not yet realized losses. Loans, advances and receivables are impaired individually as wells as collectively. Impairment charges for loss are made when an objective indication points to impairment. reviews loans and advances above a certain limit individually. Loans and advances below such limit as well as loans not impaired individually are included in the collective assessments. For individual impairment, an objective indication is when e.g. the borrower is in obvious financial trouble, when the borrower fails to pay instalments and interest, when grants a concession which it would otherwise not have granted if it had not been for the borrower s financial trouble or when it is deemed likely that the borrower will go bankrupt or be subjected to a different type of financial reconstruction. Individual impairment is charged as the difference between the book value before impairment and the current value of anticipated future payments on the loan or advance based on the most likely outcome. The originally fixed interest rate is applied for fixed-rate loans in the calculation of current value of anticipated future payments. For floating-rate loans, the current effective interest rate is applied. For loans, advances and receivables that have not been subject to individual impairment, a collective review is made to establish whether any objective impairment has occurred for the group in question (collective impairment). The collective review is carried out on the basis of groups of loans, advances and receivables with uniform characteristics in terms of credit risk. Three groups are used: one group of public authorities, one group of private individuals and one group of corporate customers. The model applies several groups of businesses, but as does not have the requisite critical mass to make the losses on its own customer portfolio within the individual financial periods reflect the credit risk actually entailed by the customer group in question, has selected a model using only one overall line of business as this is deemed to be the model that best matches the credit risk of its own corporate lending. The collective review is undertaken on the basis of a segmentation model developed by the association of local commercial and savings banks [Lokale Pengeinstitutter], which is in charge of the continuous maintenance and development thereof. Within the individual groups, the segmentation model determines the connection between established loss and a number of significant, explanatory macroeconomic variables via a linear regression analysis. The explanatory macroeconomic variables include unemployment, housing prices, interest rates, number of bankruptcies/forced sales etc. Page 27 of 45