Report and Accounts 2003

Accounting policies

General
Danmarks Nationalbank's Accounts for the year 2003 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 recognized 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 2003

Note			2003 kr. '000	2002 kr. '000
	Income from interest, etc.:
	Interest on foreign assets	6,298,610		7,047,844
1	Interest on loans, etc.	1,977,361		1,777,347
	Interest on domestic bonds	2,134,498		2,235,456
	Commission and other income	1,947		2,952
			10,412,416	11,063,599
	Expenditure on interest etc.:
	Interest on foreign liabilities	29,261		42,702
2	Interest on deposits, etc., and certificates of deposit	5,929,166		6,065,456
			5,958,427	6,108,158
	Net income from interest		4,453,989	4,955,441

	Value adjustments, etc.:
	Value adjustment of gold	103,910		218,850
3	Value adjustment of foreign assets	-37,122		1,125,763
	Value adjustment of domestic bonds	-334,188		791,149
		-267,400		2,135,762
	Write-down on financial fixed assets	-		11,966
			-267,400	2,123,796
	Profit from financial items and write-downs		4,186,589	7,079,237

	Income from shares, etc.		38,490	22,781

	Other income from ordinary operations		-	101,193

	Expenses:
4	Staff expenses	329,226		302,021
5	Other expenses	247,081		203,006
			576,307	505,027

6	Depreciation and write-down of tangible fixed assets		39,621	34,290

	Profit of the year		3,609,151	6,663,894

	Distribution of the profit for the year:
	Profit of the year		3,609,151	6,663,894
	Allocation from/to the Value Adjustment Reserve		267,400	-2,123,796
			3,876,551	4,540,098

	allocated as follows:
	Allocation to the General Reserves, 20 per cent.		775,310	908,020
	Payable to the central government, 80 per cent		3,101,241	3,632,078
			3,876,551	4,540,098

See notes to the Accounts on pp. 115-119

Balance sheet as at 31 december 2003

Note		2003 kr. '000	2002 kr. '000
	Assets
7	Gold	5,297,673	5,195,681
8	Foreign assets	214,440,926	183,034,228
9	Claims on the International Monetary Fund (IMF), etc.	7,416,059	8,267,756
10	Loans, etc.	125,485,548	132,037,278
11	Domestic bonds	39,745,673	41,011,708
12	Shares, etc.	457,350	157,205
13	Tangible fixed assets	679,769	704,775
14	Other assets	3,762,280	4,972,214
	Accruals	21,891	22,236
	Total assets	397,307,169	375,403,081

	Liabilities
	Banknotes	44,983,531	43,164,225
	Coins	4,701,041	4,490,610
	Foreign liabilities	2,975,521	3,310,569
	Counterpart of Special Drawing Rights allocated by the International Monetary Fund (SDR)	1,577,438	1,721,441
15	Deposits, etc.	91,002,358	61,679,219
	Certificates of deposit	157,279,000	160,664,000
	Central government	43,981,174	50,318,902
	Other liabilities	562,412	317,331
	Total creditors	347,062,475	325,666,297
	General Capital Fund	50,000	50,000
	Statutory Reserves	250,000	250,000
	Value Adjustment Reserve	3,310,093	3,577,493
	General Reserves	46,634,601	45,859,291
16	Total net capital	50,244,694	49,736,784
	Total liabilities	397,307,169	375,403,081

	Off-balance-sheet items:
17	Guarantees	180,098	177,207
18	Other liabilities	56,193,131	59,098,018
		56,373,229	59,275,225

Notes to the accounts for 2003

Note		2003 kr. '000	2002 kr. '000
1	Interest on loans, etc.
	Interest on loans to domestic banks and mortgage-credit institutes	1,946,169	1,672,827
	Interest on loans to other borrowers	31,192	104,520
		1,977,361	1,777,347

2	Interest on deposits, etc., and certificates of deposit
	Interest on deposits from domestic banks and mortgage-credit institutes	141,887	180,272
	Interest on certificates of deposit	3,760,261	3,780,281
	Interest on the central government's deposits	1,778,750	1,970,172
	Interest to other depositors, etc.	248,268	134,731
		5,929,166	6,065,456

3	Value adjustment of foreign assets
	Market-value adjustment	-761,612	913,427
	Exchange-rate adjustment	724,490	212,336
		-37,122	1,125,763

4	Staff expenses
	Salaries and remuneration	244,862	243,470
	Other staff expenses	58,364	53,551
	Allocations to support and severance schemes	26,000	5,000
		329,226	302,021
	Average number of employees on a full-time basis	553	559

5	Other expenses
	Materials for note production	31,960	25,406
	Materials for coin production	9,675	10,832
	Real property, current expenses	108,438	62,524
	Data processing, etc.	26,950	32,687
	Minor acquisitions and maintenance of machinery and equipment	24,102	19,604
	Other expenses	49,132	59,835
	Income from sale of coin sets and medals, etc.	-3,176	-3,559
	Reimbursement of previously paid VAT on canteen services	-	-4,323
		247,081	203,006

6	Depreciation and write-down of tangible fixed assets
	Properties	9,831	9,811
	Operating equipment	29,790	24,479
		39,621	34,290

7	Gold
	The gold stock amounts to 66,550 kg. (2002: 66,574 kg.), of which 2,028 kg. (2002: 37,287 kg.) has been lent.

8	Foreign assets
	Foreign bonds	80,081,259	74,404,097
	Claims on central banks	1,678,221	2,916,699
	Claims on foreign commercial banks	29,927,331	26,350,797
	Repo transactions against collateral in foreign bonds	102,753,593	79,361,902
	Other foreign assets	522	733
		214,440,926	183,034,228

9	Claims on the International Monetary Fund (IMF), etc.
	Denmark's IMF quota	14,488,182	15,810,800
	The IMF's holdings of Danish kroner	8,435,378	8,862,653
	Reserve position with the IMF	6,052,804	6,948,147
	Holdings of Special Drawing Rights (SDR)	481,335	730,169
		6,534,139	7,678,316
	Loans for the Poverty Reduction and Growth Facility Trust	881,920	589,440
		7,416,059	8,267,756

10	Loans, etc.
	Banks and mortgage-credit institutes:
	- Monetary-policy lending	48,024,000	81,167,000
	- Settlement accounts	73,476,520	46,504,091
	- Cash depots	3,122,555	3,208,300
		124,623,075	130,879,391
	Other	862,473	1,157,887
		125,485,548	132,037,278

11	Domestic bonds
	Danish government bonds	16,643,121	17,794,447
	Other domestic bonds	23,102,552	23,217,261
		39,745,673	41,011,708

12	Shares, etc.
	Danmarks Nationalbank's holdings of shares and equivalent investments at 31 December 2003 have an estimated market value of kr. 1,473 million.
	The holdings comprise shares, etc., in the Bank for International Settlements (BIS), PBS Holding, SAS, VP Securities Services, Grønlandsbanken, ECB capital contribution, Bella Center, Messecenter Herning, SWIFT and Det Danske Stålvalseværk subject to compulsory liquidation.

13	Tangible fixed assets
	Properties	576,932	586,229
	Machinery and equipment	95,448	115,291
	Work in progress	7,389	3,255
		679,769	704,775
	At the most recent official assessment Danmarks Nationalbank's properties were valued at kr. 894 million.

14	Other assets
	The amount includes outstanding interest of kr. 2,063 million (2002: 2,332 mio.kr.)

15	Deposits, etc.
	Banks and mortgage-credit institutes	86,421,219	56,609,598
	Other depositors	4,581,139	5,069,621
		91,002,358	61,679,219

Note		General Capital Fund and Statutory Fund	Value Adjustment Reserve	General Reserves	Total
Note		kr. '000	kr. '000	kr. '000	kr. '000
16	Total net capital
	Net capital at 1 January 2003	300,000	3,577,493	45,859,291	49,736,784
	Carried forward from the profit for the year	-	-267,400	775,310	507,910
		300,000	3,310,093	46,634,601	50,244,694

Note		2003 kr. '000	2002 kr. '000
17	Guarantees
	VP Securities Services, share of Guarantee Capital	79,614	76,102
	VP Securities Services, guarantee for errors by other account-holding institutions	36,454	35,075
	Danish Ship Finance, share of Guarantee Capital	63,000	63,000
	Other guarantees	1,030	3,030
		180,098	177,207
	Moreover, the Bank has provided guarantee obligations of Danmarks Nationalbank's Pension Fund subject to winding-up.

18	Other liabilities
	Forward purchases of foreign exchange	49,202,977	50,684,684
	Market value of assets in currency swap agreements	3,508,771	4,812,517
	Forward purchases of securities	34,109	-
	Futures	210,533	68,595
	Unutilised portion of credit facilities made available to the IMF (SDR)	3,236,741	3,532,222
		56,193,131	59,098,018
	Moreover, the Bank has established intervention agreements with the ECB and in addition, an undertaking of support has been given to former employees. The undertaking of support is fully covered by a pension insurance company.

Signatures and audit reports

Danmarks Nationalbank

Copenhagen, den 24 February 2004

Bodil Nyboe Andersen

Torben Nielsen

Jens Thomsen

/Henrik Larsen, Chief Accountant

Internal Auditor's Report
I have audited the Accounts of Danmarks Nationalbank for the financial year 1 January-31 December 2003, pp. 121-133.

The Accounts are the responsibility of Danmarks Nationalbank's Committee of Directors and Board of Directors. My responsibility is to express an opinion on the Accounts based on my audit.

Basis of opinion
I have conducted the audit in accordance with Danish Auditing Standards. Those standards require that I plan and perform the audit to obtain reasonable assurance that the Accounts are free of material misstatement. The audit included examining, on a test basis, evidence supporting the amounts and other information disclosed in the Accounts. The audit also included assessing the accounting policies applied and the significant estimates made by the Committee of Directors and Board of Directors. I believe that the performed audit provides sufficient basis for my opinion.

My audit has not resulted in any qualification.

Opinion
In my opinion, the Accounts give a true and fair view of Danmarks Nationalbank's assets, liabilities and financial position at 31 December 2003, and of the result of Danmarks Nationalbank's activities for the financial year 1 January-31 December 2003, in accordance with the accounting requirements of Danish legislation.

Copenhagen, 24 February 2004

Jan Birkedal, Chief Auditor

External Auditor's Report
As auditors appointed by the Royal Bank Commissioner we have audited the Accounts of Danmarks Nationalbank for the financial year 1 January-31 December 2003, pp. 121-133.

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

Basis of opinion
We have 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 Accounts are free of material misstatement. The audit included examining, on a test basis, evidence supporting the amounts and other information disclosed in the Accounts. The audit also included assessing the accounting policies applied and the significant estimates made by the Committee of Directors and Board of Directors. We believe that the performed audit provides sufficient basis for our opinion.

Our audit has not resulted in any qualification.

Opinion
In our opinion, the Accounts give a true and fair view of Danmarks Nationalbank's assets, liabilities and financial position at 31 December 2003, and of the result of Danmarks Nationalbank's activities for the financial year 1 January-31 December 2003, in accordance with the accounting requirements of Danish legislation.

Copenhagen, 24 February 2004

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, 16 March 2004

Hans E. Zeuthen Helle Bechgaard Michael Dithmer

Elisabeth Arnold     Søren Bjerre-Nielsen     Niels Boserup     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     Finn Thorgrimson