Report and Accounts 2002

Accounting policies

General
Danmarks Nationalbank's Accounts for the year 2002 are presented in accordance with the Danmarks Nationalbank Act and are approximated to the sound accounting policies for European central banks. Unrealised gains on foreign exchange and securities are still recognised in the profit and loss account, however.

The accounting policies applied are unchanged from the previous year.

Accounting policies:

Income and expensesare recognised in the profit and loss account for the period which they concern. Income and expenses in foreign exchange are converted at the exchange rates prevailing at the time that they are recorded in the accounts.

Premiums and discounts on Treasury bills and certificates of deposit, as well as forward premiums on forward securities and foreign‑exchange contracts, are recognised as interest.

Both realised and unrealised gains and losses are recognised in the profit and loss account, with the exception of unrealised gains on fixed assets.

Gold is stated at market value on the balance‑sheet date.

Assets and liabilities in foreign exchange, including forward contracts, are entered at the official exchange rates and securities market prices prevailing on the balance‑sheet date. Swaps and futures are stated at market value.

Bonds, including forward contracts, are stated at market value at year‑end.

Repurchase agreements, etc. Securities sold in connection with repurchase agreements, and gold and securities made available in lending facilities, are included in Danmarks Nationalbank's holdings.

Shares, etc., comprise capital investments and equivalent investments stated at acquisition value or market value at year‑end, if significantly lower. Write‑down to lower than acquisition value is recognised in the profit and loss account if it exceeds previous revaluations of the share. Revaluations are carried directly to net capital.

Tangible fixed assetsare stated at acquisition price less depreciation and amortisation. Assets with an acquisition value of less than kr. 100,000 are recognised as expenditure in the year of acquisition. Depreciation on a linear pro anno basis is made over the expected useful lives of the assets.

The useful lives are assessed as follows:

Bank properties	100 years
Other properties	25‑50 years
Building improvements	25 years
Technical building facilities	10‑25 years
Technical production facilities	5‑10 years
Other machinery and equipment	3‑5 years

Profit and loss account for the year 2002

Note			2002 kr. '000	2001 kr. '000
	Income from interest, etc,:
	Interest on foreign assets	7,047,844		6,453,276
1	Interest on loans, etc.	1,777,347		2,630,610
	Interest on domestic bonds	2,235,456		2,568,359
	Commission and other income	2,952		7,444
			11,063,599	11,659,689
	Expenditure on interest, etc.:
	Interest on foreign liabilities	42,702		67,401
2	Interest on deposits, etc., and certificates of deposit	6,065,456		6,113,674
			6,108,158	6,181,075
	Net income from interest		4,955,441	5,478,614

	Value adjustments, etc.:
	Value adjustment of gold	218,850		296,448
3	Value adjustment of foreign assets	1,125,763		-298,938
	Value adjustment of domestic bonds	791,149		126,658
		2,135,762		124,168
4	Write‑down on financial fixed assets	11,966		-
			2,123,796	124,168
	Profit from financial items and write-downs		7,079,237	5,602,782

	Income from shares, etc.		22,781	28,947

5	Other income from ordinary operations		101,193	4,275

	Expenses:
6	Staff expenses	302,021		301,335
7	Other expenses	203,006		212,707
			505,027	514,042

8	Depreciation and write‑down of tangible fixed assets		34,290	27,817

	Other expenditure on ordinary operations		-	300,000
	Profit for the year		6,663,894	4,794,145

	which is allocated as follows:
	Contribution to Danmarks Nationalbank's Anniversary Foundation of 1968		-	25,000
	Allocation to the Value Adjustment Reserve		2,123,796	124,168
	Allocation to the General Reserves		908,020	1,375,993
	Payable to the central government		3,632,078	3,268,984
	Total allocation		6,663,894	4,794,145

See Notes to the Accounts HERE,

Balance sheet as at 31 December 2002

Note		2002 kr. '000	2001 kr. '000
	Assets
9	Gold	5,195,681	4,978,942
10	Foreign assets	183,034,228	138,632,978
11	Claims on the International Monetary Fund (IMF), etc.	8,267,756	8,548,590
12	Loans, etc.	132,037,278	97,015,547
13	Domestic bonds	41,011,708	41,036,632
14	Shares, etc.	157,205	116,221
15	Tangible fixed assets	704,775	695,426
16	Other assets	4,972,214	4,239,401
	Accruals	22,236	22,244
	Total assets	375,403,081	295,285,981

	Liabilities
	Banknotes	43,164,225	42,965,622
	Coins	4,490,610	4,332,660
	Foreign liabilities	3,310,569	3,734,002
	Counterpart of Special Drawing Rights allocated by the International Monetary Fund (SDR)	1,721,441	1,884,225
17	Deposits, etc.	61,679,219	37,996,257
	Certificates of deposit	160,664,000	113,620,000
	Central government	50,318,902	43,509,692
	Other liabilities	317,331	538,555
	Total creditors	325,666,297	248,581,013
	General Capital Fund	50,000	50,000
	Statutory Reserves	250,000	250,000
	Value Adjustment Reserve	3,577,493	1,453,697
	General Reserves	45,859,291	44,951,271
18	Total net capital	49,736,784	46,704,968
	Total liabilities	375,403,081	295,285,981

	Off‑balance‑sheet items:
19	Guarantees	177,207	173,658
20	Other liabilities	59,098,018	72,140,181
		59,275,225	72,313,839

Notes to the accounts for 2002

Note		2002 kr. '000	2001 kr. '000
1	Interest on loans, etc.
	Interest on loans to domestic banks and mortgage‑credit institutes	1,672,827	2,450,925
	Interest on loans to other borrowers	104,520	179,685
		1,777,347	2,630,610

2	Interest on deposits, etc., and certificates of deposit
	Interest on deposits from domestic banks and mortgage‑credit institutes	180,272	262,044
	Interest on certificates of deposit	3,780,281	3,375,358
	Interest on the central government's deposits	1,970,172	2,209,285
	Interest to other depositors, etc.	134,731	266,987
		6,065,456	6,113,674

3	Value adjustment of foreign assets
	Market‑value adjustment	913,427	377,985
	Exchange‑rate adjustment	212,336	-676,923
		1,125,763	-298,938

4	Write‑down on financial fixed assets
	The amount pertains to write‑down of the value of the shares in Det Danske Stålvalseværk subject to compulsory liquidation.

5	Other income from ordinary operations
	The amount mainly pertains to dividend on the settlement of the C&G Bank liquidation of kr. 87.2 million, and profit on sale of shares in DLR‑Kredit of kr. 13.5 million

6	Staff expenses
	Salaries and remuneration	243,470	231,154
	Other staff expenses	53,551	60,181
	Allocations to support and severance schemes	5,000	10,000
		302,021	301,335
	Average number of employees on a full‑time basis	559	556

7	Other expenses
	Materials for note production	25,406	15,787
	Materials for coin production	10,832	15,716
	Real property, current expenses	62,524	74,844
	Data processing, etc.	32,687	42,765
	Minor acquisitions and maintenance of machinery and equipment	19,604	10,604
	Other expenses	59,835	56,427
	Income from sale of coin sets and medals, etc.	-3,559	-3,436
	Reimbursement of previously paid VAT on canteen services	-4,323	-
		203,006	212,707

8	Depreciation and write‑down of tangible fixed assets
	Properties	9,811	9,615
	Operating equipment	24,479	18,202
		34,290	27,817

9	Gold
	The gold stock amounts to 66,574 kg. (2001: 66,601 kg.), of which 37,287 kg. (2001: 61,502 kg.) has been lent.

10	Foreign assets
	Foreign bonds	74,404,097	74,969,456
	Claims on central banks	2,916,699	8,175,705
	Claims on foreign commercial banks	26,350,797	21,289,245
	Repo transactions against collateral in foreign bonds	79,361,902	34,197,191
	Other foreign assets	733	1,381
		183,034,228	138,632,978

11	Claims on the International Monetary Fund (IMF), etc.
	Denmark's IMF quota	15,810,800	17,305,912
	The IMF's holdings of Danish kroner	8,862,653	11,334,768
	Reserve position with the IMF	6,948,147	5,971,144
	Holdings of Special Drawing Rights (SDR)	730,169	2,354,327
		7,678,316	8,325,471
	Loans for the Poverty Reduction and Growth Facility Trust	589,440	223,119
		8,267,756	8,548,590

12	Loans, etc.
	Banks and mortgage‑credit institutes:
	‑ Monetary‑policy lending	81,167,000	63,353,000
	‑ Settlement accounts	46,504,091	28,783,934
	‑ Other	3,208,300	2,204,595
		130,879,391	94,341,529
	Other	1,157,887	2,674,018
		132,037,278	97,015,547

13	Domestic bonds
	Danish government bonds	17,794,447	15,903,491
	Other domestic bonds	23,217,261	25,133,141
		41,011,708	41,036,632

14	Shares, etc.
	Danmarks Nationalbank's holdings of shares and equivalent investments at 31 December 2002 have an estimated market value of kr. 958 million.
	Theholdingscomprise shares, etc., in the Bank for International Settlements (BIS), SAS, GrønlandsBANKEN, VP Securities Services, ECB capital contribution, Bella Center, Herning‑Hallen, SWIFT and Det Danske Stålvalseværk subject to compulsory liquidation.

15	Tangible fixed assets
	Properties	586,229	595,281
	Machinery and equipment	115,291	78,571
	Work in progress	3,255	21,574
		704,775	695,426
	At the most recent official assessment Danmarks Nationalbank's properties were valued at kr. 894 million.

16	Other assets
	The amount includes outstanding interest of kr. 2,332 million (2001: kr. 2,479 million).

17	Deposits, etc.
	Banks and mortgage‑credit institutes	56,609,598	32,488,596
	Other depositors	5,069,621	5,507,661
		61,679,219	37,996,257

		General Capital Fund and Statutory Fund	Value Adjustment Reserve	General Reserves	Total
		kr. '000	kr. '000	kr. '000	kr. '000
18	Total net capital
	Net capital at 1 January 2002	300,000	1,453,697	44,951,271	46,704,968
	Carried forward from the profit for the year	-	2,123,796	908,020	3,031,816
		300,000	3,577,493	45,859,291	49,736,784

Note		2002 kr. '000	2001 kr. '000
19	Guarantees
	VP Securities Services, share of Guarantee Capital	76,102	73,583
	VP Securities Services, guarantee for errors by other account‑holding institutions	35,075	34,045
	Danish Ship Finance, share of Guarantee Capital	63,000	63,000
	Other guarantees	3,030	3,030
		177,207	173,658
	Moreover, the Bank has provided the following guarantees that are assessed at kr.1: GuaranteeforobligationsofDanmarksNationalbank'sPension Fund subject to winding‑up, and price guarantee vis‑à‑vis central banks of other EU member states in the event of realisation of Danish securities pledged as collateral in the Target system.

20	Other liabilities
	Forward purchases of foreign exchange	50,684,684	61,858,251
	Market value of assets in currency swap agreements	4,812,517	6,196,831
	Futures	68,595	176,836
	Unutilised portion of credit facilities made available to the IMF (SDR)	3,532,222	3,908,263
		59,098,018	72,140,181
	Moreover, the Bank has granted an irrevocable credit undertaking to the Poverty Reduction and Growth Facility Trust (PRGF) with a guarantee from the Danish state, and established intervention agreements with the ECB and with Nordic central banks. Danmarks Nationalbank has accepted a conditional agreement for the purchase of 17.7 per cent of the shares in parts of PBS. In addition, an undertaking of support has been given to former employees, currently amounting to kr. 73 million, which is fully covered by a pension insurance company.

Signatures and audit reports

Danmarks Nationalbank

Copenhagen, 20 February 2003

Bodil Nyboe Andersen

Torben Nielsen

Jens Thomsen

/Henrik Larsen, Chief Accountant

Report of the internal audit
We have audited the Annual Report and Accounts of Danmarks Nationalbank for the financial year 1 January – 31 December 2002, pp. 114-133.

The Annual Report and Accounts is the responsibility of Danmarks Nationalbank's Committee of Directors and Board of Directors. Our responsibility is to express an opinion on the Annual Report and Accounts based on our audit.

Basis of opinion
We conducted the audit on the basis of the Danmarks Nationalbank Act and Danmarks Nationalbank's by‑laws, and in accordance with Danish Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the Annual Report and Accounts is free of material misstatement.

The audit has been planned and performed so that during the year we have assessed the procedures and internal control systems, including the risk management processes drawn up by the Management that are directed at the key business risks of Danmarks Nationalbank. In connection with the preparation of the Annual Accounts the audit included random examination of information to support the amounts and other accounting information stated in the Annual Accounts. The audit also included assessment of the accounting policies applied and the principal accounting estimates made. In our view, the audit performed provides sufficient basis for the conclusions drawn.

The audit has not resulted in any qualifications.

Opinion
In our opinion the Annual Report and Accounts give a true and fair view of the financial position of Danmarks Nationalbank as at 31 December 2002, and of the result of Danmarks Nationalbank's activities for the financial year 1 January – 31 December 2002, in accordance with the accounting requirements of Danish legislation.

Copenhagen, 20 February 2003

Peter Jochimsen, Chief Auditor

Report of the external auditors
As auditors appointed by the Royal Bank Commissioner we have audited the Annual Report and Accounts of Danmarks Nationalbank for the financial year 1 January – 31 December 2002, pp. 114-133.

Basis of opinion
We conducted our audit in accordance with Danish Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the Annual Report and Accounts is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Annual Report and Accounts. An audit also includes assessing the accounting policies used and significant estimates made by the Committee of Directors and Board of Directors. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not resulted in any qualification.

Opinion
In our opinion the Annual Report and Accounts gives a true and fair view of the financial position of Danmarks Nationalbank at 31 December 2002, and of the result of Danmarks Nationalbank's activities for the financial year 1 January – 31 December 2002, in accordance with the Danish Financial Statements Act.

Copenhagen, 20 February 2003

Svend Ørjan Jensen, State‑Authorised Public Accountant
Bjarne Fabienke, State‑Authorised Public Accountant

These accounts, audited in the manner prescribed by the by‑laws of Danmarks Nationalbank, are hereby adopted by the Board of Directors.

Copenhagen 19 March 2003

Hans E, Zeuthen Helle Bechgaard Michael Dithmer

Elisabeth Arnold Søren Bjerre-Nielsen Kristian Thulesen Dahl Bent le Fèvre Niels Fog Pia Gjellerup Pernille Blach Hansen J, Fløystrup Jensen Knud Koch Jensen Kristian Jensen Jette W, Knudsen Kjeld Larsen Michael Lunn Holger K, Nielsen Kirsten Nielsen Kirsten Nissen Jens Rohde Jens Rostrup-Nielsen Gitte Seeberg Kirsten Stallknecht Helge Sørensen Finn Thorgrimson