Important Notice

IMPORTANT NOTICE

IMPORTANT: You must read the following before continuing. The following applies to the Prospectus following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Prospectus. In accessing the Prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from the Bank or the Joint Global Coordinators & Bookrunners (each as defined in the Prospectus) as a result of such access.

NOTHING HEREIN CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SE- CURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES REGULATION IN ANY STATE OF THE UNITED STATES AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, PERSONS IN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.

THE SECURITIES OF THE BANK HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OF AUS- TRALIA, CANADA OR JAPAN AND, SUBJECT TO CERTAIN EXEMPTIONS, MAY NOT BE OFFERED OR SOLD IN OR INTO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON HAVING A REGISTERED ADDRESS IN, OR LOCATED OR RESIDENT IN, AUSTRALIA, CANADA OR JAPAN. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES IN THE BANK WITHIN AUSTRALIA, CANADA OR JAPAN.

THE PROSPECTUS MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER AND MAY NOT BE FORWARDED, DISTRIBUTED OR DISSEMI- NATED, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART TO PERSONS RESIDENT OR PHYSICALLY LOCATED IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, OR ANY OTHER JURISDICTION WHERE SUCH DISTRIBUTION OR DISSEMINATION MAY CONSTI- TUTE A VIOLATION OF THE LOCAL SECURITIES LAWS OR REGULATIONS OF SUCH JURISDICTION, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY OR ACQUIRE, ANY SHARES OR OTHER SECURITIES OF THE BANK IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE SUCH DISTRIBUTION OR DISSEMINATION MAY CONSTITUTE A VIOLATION OF THE LOCAL SECURITIES LAWS OR REGULATIONS OF SUCH JURISDICTION. ANY FORWARDING, DISTRIBU- TION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS DOCUMENT CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL NOT BE ABLE TO PUR- CHASE ANY OF THE SECURITIES DESCRIBED IN THE PROSPECTUS.

You are reminded that this Prospectus has been made available to you on the basis that you are a person into whose possession this Prospec- tus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver or disclose the contents of this Prospectus to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Joint Global Coordinators & Bookrunners or any affiliate of the Joint Global Coordinators & Bookrunners is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Joint Global Coordinators & Bookrunners or such affiliate on behalf of the Bank in such jurisdiction.

This Prospectus has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and consequently, none of the Bank or the Joint Global Coordinators & Bookrunners nor any person who controls any of them nor any director, officer, employee nor agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version available to you on request from the Joint Global Coordinators & Bookrunners. This document comprises 187 pages including this notice; please ensure that your copy is complete.

You are responsible for protecting yourself against viruses and other destructive items. Your use of this document is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. 04/03/12 19.58 04/03/12 19.45 rsion ve rnational Inte Spar Nord Bank A/S Bank Spar Nord Joint Global Coordinators & Bookrunners Coordinators Joint Global for Existing Shareholders at the ratio of 1:1 of the ratio at Shareholders Existing for The date of this Prospectus is 5 March 2012 (the “Prospectus Date”) Date”) 2012 (the “Prospectus is 5 March of this Prospectus The date (a public limited company incorporated in Denmark, company reg. (CVR) no. 13737584) no. (CVR) reg. in Denmark, company incorporated company (a public limited Offering of up to 57,068,810 new shares with a nominal value of DKK 10 each at a price of DKK 16 per new share with pre-emptive rights with pre-emptive share 16 per new of DKK of DKK 10 each at a price value with a nominal shares 57,068,810 new of up to Offering This prospectus (the “Prospectus”) has been prepared in connection with a capital increase comprising an offering (the “Offering”) of up to 57,068,810 new shares (the “Of- (the shares new 57,068,810 to up of “Offering”) (the offering an comprising increase capital a with connection in prepared been has “Prospectus”) (the prospectus This rights pre-emptive with “Group”) the subsidiaries, consolidated its with together and “Bank” (the A/S Bank Nord Spar in each 10 DKK of value nominal a with Shares”) fer on of directors ofcapital the Bank by was adopted the board the share ratio at of the 1:1. Theto(as decision increase defined below) Shareholders Existing the Bank’s for of Association”). (the “Articles of association articles 3 of the Bank’s article to 2012 pursuant 5 March Immediately prior to the Offering, share the capital registered amounted Bank’s to DKK 570,688,100 nominal value, divided into 57,068,810 shares with a nominal value of DKK 10 each (the admitted Existing “Existing are The to Shares Shares”). trading Bank’s and official listing on NASDAQ OMX Copenhagen A/S (“NASDAQ OMX”) under DK0060036564. ISIN code At 12:30 with p.m. VP Time”), CET Securities any on A/S person registered 9 2012 (“VP March (the Securities”) “Allocation as a of shareholder the - Bank (“Existing Share For “Shares”). the Shares, Offer the with together Shares (Existing held Share Existing each for Right”) (“Pre-emptive right pre-emptive (1) one allocated be will holders”) Price”). (the “Offer Share payment of DKK 16 per Offer against Share one (1) Offer subscribe for to will be entitled Right, the holder one (1) Pre-emptive every The trading period Rights Period”) will on the for (the commence 2012 7 Pre-emptive “Rights and March Trading on close 2012. 20 The March subscription period the for Offer Shares (the “Subscription Period”) will commence on 10 March 2012 and close on 23 March 2012 at 5:00 p.m. CET, inclusive. Any Pre-emptive Rights that are not exercised during the Subscription Period will lapse without value, and the holder of such Pre-emptive Rights will not emptive be Rights entitled cannot to be any or revoked compensation. modified.Exercised ThePre- Pre-emptiveRights areexpected to befor approved admissionto trading and official listing on code: NASDAQDK0060415909). If OMXa (ISIN holder of Pre-emptive Rights does not want to his exercise Pre-emptive Rights to subscribe for Offer Shares, the Pre-emptive Rights may be Period. sold during the Rights Trading OMX NASDAQ on listing official and trading to admission for approved be to expected are and DK0060416048, code, ISIN temporary a under issued be will Shares Offer The not place take to of expected the Offering, completion following with place the Authority Danish will Business of take Shares 2012. the Registration Offer 7 March as from later than on 27 March 2012, and as soon the as temporary ISIN possible thereafter, code of the Offer Shares will be merged with ISIN temporary the the under Shares ISIN Offer the of liquidity the code completed, been has of merger such Until 2012. the March 29 on than later not place Existing take to Shares, expected DK0060036564, Shares. the liquidity of the Existing from different may be substantially code certain of satisfaction the to Subject underwritten. is Offering the Agreement”, Offering—Underwriting the of Conditions and Offering—Terms II—The “Part in described As subscribed be will Rights Pre-emptive of holders by for subscribed been not have which Shares Offer any defined), (as Agreement Underwriting the in forth set conditions the subscription of a the Bank has thus been guaranteed conditions, of certain the satisfaction Bank A/S, and, subject to Bank AB and Danske by Carnegie Investment for Danske and AB Bank Investment Carnegie Offering. the with connection in million 913.1 DKK of proceeds gross total the to corresponding Shares Offer 57,068,810 of total Bank A/S not are jointly and liable. Among severally other conditions, the Underwriting is Agreement subject to the condition that the of Group (as Shareholders defined Rights under Pre-emptive on agreements binding undertakings advance as exercises below) and described Conditions in of “Part II—The the Offering—Terms Offering— Commitment”. and Underwriting Undertakings Advance have Shareholders”), of “Group (the Pensionskasse Finanssektorens and A/S Realkredit Nykredit Foundation, Nord Spar the of consisting Shareholders, Existing of group A made binding advance undertakings, subject to the satisfaction of certain conditions, to Pre-emptive Rights 2196_NORTH_Prospekt_START_UK.indd 1

Rights issue 2012 2196_NORTH_Prospekt_OMSLAG_UK.indd 1 Important Information

This Prospectus has been prepared for the Offering and for admis- Due to such restrictions under applicable laws and regulations, the sion to trading and official listing of the Pre-emptive Rights and the Bank expects that certain investors residing in the United States, Offer Shares on NASDAQ OMX in compliance with Danish laws and Canada, Australia, Japan and other jurisdictions outside Denmark, regulations, including Consolidated Act No. 883 of 9 August 2011 on Germany, Norway and Sweden, may not have the Prospectus dis- Securities Trading, as amended (the “Securities Trading Act”), Com- tributed to them and may not be able to exercise the Pre-emptive mission Regulation (EC) No. 809/2004 of 29 April 2004, as amended Rights or subscribe for the Offer Shares. No offer and no solicitation and Executive Order No. 223 of 10 March 2010, issued by the Danish to any person are being made by the Bank in any jurisdiction under Financial Supervisory Authority (the “DFSA”) on prospectuses for any circumstances that may be unlawful. securities admitted to trading on a regulated market and for public offerings of securities of at least EUR 2,500,000 and the rules of Certain statements in this Prospectus, including certain statements NASDAQ OMX for issuers of shares. in “Summary”, “Risk Factors”, “Part I—Description of the Bank— Information on Assets and Liabilities, Financial Position, Results This Prospectus has been prepared in Danish (the “Danish Prospec- and Dividend Policy—Dividend Policy”, “Part I—Description of the tus”) for the public offering in Denmark and in English (the “English Bank—Historical Financial Information”, “Part I—Description of Prospectus”) for the public offering in Germany, Norway and Swe- the Bank—Operating and Financial Review”, “Part I—Description of den and the private placement of securities outside Denmark, Ger- the Bank—Capital Resources”, “Part I—Description of the Bank— many, Norway and Sweden, except for the United States, Canada, Risk, Liquidity and Capital Management”, “Part I—Description of Australia or Japan or any other jurisdiction in which an offering or the Bank—Business and Market” and “Part I—Description of the sale would be unlawful under the applicable laws of such jurisdic- Bank—The Danish Banking System and Regulation” are based on tion. The Danish Prospectus and versions of the Prospectus used in the views of Management, as well as on assumptions made by and connection with public offers in other jurisdictions are equivalent. information currently available to Management, and such state- However, prospectuses used in connection with private placements ments may constitute forward-looking statements. Such forward- may contain less information. looking statements (other than statements of historical fact) regarding the Group’s future results of operations, financial position, cash In the event of any discrepancy between the Danish Prospectus flows, business strategy, plans and objectives of Management for and other versions of the Prospectus, the Danish Prospectus shall future operations can generally be identified by terminology such prevail. as “targets,” “believes,” “estimates”, “expects”, “aims”, “intends”, “plans”, “seeks”, “will”, “may”, “anticipates”, “would”, “could”, The distribution of this Prospectus and the Offering is, in certain “continues” or similar expressions or the negatives thereof. jurisdictions, restricted by law, and this Prospectus may not be used for the purpose of, or in connection with, any offer or solicita- Such forward-looking statements involve known and unknown risks, tion to anyone in any jurisdiction in which such offer or solicitation uncertainties and other important factors that could cause the ac- is not authorised, or to any person to whom it is unlawful to make tual results, performance or achievements of the Group, or industry such offer or solicitation. This Prospectus does not constitute an results, to differ materially from any future results, performance or offer of or an invitation to acquire any Pre-emptive Rights or to achievements expressed or implied by such forward-looking state- subscribe for Offer Shares in any jurisdiction in which such offer or ments. invitation would be unlawful. Persons into whose possession this Prospectus may come shall inform themselves of and observe all The Bank does not intend, and does not assume any obligation, to such restrictions. Neither the Bank nor the Joint Global Coordina- update any forward-looking statements contained herein, except tors & Bookrunners accept any legal responsibility for any violation as may be required by law. Any subsequent written and verbal of any such restrictions by any person, whether or not such person forward-looking statements attributable to the Bank or to persons is a prospective purchaser of Pre-emptive Rights or a subscriber acting on its behalf are expressly qualified in their entirety by the and acquirer of the Offer Shares. For a more detailed description of cautionary statements referred to above and contained elsewhere certain restrictions in connection with the Offering, see “Part II— in this Prospectus. The forward-looking statements included in this The Offering—Terms and Conditions of the Offering—Jurisdictions Prospectus speak only as at the Prospectus Date. Except for any in which the Offering will be Made and Restrictions Applicable to the prospectus supplements that the Bank may be required to publish Offering”. under Danish law, the Bank does not intend to and does not assume any obligation to update the forward-looking statements in this This Prospectus may not be distributed or otherwise made avail- Prospectus after the Prospectus Date. able, and the Offer Shares may not be offered, sold or subscribed for, directly or indirectly, and the Pre-emptive Rights may not be of- Notice to Investors in the United States fered, sold, acquired or exercised, directly or indirectly, in the United The Pre-emptive Rights and the Offer Shares have not been ap- States, Canada, Australia or Japan, unless such distribution, offer- proved by the U.S. Securities and Exchange Commission, any state ing, sale, acquisition, exercise or subscription is permitted under securities commission in the United States or any other U.S. regula- applicable laws of the relevant jurisdiction, and the Bank and the tory authority, nor have any of such regulatory authorities passed Joint Global Coordinators & Bookrunners receive satisfactory docu- upon or endorsed the merits of the Offering or the accuracy or mentation to that effect. Neither this Prospectus nor any advertise- adequacy of this Prospectus. Any representation to the contrary is a ment or any other offering material may be distributed, published or criminal offence in the United States. otherwise made available, the Offer Shares may not be offered, sold or subscribed for, directly or indirectly, and the Pre-emptive Rights Neither the Pre-emptive Rights nor the Offer Shares have been or may not be offered, sold, acquired or exercised, directly or indi- will be registered under the Securities Act or any state securities rectly, in any other jurisdiction outside Denmark, Germany, Norway laws in the United States. Accordingly, the Pre-emptive Rights may and Sweden, unless such distribution, offering, sale, acquisition, not be offered, sold, acquired or exercised in the United States, and exercise or subscription is permitted under applicable laws of the the Offer Shares may not be subscribed for, offered or sold in the relevant jurisdiction. The Bank and the Joint Global Coordinators & United States unless they are registered under the Securities Act Bookrunners may request receipt of satisfactory documentation to or an exemption from such registration requirements is available that effect. under Regulation S of the Securities Act.

2 Important Information Prospectus – Spar Nord Bank Notice to Investors in the European Economic Area by any measure implementing the Prospectus Directive in that Rel- In relation to each member state of the European Economic Area evant Member State. The expression “Prospectus Directive” means that has implemented the Prospectus Directive (each a “Relevant Directive 2003/71/EC (and amendments thereto, including the Member State”), no offering of Pre-emptive Rights or Offer Shares 2010 Amending Directive, to the extent implemented in a Relevant to the public will be made in any Relevant Member State prior to the Member State), and includes any relevant implementing measure in publication of a prospectus concerning the Pre-emptive Rights and the Relevant Member States, and the expression “2010 Amending the Offer Shares which has been approved by the competent author- Directive” means Directive 2010/73/EU. ity in such Relevant Member State or, where relevant, approved in another Relevant Member State and notified to the competent Notice to Investors in the United Kingdom authority in such Relevant Member State, all pursuant to the This Prospectus is only being distributed to, and is only directed at, Prospectus Directive, except that with effect from and including the (i) persons outside the United Kingdom or (ii) “investment profes- date of implementation of the Prospectus Directive in such Relevant sionals” falling within Article 19(5) of the Financial Services and Member State, an offering of Pre-emptive Rights and Offer Shares Markets Act 2000 (Financial Promotion) Order 2005 (the “Financial may be made to the public at any time in such Relevant Member Promotion Order”) or (iii) “high net worth companies” and other State pursuant to the following exemptions from the Prospectus persons to whom it may lawfully be communicated, falling within Directive: the meaning of Article 49(2)(a) to (d) of the Financial Promotion Order (all such persons being “Relevant Persons”). Pre-emptive (a) to any legal entity which is a qualified investor as defined in the Rights and Offer Shares are only available to relevant persons and Prospectus Directive; any invitation, offer or agreement to subscribe for, purchase or otherwise acquire such Pre-emptive Rights or Offer Shares will be (b) to any legal entity which meets at least two or more of the engaged in only with Relevant Persons. Any person who is not a following criteria: (i) an average of at least 250 employees dur- Relevant Person should not act on or rely upon this Prospectus or ing the last financial year; (ii) a total balance sheet of at least any of its contents. EUR 43,000,000; and (iii) an annual net turnover of at least EUR 50,000,000, as shown in its latest annual or consolidated Notice to Investors in Canada, Australia and Japan accounts (if the Relevant Member State has implemented the This Prospectus may not be distributed or otherwise made avail- relevant provision of the 2010 Amending Directive, this exception able, the Offer Shares may not be offered, sold or subscribed for, is no longer valid); directly or indirectly, and the Pre-emptive Rights may not be offered, sold, acquired or exercised, directly or indirectly, in Canada, Aus- (c) to fewer than 100 or, if the Relevant Member State has imple- tralia or Japan, unless such distribution, offering, sale, acquisition, mented the relevant provision of the 2010 Amending Directive, exercise or subscription is permitted under applicable laws of the 150, natural or legal persons (other than “qualified investors” relevant jurisdiction, and the Bank and the Joint Global Coordina- as defined in the Prospectus Directive), subject to obtaining the tors & Bookrunners receive satisfactory documentation to that prior written consent of the Bank and the Joint Global Coordina- effect. tors & Bookrunners; or Enforceability of Judgments (d) in any other circumstances which do not require the publication Spar Nord Bank A/S is a public limited company registered under by the Bank of a prospectus under Article 3 of the Prospectus the laws of Denmark and has its registered office in Aalborg, Den- Directive. mark.

For the purposes of the above, the expression an “offer of Pre-emp- The Board of Directors and the Executive Board mentioned herein tive Rights and Offer Shares to the public” in relation to Pre-emptive are residents of Denmark. All or a substantial portion of the assets Rights and Offer Shares in any Relevant Member State means the of the Bank and such persons are located in Denmark. As a result, communication in any form and by any means of sufficient informa- it may not be possible for investors to effect service of process upon tion on the terms of the Offering, the Pre-emptive Rights and the Of- such persons or the Bank outside Denmark or to enforce judgments fer Shares so as to enable an investor to decide whether to acquire obtained in courts outside Denmark based upon applicable laws in the Pre-emptive Rights and acquire or subscribe for the Offer jurisdictions outside Denmark against such persons or the Bank. Shares, as the same may be varied in that Relevant Member State

Spar Nord Bank – Prospectus Important Information 3 Table of Contents

Important Information 2 10.5. Term to Maturity 68 10.6. Financial Assets and Liabilities in the Trading Table of Contents 4 Portfolio and Outside the Trading Portfolio 71 10.7. Solvency and Capital 71 Responsibility Statements 6 10.8. Effect of the Offering 74 10.9. Impact of Phasing Out the Activities of Spar Nord Summary 7 Leasing A/S (previously Finans Nord A/S) 74 10.10. Effect of Future Rules on the Group’s Capital and Risk Factors 19 Cash Resources 74

General Information 28 11. Risk, Liquidity and Capital Management 76 11.1. Overview 76 Part I. Description of the Bank 32 11.2. Risk Management Organisation 76 11.3. Risk Management 77 1. Persons Responsible 33 11.4. Credit Risk 78 11.5. Market Risk 85 2. Auditors 34 11.6. Operational Risk 88 11.7. Liquidity Risk 88 3. Selected Financial Information 35 12. The Danish Banking System and Regulation 90 4. Risk Factors 36 12.1. The Danish Banking System 90 12.2. Regulation 90 5. Bank Information 37 12.3. Regulatory Initiatives to Secure Financial Stability 93 5.1. Name and Registered Office etc. 37 5.2. ISIN Code 37 13. Research and Development, Patents and Licences 97 5.3. Date of Incorporation and Governing Law 37 5.4. Object 37 14. Trend Information 98 5.5. Financial Calendar 37 5.6. Financial Year and Financial Reporting 37 15. Prospective Financial Information 99 5.7. Auditors 37 15.1. Management’s Statement on Consolidated 5.8. Issuing Agent 37 Prospective Financial Information for 2012 99 5.9. Registrar 38 15.2. Independent auditors’ report on the consolidated 5.10. Transactions with Financial Advisers 38 prospective financial information for 2012 100 5.11. The Bank’s History and Development 38 15.3. Prospective Financial Information for 2012 101 5.12. Investments 38 16. Board of Directors, Executive Board and Supervisory Bodies 103 6. Business and Market 39 16.1. Board of Directors 103 6.1. Business 39 16.2. Executive Board 105 6.2. Market 42 16.3. Statement of kinship 106 16.4. Statement of Convictions, Indictments and Conflicts 7. Organisational Structure 44 of Interest, if any 106 7.1. The Bank’s Organisational Structure 44 16.5. Restrictions on Securities Trading 106 7.2. Principal Subsidiaries 44 7.3. Associates 44 17. Remuneration and Benefits 107 17.1. Remuneration in Financial Businesses 107 8. Property, Plant and Equipment 45 17.2. Remuneration of the Board of Directors 107 8.1. Facilities 45 17.3. Remuneration of the Executive Board 107 8.2. Insurance 45 8.3. Environmental Issues 45 18. Board Practices 109 18.1. Practices of the Board of Directors 109 9. Operating and Financial Review 46 18.2. Practices of the Executive Board 109 9.1. Financial Position 46 18.3. Service Contracts with the Board of Directors and 9.2. Operating and Financial Review 49 the Executive Board 110 9.3. Primary Factors Affecting the Group’s Results of 18.4. Committees, including Audit Operations 49 and Compensation Committees 110 9.4. Business Segments 50 18.5. Management Reporting and Internal Control Systems 110 9.5. Accounting Estimates and Judgments 50 18.6. Declaration on Corporate Governance 110 9.6. Consolidated Financial Statements for 2011 with 18.7. Guidelines for Incentive Schemes 111 Comparative Figures for 2010 51 9.7. Consolidated Financial Statements for 2010 with 19. Employees 112 Comparative Figures for 2009 57 19.1. Overview of Employees 112 9.8. Off-Balance Sheet Liabilities 63 19.2. Employee Remuneration Programmes 112 9.9. Significant Events After the Balance Sheet Date 63 19.3. Holdings of Securities 112 9.10. Government, Economic, Fiscal, Monetary or Political Initiatives 64 20. Major Shareholders 114

10. Capital Resources 65 21. Related Party Transactions 115 10.1. Policies and Goals 65 21.1. Transactions with Associates 115 10.2. Liquidity 65 21.2. Transactions with Parties with Significant Influence 115 10.3. Deposits and Payables to Credit Institutions and 21.3. Transactions with the Board of Directors and the Central Banks 66 Executive Board 115 10.4. Maturity Structure of Capital Market Funding 67 21.4. Transactions with Group Enterprises 116

4 Table of Contents Prospectus – Spar Nord Bank 22. Information on Assets and Liabilities, Financial Position, 4.10. Danish Regulations Governing Mandatory Takeover Results and Dividend Policy 117 Bids, Redemption of Shares and Disclosure 22.1. Historical Financial Information 117 Requirements 142 22.2. Dividend Policy 117 4.11. Public Takeover Bids made by Third Parties for the 22.3. Litigation 117 Shares of the Bank during the Previous or Current 22.4. Significant Changes to the Bank’s Financial or Financial Year 142 Trading Position 117 4.12. Taxation 142

23. Additional Information 118 5. Terms and Conditions of the Offering 146 23.1. Share Capital before and after the Offering 118 5.1. Terms of the Offering, Subscription Ratio and 23.2. Historical Changes in the Bank’s Share Capital 118 Allocation of Pre-emptive Rights 146 23.3. Warrants and Share Options 118 5.2. Offering and Proceeds 146 23.4. Convertible Bonds 118 5.3. Completion of the Offering 146 23.5. Memorandum of Association and Articles of 5.4. Subscription Period 146 Association 119 5.5. Expected Timetable of Principal Events 146 5.6. Withdrawal of the Offering 147 24. Material Contracts 122 5.7. Reduction of Subscription 147 24.1. State Hybrid Capital 122 5.8. Minimum and/or Maximum Subscription Amount 147 24.2. Finansiel Stabilitet – Agreement on the Terms for 5.9. Revocation of Subscription Orders 147 Providing a state Guarantee 123 5.10. Payment 147 24.3. Euro Medium Term Note Programme 123 5.11. Publication of the Results of the Offering 147 24.4. Spar Nord Leasing A/S – Business Transfer 5.12. Procedure for Exercise of and Dealings in Pre- Agreement 123 emptive Rights and Treatment of Pre-emptive Rights 147 24.5. Loan Agreement between Spar Nord Leasing A/S 5.13. Jurisdictions in which the Offering will be Made and and Jyske Bank A/S 124 Restrictions Applicable to the Offering 148 24.6. Skandinavisk Data Center A/S – Data Processing 5.14. Intentions of the Major Shareholders, Board Agreement 124 of Directors or Executive Board of the Bank to 24.7. Totalkredit – Cooperation Agreement 124 Participate in the Offering 149 24.8. DLR Kredit – Cooperation Agreement 124 5.15. Plan of Distribution 149 24.9. BankInvest Fondsmæglerselskab – Marketing and 5.16. Over-allotment Information 149 Investment Advisory Services Agreement 125 5.17. Subscription Price 149 24.10. letpension – Intermediary Services relating to 5.18. Price Disparity 149 Individual Life and Pension Insurance Products 125 5.19. Payment Intermediaries 149 24.11. PFA Pension – Agreement on Provision of Pension 5.20. Placement 149 and Insurance Products 125 5.21. Underwriting Agreement 149 24.12. Other Contracts 126 5.22. Advance Undertakings and Underwriting Commitment 150 25. Third Party Information, Expert Statements and Declarations of Interest 127 6. Admission to Trading and Official Listing 151 6.1. Market Making Agreement 151 26. Disclosure of Equity Investments 128 6.2. Stabilisation and Short Positions 151

27. Documents on Display 129 7. Selling Shareholders and Lock-up Agreements 152 7.1. Shareholders that have Indicated that They Expect to 28. Definitions and glossary 130 Sell Their Shares or Pre-emptive Rights 152 7.2. Lock-up Agreements in connection with the Offering 152 Part II. The Offering 135 8. Net Proceeds and Total Costs 153 1. Persons Responsible for the Offering 136 9. Dilution 154 2. Risk Factors Related to the Offering 137 10. Additional Information 155 3. Key Information on Capitalisation and Use of Proceeds 138 10.1. Advisers 155 3.1. Working Capital Statement 138 10.2. Availability of the Prospectus 155 3.2. Capitalisation and Indebtedness 138 3.3. Natural and Legal Persons’ Interests in the Offering 138 Appendix 1 156 3.4. Reasons for the Offering and Use of Proceeds 138 Articles of Association of Spar Nord Bank A/S 156 4. Information Concerning the Offer Shares 140 Annex 1 161 4.1. Type of Securities, Allocation Time and ISIN Codes 140 Annex 2 162 4.2. Governing Law and Jurisdiction 140 Annex 3 – Agreement on state-funded capital injection 163 4.3. Registration 140 Appendix 1 170 4.4. Currency 140 Appendix 2 171 4.5. Exchange Control Regulation in Denmark 140 Terms and conditions of the notes 172 4.6. Rights Attached to the Pre-emptive Rights and the Appendix 1 182 Offer Shares 140 Appendix 2 183 4.7. Resolutions, Authorisations and Approvals of the Appendix 3 184 Offering 141 4.8. Date of Allocation of Pre-emptive Rights and Appendix 2 185 Issuance of Offer Shares 141 4.9. Negotiability and Transferability of the Shares and Part F – Financial information 185 Offer Shares 142

Spar Nord Bank – Prospectus Table of Contents 5 Responsibility Statements

Spar Nord Bank A/S is responsible for this Prospectus pursuant to Danish law.

Statement by Management

We hereby declare that we have taken all reasonable care to ensure that, to the best of our knowledge and belief, the information contained in the Prospectus is in accordance with the facts and contains no omissions likely to affect the import thereof.

Aalborg, 5 March 2012

Spar Nord Bank A/S

Board of Directors

Torben Fristrup Per Nikolaj Bukh Carsten Normann (Chairman) (Deputy Chairman)

Hans Østergaard Niels Kristian Kirketerp Ole Skov

Jannie Skovsen Jan Høholt Jensen

Torben Fristrup is CEO of CUBIC-Modulsystem A/S.

Per Nikolaj Bukh is professor at Aalborg University.

Carsten Normann is a professional director, CEO of Cano Holding ApS.

Hans Østergaard is a professional director.

Niels Kristian Kirketerp is a farm owner.

Ole Skov is a workplace representative of Spar Nord Bank A/S.

Jannie Skovsen is a workplace representative of Spar Nord Bank A/S.

Jan Høholt Jensen is a project consultant of Spar Nord Bank A/S.

Executive Board

Lasse Nyby John Lundsgaard Lars Møller (Chief Executive Officer) (Managing Director) (Managing Director)

6 Responsibility Statements Prospectus – Spar Nord Bank Summary

This summary must be read as an introduction to this Prospectus. Any focused on the core business areas of transport, agriculture and decision to invest in the Offer Shares or the Subscription Rights should construction. Since 1 October 2011, the company has been catego- be based on a consideration of this Prospectus as a whole, including rised as Discontinuing Activities, as an agreement has been made the documents incorporated by reference and the risks of investing with the Jyske Bank group for the transfer of its forward-looking in the Offer Shares and the Subscription Rights set out in the section activities in Denmark and the remaining activities will be phased out entitled “Risk Factors.” This summary is not complete and does not as the leases expire. contain all the information that you should consider in connection with any decision relating to the Offer Shares and the Subscription Rights. Certain information about the Group’s business segments for 2011 Certain terms applied in this summary are defined elsewhere in the can be found in the table below. Prospectus.

Where a claim relating to information contained in this Prospectus is Table 1 – Certain Information about the Group’s Business Segments brought before a court, the investor making such claim may have to for 2011 bear the costs of translating the Prospectus before such legal proceedings are initiated. Profit/loss The Bank, which has prepared this summary or any translations (DKKm) Total assets before tax thereof, and have requested approval thereof, may be subject to civil Spar Nord’s Local Banks 38,291.7 231.1 liability, but only if it is misleading, incorrect or inconsistent when read in conjunction with the other parts of the Prospectus. Trading, Financial Markets and International Division 20,287.2 188.2 Business and Market Other Areas 3,718.4 -116.6 Business Spar Nord Leasing A/S Business Overview (Discontinuing Activities) 7,784.1 42.2 Founded in Aalborg, Denmark in 1824, the Bank has historically been rooted in northern Jutland, and it continues to have a sig- Total 70,081.4 344.9 nificant market share in this region. During the period from 2002 to 2010, the Bank opened or acquired a total of 27 local branches Vision, Values and Strategy outside the North Jutland region, and today it is present in most The Bank’s corporate vision is, through the Group’s decentralised major Danish cities. organisation and extensive degree of local self-determination, to create Denmark’s most attractive banking chain for the customers, The Group provides a wide range of financial services, advisory ser- the employees and the shareholders. The Bank’s customer mission vices and products, either in-house or through business partners. is to create financial freedom for its customers through “individual The Group’s main business focus is on retail customers as well as solutions based on competent advisory services and local involve- small and medium-sized businesses in local areas where the Group ment”. These visions are supported by the Bank’s three core values has representation. of being down-to-earth, ambitious and actively involved.

The Group comprises the business segments Spar Nord’s Local For the period 2011–2013, three specific strategic focal areas have Banks; Trading, Financial Markets & the International Division; and been defined, each defining three strategic goals. Spar Nord Leasing A/S, of which the latter has been classified as Discontinuing Activities since 1 October 2011. In addition, it has a Under the heading “More customers – more business”, the Bank number of staff and support departments based at the Aalborg head aims to attract 10,000 new retail customers and 1,000 new business office as well as the business segments Unallocated, Eliminations customers per year, increase average business volumes (deposits and Earnings from investment portfolios, which are described under as well as loans, advances and guarantees) per customer by 5% per Other business areas in ”Part I—Description of the Bank—Operating year and bring the Group’s specialist skills, including particularly in and Financial Review”. the remit of Trading, Financial Markets and the International Divi- sion, even more into play. Spar Nord’s Local Banks consists of the banking activities of the Group’s 69 Danish branches, through which the Group serves retail Under the heading “Stronger focus – stronger chain”, the Bank has and business customers and provides banking services such as defined a goal for customer advisers to devote at least 55% of their loans and credit facilities, credit and debit cards as well as a broad time to customers and for 10,000 hours of development time to be range of savings, non-life insurance, life insurance and pension spent each year to enhance customer service. Finally, a goal has savings products. According to the most current data available, Spar been defined that employee satisfaction should be further enhanced Nord’s Local Banks had market share of 3.3% measured on loans over the coming years. and advances and 3.7% measured on deposits at 30 September 2011. Under the heading “Better bottom line – better bank”, the Bank maintains a long-term goal of improving its Cost/Income Ratio to 55 Trading, Financial Markets & the International Division consists of and to keep the impairment ratio on a level with the best third of a Markets, Bonds, Shares, the Interest and Forex Division, Asset defined group of Danish peer banks. Finally, a goal has been defined Management and the International Division. This business area for the Bank to create the basis over the coming years for repaying serves the Group’s own retail and business customers and insti- Hybrid Core Capital to the Danish State. tutional clients and is a provider of wholesale services (forex and securities-related transactions, trade finance services and clearing Market services) to small and medium-sized banks. The number of banks and savings banks operating in Denmark is relatively large compared with other European countries, even when Spar Nord Leasing A/S is a finance company offering leasing services taking into consideration the sector consolidation that has been in Denmark and Sweden (through the subsidiary SN Finans Nord ongoing for the past two decades. AB). The company mainly provides financing for vehicles and is

Spar Nord Bank – Prospectus Summary 7 First of all, the market is dominated by the two international finan- In addition, Management aims to strengthen the Bank’s organic cial groups Danske Bank and Nordea. Next, there are a number of growth through an increased customer inflow and business volume; banks that more or less provide full market coverage. These are especially in the branches that have been acquired or established in Jyske Bank, Sydbank, the Bank, Nykredit Bank, Vestjysk Bank and recent years. Arbejdernes Landsbank. The rest of the Danish banking market consists of a large number of small local banks and savings banks. Finally, Management expects the next few years to offer opportunities for minor acquisitions of banking activities that are strategically Accordingly, the Group competes with large nation-wide and inter- attractive to the Group, which would also require a strengthened national financial groups as well as small local and regional banks. capital base. Especially acquisition of activities in those areas outside the North Jutland region in which the Bank has set up busi- As a financial business, the Group is highly dependent on the overall ness during the past ten years, and in which it still has unutilised economic trends in Denmark and thus also on developments in the capacity, would be of interest to the Bank, provided that the assets international economy. During periods of economic boom, banks are of high quality and of a scope that allows for integration with the generally experience growing profits, in part as a result of higher existing business. lending and deposit volumes, lower loan default rates and higher collateral values, while the opposite applies in periods of economic Prospective Financial Information downturn. Methodology and Assumptions Applied in Prospective Financial Information for 2012 The table below shows developments in certain economic indicators Introduction for Denmark for the years 2011, 2010 and 2009. The Bank has prepared the prospective consolidated financial information for the financial year ended 31 December 2012 herein for use in this Prospectus in compliance with applicable laws and Table 2 – Percentage Changes in Certain Economic Indicators for regulations. The Board of Directors and the Executive Board are Denmark responsible for the information.

The prospective financial information for the financial year ended 31 Financial year December 2012 is based on a number of assumptions and esti- (%) 2011 2010 2009 mates which, while presented with numerical specificity and considered reasonable by the Bank, are inherently subject to significant GDP 1.0 1.3 -5.2 business, operational, economic and competitive uncertainties and Consumer spending -0.7 1.9 -4.5 contingencies, and are based on assumptions with respect to future Housing investments 9.7 -7.4 -16.9 business decisions that are subject to change.

Corporate investments -5.0 -4.4 -15.9 The Bank’s expectations in relation to future developments may dif- Investment in inventories 0.4 1.0 -2.0 fer significantly from actual developments, and realised results are Exports 7.3 3.2 -9.7 likely to differ from the stated estimates, and such variance may be material. Accordingly, potential investors should treat this infor- Imports 6.1 3.5 -12.5 mation with caution and not place undue reliance on the following Source: Danmarks Nationalbank prospective financial information.

Methodology and Assumptions The prospective consolidated financial information for the financial Reasons for the Offering and Use of Proceeds year ended 31 December 2012 has been prepared on the basis of The conditions for carrying on banking business have in many ways the Bank’s accounting policies, which are in accordance with the changed due to the crisis witnessed in recent years in the financial recognition and measurement provisions of IFRS as adopted by the markets and the legislative and regulatory measures resulting from EU and are identical to the accounting policies applied in the audited the crisis. The main consequences include stricter requirements consolidated financial statements for 2011 set out in note 1 to the and higher expectations from investors to the capitalisation of Bank’s audited consolidated financial statements for the financial banks and, in particular, to their Common Equity (Tier 1). year ended 31 December 2011, included in this Prospectus, and the accounting estimates described therein. In note 1, “Information In 2009, for the purpose of strengthening its capital base and ac- on standards that have not yet come into force”, it is stated that no commodating the demand for financing expected then, the Bank changes to the accounting policies are expected in 2012. raised a loan with the Danish State of DKK 1,265 million in the form of Hybrid Core Capital, and in 2006 and 2007 the Bank strengthened The prospective consolidated financial information for the finan- its capital base by DKK 808 million by way of subordinated loans. cial year ended 31 December 2012 has been prepared for use in The Hybrid Core Capital may be repaid as from the end of June this Prospectus using the Bank’s usual analysis and budgeting 2014, and part of the subordinated loans was repaid in November procedures and on a basis comparable to the historical financial 2011 and February 2012 whereas the remaining part is expected to information included elsewhere in this Prospectus. However, the be repaid by DKK 297 million by 31 March 2012 and by DKK 100 mil- prospective consolidated financial information is based on a large lion in December 2012, respectively. number of estimates made by the Bank on the basis of assumptions of future events that are subject to numerous and significant un- Accordingly, the reason for the Offering is the wish of increasing the certainties as a result of business, economic, competitive and other Group’s financial strength and, in particular, of strengthening the risks and uncertainties that may cause the Bank’s actual results Bank’s Common Equity (Tier 1). As a result, the Bank’s Common to differ significantly from the prospective financial information Equity (Tier 1) ratio will be approximately 12.4% at 31 December presented herein. 2011 (pro forma). Some of the assumptions, uncertainties and unforeseen events relating to the prospective consolidated financial information are

8 Summary Prospectus – Spar Nord Bank beyond the Bank’s control, including those relating to changes in A minor increase in deposits is expected, which is expected to have political, legal, fiscal, market or economic conditions, improvements limited impact on net interest income. in macroeconomic conditions, currency fluctuations and customers’ or competitors’ actions. The Bank has full or partial control over Net interest income is affected by increased funding costs. Bond certain other assumptions, uncertainties and contingencies, includ- and senior loans in the amount of DKK 5.4 billion mature during ing events related to the implementation of the Bank’s strategy and 2012. To the extent that these are refinanced, this is expected to be restructuring projects. at a higher margin than the matured loans.

Even though the material assumptions applied in preparing the Net income from fees, charges and commissions for 2012 is ex- prospective financial information are set out below, there is a pos- pected to be in line with 2011. Net income from fees, charges and sibility that one or more of the assumptions applied by the Bank will commissions for 2012 will be positively affected by the increase at not be realised. 1 April 2012 in the administration fee on arranged Totalkredit loans.

The Bank’s prospective financial information is based on a number Costs of assumptions and estimates which, while presented with numeri- Total costs for 2012 are expected to be in line with 2011. Among cal specificity and considered reasonable by Management, are other measures, this has been ensured by an alignment of the inherently subject to significant business, operational and economic organisation towards the end of 2011. uncertainties, many of which are beyond the Bank’s control. Man- agement finds that the Bank solely has direct influence on those Impairment Losses assumptions regarding the Group in general, Spar Nord’s Local Impairment of loans and advances is highly sensitive to cyclical Banks, Spar Nord Leasing and the assumptions about unchanged changes, and for 2012 is subject to considerable uncertainty. income and zero cost growth in the Trading, Financial Markets and International Division. Impairment losses are expected to remain high due to the sustained challenging situation. The prospective financial information is, among other things, based on the assumption that the Bank’s strategy is implemented. The profit forecast set out below is stated as core earnings before Whether this strategy is successful is subject to uncertainties and impairment losses. contingencies beyond the Bank’s control, and there can be no assurance that the strategy will be realised within the forecast period, Discontinuing Activities if at all. Accordingly, there can be no assurance that the forecast The remaining part of Spar Nord Leasing in Denmark and Swe- results will materialise. Actual results may therefore differ from the den is expected to be phased out during the year, to the effect that budgeted results, and the variance may be material. loans and advances at year end 2012 will amount to DKK 4.4 billion, against DKK 7.1 billion at year end 2011. This development in loans The prospective financial information for 2012 represents Manage- and advances is based on the following assumptions: ment’s best estimates at the Prospectus Date. The prospective financial information contains estimates and assertions that are • repayment in accordance with agreements with customers; subject to considerable uncertainty. See “Risk Factors”. • extraordinary instalments due to transfers of whole customers to Actual results may differ significantly from the Bank’s assumptions other leasing companies. as a result of other circumstances including, but not limited to, those described in “Risk Factors”. See “Operating and financial re- A profit on Discontinuing Activities is expected for 2012. view—Primary Factors Affecting the Group’s Results of Operations” for further information on the primary factors that, in the Bank’s Contributions to Sector-Targeted Solutions opinion, could potentially have a significant effect on its results. Based on the available draft Deposit Guarantee Scheme, contributions to sector-targeted solutions for 2012 are expected to be an In preparing the prospective consolidated financial information for expense in the range of DKK 35-65 million. the financial year ended 31 December 2012, the Bank’s assumptions included the following: Consolidated Profit Forecast for 2012 Based on the above, the Bank expects to realise core earnings Uncertainty as to Economic Outlook before impairment of around DKK 800 million for 2012. During 2011, the brighter economic outlook perceived in 2010 gave way to expectations of very subdued growth or outright recession in The Bank’s financial and operational performance is affected by 2012. The economic outlook is still subject to considerable uncer- various factors. See “Risk Factors” for a description of some of the tainty as a result of, among other things, the political situation sur- factors that could have an adverse effect on the Bank’s operational rounding the resolution of the sovereign debt problems in Greece, and financial performance and should, therefore, be read in con- Italy, Spain, Ireland and Portugal. junction with the prospective financial information.

The uncertainty as to the economic situation in 2012 impacts the Risk Factors prospects for 2012 with flat lending growth, moderate growth in Investing in the Pre-emptive Rights, the Offer Shares and/or the deposits and continued limited activity in the investment area. Existing Shares involves risks. Such risks include, but are not limited to, the risk factors described in “Risk Factors”. Any of these Core Income risks may adversely impact the Group’s business, results of opera- The Bank’s core income is expected to increase relative to 2011. tion, financial position and prospects and the value of the Shares. The increase is largely linked to the interest rate increases in 2011, The Group faces additional risks and uncertainties, including risks which will take full effect in 2012. and uncertainties not presently known to Management or that Management currently deems immaterial, which may have a mate- Based on expectations of a poor economic outlook and uncertain rial adverse effect on the Group’s business, results of operation, market conditions in 2012, lending growth is expected to be flat. financial position or prospects, or which may cause other events

Spar Nord Bank – Prospectus Summary 9 that may cause investors to lose all or part of their investment. Operational risks include: This Prospectus also contains forward-looking statements that are • Operational risks, including outsourcing partners and suppliers, subject to future events, risks and uncertainties. The actual results could result in financial loss and could harm the Group’s reputa- could differ materially from those indicated in these forward-look- tion ing statements as a result of many factors, including, but not limited to, the risks described below and elsewhere in this Prospectus. See • The risk management methods used by the Group may prove “General Information—Forward-looking Statements”. insufficient to cover unidentified, unanticipated or incorrectly quantified risks, which could lead to material losses or a material The most important risk factors related to the Bank’s business are increase in liabilities described in “Risk Factors” and may be divided into the following categories: • The Group depends on its senior management and employees and it may have difficulty attracting and retaining qualified em- Risks related to macro-economic conditions include: ployees in future • The Group’s business, results of operations and financial position are impacted by macro-economic conditions and economic • Catastrophic events, terrorist attacks, acts of war, hostilities, trends in Denmark pandemic diseases or other unpredictable events could have a material adverse effect on the Group’s business, results of Credit risks include: operations and financial position • The Group has significant customer and counterparty credit risk exposure Sector-related risks include: • As part of the financial services industry, the Group faces sub- • The Group’s impairment of loans and advances has increased stantial competitive pressures significantly as a result of the difficult economic conditions • The Group is exposed to business and image related risks • The Group has risks relating to property-related loans and advances • As a result of the Group’s participation in the bank packages, it continues to be subject to a number of limitations that may have • The Group is exposed to risks related to the agricultural sector a material adverse effect on its business

• The Group is exposed to risks related to other sectors • The Group has incurred major costs relating to its participation in Bank Package I and may potentially have to pay additional • The Group is exposed to debtor risk related to the discontinuation amounts as a result of its participation in the current state de- of its leasing activities posit guarantee schemes

• The Group is exposed to risks related to trading partners in the • Legislation, regulation and actions of supervisory authorities may financial sector have a material effect on the Group’s business, results of operations and financial position Market risks include: • Interest margin trends have a significant impact on the Group’s • A change in assumptions and methods of valuation may have a profitability material effect on the Group’s business, results of operations and financial position • The Group’s future interest income could come under pressure due to continued moderate demand and, hence, moderate lend- Risks related to the Offering include: ing growth • The market price of the Bank’s Shares, Pre-emptive Rights and other securities may be highly volatile • The Group’s portfolio of shares, bonds and other securities increases the risks of the Group • The Bank is a public limited company registered under Danish law, which may make it difficult for shareholders resident outside • Adverse capital and credit market conditions may affect the Denmark to exercise or enforce certain rights Group’s ability to raise adequate funding and may adversely affect the Group’s funding costs to a material degree • Certain shareholders resident outside Denmark may not be able to acquire and/or exercise the Pre-emptive Rights • The Bank’s credit rating may affect the Bank’s funding and competitive position • The Offering may be withdrawn and investors having bought Pre- emptive Rights or Offer Shares may incur a loss if the Offering is • The Group’s financial results and basis of existence may be af- not completed fected if its solvency ratio is reduced or deemed inadequate • Subscription undertakings regarding the Offering are not secured • An increase of risk-weighted assets may result in a reduction of the Group’s solvency ratio • Failure to exercise the Pre-emptive Rights before expiry of the Subscription Period will result in the lapse of the holder’s Pre- • If the Group is unable to comply with the limit values identified emptive Rights in the Supervisory Diamond, the publication of such non-compliance could have material adverse consequences for the Group’s • If the Existing Shareholders do not exercise any or all of the Pre- business emptive Rights, their ownership interest will become diluted, and such dilution may be significant

10 Summary Prospectus – Spar Nord Bank • If the Danish State converts debt into Shares, the Danish State The financial information contained in the management’s review will become a new major shareholder and other shareholdings for 2011 has been extracted from the audited consolidated financial will be diluted statements for the financial years ended 31 December 2011, 2010 and 2009 and restated to reflect the below-mentioned reclassifi- • Shareholders with small shareholdings may have limited influ- cation of Spar Nord Leasing A/S to Discontinuing Activities. The ence consolidated financial statements have been audited by KPMG Statsautoriseret Revisionspartnerselskab, independent auditors of • The market for the Pre-emptive Rights and/or for the Offer the Bank, and have been prepared in accordance with International Shares may only offer limited liquidity, and if a trading market Financial Reporting Standards (“IFRS”) as adopted by the European develops, the price of the Pre-emptive Rights and/or of the Offer Union (“EU”). Shares may be subject to greater volatility than the price of the Existing Shares The income statement information is based on the performance indicators and financial ratios (statement of core earnings) used by • Shareholders outside Denmark are exposed to exchange-rate the Group when presenting earnings in the management’s review in risk the 2011 annual report. The Group’s performance indicators deviate from the consolidated financial statements due to additional specifi- Summary Financial Information cations and reclassification of certain items. The following selected consolidated financial information for the financial years ended 31 December 2011, 2010 and 2009 has been The information below should be read in conjunction with the extracted from the management’s review in the annual report for audited consolidated financial statements incorporated by reference 2011. into this Prospectus and “Part I—Description of the Bank—Operat- ing and Financial Review”.

Table 3 – Performance Indicators

Financial year (DKKm) 2011 2010 2009

Income statement Net interest income 1,471.7 1,438.3 1,611.5 Net income from fees, charges and commissions 476.8 498.5 410.1 Market-value adjustments and dividends 130.3 270.2 300.2 Other operating income 40.3 34.1 30.8 Profit/loss on equity investments in associates and group enterprises 39.0 61.0 35.9 Core income 2,158.1 2,302.1 2,388.5 Salaries 882.5 875.5 845.1 Operating expenses 504.2 529.4 559.8 Depreciation, amortisation and impairment 73.3 63.7 68.9 Costs 1,460.0 1,468.6 1,473.8 Core earnings before impairment 698.1 833.5 914.7 Impairment of loans, advances and receivables, etc. 404.4 356.3 467.6 Core earnings 293.7 477.2 447.1 Earnings from investment portfolios 3.0 -22.2 17.1 Profit/losson ordinary operations 296.7 455.0 464.2 Contributions to sector-targeted solutions 6.0 -324.2 -291.2 Profit/loss on continuing activities before tax 302.7 130.8 173.0 Spar Nord Leasing A/S (Discontinuing Activities) 42.2 2.2 -28.3 Profit/lossbefore tax 344.9 133.0 144.7 Tax on continuing activities 52.9 27.1 33.9 Tax on Discontinuing Activities 17.2 0.9 -6.7 Profit/loss 274.8 105.0 117.5

Spar Nord Bank – Prospectus Summary 11 Table 3 – Performance Indicators – continued

As at 31 December (DKKm) 2011 2010 2009

Balance sheet Assets Cash balances and demand deposits with central banks 641.0 578.1 841.5 Receivables from credit institutions and central banks 2,428.3 2,227.8 4,013.7 Lending, banking activities 31,189.1 30,754.0 30,791.8 Lending, reverse transactions 393.2 1,516.6 0.0 Lending, leasing activities 7,119.8 7,681.5 7,523.6 Loans, advances and other receivables at amortised cost, total 38,702.1 39,952.1 38,315.4 Bonds at fair value 16,421.2 13,637.3 12,578.8 Shares etc. 1,040.4 1,121.7 869.8 Equity investments in associates 765.1 745.8 718.8 Assets linked to pooled schemes 6,327.1 5,678.5 4,066.5 Intangible assets 131.4 157.5 165.9 Investment properties 48.5 61.4 60.4 Corporate properties 456.6 452.8 462.8 Land and buildings, total 505.1 514.2 523.2 Operating lease assets 404.0 437.4 199.2 Other property, plant and equipment 139.6 166.4 152.9 Other property, plant and equipment, total 543.6 603.8 352.1 Current tax assets 10.3 1.4 3.5 Temporary assets 87.5 79.8 96.7 Other assets 2,401.7 2,064.5 1,907.4 Prepayments 76.6 73.2 75.9 Total assets 70,081.4 67,435.7 64,529.2

Shareholders’ equity and liabilities Payables to credit institutions and central banks 12,090.9 7,314.0 9,327.3 Deposits and other payables 31,087.6 31,203.7 31,930.7 Deposits in pooled schemes 6,327.1 5,678.5 4,066.5 Issued bonds 8,021.3 7,806.2 6,445.2 Other non-derivative financial liabilities at fair value 769.8 1,211.4 86.0 Current tax liabilities 7.3 2.4 0.1 Other liabilities 4,326.0 6,708.6 5,210.8 Deferred income 53.8 190.1 158.7 Total liabilities other than provisions 62,683.8 60,114.9 57,225.3

Provisions for deferred tax 394.9 333.7 311.1 Provisions for losses on guarantees 1.8 4.5 133.8 Other provisions 56.8 131.2 35.2 Total provisions 453.5 469.4 480.1

Subordinated debt 2,316.8 2,477.0 2,681.1 Total liabilities 65,454.1 63,061.3 60,386.5

Shareholders’ equity Share capital 570.7 570.7 570.7 Revaluation reserves 62.4 64.6 54.7 Accumulated changes in value, total 62.4 64.6 54.7 Statutory reserves 450.7 440.1 411.9 Statutory reserves, total 450.7 440.1 411.9 Retained earnings 3,543.5 3,299.0 3,105.4 Total shareholders’ equity 4,627.3 4,374.4 4,142.7

Total shareholders’ equity and liabilities 70,081.4 67,435.7 64,529.2

12 Summary Prospectus – Spar Nord Bank Table 3 – Performance Indicators – continued

As at 31 December 2011 2010 2009

FINANCIAL RATIOS Earnings per share, DKK 4.8 1.9 2.1 Return on equity before tax (%) 7.7 3.1 3.5 Cost share of core income from continuing activities 0.68 0.64 0.62 Solvency ratio 14.0 13.4 14.2 Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 13.3 13.2 13.2 Common Equity (Tier 1) ratio 10.4 9.5 9.3 Number of employees (full-time, end of year) (continuing activities) 1,355 1,360 1,423 Number of employees (full-time, end of year) (Discontinuing Activities) 42 111 107

Spar Nord Bank – Prospectus Summary 13 Summary of the Offering For a detailed description of the Offering, see “Part II—The Offering”.

Offering The Offering comprises up to 57,068,810 Offer Shares with a nominal value of DKK 10 each with pre-emptive rights for the Existing Shareholders of the Bank.

Offer Price The Offer Shares are offered at DKK 16 per Offer Share (excluding fees, if any, from the investor’s own custodian bank or brokers).

Proceeds Assuming full subscription of the Offering, the gross proceeds will be DKK 913.1 million and the net proceeds (gross proceeds less estimated costs to the Bank relating to the Offering) are expected to be approximately DKK 837.7 million.

Subscription Ratio The Offering is being made at the ratio of one (1), which means that each Existing Shareholder will be entitled to and allocated one (1) Pre-emptive Right for every one (1) Existing Share held at the Allocation Time, and that one (1) Pre-emptive Right will be required to subscribe for one (1) Offer Share.

Allocation of Pre-emptive Rights On 9 March 2012 at 12:30 p.m. CET, any person registered with VP Securities as a shareholder of the Bank will be allocated one (1) Pre-emptive Right for every one (1) Existing Share held.

Trading in Pre-emptive Rights The Pre-emptive Rights may be traded on NASDAQ OMX from 7 March 2012 at 9:00 a.m. CET until 20 March 2012 at 5:00 p.m. CET.

Holders wishing to sell their Pre-emptive Rights should instruct their custodian bank or other financial intermediary accordingly.

Subscription Period The subscription period for the Offer Shares will commence on 10 March 2012 at 9:00 a.m. CET and close on 23 March 2012 at 5:00 p.m. CET, inclusive.

Method of Subscription Holders of Pre-emptive Rights wishing to subscribe for Offer Shares must do so through their own custodian bank or other financial intermediary, in accordance with the rules of such bank or intermediary. The deadline for notification of exercise depends on the holder’s agreement with the relevant custodian bank or other financial intermediary, and the deadline may be earlier than the last day of the subscription period. Once a holder has exercised its Pre-emptive Rights, such exercise may not be revoked or modified.

The Offer Shares will be issued under a temporary ISIN code, DK0060416048, and are expected to be approved for trading and official listing on NASDAQ OMX as from 7 March 2012. Upon exercise of the Pre-emptive Rights and payment of the Offer Price, the Offer Shares will, during the Subscription Period, be allocated through VP Securities under a temporary ISIN code, DK0060416048, at the end of a business day.

Payment Upon exercise of the Pre-emptive Rights, the holder must pay DKK 16 per Offer Share subscribed for.

Payment for the Offer Shares shall be made in Danish Kroner on the date of subscription, however, not later than on 23 March 2012 at 5:00 p.m. CET, against registration of the Offer Shares in the investor’s account with VP Securities under the temporary ISIN code DK0060416048.

Holders of Pre-emptive Rights are required to adhere to the account agreement with their Danish custodian bank or other financial intermediary through which they hold Existing Shares. Financial intermediaries through which a holder may hold Pre-emptive Rights may require payment by an earlier date.

Admission to Trading and Official Listing The Pre-emptive Rights are expected to be approved for admission to trading and official listing on NASDAQ OMX to the effect that they may be traded on NASDAQ OMX during the period from 7 March 2012 to 20 March 2012.

The Offer Shares will be issued under a temporary ISIN code and are expected to be approved for admission to trading and official listing on NASDAQ OMX as from 7 March 2012.

Registration of the capital increase with the Danish Business Authority will take place following completion of the Offering, expected to take place not later than on 27 March 2012, and as soon as possible thereafter, the temporary ISIN code of the Offer Shares will be merged with the ISIN code of the Existing Shares, expected to take place not later than on 29 March 2012. Until such merger has been completed, the liquidity of the Offer Shares under the temporary ISIN code may be substantially different from the liquidity of the Existing Shares.

14 Summary Prospectus – Spar Nord Bank Unexercised Pre-emptive Rights Upon expiry of the Subscription Period, the Pre-emptive Rights will lapse without value, and the holders of such Pre-emptive Rights will not be entitled to any compensation. The Sub- scription Period closes on 23 March 2012 at 5:00 p.m. CET.

Completion of the Offering The Offering will only be completed if and when the Offer Shares subscribed for are issued by the Bank and the capital increase is registered with the Danish Business Authority, expected to take place not later than on 27 March 2012.

The results of the Offering are expected to be announced on 27 March 2012.

Underwriting and Advance Undertakings Subject to the satisfaction of certain conditions set forth in the Underwriting Agreement (as defined), any Offer Shares which have not been subscribed for by holders of Pre-emptive Rights will be subscribed for by Carnegie Investment Bank AB and Danske Bank A/S, and, subject to the satisfaction of certain conditions, the Bank has thus been guaranteed the subscription of a total of 57,068,810 Offer Shares corresponding to the total gross proceeds of DKK 913.1 million in connection with the Offering. Carnegie Investment Bank AB and Danske Bank A/S are not jointly and severally liable, and Carnegie Investment Bank AB guarantees a proportion of 22.2%, and Danske Bank A/S guarantees a proportion of 79.8%. Among other conditions, the Underwriting Agreement is subject to the condition that the Group of Shareholders (as defined below) exercises Pre-emptive Rights under agreements on binding advance undertakings.

A group of Existing Shareholders, consisting of the Spar Nord Foundation, Nykredit Realkredit A/S and Finanssektorens Pensionskasse (the “Group of Shareholders”), have made binding advance undertakings, subject to the satisfaction of certain conditions, to exercise Pre- emptive Rights corresponding to the subscription of an aggregate of 7,161,020 Offer Shares, corresponding to total gross proceeds of DKK 114.6 million. The Spar Nord Foundation’s proportion thereof represents 1,875,000 Offer Shares, corresponding to a subscription amount of approximately DKK 30.0 million, Nykredit Realkredit A/S’ proportion represents 4,380,000 Offer Shares, corresponding to a subscription amount of approximately DKK 70.1 million, and Finanssektorens Pensionskasse’s proportion represents 906,020 Offer Shares, corresponding to a subscription amount of approximately DKK 14.5 million. Accordingly, Nykredit Realkredit A/S and Finanssektorens Pensionskasse have made binding advance undertakings to exercise all Pre-emptive Rights allocated to them. In addition to the undertakings referred to above, the Spar Nord Foundation has, subject to certain conditions, made an undertaking to subscribe for Offer Shares on a cash-neutral basis (after transaction costs) of the remaining part of the Pre-emptive Rights allocated to the Spar Nord Foundation by subscribing for the maximum number of Offer Shares that the Spar Nord Foundation can finance through the sale of Pre- emptive Rights alone. Such Pre-emptive Rights will, during the Rights Trading Period, be sold by the Joint Global Coordinators & Bookrunners on behalf of the Spar Nord Foundation in open market transactions, privately negotiated transactions, block trades or otherwise.

Furthermore, a number of Existing Shareholders, Nykredit Realkredit A/S, Finanssektorens Pensionskasse and other institutional and private investors, including Fondsmæglerselskabet Maj Invest A/S, Skandinaviska Enskilda Banken A/S and SmallCap Danmark A/S, have made binding agreements with Carnegie Investment Bank AB and Danske Bank A/S to acquire from Carnegie Investment Bank AB and Danske Bank A/S an additional 44,296,875 Offer Shares at the Offer Price, corresponding to an amount of approximately DKK 708.8 million, if and to the extent the Offer Shares are not subscribed for by holders of Pre-emptive Rights.

Thus Carnegie Investment Bank AB and Danske Bank A/S have received binding advance undertakings and binding agreements to acquire Offer Shares at the Offer Price for an amount corresponding to DKK 823.3 million in aggregate.

ISIN Codes Existing Shares

DK0060036564

Pre-emptive Rights

DK0060415909

Offer Shares (temporary ISIN code)

DK0060416048

Dividend Rights Upon registration of the capital increase with the Danish Business Authority in connection with the Offering, the Offer Shares will rank pari passu with the Existing Shares, including with respect to eligibility for any dividends after the completion of the Offering.

Although the Bank usually intends to distribute dividends to its shareholders, there can be no assurance thereof. See “Part I—Description of the Bank—Information on Assets and Liabili- ties, Financial Position, Results and Dividend Policy—Dividend Policy”.

Spar Nord Bank – Prospectus Summary 15 See “Part I—Description of the Bank—The Danish Banking System and Regulation” and “Part I—Description of the Bank—Material Contracts” for information about certain dividend restrictions.

Share Capital As at the Prospectus Date, the nominal value of the Bank’s share capital is DKK 570,688,100 divided into 57,068,810 Existing Shares, each with a nominal value of DKK 10, which have all been issued and fully paid up.

Assuming that an aggregate of 57,068,810 Offer Shares will be subscribed for in the Offering, the Bank’s share capital will have a nominal value of DKK 1,141,376,200, corresponding to 114,137,620 Shares with a nominal value of DKK 10 each after the completion of the Offering.

Treasury Shares As at the Prospectus Date, the Group holds 156,842 Existing Shares in the Bank as treasury shares corresponding to a total nominal value of DKK 1,568,420 or 0.27% of the Bank’s share capital. The Bank’s treasury shares are recognised directly in equity (corresponding to a carrying amount of DKK 0).

In connection with the Offering, Pre-emptive Rights will be allocated to the Bank in respect of its treasury shares. Pursuant to the Companies Act (as defined), the Bank may not exercise such Pre-emptive Rights, and the Bank therefore expects to sell the Pre-emptive Rights allocated to it in respect of its treasury shares.

Rights to Attend and Vote Against presentation of an admission card, any shareholder who is registered in the register of shareholders as of the date of registration one week before a general meeting, or who has, as of that date, requested that his Shares be registered in the register of shareholders, shall be entitled to attend a general meeting – either in person or represented by proxy – and to address the general meeting.

Pursuant to Article 10(4) of the Articles of Association, shareholders’ right to vote at general meetings shall be exercised through delegates who are members of the Bank’s bank committees. However, shareholders holding at least 20,000 Shares on the date of registration one week before the relevant general meeting shall be entitled to exercise their voting rights at general meetings. See Article 9(1) of the Articles of Association.

Delegates who are also members of the Bank’s bank committees represent the share capital that has been registered as belonging to the relevant shareholder region as of the record date one week before the relevant general meeting. Each delegate represents equal fractions of the share capital, calculated on the basis of the number of delegates immediately prior to the general meeting. A major shareholder, see Article 9(1) of the Articles of Association, represents the share capital which has been registered on the record date one week before the re levant general meeting, or which such shareholder has requested be registered as belonging to the relevant major shareholder.

To gain access to general meetings and be entitled to vote, a delegate or major shareholder, respectively, shall request an admission card at least three days before the relevant general meeting.

The Articles of Association contain no provisions regarding ownership or voting restrictions.

See “Part I—Description of the Bank—Additional Information—Memorandum of Association and Articles of Association”.

Issuing Agent The Bank’s issuing agent is Spar Nord Bank A/S, Skelagervej 15, P.O. Box 162, 9100 Aalborg, Denmark.

Major Shareholders The following shareholders (“Major Shareholders”) have notified the Bank that they hold more than 5% of the Bank’s registered share capital: the Spar Nord Foundation (Spar Nord Fonden) and Nykredit Realkredit A/S.

Intentions of Major Shareholders, A group of Existing Shareholders, consisting of the Spar Nord Foundation, Nykredit Realkredit Board of Directors and Executive A/S and Finanssektorens Pensionskasse (the “Group of Shareholders”), have made binding Board to Participate in the Offering advance undertakings, subject to the satisfaction of certain conditions, to exercise Pre- emptive Rights corresponding to the subscription of an aggregate of 7,161,020 Offer Shares, corresponding to total gross proceeds of DKK 114.6 million. The Spar Nord Foundation’s proportion thereof represents 1,875,000 Offer Shares, corresponding to a subscription amount of approximately DKK 30 million, Nykredit Realkredit A/S’ proportion represents 4,380,000 Offer Shares, corresponding to a subscription amount of approximately DKK 70.1 million, and Fi- nanssektorens Pensionskasse’s proportion represents 906,020 Offer Shares, corresponding to a subscription amount of approximately DKK 14.5 million. Thus, Nykredit Realkredit A/S and Finanssektorens Pensionskasse have made binding undertakings to exercise all Pre-emptive Rights allocated to them, whereas the Spar Nord Foundation’s subscription amount corre-

16 Summary Prospectus – Spar Nord Bank sponds to approximately 50% of its available funds. In addition to the undertakings referred to above, the Spar Nord Foundation has, subject to certain conditions, made an undertaking to subscribe for Offer Shares on a cash-neutral basis (after transaction costs) of the remaining part of the Pre-emptive Rights allocated to the Spar Nord Foundation by subscribing for the maximum number of Offer Shares that the Spar Nord Foundation can finance through the sale of Pre-emptive Rights alone. Such Pre-emptive Rights will, during the Rights Trading Period, be sold by the Joint Global Coordinators & Bookrunners on behalf of the Spar Nord Founda- tion in open market transactions, privately negotiated transactions, block trades or otherwise.

The Board of Directors and the Executive Board have informed the Bank that they will exercise their respective Pre-emptive Rights to subscribe for their proportionate share in the Offering to the extent such subscriptions comply with applicable laws and regulations.

Lock-up by the Bank The Bank has agreed that, during a period from the date of the Underwriting Agreement up to and including 180 days after the completion of the Offering, it will ensure that neither the Bank nor any person acting on its behalf will, without the written consent of the Joint Global Coordinators & Bookrunners (which consent shall not be unreasonably withheld or delayed), (A) directly or indirectly, issue, offer, pledge, sell, contract to sell, sell or grant any option, right, warrant or contract to purchase, exercise any option to sell, purchase any option or contract to sell, or lend or otherwise transfer or dispose of any Shares or other shares of the Bank, or any securities convertible into or exercisable or exchangeable for Shares or other shares of the Bank, or file any prospectus or any similar document with any securities regulator, stock exchange or listing authority or file any registration statement under the Securities Act with respect to any of the foregoing, or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic implication of ownership of any Shares or other securities in the Bank, whether or not any such transaction described in clause (A) or (B) above is to be settled by delivery of Shares or other securities, in cash or otherwise or (C) publicly announce such an intention to effect any such transaction.

The foregoing restrictions do not apply to (1) the subscription or sale of the Offer Shares in the Offering, (2) the grant or exercise of share options or other rights to acquire Shares or rights related to Shares as well as the issuance of Shares under the Bank’s employees share and incentive schemes and related hedging arrangements, (3) market making, hedging, brokerage and asset management activities in the ordinary course of trading and brokering, (4) hedging by the Bank of its exposures under existing and new employee option or long-term incentive programmes, (5) the issuance of Shares required by (i) the DFSA and (ii) pursuant to terms and conditions applying to the convertible loans as described in the Articles of Association of the Bank, (6) Shares traded on behalf of customers.

Governing Law The Offering will be made pursuant to Danish law. This Prospectus has been prepared in compliance with the standards and requirements of Danish legislation. Any dispute which may arise as a result of the Offering shall be brought before the Danish courts of law.

Transfer Restrictions The Pre-emptive Rights and the Offer shares will be subject to certain transfer and selling restrictions. See “Part II—The Offering—Terms and Conditions of the Offering—Jurisdictions in which the Offering Will Be Made and Restrictions Applicable to the Offering”.

Availability of the Prospectus Requests for copies of the Prospectus may be made to:

Carnegie Bank A/S Overgaden neden Vandet 9B DK-1414 Copenhagen K Denmark Tel.: +45 32 88 02 00 E-mail: [email protected]

Danske Bank A/S Corporate Actions Holmens Kanal 2-12 DK-1092 Copenhagen K Denmark Tel.: +45 70 13 42 00 E-mail: [email protected]

Subject to certain exceptions, the Prospectus may also be downloaded from the Bank’s website: www.sparnord.dk. Except for the information incorporated herein by reference, the contents of the website do not form part of the Prospectus.

Withdrawal of the Offering The Offering may be withdrawn at any time before registration of the capital increase relating to the Offer Shares with the Danish Business Authority. Any such withdrawal will be notified via NASDAQ OMX.

Spar Nord Bank – Prospectus Summary 17 Expected Timetable of Principal Events

Publication of Prospectus: 5 March 2012

Last day of trading in Existing Shares cum Pre-emptive Rights: 6 March 2012

First day of trading in Existing Shares ex Pre-emptive Rights: 7 March 2012

Rights Trading Period begins: 7 March 2012

Date of listing of the Offer Shares under the temporary ISIN code: 7 March 2012

Allocation Time of Pre-emptive Rights: 9 March 2012 at 12:30 p.m. CET via the computer system of VP Securities

Subscription Period for the Offer Shares begins: 10 March 2012 (the day after the Allocation Time)

Rights Trading Period closes: 20 March 2012 at 5:00 p.m. CET

Subscription Period for the Offer Shares closes: 23 March 2012 at 5:00 p.m. CET

Publication of the results of the Offering: Expectedly two Banking Days after expiry of the Subscription Period, (expectedly on 27 March 2012)

Registration of the Offer Shares with the Danish Business Authority: Expectedly on 27 March 2012

Completion of the Offering: The Offering will only be completed if and when the Offer Shares subscribed for are issued by the Bank and the capital increase is registered with the Dan- ish Business Authority, expected to take place on 27 March 2012

Merger of ISIN codes: Expectedly on 29 March 2012

18 Summary Prospectus – Spar Nord Bank Risk Factors

Investing in the Pre-emptive Rights or the Offer Shares and/or the Credit Risks Existing Shares involves risk. You should consider carefully the follow- The Group has significant customer and counterparty credit risk ing risk factors, which Management considers material, in conjunction exposure with other information contained in this Prospectus prior to making any The Group engages in traditional banking transactions, including investment decision with respect to the Pre-emptive Rights, the Offer loans and advances to retail and business customers. These activi- Shares and/or the Existing Shares. ties expose the Group to risk of loss from customers failing to meet all or part of their obligations. Furthermore, the Group is exposed These risks are not the only risks the Group faces. They should be taken to credit risk with respect to trading partners in the financial sec- as an expression of the risk factors which the Bank believes are par- tor who owe the Group money, securities or other assets and who ticularly important and relevant for the Group at the Prospectus Date. may not pay or may not perform their obligations. Such customers Should any of the following risks occur, it could have a material adverse and counterparties include borrowers of loans provided to them effect on the Group’s business, results of operation and financial posi- by the Group, issuers of securities whose securities the Group tion. However, additional risks and uncertainties not presently known holds, trading counterparties, counterparties in swap or currency to Management or that Management currently deems immaterial may arrangements and under other financial instruments, exchanges, also have a material adverse effect on the Group’s business, results clearing houses and other trading partners in the financial sector. of operations and financial position. The price of the Shares and the These parties may default on their obligations to the Group due to Pre-emptive Rights could decline, and you may lose all or a part of your bankruptcy, liquidity shortage, economic downturns or declines in investment. In addition, this section includes certain risks related to the asset values, operational failures or for other reasons. Offering which could also have a material adverse effect on the value of the Shares and the Pre-emptive Rights. This Prospectus also contains Generally, the Group is broadly diversified in terms of customer ex- forward-looking statements that are subject to future events, risks posure, but it does have a number of large exposures each of which and uncertainties. The Group’s actual results could differ materially could have a significant effect on the Group. The Group has defined from those indicated in these forward-looking statements as a result of an in-house limit for its customer exposures of DKK 400 million, the many factors, including, but not limited to, the risks the Group faces as unsecured portion of which is capped at DKK 150 million. As at the described below and elsewhere in this Prospectus. Prospectus Date, the Group has no customer exposures exceeding DKK 400 million, except for exposures with trading partners in the The risk factors set out below are not listed in any order of priority with financial sector that are subject to supervision. The DKK 400 million regard to significance or likelihood of occurrence. It is not possible to cap does not apply to exposures to trading partners in the financial quantify the significance to the Group of each individual risk factor as sector that are subject to supervision. The granting and manage- each of the risk factors mentioned below may materialise to a greater ment of such exposures is subject to legislative requirements and or lesser extent, and this may have a material adverse effect on the the external credit rating of the individual trading partner. Group’s business, results of operations and financial position. In addition, the Group’s customers may have exposures with other Risks Related to Macro-economic Conditions banks or other creditors, including exposures of which the Group The Group’s business, results of operations and financial position is not aware. Such other banks and creditors may terminate their are impacted by macro-economic conditions and economic trends exposures or demand repayment of amounts owed to them, without in Denmark the Group having any influence thereon. This may affect the cus- The Group’s primary business activity is to offer financial products tomer’s ability to repay and may cause the Group to incur a loss or and services to retail customers and small and medium-sized busi- cause an increase in the Group’s indication of impairment, risk of nesses in Denmark. The Group was founded in northern Jutland, actual losses on exposures already written down or an increase in and 45.7% of the Group’s credit exposure still relates to this region. capital adequacy needs. Of the credit exposure, 46.8% is distributed across other parts of Denmark and 5.3% is attributable to leasing activities in Sweden If any of these events were to occur they could have a material (Discontinuing Activities). Accordingly, the Group relies strongly adverse effect on the Group’s business, results of operations and on macro-economic trends in Denmark generally and in northern financial position. Jutland in particular. The Group’s impairment of loans and advances has increased In 2008 and 2009, in particular, Denmark saw declining economic significantly as a result of the difficult economic conditions growth, rising unemployment and decreasing asset values. These The Group’s impairment of loans and advances amounted to DKK adverse economic and market conditions affected the Group in a 474 million, DKK 454 million and DKK 584 million in 2011, 2010 and number of ways, including in terms of lower demand for the Group’s 2009, respectively. Although loan impairment charges were lower products and services, increased costs of funding, volatile fair in 2011 and 2010 relative to 2009, the impairment of loans and values of many of the Group’s financial instruments and increasing advances remained at a high level when compared with the Group’s impairment of loans and advances, all of which reduced profitabil- historical levels prior to the financial crisis. In 2011, impairment ity. In 2010, the business environment began to improve, but the charges against retail customer credit facilities amounted to DKK Group’s earnings were still adversely affected by the difficult macro- 66 million (DKK 57 million in 2010), and impairment charges against economic conditions. In 2011, economic growth remained at a low business customer credit facilities amounted to DKK 408 million level in Denmark for reasons including general deleveraging of (DKK 397 million in 2010). In recent years, impairment charges businesses and private households. General demand for the Group’s against credit facilities to business customers have primarily been products and services and, hence, profitability thus remains lower attributed to the property and agricultural sectors as well as the than in the years leading up to the onset of the crisis. If economic trade and transport sectors. conditions take longer to improve than currently anticipated by Man- agement, or circumstances deteriorate, this could have a material The continuing difficult economic conditions in Denmark may have adverse effect on the Group’s business, results of operations and a material adverse effect on the credit quality of the Group’s loan financial position. portfolio and may cause loan impairment charges and loan losses to remain at high or increasing levels, which could have a material adverse effect on the Group’s business, results of operations and financial position.

Spar Nord Bank – Prospectus Risk Factors 19 The Group has risks relating to property-related loans and the Group’s exposure was 11.9% of its total loans, advances and advances guarantees, and at 31 December 2009, the exposure was 12.5% of The Group grants loans to business customers operating in the its total loans, advances and guarantees. property sector, including in property development and rental activities, and to retail customers for home financing purposes. The Although it is the Group’s policy that agriculture-related loans and Group also arranges mortgage-credit loans for retail customers advances should generally be granted against collateral, loans are through Totalkredit. also granted on an unsecured basis. Further, the expected value of the collateral provided may prove unrealisable. The collateral As at 31 December 2011, the Group’s credit exposure to the com- provided for both bank and mortgage exposures mainly consists of mercial property sector amounted to DKK 4.9 billion, corresponding agricultural properties. to 11.3% of total loans, advances and guarantees, at 31 December 2010, the credit exposure amounted to DKK 4.9 billion, correspond- The agricultural sector has been severely affected by recent years’ ing to 10.7% of total loans, advances and guarantees, and at 31 economic downturn, and the impairment of agriculture-related December 2009, it amounted to DKK 5 billion, corresponding to 11% loans and advances thus amounted to DKK 137 million in 2011, of total loans, advances and guarantees. DKK 107 million in 2010 and DKK 141 million in 2009. Accordingly, impairment of agriculture-related loans, and advances constituted As at 31 December 2011, the Group’s credit exposure to loans 24-29% of the total impact on the income statement from impair- and advances to retail customers secured against real property ment losses in 2009-2011. amounted to DKK 5.4 billion, corresponding to 12.4% of total loans, advances and guarantees. At 31 December 2010, the credit Mortgage-credit loans through DLR Kredit are arranged against exposure amounted to DKK 6.3 billion, corresponding to 13.6% of payment of commission. DLR Kredit is entitled to set off any losses total loans, advances and guarantees, and at 31 December 2009, it against commission which DLR Kredit owes the Group, and the amounted to DKK 6.4 billion, corresponding to 14.1% of total loans, Bank may in certain circumstances provide DLR Kredit with a advances and guarantees. guarantee against loss. The Group’s income from such fees after set-off amounted to DKK 18 million in 2011, DKK 16 million in 2010 At the Prospectus Date, the Group had no exposure to the property and DKK 12 million in 2009. Set-off against fees from DLR Kredit sector exceeding DKK 300 million. amounted to DKK 0.4 million in 2011, DKK 0 million in 2010 and DKK 0 million in 2009. Although it is the Group’s policy that property-related loans and advances should generally be granted against collateral, loans are If the economic downturn in Denmark persists, if the prices of meat, also granted on an unsecured basis. Further, the expected value of milk or grain fall, or if the prices of animal feed increase, there is a the collateral provided may prove unrealisable. risk of a higher default on agricultural exposures, increased set-off against the fees from DLR Kredit, reduced value of collateral and Impairment of loans and advances to the commercial property increased illiquidity of collateral, which could have material adverse market amounted to DKK 82 million in 2011, DKK 79 million in 2010 consequences for the Group’s business, results of operations and and DKK 69 million in 2009. Accordingly, impairment of loans and financial position. advances to the commercial property market amounted to 12-17% of total impact on income statement of impairment charges in 2009- The Group is exposed to risks related to other sectors 2011. The Group has incurred impairment losses in sectors other than agriculture and property, including in the transport and trade sectors. Mortgage-credit loans through Totalkredit are arranged against payment of commission. Totalkredit is entitled to set off any losses The Group is exposed to business customers in the transport sec- against commission Totalkredit owes the Group, and the Bank tor, primarily through the leasing company Spar Nord Leasing A/S. may in certain circumstances provide Totalkredit with a guaran- The Group’s total exposure to the industry represents 6.4% before tee against loss. The Group’s income from such fees after set-off impairment of total loans, advances and guarantees. Impairment in amounted to DKK 97 million in 2011, DKK 87 million in 2010 and respect of the transport sector amounted to DKK 45 million in 2011, DKK 89 million in 2009. Set-off against fees from Totalkredit DKK 64 million in 2010 and DKK 28 million in 2009. Economic down- amounted to DKK 4 million in 2011, DKK 2 million in 2010 and DKK turn may cause financial difficulties for the Group’s customers and 1 million in 2009. could therefore have material adverse consequences for the Group’s business, results of operations and financial position. General economic downturn, rising unemployment, falling house prices, increasing interest rates and/or a higher level of lending The Group grants loans to business customers in the trade sector, aversion among credit providers may result in a higher default rate and at 31 December 2011, the Group’s total exposure to the sec- on commitments with property exposure, reduced collateral values, tor was 8.6% before impairment of its total loans, advances and increased illiquidity of collateral and increased set-off against fees guarantees. Impairment in respect of the trade sector amounted to from Totalkredit and may, therefore, have a material adverse effect DKK 27 million in 2011, DKK 78 million in 2010 and DKK 75 million on the Group’s business, results of operations and financial position. in 2009. In recent years, impairment primarily related to a few major customers and to a lesser extent to the sector in general. Rising raw The Group is exposed to risks related to the agricultural sector material prices and economic downturn may lead to lower demand The Group is exposed to the agricultural sector because of its and settlement prices, especially for sub-suppliers, but also for re- presence in areas with a high proportion of agricultural customers. tailers. Declining revenue and earnings among customers exposed In addition to providing loans and advances on its own books, the to the trade sector may have material adverse consequences for the Group contributes to financing the agricultural sector by arranging Group’s business, results of operations and financial position. mortgage-credit loans through DLR Kredit. The Group is exposed to debtor risk related to the discontinuation At 31 December 2011, the Group’s total exposure to agriculture of its leasing activities was 12.0% of its total loans, advances and guarantees, including an In 2011, the Group made a strategic decision to no longer include exposure in Spar Nord Leasing A/S of 4.3%. At 31 December 2010, leasing in its activities and thus to divest and/or phase out its leas-

20 Risk Factors Prospectus – Spar Nord Bank ing activities. As regards the Group’s activities in the Danish com- and the Group’s ability to price its credit services and credit prod- mercial leasing market within the framework of Spar Nord Leasing ucts to its customers have a material effect on the Group’s busi- A/S, the portfolio will gradually be phased out, as the continuing ness, results of operations and financial position, and reductions in activities were taken over by the Jyske Bank Group effective 1 Octo- the level of interest rates and narrowing interest rate spreads could ber 2011. The activities in the Swedish market, in the subsidiary SN have a material adverse effect thereon. Finans Nord AB, will also be gradually phased out as and when the contracts expire. The Group’s future interest income could come under pressure due to continued moderate demand and, hence, moderate lending The average contractual term of the existing leasing portfolio, growth comprising assets worth approximately DKK 8.5 billion on com- Since 2002, the Bank has opened or acquired 27 branches outside mencement of the phasing-out, is 48 months. The average historical its northern Jutland core area, and in its strategy plan for the years repayment period is 30-38 months due to prepayment. 2011-2013, the Bank has defined a goal for the next few years of generating a net inflow of retail and business customers and growth During the phasing-out period, the Group will be exposed to debtor in its average business volume (deposits, loans, advances and risk and may, especially towards the end of the period, be exposed guarantees) per customer. Thus, the Bank aims to grow its Danish to losses and impairment on debtors with weak credit quality in market share, and thereby achieve above-sector-average lending excess of historical loss levels and which may therefore have a ma- growth. terial adverse effect on the Group’s business, results of operations and financial position. The Group’s loans and advances fell by 3% from DKK 40 billion at 31 December 2010 to DKK 39 billion at 31 December 2011. Loans and The Group is exposed to risks related to trading partners in the advances grew from DKK 38 billion at 31 December 2009 to DKK 40 financial sector billion at 31 December 2010. As a consequence of its business collaboration with a large number of other financial businesses, including its role as a wholesale If due to market conditions or other factors the Bank is no longer bank to small and medium-sized banks in Denmark, the Group is able to realise its target growth and exploit the potential of the exposed to counterparty risk. Counterparty risk is the risk of loss newly opened or acquired branches, it will have a material adverse caused by a trading partner in the financial sector defaulting on its effect on the Bank’s potential for achieving satisfactory profitability obligations under a contract. In addition, the Group is exposed to in the business established as an investment in creating a presence risk when financial contracts are concluded or settled, as, for exam- in areas outside the North Jutland region, and, by extension, on the ple, principals denominated in different currencies are not neces- Group’s business, results of operations and financial position. sarily exchanged at the same time or securities are not received simultaneously with the appropriate payment. The Group does not The Group’s portfolio of shares, bonds and other securities participate in any syndication under which the Bank would be one increases the risks of the Group among several lenders to the same customer. The Group holds a large securities portfolio consisting of bonds (the Bond Portfolio), trading portfolio assets and assets outside the The Group has not recorded any impairment write-downs as a trading portfolio. This securities portfolio amounted to DKK 20.242 result of default by trading partners in the financial sector during million at 31 December 2011. the period 2009-2011. Bond Portfolio Within the financial sector, default of any one institution could also The Group’s portfolio of bonds amounted to DKK 16,421 million at lead to defaults by other institutions. Concerns about, or the default 31 December 2011. The Bond Portfolio ensures ongoing liquidity for by, one institution could thus lead to significant liquidity problems, the Group, which is built up by investing excess liquidity in, primar- losses or defaults by other institutions, because the commercial and ily, Danish highly-rated liquid government and mortgage bonds. financial soundness of financial businesses may be closely related Because of their high liquidity, the liquidity portfolio is overweight in as a result of credit granting, trading, clearing and other mutual short-term bonds. The Group’s portfolio of bonds exposes the Group relationships. Even perceived lack of creditworthiness or doubts to market risk in the form of interest rate fluctuations and credit about a counterparty’s solvency may lead to market-wide liquidity risk. Failure by the Group to manage these risks could have a mate- problems and losses or defaults by the Group or by other institu- rial adverse effect on the Group’s business, results of operations tions. This risk may have a material adverse effect on financial and financial position. intermediaries, such as clearing houses, banks, securities broker firms and exchanges to which the Group is exposed. Assets in the Trading Portfolio The Group’s trading portfolio, consisting predominantly of listed All of the above factors may have a material adverse effect on the shares and bonds, but also other types of financial instruments, Group’s business, results of operations and financial position. represented DKK 18,462 million at 31 December 2011. The assets of the trading portfolio were acquired with a view to trading and Market Risks are primarily traded on behalf of customers. The fair value of the Interest margin trends have a significant impact on the Group’s Group’s securities may decline going forward and may cause the profitability Group to realise material negative value adjustments. Moreover, The Group earns interest from loans and advances and other as- market volatility and illiquidity may make it difficult to value certain sets and pays interest to its depositors and other creditors. The of the Group’s holdings. Any of these factors could require the Group’s results of operations are therefore strongly dependent Group to recognise impairment charges, which may have a material on the Group’s net interest income. For 2011, net interest income adverse effect on the Group’s business, results of operations and accounted for 68% of the Group’s total core income, against 62% in financial position. 2010 and 67% in 2009. The Group’s net interest margin, which is the difference between the yield on the Group’s interest-bearing assets Assets outside the Trading Portfolio and the costs of its interest-bearing liabilities, depends to some The Group’s holding of assets outside the trading portfolio mainly extent on prevailing interest rate levels and is a significant factor in consists of shares in associates and shares in strategic partners determining the profitability of the Group. Interest rate fluctuations in the financial sector and accounted for DKK 1,780 million at 31

Spar Nord Bank – Prospectus Risk Factors 21 December 2011. The shares in strategic partners are intended to If the Bank does not achieve an adequate credit rating, it could have support the Group’s business within mortgage credit, payment ser- a material adverse effect on its liquidity and competitive position, vices, investment funds, etc., whereas shares in associates mainly increase its borrowing costs and limit its access to the capital mar- consist of a 50.2% stake in Nørresundby Bank A/S. In several of the kets or trigger obligations under certain bilateral provisions in some sector companies, the shares are reallocated to the effect that the of its trading and collateralised financing contracts. Under such ownership interest of the banks will reflect the business volume provisions, counterparties may terminate contracts with the Bank of the relevant institution with the sector company. Typically, such or require it to post additional collateral. Termination of the Bank’s reallocation is made annually based on the net asset value of the trading and collateralised financing contracts could cause it to sus- sector company in question. On this basis, the Group adjusts the tain losses and may impair its liquidity by requiring the Bank to find recognised value of these shares when new information is available other sources of financing or to make significant cash payments or that supports a change of valuation. The value of assets outside securities transfers. The Bank’s credit ratings are subject to change the trading portfolio is measured based on a recognised valuation at any time and its credit ratings could be downgraded as a result method. The adjustments of the value of the assets are recognised of many different factors, including failure by the Group to success- in the income statement, and this could affect the Group’s business, fully implement its strategies or a general downgrading of the credit results of operations and financial position. ratings of financial institutions. If the Bank does not achieve an adequate credit rating, it could also lead to a loss of customers and Adverse capital and credit market conditions may affect the counterparties, which could have a material adverse effect on the Group’s ability to raise adequate funding and may adversely affect Group’s business, results of operations and financial position. the Group’s funding costs to a material degree The international capital and credit markets have generally experi- The Group’s financial results and basis of existence may be enced volatility since the financial crisis began in 2008. This volatil- affected if its solvency ratio is reduced or deemed inadequate ity has had a material adverse effect on access to financing and in Pursuant to the Financial Business Act, Danish banks must comply some circumstances led to extensive liquidity problems for financial with a solvency requirement which is 8% of Risk-weighted Items or businesses. Following a gradual recovery of the financial markets any higher solvency requirement fixed by the DFSA. Danish banks during 2009 and 2010, the financial markets in 2011 were affected must also comply with an ICAAP ratio calculated individually by the by a number of European economies struggling with large budget banks. The ICAAP ratio is calculated on the basis of an assessment deficits, adversely affecting the market for government bonds is- of a number of risks to which banks are or may be subject, includ- sued by these economies. This was one of the reasons for the weak ing credit risks, market risks, operational risks, etc. An increase in activity on the international capital and credit markets throughout some of these risks could affect the ICAAP ratio. most of 2011. The Group’s solvency ratio stood at 14.0% at 31 December 2011. The Group’s financing is primarily attributable to deposits from After the Offering (assuming the Offering is fully subscribed), the retail and business customers and public authorities and to issued Group’s solvency ratio will stand at 14.8% as at 31 December 2011 bonds and senior loans. The availability of financing depends on a (pro forma), adjusted to reflect repayment of subordinated loan variety of factors such as market conditions, the general availability capital, thus exceeding by 6.0 percentage points the Bank’s ICAAP of credit, the volume of trading activities, the overall availability of ratio of 8.8% as at 31 December 2011. credit to the financial services industry, credit demand, the Group’s credit ratings and credit capacity, as well as the risk that customers or lenders may develop a negative perception of the Group’s long- Table 4 – Effect of the Offering term or short-term financial prospects.

DKK 6 billion of the Group’s capital market funding is repayable in (%) 2011 2012, DKK 4 billion in 2013 and DKK 2 billion in 2014. Solvency ratio 16.0 The uncertain funding market has caused the Bank to commence Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 15.3 phasing out the Group’s leasing activities. Subject to certain condi- Common Equity (Tier 1) ratio 12.4 tions, including an estimated portion of the finance leases being repaid prior to the expiry of the contracts, the phasing-out of the leasing activities is expected to improve the Group’s strategic liquidity by DKK 2.7 billion in 2012 and an additional DKK 2.3 billion in 2013, and is thus expected to reduce the Group’s need for senior Table 5 – Effect of the Offering, adjusted to reflect repayment of loans and issued bonds. Subordinated Loan Capital

If the Group’s funding sources become restricted or unavailable, or (%) 2011 if the Group’s funding costs increase substantially, it could have a material adverse effect on the Group’s business, results of opera- Solvency ratio 14.8 tions and financial position. Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 14.8 The Bank’s credit rating may affect the Bank’s funding and Common Equity (Tier 1) ratio 12.4 competitive position The Bank’s international credit rating is important to its business. The Bank is rated by Moody’s, and at the Prospectus Date, the Despite the solvency buffer, authorities, lenders, equity investors, Bank’s long-term debt had been assigned a Baa2 rating. On 16 Feb- analysts and other relevant market participants may believe that the ruary 2012, Moody’s announced that it had placed the Bank under Group’s solvency ratio is too low relative to the prevailing uncer- review for a possible downgrade together with a large number of tainty in the financial sector. This may cause the Group to incur other Danish banks and more than 100 banks in other European increased funding costs and limit its access to the capital markets. countries. As a result, there is a risk that the Bank’s long-term debt may be downgraded by up to three notches to Ba2.

22 Risk Factors Prospectus – Spar Nord Bank If the Group’s solvency ratio is reduced, and the Bank is unable to Operational Risks raise additional capital, the Group may need to reduce its lending or Operational risks, including outsourcing partners and suppliers, divest other assets in order to comply with any individual solvency could result in financial loss and could harm the Group’s requirement as may be fixed by the DFSA or the ICAAP ratio fixed reputation by the Bank. Ultimately, this may lead to a transfer of the Group to The Group is exposed to operational risks in the form of pos- Finansiel Stabilitet A/S and/or cause the banking activities to be sible losses resulting from inappropriate or inadequate internal discontinued. procedures, human or system errors, or external events, including events relating to the Group’s outsourcing partners, including in the An increase of risk-weighted assets may result in a reduction of IT area. the Group’s solvency ratio Risk-weighted Items consist of balance sheet items, off-balance Operational risks are often associated with one-off events, such sheet items and other market and operational risk positions, as failure to observe business or working procedures, defects or measured and risk-weighted according to standard methods, see breakdowns of technical infrastructure, criminal acts, fire and executive order no. 1399/2011. storm damage, and litigation. These events could potentially result in financial loss and could harm the Group’s reputation generally. Any default on an exposure or reduction of the value of collateral provided could cause an increase in the Group’s Risk-weighted The Group’s business inherently involves operational risk, as the Items. Moreover, increased funding costs and other factors could Group is dependent on processing a large number of complex trans- affect the Group’s Capital Base, and significant market volatility or actions across numerous and diverse products, and it is subject to legislative changes, for example, could result in an increase in risk- a number of different legal and regulatory regimes. The recording weighted assets and thus potentially reduce the Group’s solvency and processing of these transactions are potentially exposed to the ratio. risk of human or technical error or a breakdown of internal controls relating to the due authorisation of transactions. Given the Group’s In the event that the Group’s operations lead to losses of a magni- high volume of transactions, errors may be repeated or compound- tude that reduces the Group’s solvency ratio, and the Bank is unable ed before they are discovered and rectified, and there can be no to raise additional capital, the Group may need to reduce its lending assurance that risk assessments made in advance will adequately or divest other assets in order to comply with any individual solvency predict the occurrence, or estimate the costs, of such errors. requirement as may be fixed by the DFSA or the ICAAP ratio fixed by the Bank. Ultimately, this may lead to a transfer of the Bank to If the Group is not able to manage these risks, it could have a mate- Finansiel Stabilitet A/S and/or cause the banking activities to be rial adverse effect on the Group’s reputation, business, results of discontinued. operations and financial position.

If the Group is unable to comply with the limit values identified in The risk management methods used by the Group may prove the Supervisory Diamond, the publication of such non-compliance insufficient to cover unidentified, unanticipated, or incorrectly could have material adverse consequences for the Group’s quantified risks, which could lead to material losses or a material business increase in liabilities In 2010, the DFSA launched a new test model, the “Supervisory Dia- The Group devotes significant resources to developing risk man- mond”, which assesses the strength and risk exposure of banks ac- agement policies, procedures and assessment methods for its cording to five parameters, each with its own limit value with which banking and other businesses. Nonetheless, the risk management the banks must generally comply from the end of 2012. Combined, techniques and strategies applied by the Group may not be fully the five parameters will illustrate whether Danish banks are oper- effective in hedging risk exposure in all economic market environ- ated at a reasonable risk level and whether individual banks have ments or against all types of risk, including risks that the Group adequate financial strength. The five parameters (limit values) are: fails to identify or anticipate. Some of the tools and metrics used by the Group for managing risk are based upon the use of observed • Sum of large exposures (less than 125% of the Capital Base) historical market behaviour as well as predictions of future developments. The Group applies statistical and other tools for these • Lending growth (less than 20% per year) observations and predictions in order to arrive at quantifications of risk exposures. These tools and metrics may fail to predict future • Property exposure (less than 25% of total loans) risk exposures, or may predict incorrectly future risk exposures, and the Group’s losses could therefore be significantly greater than • Stable funding (lending/working capital less bonds with remain- such measures would indicate. In addition, the risk management ing maturity of less than 1 year). Limit value: less than 1 methods used by the Group do not take all risks into account and could prove inadequate. If prices move in a way that the Group’s risk • Excess liquidity coverage (above 50%), see section 152(1)(ii) of the models had not anticipated, the Group may experience significant Financial Business Act losses. Assets that are not traded in a public market, such as derivative contracts between banks, may be assigned values that are Each quarter thehe Group announces whether the limit values calculated by the Group using mathematical models. Monitoring the defined in the Supervisory Diamond are complied with. A situation deterioration of such assets may be difficult and may lead to losses in which one or more limit values are exceeded may be adversely that the Group had not anticipated. Unanticipated or incorrectly perceived by the markets and hence have material adverse con- quantified risk exposures could result in material losses to the sequences for the Group’s business, results of operations and finan- banking and asset management business of the Group. cial position. Other risk management methods depend upon the evaluation of information regarding markets, customers or other matters that are publicly available or otherwise accessible. This information may not in all cases be accurate, up-to-date or properly evaluated. Manage- ment of operational, legal and regulatory risk requires, among other things, policies and procedures to properly record and verify a large

Spar Nord Bank – Prospectus Risk Factors 23 number of transactions and events, and the Group’s policies and competition for the products and services that the Group provides. procedures may not be fully effective. The Group’s competitors include small local and regional banks as well as large national and international groups. The individual The inability of the Group to successfully implement and adhere to banks compete on a wide range of parameters, including market- effective risk management methods, including the inability to accu- ing, prices, products, personal advice and financial strength. rately assess the credit risk of its customers, could have a material adverse effect on the Group’s business, results of operations and If the Group is unable to compete on these and possibly other sig- financial position. nificant competitive parameters, it may lose market share or incur losses on some or all of its activities. The Group’s failure to compete The Group depends on its senior management and employees and effectively could have a material adverse effect on its business, it may have difficulty attracting and retaining qualified employees results of operations and financial position. in future The future operating results of the Group depend heavily on the The Group is exposed to business and image related risks continued contributions of senior management. Hence, the Group Media coverage and publicity in general could significantly impact could be adversely affected to a material degree if any of its senior customer behaviour and investors’ appetite for investing in bank managers ceases to actively participate in the management of its shares. The trend witnessed in the financial markets in recent business. In addition, the Group depends in large part on its ability years, including the bankruptcies of a large number of financial to attract, train, retain and motivate highly skilled managers and businesses in Denmark and in the rest of the world, has influenced employees. Due to significant competition for employees with the public debate and created a negative focus on the financial sector in level of experience and qualifications in banking on which the Group general. The Group makes continuous efforts to differentiate itself depends, it may prove difficult for the Group to hire and retain quali- from and strengthen its profile relative to its competitors and to fied employees in future. adapt to its customers’ and other important stakeholders’ demands and requirements as and when they change. However, the Group, The Group may also lose some of its most talented personnel to like other banks, may risk negative media coverage or publicity in competitors which could have a material adverse effect on the analytical reports or newspaper articles, for example. Any nega- business of the Group and prevent it from retaining and attracting tive publicity concerning the Group or the industry as a whole may customers, managing existing and new legal and regulatory obliga- weaken the Group’s competitive strength and hence reduce its cus- tions, implementing and monitoring internal financial reporting tomer base and the Group’s ability to attract investors. If the Group policies and procedures and maintaining or improving operational is exposed to negative publicity or is unable to differentiate itself performance. from its competitors, it may have a material adverse effect on the Group’s business, results of operations and financial position. In order to recruit qualified and experienced employees and to minimise the risk of their departure to other companies, the Group As a result of the Group’s participation in the bank packages, it offers salary and employment conditions expected to be consistent continues to be subject to a number of limitations that may have a with the standards of the labour markets in which the Group oper- material adverse effect on its business ates, and accordingly the Group may encounter higher operational During 2008 and 2009, governments around the world, including the costs. If the Group cannot attract, train, retain and motivate quali- Danish government, took unprecedented steps to provide assistance fied personnel, it may be unable to compete effectively in the bank- to financial businesses, in certain cases requiring (indirect) influ- ing industry, which may limit the Group’s growth strategies, which ence on or requiring changes to a financial institution’s governance in each case could have a material adverse effect on the Group’s and remuneration practices. The bank packages adopted in Den- business, results of operations and financial position. mark included the guarantee scheme adopted by the Danish State in October 2008, pursuant to which the Danish State guaranteed Catastrophic events, terrorist attacks, acts of war, hostilities, unsecured creditors’ claims against losses in Danish banks to the pandemic diseases or other unpredictable events could have extent such claims were not otherwise covered (“Bank Package I”), a material adverse effect on the Group’s business, results of a transition scheme introduced in February 2009, whereby a Danish operations and financial position bank could apply individually for a state guarantee of its existing Catastrophic events, terrorist attacks, acts of war or hostilities, and new, unsubordinated, unsecured debt with a maturity of up to pandemic diseases or other similar unpredictable events, as well as three years (the “Transition Scheme”) and a scheme introduced in responses to such events or acts, may create economic and politi- February 2009, whereby the Danish State offered to inject Hybrid cal uncertainty and, more specifically, could disrupt the Group’s Core Capital into Danish banks and mortgage-credit institutions business and result in substantial losses. Such events or acts and and to act as underwriter in connection with the issuance of Hybrid losses resulting therefrom are difficult to predict and may relate to Core Capital by such banks and mortgage-credit institutions. See property, financial assets, trading positions or key employees. If the “Part I—Description of the Bank—The Danish Banking System and Group’s business continuity plans do not fully address such events Regulation—Regulatory Initiatives to Secure Financial Stability” or cannot be implemented under the circumstances, such losses for more detailed information thereon. Bank Package I expired on may grow. Unforeseen events could also lead to additional operating 30 September 2010 and was in part funded by the Danish banks costs, such as higher insurance premiums and the implementa- participating in Bank Package I, including the Bank. tion of redundant back-up systems. Insurance coverage for certain unforeseeable risks may also be unavailable, and may thus increase Participation in the Danish bank packages by the Group resulted the risk facing the Group. These factors may have a material in the imposition of certain limitations on the Group’s operations, adverse effect on the Group’s business, results of operations and some of which continue to apply. As a result of having received financial position. State Hybrid Capital and having issued notes under the Transition Scheme, the Bank is subject to, among other things, restrictions on Sector-related Risks the payment of dividends. The Bank may only distribute dividends As part of the financial services industry, the Group faces to the extent that the dividends can be financed by the Bank’s net substantial competitive pressures profit after tax. This and certain other restrictions discussed in In Denmark, where most of the Group’s activities are based, there “Part I—Description of the Bank—The Danish Banking System and is a vast number of large and small players and hence substantial Regulation—Regulatory Initiatives to Secure Financial Stability” will

24 Risk Factors Prospectus – Spar Nord Bank apply to the Bank (i) for the duration of the State Guarantee under ern, inter alia , the Group’s business, organisation, management, the Transition Scheme and (ii) until all amounts payable under the accounting policies, capital adequacy and liquidity. Many of the State Hybrid Capital, including interest and costs, have been repaid Group’s activities are contingent upon licences issued by financial in full, cancelled or converted into equity, or the Danish State has authorities, and the Group’s compliance with applicable laws and transferred all State Hybrid Capital notes and thus has ceased to be regulations is supervised by the DFSA and others. a creditor of all or part of the State Hybrid Capital. Any amendments of the regulations to which the Group is subject, The above limitations may make it less favourable to invest in banks. including, for example, the introduction of stricter rules for solvency If, due to increased regulation, it becomes more difficult for the and capital assessments, measurement of loans, new liquidity Bank to attract investors, it could have a material adverse effect on requirements and a higher level of supervision of banks in general the Group’s business, results of operations and financial position. may have the effect that the Group’s costs increase or that the Group’s earnings otherwise fall. The Group has incurred major costs relating to its participation in Bank Package I and may potentially have to pay additional Any future regulatory scrutiny and future changes in regulatory amounts as a result of its participation in the current state deposit practice, in relation to, for example, the principles for impairment of guarantee schemes loans and advances, calculation of ICAAP ratio, etc., may result in an From the beginning of the fourth quarter of 2008 to the end of the increase in the Group’s impairment or capital requirements. third quarter of 2010, the costs of the Group’s participation in Bank Package I totalled DKK 608 million. Of this amount, DKK 354 mil- Finally, any intentional or unintentional non-compliance with lion represented the Group’s guarantee commission, whereas the the rules to which the Group is subject may result in the Group’s remaining DKK 254 million was paid to cover negative balances of licences being withdrawn. failed banks. If one or more of the above risks materialise, it could have a mate- Bank Package III and Bank Package IV were introduced in June 2010 rial adverse effect on the Group’s reputation, business, results of and November 2011, respectively, and will, in the event of future operations and financial position. bank failures, be used to secure depositors’ claims and financial stability. As a result, in 2010 and 2011, the costs to the Group of The Group is unable to predict what regulatory changes may be these schemes amounted to DKK 76 million. introduced in the future or to estimate the impact that any regulatory changes may have on its business, the products and services it As a consequence of Bank Package III, there is no longer an offers or the values of its assets. unlimited guarantee for deposits made with Danish banks; the Danish Guarantee Fund for Depositors and Investors (the “Guar- See “Part I—Description of the Bank—The Danish Banking System antee Fund”) will provide coverage in future for depositors for their and Regulation—Regulatory Initiatives to Secure Financial Stabil- full deposits into certain types of accounts (including certain types ity—Basel III and Other Regulatory Proposals” for more details of pension accounts) and coverage of up to EUR 100,000 of each about laws and regulation. customer’s total net deposit. Bank Package IV will, among other things, allow the Danish State to grant, through Finansiel Stabilitet, A change in assumptions and methods of valuation may have a a so-called dowry to a bank wishing to take over a distressed bank. material effect on the Group’s business, results of operations and The Guarantee Fund may also grant a dowry under the Danish Act financial position on a guarantee scheme for depositors and investors. A large number of assets have been provided as collateral for the Group’s loans to customers. Such assets include real property, The Guarantee Fund is financed by the banks to the effect that including residential property and agricultural land, as well as banks participating in the scheme contribute an amount corre- securities and vehicles. In addition, the Group owns a number of sponding to their share of the total covered deposits with Danish shares, primarily in the form of unlisted shares, as well as proper- banks. The financial risks to the Danish banks consist first and fore- ties which are not directly related to the Group’s loans to customers. most of the Guarantee Fund’s protection of depositors and investors A common denominator of the valuation of the Bank’s assets and within the framework of the Guarantee Fund. In addition, there are collateral is that they are subject to a number of laws, regulations costs involved in connection with guarantees for the funding of, and recommendations laid down by the DFSA and others and in liquidity lines for and any losses in banks transferred for winding up accordance with IFRS, and that they are based on a number of as- in the government-owned company Finansiel Stabilitet. sumptions and estimates.

Thus, from an overall perspective, the Group has incurred substan- In the valuation of individual assets and collateral, legislation al- tial costs in this connection, and if the number of financial business- lows for a certain degree of flexibility with respect to the choice es encountering serious difficulties remains high, and the Group’s of method, and the Bank applies a number of different valuation contributions to deposit guarantee schemes (“Deposit Guarantee methods across asset classes. Scheme”) thus remain at a high level or increase, this may have a continued material adverse effect on the Group’s business, results The DFSA or other authorities may from time to time amend the of operations and financial position. laws, regulations or recommendations relating to the valuation of individual assets. Furthermore, the assumptions and estimates that See “Part I—Description of the Bank—The Danish Banking System form the basis of the individual valuations may be subject to change and Regulation—Regulatory Initiatives to Secure Financial Stability” or may no longer apply. Both factors may have a material adverse for additional information on regulatory initiatives. effect on the value of the Bank’s assets or collateral and hence result in a need for further impairment. Legislation, regulation and actions of supervisory authorities may have a material effect on the Group’s business, results of If the laws, regulations or recommendations relating to valua- operations and financial position tion are subject to change by the DFSA or other authorities, or the The Group is subject to a large number of laws and regulations assumptions or estimates forming the basis of the individual valua- both at national and at EU level. Such laws and regulations gov- tions have to be changed or no longer apply, resulting in an increase

Spar Nord Bank – Prospectus Risk Factors 25 of the Group’s impairment charges, it could have a material adverse Offer Shares or any rights or other securities being offered have effect on the Group’s business, results of operations and financial been registered with the relevant authorities in such jurisdictions, position. or unless any such acquisition or exercise is made in accordance with an exemption from registration requirements. The Bank is un- Risks Related to the Offering der no obligation and does not intend to file a registration statement The market price of the Bank’s Shares, Pre-emptive Rights and in any jurisdiction outside Denmark in respect of the Pre-emptive other securities may be highly volatile Rights or the Offer Shares and makes no representation as to the The market price of the Shares, the Pre-emptive Rights and availability of any exemption from the registration requirement other securities may be highly volatile and subject to significant under the laws of any other jurisdiction outside Denmark, Sweden, fluctuations caused by various factors, some or many of which Norway or Germany in respect of any such rights in future. are beyond the Bank’s control and not necessarily related to the Bank’s business, operations or prospects. These factors include The Offering may be withdrawn and investors having bought Pre- changes in market conditions of companies in the financial services emptive Rights or Offer Shares may incur a loss if the Offering is industry; variations in the Group’s quarterly results of operations; not completed fluctuations in stock market and bond market prices and volumes; The Offering may be withdrawn during the period leading up to regi perceived systemic risk in Denmark; changes in the shareholder stration with the Danish Business Authority of the capital increase structure; changes in financial estimates or recommendations by pertaining to the Offer Shares. If the Offering is not completed, the securities analysts regarding the Bank or its Shares and other secu- exercise of Pre-emptive Rights that has already taken place will rities; issuances of shares or other securities in future; announce- be cancelled automatically. The subscription amount for the Offer ments by the Bank or its competitors of new products, services or Shares will be refunded (less any transaction costs), all Pre-emptive technology, acquisitions, or joint ventures; and activity by short sell- Rights will lapse, and no Offer Shares will be issued. However, ers and changing government restrictions on such activity. In ad- trades of Pre-emptive Rights executed during the Rights Trad- dition, the equity market has generally been exposed to significant ing Period will not be affected. As a result, investors who acquire fluctuations in prices which may be unrelated to or disproportion- Pre-emptive Rights will incur a loss corresponding to the purchase ately high in relation to the results of operations of the companies in price of the Pre-emptive Rights and any transaction costs. Similarly, question. Such general market factors may have a material adverse if the Offering is not completed, the Offer Shares will not be issued. effect on the market price of the Shares and other securities, irre- However, trades in Offer Shares will not be affected, and investors spective of the Bank’s results of operations. The market price of the who have acquired Offer Shares will receive a refund of the sub- Pre-emptive Rights depends on the price of the Shares. A decline scription amount for the Offer Shares (less any transaction costs). in the price of the Shares may have a material adverse effect on the Investors who have acquired Offer Shares will consequently incur value and market price of the Pre-emptive Rights. a loss corresponding to the difference between the purchase price and the subscription price of the Offer Shares plus any transaction The Bank may issue additional Shares or other securities in future, fees, unless they succeed in recovering the purchase price from the which may have a material adverse effect on the price of the Shares. seller of the Offer Shares.

Upon completion of the Offering, the Bank is subject to a lock-up Subscription undertakings regarding the Offering are not secured agreement for a limited period of time. See “Part II—The Offering— A group of Existing Shareholders, consisting of the Spar Nord Selling Shareholders and Lock-up Agreements” for a more detailed Foundation, Nykredit Realkredit A/S and Finanssektorens Pensions description of the lock-up agreement. Upon expiry of the lock-up kasse (the “Group of Shareholders”), have made binding advance period, the Bank may freely issue new shares and other securities, undertakings, subject to the satisfaction of certain conditions, to which may cause the price of the Shares to decrease. If a further exercise Pre-emptive Rights corresponding to the subscription offering of Shares, pre-emptive rights, bonds or other securities of an aggregate of 7,161,020 Offer Shares, corresponding to total convertible or exchangeable into Shares is made by the Bank or the gross proceeds of DKK 114.6 million. The Spar Nord Foundation’s Bank’s major shareholders, or if the public assumes that an offering proportion thereof represents 1,875,000 Offer Shares, correspond- or sale might be made, this may have a material adverse effect on ing to a subscription amount of approximately DKK 30.0 million, the price of the Shares and the Pre-emptive Rights. Nykredit Realkredit A/S’ proportion represents 4,380,000 Offer Shares, corresponding to a subscription amount of approximately The Bank is a public limited company registered under Danish DKK 70.1 million, and Finanssektorens Pensionskasse’s proportion law, which may make it difficult for shareholders resident outside represents 906,020 Offer Shares, corresponding to a subscription Denmark to exercise or enforce certain rights amount of approximately DKK 14.5 million. Accordingly, Nykredit Spar Nord Bank A/S is a public limited company registered under Realkredit A/S and Finanssektorens Pensionskasse have made the laws of Denmark, which may make it difficult for shareholders binding advance undertakings to exercise all Pre-emptive Rights of the Bank resident outside of Denmark to exercise or enforce cer- allocated to them. In addition to the undertakings referred to above, tain rights. The rights of holders of Shares and Pre-emptive Rights the Spar Nord Foundation has, subject to certain conditions, made are governed by Danish law and by the Articles of Association. an undertaking to subscribe for Offer Shares on a cash-neutral ba- These rights may differ from the typical rights of shareholders in sis (after transaction costs) of the remaining part of the Pre-emptive other jurisdictions. As a result, it may not be possible for investors Rights allocated to the Spar Nord Foundation by subscribing for the to effect service of process upon the Bank outside Denmark or to maximum number of Offer Shares that the Spar Nord Foundation enforce against the Bank judgments obtained in courts outside Den- can finance through the sale of Pre-emptive Rights alone. Such Pre- mark based upon applicable laws in jurisdictions outside Denmark. emptive Rights will, during the trading period for the Pre-emptive Furthermore, shareholders outside Denmark may not be entitled to Rights, be sold by the Joint Global Coordinators & Bookrunners on exercise their voting rights. behalf of the Spar Nord Foundation in open market transactions, privately negotiated transactions, block trades or otherwise. Certain shareholders resident outside Denmark may not be able to acquire and/or exercise the Pre-emptive Rights Furthermore, subject to certain conditions, a number of Existing Shareholders resident in certain jurisdictions outside Denmark, in- Shareholders, Nykredit Realkredit A/S and Finanssektorens Pen- cluding the United States, may be unable to acquire and/or exercise sionskasse and other institutional and private investors, including the Pre-emptive Rights, unless the Pre-emptive Rights and/or the Fondsmæglerselskabet Maj Invest A/S, Skandinaviska Enskilda

26 Risk Factors Prospectus – Spar Nord Bank Banken A/S and SmallCap Danmark A/S, have made binding agree- Shareholders with small shareholdings may have limited ments with Carnegie Investment Bank AB and Danske Bank A/S influence to acquire from Carnegie Investment Bank AB and Danske Bank As at the Prospectus Date, the Bank had approximately 110,000 A/S an additional 44,296,875 Offer Shares at the Offer Price, cor- shareholders. Of these shareholders, the three largest investors responding to an amount of approximately DKK 708.8 million if the hold approximately 38% of the share capital of the Bank. There is Offering is not fully subscribed. a risk that the share capital may be increasingly concentrated on a few large investors after the Offering. The composition of share- However, these undertakings are not secured. Accordingly, there holders determines the risk and control allocation, thus involving a is a risk that one or more investors referred to in this section and risk that minority shareholders may not be able to exert significant the Group of Shareholders will not fulfil their subscription indica- control and influence Management to perform certain acts if the tions/undertakings, which may have a material adverse effect on majority shareholders do not exercise their influence to the same the completion of the Offering, including as a consequence of the effect. Joint Global Coordinators & Bookrunners being entitled to, prior to completion of the Offering, withdraw their underwriting commit- The market for the Pre-emptive Rights and/or for the Offer Shares ment under certain circumstances with the result that the Offering may only offer limited liquidity, and if a trading market develops, will not be completed. the price of the Pre-emptive Rights and/or of the Offer Shares may be subject to greater volatility than the price of the Existing Failure to exercise the Pre-emptive Rights before expiry of the Shares Subscription Period will result in the lapse of the holder’s Pre- The trading period for trading in the Pre-emptive Rights on NASDAQ emptive Rights OMX under the ISIN code DK0060415909 commences on 7 March Failure to exercise Pre-emptive Rights before expiry of the Sub- 2012 and closes on 20 March 2012, inclusive. The Offer Shares are scription Period will cause the holder’s Pre-emptive Rights to lapse, expected to be approved for admission to trading and official listing and the holder will not be entitled to any compensation. Accordingly, on NASDAQ OMX from 7 March 2012 under the temporary ISIN code Existing Shareholders and other holders of Pre-emptive Rights DK0060416048, which is expected to be merged with the ISIN code must ensure that all required exercise instructions are received by of the Existing Shares, DK0060036564, expected to take place not such Existing Shareholders’ or other holders’ custodian bank or later than on 29 March 2012. other financial intermediary before expiry of the time limit. Until the merger of the ISIN codes has been completed, the liquidity If the Existing Shareholders do not exercise any or all of the Pre- of the Offer Shares under the temporary ISIN code may be substan- emptive Rights, their ownership interest will become diluted, and tially different from the liquidity of the Existing Shares. such dilution may be significant The issue of the Offer Shares will cause Existing Shareholders who There can be no assurance that a market for the Pre-emptive Rights have not exercised their Pre-emptive Rights to experience a dilution and/or for the Offer Shares will develop when they are initially of their ownership interest and voting rights, and such dilution may traded on NASDAQ OMX, and if such market develops, the Pre- be significant. Even if such Existing Shareholders decide to sell their emptive Rights and/or the Offer Shares may be subject to greater Pre-emptive Rights, the payment they receive may not be sufficient volatility than the Existing Shares. to offset the dilution. Shareholders outside Denmark are exposed to exchange-rate risk If the Danish State converts debt into Shares, the Danish State will The Pre-emptive Rights and the Offer Shares are priced in Danish become a new major shareholder and other shareholdings will be kroner. Accordingly, the value of the Pre-emptive Rights and the diluted Offer Shares is likely to fluctuate in line with any fluctuation of the In connection with the bank packages, the Bank has raised loans exchange rate between the local currency of the country in which an with the Danish State, which may be converted into share capital in investor outside Denmark is based and Danish kroner. If the value of the Bank given certain circumstances; this could dilute the holdings Danish kroner depreciates against the local currency of the country of the other shareholders and mean that the Danish State may have in which an investor outside Denmark is based, the value of the Pre- significant possibility for influencing the decision-making process at emptive Rights and the Offer Shares will decrease. the Bank’s general meetings.

Spar Nord Bank – Prospectus Risk Factors 27 General Information

References in this Prospectus to the “Bank” are to Spar Nord Bank plied, and assume no responsibility for the accuracy and complete- A/S, and references to the “Group” are to Spar Nord Bank A/S ness of the information contained in the Prospectus. together with its consolidated subsidiaries, unless the context requires otherwise. See “Part I—Description of the Bank—Definitions Neither the delivery of this Prospectus nor the exercise of Pre- and Glossary” for a list of terms and definitions frequently used in emptive Rights or the subscription or acquisition of the Offer Shares this Prospectus. shall create any implication that the information contained in this Prospectus is correct as at any time subsequent to the Prospectus This Prospectus is not intended to provide the basis of any credit or Date, or that there have been no changes in the affairs of the Group any other evaluation and should not be considered as a recommen- since the date hereof. Any material change as compared with the dation by the Bank or the Joint Global Coordinators & Bookrunners contents of this Prospectus will be published as a supplement that any recipient of this Prospectus should acquire or exercise Pre- pursuant to applicable laws and regulations. Investors who have ac- emptive Rights or subscribe for any Offer Shares. Each prospective cepted to exercise Pre-emptive Rights and/or acquire Offer Shares investor should determine for itself the relevance of the informa- prior to publication of any supplement are entitled to withdraw their tion contained in this Prospectus, and any subscription of the Offer acceptance during two business days after the publication of such Shares or acquisition or exercise of the Pre-emptive Rights should supplement with the exception of the Group of Shareholders, who be based upon such information as it deems necessary. have made binding advance undertakings subject to the satisfaction of certain conditions. Investors are authorised to use this Prospectus solely for the purpose of considering the acquisition or exercise of the Pre-emptive Investors further acknowledge that: (i) they have not relied on the Rights and subscription of the Offer Shares described in this Joint Global Coordinators & Bookrunners or any person affiliated Prospectus. The information contained in this Prospectus has been with the Joint Global Coordinators & Bookrunners in connection provided by the Bank and by other sources identified herein. The with any investigation of the accuracy of any information contained Joint Global Coordinators & Bookrunners make no representation in this Prospectus or their investment decision; and that (ii) they or warranty, whether expressed or implied, as to the accuracy or have relied only on the information contained in this document, and completeness of such information contained in the Prospectus, and that no person has been authorised to give any information or to nothing contained in this Prospectus is, or shall be relied upon as, a make any representation concerning the Group or the Shares (other promise or representation by the Joint Global Coordinators & Book- than as contained in this document) and, if given or made, any such runners in this respect, whether as to the past or the future The information or representation should not be relied upon as having Joint Global Coordinators & Bookrunners assume no responsibility been authorised by the Bank or the Joint Global Coordinators & for the accuracy or completeness of the Prospectus and accordingly Bookrunners. disclaim, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which they This Prospectus may not be forwarded, reproduced or in any other might otherwise be found to have in respect of this Prospectus or way redistributed by anyone but the Joint Global Coordinators & any such statement. Investors may not reproduce or distribute this Bookrunners and the Bank. The Pre-emptive Rights and the Offer Prospectus, in whole or in part, and investors may not disclose any Shares may be subject to restrictions on transferability and resale of the contents of this Prospectus or use any information herein for under applicable securities legislation in certain jurisdictions and any purpose other than for considering the acquisition or exercise of may not be acquired, transferred, exercised or resold unless per- Pre-emptive Rights and the subscription of Offer Shares. Investors mitted under applicable securities legislation. Persons into whose accept the above by acknowledging receipt of this Prospectus. possession this Prospectus may come undertake to inform themselves about and to observe such restrictions. Neither the Bank Prospective holders or acquirers of the Pre-emptive Rights and nor the Joint Global Coordinators & Bookrunners assume any legal prospective subscribers or acquirers of the Offer Shares should responsibility for any violation of these restrictions by any person, make an independent assessment as to whether the information irrespective of whether such person is a potential holder of the Pre- in this Prospectus is relevant to their situation, and any acquisition emptive Rights or a potential subscriber of the Offer Shares. or exercise of the Pre-emptive Rights and any subscription for or acquisition of the Offer Shares should be based on the information None of the Bank or the Joint Global Coordinators & Bookrunners, that the holder or subscriber in question may deem necessary. or any of their respective representatives, is making any representation to any offeree or purchaser of the Pre-emptive Rights or The Joint Global Coordinators & Bookrunners will receive fees from Offer Shares regarding the lawfulness of an investment in the Pre- the Bank in connection with the Offering. In connection with their emptive Rights or the Offer Shares by such offeree or purchaser usual business activities, the Joint Global Coordinators & Bookrun- under the laws applicable to such offeree or purchaser. Prospective ners may in the past have provided, are currently providing and may holders and acquirers of the Pre-emptive Rights and prospective in the future at any time provide banking services to the Bank and subscribers and acquirers of the Offer Shares should make their the Group, for which they have received, are receiving and may in own individual assessment of the legal basis and consequences of the future receive fees and commissions. See “Part I—Description the Offering, including any possible tax consequences and possi- of the Bank—Bank Information—Transactions with Financial Advis- ble foreign exchange restrictions which may apply before deciding ers”. whether to invest in the Pre-emptive Rights and the Offer Shares. Each investor should consult with his or her own advisers as to the The Joint Global Coordinators & Bookrunners are acting exclusively legal, tax, business, financial and related aspects of a purchase of for the Bank and no one else in connection with the Offering, and the Offer Shares or the Pre-emptive Rights. they will not regard any other person (whether or not a recipient of this Prospectus) as their respective clients in relation to the Prospective holders and acquirers of Pre-emptive Rights and sub- Offering and will not be responsible to anyone other than the Bank scribers of Offer Shares shall comply with all applicable laws and for providing the protections afforded to their respective clients nor provisions in countries or regions in which they acquire, subscribe for giving advice in relation to the Offering or any transaction or for, offer, sell or exercise the Pre-emptive Rights or the Offer Shares arrangement referred to herein. The Joint Global Coordinators & or possess or distribute this Prospectus and shall obtain consent, Bookrunners make no representation, whether expressed or im- approval or permission, as required, for the acquisition of the Pre-emptive Rights or subscription for the Pre-emptive Rights or

28 General Information Prospectus – Spar Nord Bank subscription for or acquisition of the Offer Shares. In connection average of the shares at the beginning of the year and at the end with the Offering, the Joint Global Coordinators & Bookrunners and of the year. any of their respective group enterprises, acting as investors for their own account, may take up Offer Shares in the Offering and in • Return on equity before tax: Profit/loss before tax in per cent of that capacity may retain, purchase or sell for its own account such average shareholder’s equity. The average shareholders’ equity is securities and Offer Shares or related investments and may offer or calculated as a simple average of the shareholders’ equity at the sell such Offer Shares or other investments otherwise than in con- beginning of the year and at the end of the year. nection with the Offering. Accordingly, references in the Prospectus to Offer Shares being offered or placed should be read as including • Cost share of core income from continuing activities: Operating any offering or placement of Offer Shares to the Joint Global Co- expenses and depreciation and amortisation/core income. ordinators & Bookrunners or any of its group enterprises acting in such capacity. The Joint Global Coordinators & Bookrunners do not • Impairment ratio: Impairment in per cent of loans and advances intend to disclose the extent of any such investment or transaction + guarantees + impairment. otherwise than in accordance with any legal or regulatory obligation to do so. • Solvency ratio: Capital Base in per cent of risk-weighted assets (calculated in accordance with the CRD). Enforceability of Judgments The Bank is a public limited company registered under the laws of • Common Equity (Tier 1) ratio: Core Tier 1 Capital after primary Denmark and has its registered office in Aalborg, Denmark. deductions in per cent of risk-weighted assets.

The Board of Directors and the Executive Board mentioned herein • Employees (full-time, end of year): Number of full-time employ- are residents of Denmark. All or a substantial portion of the assets ees at end of year. of the Bank and such persons are located in Denmark. As a result, it may not be possible for investors to effect service of process upon The non-IFRS financial measures presented are not measures of such persons or the Bank outside Denmark or to enforce judgments financial performance under IFRS as adopted by the EU but meas- obtained in courts outside Denmark based upon applicable laws in ures used by the Bank’s management to monitor the underlying jurisdictions outside Denmark against such persons or the Bank. performance of the Group’s business and operations. Furthermore, they may not be indicative of the Group’s historical operating re- Presentation of Financial and Certain Other Information sults, nor are such measures meant to be predictive of the Group’s The financial information set forth in a number of tables in this future results. The Bank presents these non-IFRS measures in this Prospectus has been rounded. Accordingly, in certain instances, Prospectus because it considers them an important supplemental the sum of the figures in a column or row may not conform exactly measure of the Group’s performance and believes that they are to the total figure given for that column or row. In addition, certain widely used by investors in comparing performance among compa- percentages presented in the tables in this Prospectus reflect cal- nies. culations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that However, not all companies calculate the non-IFRS financial meas- would be derived if the relevant calculations were based upon the ures in the same manner or on a consistent basis, and, as a result, rounded numbers. the Bank’s presentation thereof may not be comparable to measures used by other companies under the same or similar names. The Group’s financial year ends on 31 December, and references Accordingly, undue reliance should not be placed on the non-IFRS in this Prospectus to any specific financial year are to the twelve- financial measures contained in this Prospectus, and they should month period ended or ending on 31 December of such year. not be considered as a substitute for profit/loss, cash flow or other financial measures computed in accordance with IFRS as adopted In this Prospectus, all references to “Danish kroner” or “DKK” are by the EU. to the currency of the Kingdom of Denmark, and all references to “euro” or “EUR” are to the common European currency. Foreign Currency Presentation The Bank publishes its consolidated financial statements in Danish This Prospectus presents historical financial information, includ- Kroner. ing selected consolidated income statement, balance sheet and cash flow data derived from the Group’s consolidated financial Market and Industry Information statements which have been prepared in accordance with IFRS as This Prospectus contains information about the market share, adopted by the EU and audited by KPMG Statsautoriseret Revi- market position and industry data for the operating areas of the sionspartnerselskab, the Bank’s independent auditors. Financial Group and its reporting segments. Unless otherwise indicated, the information previously published for any financial years may differ statistical and other market information relating to such informa- from subsequently published financial information due to the retro- tion is based on data reported to the central bank in Denmark. active implementation of subsequent changes in accounting policies Such information has been accurately reproduced and, as far as and other retroactive adjustments made in accordance with IFRS as Management is aware and is able to ascertain from such informa- adopted by the EU. tion, no facts have been omitted which would render the information provided herein inaccurate or misleading. Non-IFRS Financial Measures The following financial measures included in this Prospectus are Industry publications generally state that the information they not measures of financial performance or liquidity under IFRS as contain has been obtained from sources believed to be reliable, but adopted by the EU: the accuracy and completeness of such information is not guaranteed. Management has not independently verified and cannot give • Earnings per share, DKK: The profit/loss for the year after tax/ any assurance as to the accuracy of such market data and industry average number of shares in circulation, excluding treasury forecasts contained in this Prospectus that were taken or derived shares. The average number of shares is calculated as a simple from such industry publications.

Spar Nord Bank – Prospectus General Information 29 Review Performed by PricewaterhouseCoopers, Statsautoriseret the views of Management, as well as on assumptions made by and Revisionspartnerselskab information currently available to Management, and such state- In connection with the preparation of this Prospectus, the Joint ments may constitute forward-looking statements. Such forward- Global Coordinators & Bookrunners asked PricewaterhouseCoop- looking statements (other than statements of historical fact) regard- ers, Statsautoriseret Revisionspartnerselskab (“PwC”) to perform ing the Group’s future results of operations, financial position, cash a limited review of the balance sheet and 70 selected credit risk flows, business strategy, plans and objectives of Management for exposures (the “Review”) within the Spar Nord Bank A/S Group. future operations can generally be identified by terminology such PwC performed the Review in the period from 10 November to 14 as “targets,” “believes,” “estimates”, “expects”, “aims”, “intends”, December 2011 and on the basis of information on credit risk expo- “plans”, “seeks”, “will”, “may”, “anticipates”, “would”, “could”, sures available as of 30 September 2011. “continues” or similar expressions or the negatives thereof.

The Review comprised the following credit risk exposures: Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the ac- • The twenty largest credit risk exposures (except for credit risk tual results, performance or achievements of the Group, or industry exposures concluded with the state/municipalities, including results, to differ materially from any future results, performance companies owned by the state/municipalities); or achievements, whether expressed or implied, by such forward- looking statements. Such risks, uncertainties and other important • The ten largest credit risk exposures appearing on the Bank’s factors include: internal observation list of credit risk exposures showing signs of weakness; • changes in the general economic and business conditions in the markets in which the Group operates; • The ten largest credit risk exposures carrying impairment; • changes in industry trends; • The ten largest unsecured credit risk exposures; • changes in competition in the markets in which the Group oper- • The ten largest credit risk exposures in the real estate sector; ates; and; • changes in interest rates, credit spreads, foreign exchange rates, • The ten largest credit risk exposures related to the agriculture, equity and commodity prices; trade and transportation sectors. • changes in real property values or asset quality; In addition, the Review comprised a limited analysis of the leasing portfolio in Spar Nord Leasing A/S, the valuation of intangible as- • the loss of any significant customers; sets, material unlisted share holdings, real estate properties owned by Spar Nord Bank A/S Group and principles regarding provision for • changes in the quality of the Group’s loan portfolio and the court cases as at 30 September 2011. The Review moreover com- Group’s counterparty risk, including credit developments in the prised procedures for risk management regarding lending activities small and medium sized enterprise segment; and the solvency statement as at 30 September 2011. • changes in business strategy or development plans; The extent of the Review is defined in an engagement letter with PwC dated 28 October 2011. PwC has not performed an audit, a • availability, terms and deployment of capital; review or any other work for the purpose of providing an opinion with assurance. As the Review neither represents an audit nor a • changes in the Group’s funding and liquidity position; review in accordance with the international standards for audits and reviews, PwC has not expressed any opinion with assurance on Spar • changes in the Group’s credit ratings; Nord Bank A/S’ balance sheet as at 30 September 2011. Had PwC performed further procedures, performed an audit or a review of • changes in the availability of qualified personnel; Spar Nord Bank A/S’ balance sheet as at 30 September 2011, other observations could have been made and reported to the Joint Global • changes in, or the failure or inability to comply with, government Coordinators & Bookrunners and Spar Nord Bank A/S. regulation or other factors referenced in this Prospectus;

Spar Nord Bank A/S’ Management has reviewed PwC’s report that • political, governmental and regulatory changes or changes in was the result of the Review and concluded that in preparing the political or social conditions; Prospectus all conclusions in the report that was a result of the Review have been taken into account. PwC has not verified that this • limitations in the effectiveness of the Group’s internal risk is in fact the case and accepts no liability in this respect. management processes, of its risk measurement, control and modelling systems, and of financial models generally; Forward-looking Statements Certain statements in this Prospectus, including certain statements • management changes and changes to the structure of the in “Summary”, “Risk Factors”, “Part I—Description of the Bank— Group’s business groups; Information on Assets and Liabilities, Financial Position, Results and Dividend Policy—Dividend Policy”, “Part I—Description of the • the occurrence of operational failures, such as fraud, unauthor- Bank—Historical Financial Information”, “Part I—Description of ised trading and systems failures; and the Bank—Operating and Financial Review”, “Part I—Description of the Bank—Capital Resources”, “Part I—Description of the Bank— • technological developments. Risk, Liquidity and Capital Management”, “Part I—Description of the Bank—Business and Market” and “Part I—Description of the Should one or more of these factors or uncertainties materialise, Bank—The Danish Banking System and Regulation” are based on or should any underlying assumptions prove to be incorrect, the

30 General Information Prospectus – Spar Nord Bank Group’s actual results of operations or financial position could differ as may be required by law. Any subsequent written and verbal materially from that described herein as anticipated, assessed, esti- forward-looking statements attributable to the Bank or to persons mated or expected. The Bank urges investors to read the sections of acting on its behalf are expressly qualified in their entirety by the this Prospectus entitled “Risk Factors”, “Part I—Description of the cautionary statements referred to above and contained elsewhere Bank—Operating and Financial Review” and “Part I—Description of in this Prospectus. The forward-looking statements included in this the Bank—Business and Market” for a more complete discussion of Prospectus speak only as at the Prospectus Date. Except for any the factors that could affect the Group’s future performance and the prospectus supplements that the Bank may be required to publish industry in which the Bank operates. under Danish law, the Bank does not intend to and does not assume any obligation to update the forward-looking statements in this The Bank does not intend, and does not assume any obligation, to Prospectus after the Prospectus Date. update any forward-looking statements contained herein, except

Spar Nord Bank – Prospectus General Information 31 Part I. Description of the Bank

32 PART I – Part I. Description of the Bank Prospectus – Spar Nord Bank 1. Persons Responsible

See “Responsibility Statements” elsewhere in this Prospectus.

Spar Nord Bank – Prospectus PART I – 1. Persons Responsible 33 2. Auditors

The Bank’s independent auditors are:

KPMG Statsautoriseret Revisionspartnerselskab Company reg. (CVR) no. 30700228 Oswald Helmuths Vej 4 DK-2000 Frederiksberg Denmark

KPMG Statsautoriseret Revisionspartnerselskab is represented by Per Gunslev and Lisbet Kragelund.

Torben Bender and Lisbet Kragelund have audited and signed the Group’s consolidated financial statements and financial statements for the financial years ended 2009 and 2010.

Per Gunslev and Lisbet Kragelund have audited and signed the Group’s consolidated financial statements and financial statements for the financial year ended 2011.

Due to in-house rotation, KPMG Statsautoriseret Revisionspartner- selskab changed the auditors signing the financial statements in 2011.

The state-authorised public accountants signing the consolidated financial statements are members of the Institute of State Authorised Public Accountants in Denmark (FSR – Danske Revisorer).

34 PART I – 2. Auditors Prospectus – Spar Nord Bank 3. Selected Financial Information

See “Part I—Description of the Bank—Operating and Financial Review”.

Spar Nord Bank – Prospectus PART I – 3. Selected Financial Information 35 4. Risk Factors

For a description of risk factors, see “Risk Factors”.

36 PART I – 4. Risk Factors Prospectus – Spar Nord Bank 5. Bank Information

5.1. name and Registered Office etc. 5.2. ISIN Code

Spar Nord Bank A/S The Bank’s Existing Shares are listed on NASDAQ OMX under ISIN Company reg. (CVR) no. 13737584 code DK0060036564. Skelagervej 15 P.O. Box 162 DK-9100 Aalborg 5.3. date of Incorporation and Governing Law Denmark Telephone: +45 96 34 40 00 The Bank was officially incorporated as a public limited com- Website: www.sparnord.dk pany under Danish law on 20 December 1989. In the period from 1824 until incorporation of the public limited company, Spar Nord Subject to certain exceptions, the Prospectus may also be down- (Sparekassen Nordjylland) carried on business as a guarantee sav- loaded from the Bank’s website: www.sparnord.dk. Except for the ings bank. information incorporated herein by reference, the contents of the website do not form part of the Prospectus. 5.4. Object According to Article 1(1) of the Articles of Association (included as an appendix to this Prospectus), Spar Nord Bank A/S has the follow- According to Article 1(3) of the Articles of Association, the object of ing registered secondary names: the Bank is to carry on banking pursuant to section 7(1) and (2) of the Financial Business Act. SBN Bank A/S (Spar Nord Bank A/S), Sparbank Nord A/S (Spar Nord Bank A/S), Telefonbanken A/S (Spar Nord Bank A/S), Spar Nordjyl- land Bank A/S (Spar Nord Bank A/S), Spar Nordjylland Bankak- 5.5. fInancial Calendar tieselskab, (Spar Nord Bank A/S), Sparekassen Nordjylland A/S ( Spar Nord Bank A/S), Spar Nord Bankaktieselskab (Spar Nord Bank Annual general meeting 18 April 2012 A/S), Aars Bank A/S (Spar Nord Bank A/S). Lokalbank Aabybro A/S Three-month interim report 2012 25 April 2012 (Spar Nord Bank A/S), Lokalbank Aalborg A/S (Spar Nord Bank A/S), Six-month interim report 2012 15 August 2012 Lokalbank Aars A/S (Spar Nord Bank A/S), Lokalbank Brønderslev Nine-month interim report 2012 24 October 2012 A/S (Spar Nord Bank A/S), Lokalbank Danmark A/S (Spar Nord Bank A/S), Lokalbank Esbjerg A/S (Spar Nord Bank A/S), Lokalbank Fredericia A/S (Spar Nord Bank A/S), Lokalbank Frederikshavn A/S 5.6. fInancial Year and Financial Reporting (Spar Nord Bank A/S), Lokalbank Fåborg A/S (Spar Nord Bank A/S), Lokalbank Grenaa A/S (Spar Nord Bank A/S), Lokalbank Haderslev Spar Nord Bank A/S’ financial year runs from 1 January to A/S (Spar Nord Bank A/S), Lokalbank Hadsund A/S (Spar Nord Bank 31 December. A/S), Lokalbank Hasseris A/S (Spar Nord Bank A/S), Lokalbank Herning A/S (Spar Nord Bank A/S), Lokalbank Hirtshals A/S (Spar Spar Nord Bank A/S publishes annual reports and interim reports Nord Bank A/S), Lokalbank Hjallerup A/S (Spar Nord Bank A/S), for the Group for the first, second and third quarters. The annual Lokalbank Hjørring A/S (Spar Nord Bank A/S), Lokalbank Hobro report and the interim reports are published in both Danish and A/S (Spar Nord Bank A/S), Lokalbank Holbæk A/S (Spar Nord Bank English. A/S), Lokalbank Holstebro A/S (Spar Nord Bank A/S), Lokalbank Horsens A/S (Spar Nord Bank A/S), Lokalbank Kolding A/S (Spar The most recent annual general meeting was held on 27 April Nord Bank A/S), Lokalbank København A/S (Spar Nord Bank A/S), 2011. The most recent extraordinary general meeting was held on Lokalbank Køge A/S (Spar Nord Bank A/S), Lokalbank Løgstør A/S 1 March 2012. (Spar Nord Bank A/S), Lokalbank Nakskov A/S (Spar Nord Bank A/S), Lokalbank Nyborg A/S (Spar Nord Bank A/S), Lokalbank Nykøbing Falster A/S (Spar Nord Bank A/S), Lokalbank Næstved 5.7. Auditors A/S (Spar Nord Bank A/S), Lokalbank Nørresundby A/S (Spar Nord Bank A/S), Lokalbank Odense A/S (Spar Nord Bank A/S), Lokalbank KPMG Statsautoriseret Revisionspartnerselskab Randers A/S (Spar Nord Bank A/S), Lokalbank Ringsted A/S (Spar Company reg. (CVR) no. 30700228 Nord Bank A/S), Lokalbank Silkeborg A/S (Spar Nord Bank A/S), Oswald Helmuths Vej 4 Lokalbank Skagen A/S (Spar Nord Bank A/S), Lokalbank Skander- DK-2000 Frederiksberg borg A/S (Spar Nord Bank A/S), Lokalbank Skive A/S (Spar Nord Denmark Bank A/S), Lokalbank Skjern A/S (Spar Nord Bank A/S), Lokalbank Slagelse A/S (Spar Nord Bank A/S), Lokalbank Støvring A/S (Spar Nord Bank A/S), Lokalbank Svendborg A/S (Spar Nord Bank A/S), 5.8. Issuing Agent Lokalbank Sæby A/S (Spar Nord Bank A/S), Lokalbank Sønderborg A/S (Spar Nord Bank A/S), Lokalbank Terndrup A/S (Spar Nord The Bank’s issuing agent is: Bank A/S), Lokalbank Thisted A/S (Spar Nord Bank A/S), Lokalbank Vejgaard A/S (Spar Nord Bank A/S), Lokalbank Vejle A/S (Spar Nord Spar Nord Bank A/S Bank A/S), Lokalbank Viborg A/S (Spar Nord Bank A/S), Lokalbank Company reg. (CVR) no. 13737584 Østeraa A/S (Spar Nord Bank A/S), Lokalbank Århus A/S (Spar Nord Skelagervej 15 Bank A/S). P.O. Box 162 DK-9100 Aalborg The Bank’s registered office is situated in the Municipality of Aal- Denmark borg, Denmark.

Spar Nord Bank A/S is subject to Danish law.

Spar Nord Bank – Prospectus PART I – 5. Bank Information 37 established or acquired, while 22 branches were closed during the 5.9. Registrar same period in the North Jutland region to improve profitability.

The Banks’ registrar is: At 31 December 2011, the Bank had a presence in most Danish cities with more than 25,000 inhabitants. Accordingly, the Group’s Computershare A/S branch network comprises 69 branches, 42 of which are located in Company reg. (CVR) no. 27088899 North Jutland and 24 in other locations in Denmark. Kongevejen 418 DK-2840 Holte Denmark 5.12. Investments

The Group’s total investments for the financial year ended 31 De- 5.10. Transactions with Financial Advisers cember 2011 amounted to DKK 408 million, of which DKK 322 million was attributable to investments in equipment used for leasing The Joint Global Coordinators & Bookrunners may in the past have in Spar Nord Leasing A/S, DKK 59 was attributable to investments in provided, are currently providing and may in the future at any time other property, plant and equipment, including corporate properties provide banking services to the Bank and the Group for which they and equipment, and DKK 4 million was attributable to investments have received, are receiving and may in the future receive fees and in intangible assets, including software, and DKK 23 million to commissions. shares and equity investments in associates.

In the financial year ended 31 December 2010, the Group’s invest- 5.11. The Bank’s History and Development ments amounted to DKK 592 million, of which DKK 415 million was attributable to equipment used for leasing, DKK 77 million was at- See “Part I–Description of the Bank–Business and Markets”. tributable to other plant and equipment, DKK 0 to intangible assets and DKK 100 million to shares and equity investments in associates. The financial business, which is now Spar Nord Bank A/S was founded in 1824 as Aalborg Bys og Omegns Sparekasse. In 1967, In the financial year ended 31 December 2009, the Group’s invest- the savings bank merged with Landbosparekassen, and the name ments amounted to DKK 473 million, of which DKK 279 million was was changed to Sparekassen Nordjylland. In the following decades, attributable to equipment used for leasing, DKK 61 million was a large number of local savings banks in the North Jutland region attributable to plant and equipment, DKK 2 million to intangible merged with Sparekassen Nordjylland. In 1989, the savings bank assets and DKK 131 million to shares and equity investments in was converted into a public limited company and the accumulated associates. reserves were separated into a fund. Due to the sale of Finans Nord Easyfleet A/S and the transfer of the In the 1990s, Sparekassen Nordjylland took over Himmerlands- forward-looking activities of Spar Nord Leasing A/S to the Jyske banken and Aars Bank, among other acquisitions, and in 2000 its Bank Group, the Group’s investments in property, plant and equip- name was changed to Spar Nord Bank A/S. ment in the years ahead are expected to be significantly lower than in the years 2009-2011. Over the past ten years, the Bank has worked to strengthen its position in the Danish market for financial products and services The Group has no substantial ongoing investments and currently by setting up and acquiring branches in major cities outside its tra- has not planned any substantial future investments apart from ditional core area, North Jutland. A total of 27 branches have been investments in ordinary operations and maintenance.

38 PART I – 5. Bank Information Prospectus – Spar Nord Bank 6. Business and Market

This business review contains a number of observations, judgments Certain information about the Group’s business segments for 2011 and estimates, especially in relation to market sizes, market share can be found in the table below. and market trends, which are based on Management’s estimates and publicly available information. Management’s estimates are generally based on the Group’s knowledge of the market and various external Table 6 – Certain Information about the Group’s Business Segments research and industry reports. External sources were used only to a for 2011 limited extent in the preparation of this business review. However, there can be no assurance that other sources may not express a different opinion of the market, etc. than the one on which Management has Profit/loss based its views. The information regarding market conditions is based (DKKm) Total assets before tax on Management’s estimates. The forward-looking estimates are subject to substantial uncertainty. Spar Nord’s Local Banks 38,291.7 231.1

Trading, Financial Markets and 6.1. Business International Division 20,287.2 188.2

Introduction Other Areas 3,718.4 -116.6 Founded in Aalborg, Denmark in 1824, the Bank has historically Spar Nord Leasing A/S been rooted in northern Jutland, and it continues to have a sig- (Discontinuing Activities) 7,784.1 42.2 nificant market share in this region. During the period from 2002 Total 70,081.4 344.9 to 2010, the Bank opened or acquired a total of 27 local branches outside the North Jutland region, and today it is present in most major Danish cities. See “Part I—Description of the Bank—Operating and Financial Review” for more information about the financial years ended 31 The Group provides a wide range of financial services, advisory ser- December 2010 and 2009. vices and products, either in-house or through business partners. The Group’s main business focus is on retail customers as well as Vision, Mission and Values small and medium-sized businesses in local areas where the Group Corporate Vision has a presence. The Bank’s corporate vision is as follows: “By giving our local banks a significant amount of local autonomy, we intend to create The Group comprises the business segments Spar Nord’s Local Denmark’s most attractive banking chain. For the benefit of our Banks; Trading, Financial Markets & the International Division; and customers, employees and shareholders.” Spar Nord Leasing A/S, of which the latter has been classified as Discontinuing Activities since 1 October 2011. In addition, it has a In the vision, “local autonomy” refers to the Group’s decentralised number of staff and support departments based at the Aalborg head organisation and the extensive degree of local self-determination. office as well as the business segments Unallocated, Eliminations Spar Nord’s Local Banks operate as a chain of individual businesses and Earnings from investment portfolios, which are described under each with extensive decision-making powers in areas such as cus- Other business areas in ”Part I—Description of the Bank—Operating tomer service, market canvassing, physical locations and employee and Financial Review”. relations. In addition, Spar Nord’s Local Banks work with the other earnings-generating units to define requirements for development Spar Nord’s Local Banks consists of the banking activities of the initiatives in the support functions. Local decision-making powers Group’s 69 Danish branches, through which the Group serves retail are limited only in respect of credit-granting. and business customers and provides banking services such as loans and credit facilities, credit and debit cards as well as a broad “Denmark’s...” indicates that the Bank’s geographical focal area range of savings, non-life insurance, life insurance and pension covers all of Denmark. Since 2002, the Group has pursued a strate- savings products. According to the most current data available, Spar gic goal of building nationwide coverage by opening new local banks Nord’s Local Banks had market share of 3.3% measured on loans in major cities outside the North Jutland region. During the period and advances and 3.7% measured on deposits at 30 September 2002 to 2010, the Bank opened or acquired 27 local branches. 2011. Over the coming years, the Bank will consider any minor acquisition opportunities for banking activities that would be strategically Trading, Financial Markets & the International Division consists of attractive to the Bank. Especially acquisition of activities in those Markets, Bonds, Shares, the Interest and Forex Division, Asset Man- areas outside the North Jutland region in which the Bank has set agement and the International Division. This business area serves up business during the past ten years, and in which it still has unu- the Group’s own retail and business customers and institutional tilised capacity, would be of interest to the Bank, provided that the clients and is a provider of wholesale services (forex and securities- assets are of high quality and of a scope that allows for integration related transactions, trade finance services and clearing services) with the existing business. to small and medium-sized banks. “Banking chain” signals that the Bank is precisely a chain of indi- Spar Nord Leasing A/S is a finance company offering leasing services vidual businesses operating under a shared general structure and in Denmark and Sweden (through the subsidiary SN Finans Nord with competent centralised functions. In addition, the chain concept AB). The company mainly provides financing for vehicles and is suggests an association with the retail trade, which is a field the focused on the core business areas of transport, agriculture and Bank is very willing to look to for inspiration in respect of customer contracting. Since 1 October 2011, the company has been catego- service and in-branch experiences. rised as Discontinuing Activities, as an agreement has been made with the Jyske Bank group for the transfer of its forward-looking Finally, the wording “...the most attractive banking chain...For the activities in Denmark and the remaining activities will be phased out benefit of our customers, employees and shareholders” refers to as the leases expire. the Bank’s objective of ranking among the best of its peers in terms of customer satisfaction and customer inflow, employee satisfac-

Spar Nord Bank – Prospectus PART I – 6. Business and Market 39 tion and performance as well as return on equity and share price In addition, the intention is for the work and efforts involved in TIME performance. FOR CUSTOMERS to result in enhancements in areas where the Bank may previously have had less satisfactory results, including Customer Mission cost efficiency and average business volume per customer. The Bank’s customer mission statement is as follows: “Together we create financial freedom”. For the period 2011–2013, three specific strategic focal areas have been defined, each defining three strategic goals. In an explanatory addition to the customer mission statement, the Bank explains that financial freedom is created through “individual so- Under the heading “More customers – more business”, the Bank lutions based on competent advisory services and local involvement”. aims to attract 10,000 new retail customers and 1,000 new business customers per year, increase average business volumes (deposits The wording indicates that the most important goal for the Group as well as loans, advances and guarantees) per customer by 5% per and its employees is to provide competent and timely advice in order year and bring the Group’s specialist skills, including particularly in to contribute to creating financial headroom and security in the day- the remit of Trading, Financial Markets and the International Divi- to-day settings of its retail and business customers. sion, even more into play.

In other words, the Bank emphasises personal and attentive advi- Under the heading “Stronger focus – stronger chain”, the Bank has sory services, and the Group’s goal in any customer relationship is defined a goal for customer advisers to devote at least 55% of their to compose an advisory and product offering tailored specifically to time to customers and for 10,000 hours of development time to be the needs of each individual customer. spent each year to enhance customer service. Finally, a goal has been defined that employee satisfaction should be enhanced further Combined, the corporate vision and the customer mission statement over the coming years. represent the Bank’s ambition of combining proximity and commitment from a small local bank with the strength, level of professional Under the heading “Better bottom line – better bank”, the Bank skill and support organisation of a large, nation-wide bank. maintains a long-term goal of improving its Cost/Income Ratio to 55 and to keep the impairment ratio in the top third of a defined group Corporate Values of Danish peer banks. Finally, a goal has been defined for the Bank The Bank’s three core values are to be down-to-earth, ambitious to create the basis for repaying Hybrid Core Capital to the Dan- and actively involved. ish State over the coming years. For additional information about repayment of Hybrid Core Capital, see “Part I—Description of the The first value, being down-to-earth, has formed part of the Group’s Bank—Capital resources”. values for many years. In other words, an informal tone has always been a characteristic of the Bank in a setting where the employees Customer Focus and Exposure engage on an even level with the customers and with each other. For its retail customers, the Bank gives priority to full-service cus- The Group strives to preserve this informal atmosphere. tomers in the sense that for financially sound customers the Bank aims to be a banker to the entire family and cater to the full range The “ambitious” value is well in line with the vision of becoming of a family’s banking needs. In day-to-day operations, the Group is Denmark’s most attractive banking chain for the customers, the focused on retaining existing full-service customers, turn existing employees and the shareholders. Specifically, it implies that the part-service customers into full-service customers and attract new Bank will work continuously to develop business concepts, products customers with a good, strong banking potential. and the skills of its employees. For its business customers, the Bank is focused on small and me- The Bank wants to be actively involved and close to the customers in dium-sized businesses in those local areas where the Bank has a a dual sense. Physically present, meaning the nearest local bank is presence. In other words, it is very much a question of the structure never far away because the Group is involved in the local community of a local business community and the local focus that determines and engages with customers individually. Mentally present, mean- the distribution of branches in the individual banking areas. ing engaging with customers and always being able to provide an individually tailored solution. The following table sets forth the geographical distribution of business volumes, earnings, customers and employees for Spar Nord’s Strategy plan: TIME FOR CUSTOMERS Local Banks. The strategy plan TIME FOR CUSTOMERS indicates the Bank’s strategic direction for 2011–2013. The strategy plan continues where the Group left off in its the geographical expansion during the period Table 7 – Spar Nord’s Local Banks, Geographical Distribution in 2011 from 2002 to 2010, spotlighting growth in number of customers, business volume and earnings. North Jutland Outside North The intention behind TIME FOR CUSTOMERS is to consolidate the Percentage distribution region Jutland Group’s approach to banking operations of combining a local pres- Business volume 69 31 ence, local commitment and local decision-making powers with centralised units offering strong, specialist skills. Core earnings before impairment 77 23 Customers 69 31 In terms of its markets, the Bank aims to retain the Group’s strong Employees 63 37 market position and large market share in the core region of northern Jutland and to exploit the growth potential created through recent years’ investments to expand its distribution power. Finally, the Group’s goal is to maintain a high level of credit quality.

40 PART I – 6. Business and Market Prospectus – Spar Nord Bank Table 8 – Spar Nord’s Local Banks, Geographical Distribution in 2010 Distribution The 69 local bank branches throughout Denmark constitute the backbone of the Bank’s distribution network. The Bank gives very North Jutland Outside North high priority to the personalised advisory services provided in the Percentage distribution region Jutland physical branches and considers self-service solutions such as online banking and mobile platforms to be a supplementary factor. Business volume 71 29 Core earnings before impairment 80 20 Trading, Financial Markets & the International Division serves Customers 71 29 customers from the Bank’s local branch network as well as large Employees 62 38 retail customers and institutional clients in the field of shares, bonds, fixed income/forex, asset management and international transactions. In addition, a substantial proportion of the activities in the Trading, Financial Markets & International Division derives from the Bank’s position as a wholesale bank to small and medium-sized Table 9 – Spar Nord’s Local Banks, Geographical Distribution in 2009 banks all over Denmark. For example, the Bank performs investment and forex transactions as well as international transactions for 67 banks. North Jutland Outside North Percentage distribution region Jutland In its continuing activities, the Group had, at 31 December 2011, approximately 252,000 customers, distributed on approximately Business volume 73 27 231,000 retail customers and approximately 21,000 business cu Core earnings before impairment 80 20 stomers. Customers 73 27 Employees 65 35 Business Partners The Group aims to offer its customers financial solutions, products and advisory services in all relevant areas, and in many of these areas the business has been outsourced to external providers and The following table sets forth the Group’s loans, advances and business partners. guarantees by industry. In terms of IT, the Bank, along with a large number of other Scan- dinavian banks, is a co-owner of the SDC data-processing centre. Table 10 – The Group’s Loans, Advances and Guarantees by Industry In forming part of the SDC collaboration, the Bank participates in for 2011, 2010 and 2009 and contributes to shared operations and development and, in some areas, the Bank shares solutions, in full or in part, with other banks. The collaboration, and the fact that the Bank is among its largest Loans, advances and guarantees players, also means that the Bank is well positioned to act as a (DKKm) 2011 2010 2009 wholesale bank to other banks working on the same platform.

Industry Some of the most important business partners in the various prod- Public authorities 1,744.9 1,044.9 650.9 uct and advisory service areas include: Agriculture, hunting, forestry and fisheries 5,414.6 5,645.1 5,922.4 Totalkredit/Nykredit (Mortgage-Credit Institution) Totalkredit is a member of the Nykredit group. The Nykredit group Industry and raw materials is the Group’s most important strategic business partner in terms of extraction 1,634.2 1,739.7 1,895.9 business volume and earnings. The business cooperation, estab- Energy supply 1,716.7 1,398.8 1,204.2 lished in 2003, chiefly involves arranging mortgage loans to retail Building and construction 2,185.6 2,279.9 2,009.3 and business customers through Totalkredit. At 31 December 2011, Totalkredit had total mortgage lending of DKK 480 billion, of which Trade 3,745.6 3,864.3 3,506.0 the Group had facilitated DKK 35.7 billion. Transport, hotels and restaurants 2,814.1 3,032.8 3,199.2 DLR Kredit (Mortgage-Credit Institution) Information and DLR Kredit provides mortgage lending to agricultural and other communication 182.8 83.8 105.2 business customers. DLR Kredit is owned by a large number of Financing and insurance 2,380.2 3,651.1 2,072.0 regional and local banks. At 31 December 2011, DLR Kredit had total mortgage lending of DKK 133 billion, of which the Group had Real property 4,923.7 4,925.3 5,021.4 facilitated DKK 5.6 billion. Other industries 2,868.5 3,080.8 3,351.0 Total business customers 29,610.9 30,746.5 28,937.5 BankInvest (Investment Fund) BankInvest manages investment funds and had DKK 83 billion un- Total retail customers 14,071.7 15,370.0 16,712.8 der management at 31 December 2011. At 31 December 2011, the Total 43,682.6 46,116.5 45,650.3 Group’s customers had DKK 6.1 billion placed in investment funds managed by the BankInvest group. See “Part I–Description of the Bank–Operating and Financial Review” for more information about the financial years ended 31 ValueInvest (Investment Fund) December 2011, 2010 and 2009. ValueInvest is a member-owned investment association specialising in so-called value equity investments. In this context, value equities are taken to mean equities whose current market value is lower than the company’s true value, as assessed by ValueInvest. At 31

Spar Nord Bank – Prospectus PART I – 6. Business and Market 41 December 2011, the Group had acted as an intermediary in the sale First of all, the market is dominated by the two international finan- of units from ValueInvest amounting to DKK 1.1 billion. cial groups Danske Bank and Nordea. Next, there are a number of banks that more or less provide full market coverage. These are Privatsikring (Non-life Insurance) Jyske Bank, Sydbank, the Bank, Nykredit Bank, Vestjysk Bank and Privatsikring is a subsidiary of the Codan group distributing a full Arbejdernes Landsbank. The rest of the Danish banking market range of non-life insurance products in Denmark though local and consists of a large number of small local banks and savings banks. regional banks. Accordingly, the Group competes with large nation-wide and inter- letpension (Life Insurance and Pension Product Provider) national financial groups as well as small local and regional banks. letpension is owned by a large number of local and regional Danish banks. letpension is a provider of life insurance and pension pro As for the latter group, competition mainly involves building as ducts. many local ties and as strong a commitment to the local community as possible, while for the former group, attractive products and Nets (Payment Services) pricing are the most important factors. For both of these competitor Nets is owned by Danmarks Nationalbank and a number of Danish groups, it is extremely important to provide a high level of quality in and Norwegian banks and provides debit card, payment solution personalised advisory services, which requires, among other things, and information exchange services, including Betalingsservice employees with strong professional skills and strong personal rela- (automated payment services) and eBoks. tions with retail and business customers.

Credit Ratings Since 2009, the Danish banking sector has experienced negative At the Prospectus Date, the Bank’s long-term debt had been as- growth in its overall lending and business volume. Accordingly, signed a Baa2 rating by Moody’s. On 16 February 2012, Moody’s winning market share in order to maintain or increase earnings has announced that it had placed the Bank under review for a possible been essential. In that respect, the Group has remained focused on downgrade together with a large number of other Danish banks and exploiting the growth potential it has created by opening or acquir- more than 100 banks in other European countries. As a result, there ing 27 local branches during the period from 2002 to 2010. is a risk that the Bank’s long-term debt may be downgraded by up to three notches to Ba2. Denmark As a financial business, the Group is highly dependent on the overall Supervisory Diamond economic trends in Denmark and thus also on developments in the In 2010, the DFSA launched a new test model, the “Supervisory international economy. During periods of economic boom, banks Diamond”, which assesses, from the end of 2012, the strength and generally experience growing profits, in part as a result of higher risk exposure of banks according to five parameters, each with its lending and deposit volumes, lower loan default rates and higher own limit value. Combined, the five parameters illustrate whether collateral values, while the opposite applies in periods of economic Danish banks are operated at a reasonable risk and whether an downturn. individual bank has adequate financial strength. The tables below show developments in certain economic indicators At 31 December 2011, the Bank was comfortably in compliance with for Denmark for the years 2011, 2010 and 2009. all limit values.

Table 11 – Percentage Changes in Certain Economic Indicators for Figure 1 – supervisory diamond Denmark

Sum of large exposures < 125% Lending growth < 20% Financial year SPAR NORD: 0.0% SPAR NORD: -3.8% (%) 2011 2010 2009

GDP 1.0 1.3 -5.2 Consumer spending -0.7 1.9 -4.5

Stable funding < 1.00 Property exposure < 25% Housing investments 9.7 -7.4 -16.9 SPAR NORD: 0.76% SPAR NORD: 11.7% Corporate investments -5.0 -4.4 -15.9 Investment in inventories 0.4 1.0 -2.0 Excess liquidity coverage > 50% Exports 7.3 3.2 -9.7 SPAR NORD: 166.3% Imports 6.1 3.5 -12.5

Source: Danmarks Nationalbank See “Part I—Description of the Bank—The Danish Banking System and Regulation—Regulatory Initiatives to Secure Financial Stabil- ity”.

6.2. Market

The number of banks and savings banks operating in Denmark is relatively large compared with other European countries, even with the industry consolidation that has been ongoing for the past two decades.

42 PART I – 6. Business and Market Prospectus – Spar Nord Bank Table 12 – Certain Other Economic Indicators for Denmark In 2010, business trends improved in Denmark, fuelled by tax concessions and major advances in the country’s important export markets, Sweden and Germany. After a combined production output Financial year loss (GDP) of 8% following in the wake of the financial crisis, GDP 2011 2010 2009 climbed 2% in 2010. Unemployment, which rose sharply throughout 2009, stabilised at around 4.2% in 2010. Consumer prices, percentage change 2.7 2.2 1.1 After a positive opening to 2011, rising commodity prices, the debt Unemployment, net, per crisis in southern Europe and declining industry and consumer 1,000 capita 110 114 98 confidence, economic growth again turned sluggish. For the year Public sector budget balance overall, GDP grew by 1% and the net unemployment figure fell from in % of GDP -3.8 -2.7 -2.8 114,000 at 31 December 2010 to 110,000 at 31 December 2011.

Current account in % of GDP 6.6 5.5 3.6 At the end of 2011, a number of agreements were concluded at EU level with a view to tackling the debt crisis in certain eurozone Source: Danmarks Nationalbank countries and securing financial stability. However, growth forecasts As a result of the global financial crisis, the Danish economy suf- from the IMF as well as the OECD and the EU predict a continuation fered a severe economic downturn in 2009. In particular, in the of weak growth in the international economy in 2012, which is also first six months of 2009, Denmark suffered a substantial decline in reflected in the growth forecasts issued for the Danish economy. industrial output, rising unemployment, falling property prices and Danmarks Nationalbank predicts 1.1% growth in Danish GDP for declining GDP. Apart from a slight improvement in GDP, this trend 2012 and an increase in net unemployment to 119,000 at 31 Decem- continued in the second half of 2009, albeit with abating strength. ber 2012.

Spar Nord Bank – Prospectus PART I – 6. Business and Market 43 7. Organisational Structure

7.1. the Bank’s Organisational Structure 7.2. principal Subsidiaries

Spar Nord Bank A/S is the parent company of the Group, which The following table shows a list of the Group’s principal subsidiar- comprises the Bank and its subsidiaries. ies owned by the Group as at the Prospectus Date, and states the ownership interest. The Group’s share of the capital corresponds to The Bank’s organisational structure is shown below. its share of votes in all companies listed below.

Figure 2 – the Bank’s Organisational Structure Table 13 – Principal Subsidiaries

Country Owner- executive board Registered of incor- ship Name office poration interest

Consolidated subsidiaries Management Finance & Legal Credit Rating Chain Office Secretariat Accounts Department Erhvervsinvest Nord A/S Aalborg Denmark 100% Spar Nord Ejendomsselskab A/S Aalborg Denmark 100%

trading, financial corporate Spar Nord Leasing A/S Aalborg Denmark 100% Spar nord’s markets & the inter- coordination local banks national division & support SN Finans Nord AB Malmö Sweden 100% Finans Nord Cross Border A/S Aalborg Denmark 100%

33 bank regions Share Investment Back Office

69 local banks Bonds Business Development 7.3. Associates

The Bank has equity investments in a number of associates, of Asset Management HR Department which Nørresundby Bank A/S is the most important.

The Bank owns 50.2% of Nørresundby Bank A/S, which generated Markets IT Department a profit of DKK 40.8 million in the financial year ended 31 Decem- ber 2011 and a paid dividends of a total of DKK 9.2 million. Due to restrictions on voting rights included in the articles of association of Interest and Spar Nord Direct Forex Products Nørresundby Bank A/S, the Bank does not have a controlling interest in Nørresundby Bank A/S’ business, but includes Nørresundby Bank A/S as an associate in the financial statements. International Division Spar Nord Production Other associates include: JSNA Holding A/S, Core Property Man- agement A/S, Erhvervsinvest K/S, Valueinvest Asset Management S.A., Fjerritslev Gruppen ApS, Høgsberg Assurance Service A/S and Nørager Industrihuse I/S.

44 PART I – 7. Organisational Structure Prospectus – Spar Nord Bank 8. Property, Plant and Equipment

Property, Plant and Equipment 8.1. Facilities

Owned Properties Table 14 – Carrying Amounts of Property, Plant and Equipment as at The Group’s portfolio of owned properties generally includes cor- 31 December 2011 porate properties with prime locations in major cities in Denmark, including the Group’s headquarters located at Skelagervej 15, DK- (DKKm) 9000 Aalborg, Denmark. To this should be added a number of other commercial and residential properties. In the Group’s portfolio of Land and buildings, total 505 owned properties, properties constructed by the Group are included. Investment properties 48 Properties constructed by the Group located in Odense and Nyborg have been divested to the subsidiary Spar Nord Ejendomsselskab Corporate properties 457 A/S. The Group owns a total site area of 154,891 sqm. The Group’s Other property, plant and equipment 631 owned site area comprises buildings with a floor area of 66,371 sqm Operating lease assets 404 distributed on 56 business locations. As at 31 December 2011, the Group’s land and properties had a total carrying amount of DKK Other property, plant and equipment 227 505.1, equivalent to 1% of the Group’s total balance sheet. Total 1,136

No significant easements affect the Group’s properties. 8.2. Insurance The Group is not planning any substantial investments in property, plant and equipment. Management believes that the companies of the Group have taken out insurance that is customary for the line of business in which Leased Land and Buildings they operate and at an adequate level. In addition to the portfolio of leased corporate properties, the Group has a significant number of leases at its disposal in the cities in which the Group operates. Consequently, the Group has leased 8.3. environmental Issues premises at a total of 33 leased locations with a total floor area of 18,788 sqm and 16 ATM leases. Leases are usually signed for a Management believes that there are no significant environmental longer period of time with a non-terminability period, after which issues that could affect the use of the Group’s properties or other the leases may usually be terminated by giving up to 12 months property, plant and equipment. notice.

In 2011, total rent for the Group’s leases amounted to DKK 23.8 million exclusive of VAT.

Spar Nord Bank – Prospectus PART I – 8. Property, Plant and Equipment 45 9. Operating and Financial Review

According to the financial reporting rules, balance sheet items 9.1. fInancial Position should not be separated out and comparative figures should not be restated. In order to clarify the development in loans and advances The following selected consolidated financial information for the between banking and leasing activities, however, it has been decided financial years ended 31 December 2011, 2010 and 2009 has been to divide the Group’s loans and advances into the three categories extracted from the management’s review in the annual report for “banking activities”, “reverse transactions”, and “leasing activi- 2011. ties”. Comparative figures have been restated and included in the management’s review in the 2011 annual report. The financial information contained in the management’s review for 2011 has been extracted from the audited consolidated financial Cash flow information regarding Spar Nord Leasing A/S is provided statements for the financial years ended 31 December 2011, 2010 in the separate note on Discontinuing Activities in the 2011 annual and 2009 and restated to reflect the below-mentioned reclassifi- report. cation of Spar Nord Leasing A/S to Discontinuing Activities. The consolidated financial statements have been audited by KPMG Review of reclassifications Statsautoriseret Revisionspartnerselskab, independent auditors of The mentioned reclassification of Spar Nord Leasing A/S to Discon- the Bank, and have been prepared in accordance with International tinuing Activities has given rise to the following adjustments relative Financial Reporting Standards (“IFRS”) as adopted by the European to the official annual reports for 2009 and 2010. Union (“EU”). • Spar Nord Leasing A/S’ proportionate share of the Group’s The income statement information is based on the performance contribution to sector-targeted solutions was in 2009 and 2010 indicators and financial ratios (statement of core earnings) used by settled through the liquidity premium that Spar Nord Leasing A/S the Group when presenting earnings in the management’s review in paid to the Group and was thus recognised as interest expense in the 2011 annual report. Spar Nord Leasing A/S’ financial statements. In the consolidated financial statements, and accordingly in the note “Business Seg- The Group’s performance indicators deviate from the consolidated ments”, contributions to sector-targeted solutions are stated as financial statements presented in accordance with IFRS as adopted a separate line item. Consequently, DKK 24.6 million for 2009 and by the EU due to additional specifications and reclassification of DKK 18.8 million for 2010 has been reclassified from “Contribu- the Group’s contribution to sector-targeted solutions, return on the tions to sector-targeted solutions” to “Net interest income”. Group’s earnings from investment portfolios and presentation of tax on Discontinuing Activities. See also note disclosures (the note • Spar Nord Leasing A/S’ financial statement figures, presented “Business Segments”) in the annual report for 2011. in the annual reports for 2009 and 2010 in the note “Business Segments”, include for Spar Nord Leasing A/S payment of an Spar Nord Leasing A/S Presented under Discontinuing Activities intra-group liquidity premium recognised according to the same The Bank’s subsidiary, Spar Nord Leasing A/S (formerly Finans principles as apply to the Group’s other earnings entities. As a Nord A/S) on 22 September 2011 entered into an agreement to consequence of the reclassification to Discontinuing Activities, transfer certain assets and liabilities to the Jyske Bank Group. The this liquidity premium has been adjusted, positively affecting net agreement became effective at 1 October 2011. interest income in Spar Nord Leasing A/S by DKK 2.1 million in 2009 and by DKK 1.4 million in 2010. Under the rules governing accounting for discontinuing activities, the profit/loss of discontinuing activities should be presented as • Before the reclassification, the Group’s tax was presented in a separate line item, and the comparative figures in the income a single line in the income statement below the Group’s (i.e. statement should be restated. Accordingly, the individual income the sum of all business segments’) profit/loss before tax, and statement items for 2010 and 2009 have been reclassified to the Spar Nord Leasing A/S’ tax is therefore not shown in the note effect that the share of the individual consolidated income state- “Business Segments”. The share of the Group’s tax attributable ment items relating to Spar Nord Leasing A/S have been moved to to Spar Nord Leasing A/S is shown in the audited consolidated the item “Profit/loss of Discontinuing Activities”. The reclassification financial statements of Spar Nord Leasing A/S, and the adjust- was made on the basis of the official annual reports for 2010 and ment is therefore based on the tax amount stated therein. 2009 – the income statement and the note “Business Segments” respectively – and the audited annual reports of Spar Nord Leasing To enable the readers of this Prospectus to retrace the connection A/S. to the official annual reports, a detailed specification is presented below of the effects of the reclassification on the individual line items in 2009 and 2010.

46 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Table 15 – Effects of the Reclassification on Individual Line Items in 2010

2010 acc. SN Leasing SN Leasing SN Leasing 2010 acc. to annual segment reclassi- Discontinuing to annual (DKKm) report 2011 note 2 fication Activities report

Income statement Net interest income 1,438.3 189.8 -20.2 169.6 1,607.9 Net income from fees, charges and commissions 498.5 7.1 0.0 7.1 505.6 Market-value adjustments and dividends 270.2 -1.8 -0.1 -1.9 268.3 Other operating income 34.1 98.3 0.1 98.4 132.5 Profit/loss on equity investments in associates and group enterprises 61.0 0.0 0.0 0.0 61.0 Core income 2,302.1 293.4 -20.2 273.2 2,575.3 Salaries 875.5 72.7 0.0 72.7 948.2 Operating expenses 529.4 39.5 0.0 39.5 568.9 Depreciation, amortisation and impairment 63.7 61.5 0.0 61.5 125.2 Costs 1,468.6 173.7 0.0 173.7 1,642.3 Core earnings before impairment 833.5 119.7 -20.2 99.5 933.0 Impairment of loans, advances and receivables, etc. 356.3 97.3 0.0 97.3 453.6 Core earnings 477.2 22.4 -20.2 2.2 479.4 Earnings from investment portfolios -22.2 0.0 0.0 0.0 -22.2 Profit/loss on ordinary operations 455.0 22.4 -20.2 2.2 457.2 Contributions to sector-targeted solutions -324.2 -18.8 18.8 0.0 -324.2 Profit/loss on continuing activities before tax 130.8 3.6 -1.4 2.2 133.0 Spar Nord Leasing A/S (Discontinuing Activities) 2.2 0.0 -2.2 -2.2 0.0 Profit/loss before tax 133.0 3.6 -3.6 0.0 133.0 Tax on continuing activities 27.1 - - 0.9 28.0 Tax on Discontinuing Activities 0.9 - - -0.9 0.0 Profit/loss 105.0 - - 0.0 105.0

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 47 Table 16 – Effects of the Reclassification on Individual Line Items in 2009

2009 acc. SN Leasing SN Leasing SN Leasing 2009 acc. to annual segment reclassi- Discontinuing to annual (DKKm) report 2011 note 2 fication Activities report

Income statement Net interest income 1,611.5 182.9 -26.7 156.2 1,767.7 Net income from fees, charges and commissions 410.1 6.7 0.0 6.7 416.8 Market-value adjustments and dividends 300.2 3.9 -0.1 3.8 304.0 Other operating income 30.8 68.9 0.1 69.0 99.8 Profit/loss on equity investments in associates and group enterprises 35.9 0.0 0.0 0.0 35.9 Core income 2,388.5 262.4 -26.7 235.7 2,624.2 Salaries 845.1 70.3 0.0 70.3 915.4 Operating expenses 559.8 34.7 0.0 34.7 594.5 Depreciation, amortisation and impairment 68.9 42.6 0.0 42.6 111.5 Costs 1,473.8 147.6 0.0 147.6 1,621.4 Core earnings before impairment 914.7 114.8 -26.7 88.1 1,002.8 Impairment of loans, advances and receivables, etc. 467.6 116.4 0.0 116.4 584.0 Core earnings 447.1 -1.6 -26.7 -28.3 418.8 Earnings from investment portfolios 17.1 0.0 0.0 0.0 17.1 Profit/loss on ordinary operations 464.2 -1.6 -26.7 -28.3 435.9 Contributions to sector-targeted solutions -291.2 -24.6 24.6 0.0 -291.2 Profit/loss on continuing activities before tax 173.0 -26.2 -2.1 -28.3 144.7 Spar Nord Leasing A/S (Discontinuing Activities) -28.3 0.0 28.3 28.3 0.0 Profit/loss before tax 144.7 -26.2 26.2 0.0 144.7 Tax on continuing activities 33.9 - - -6.7 27.2 Tax on Discontinuing Activities -6.7 - - 6.7 0.0 Profit/loss 117.5 - - 0.0 117.5

48 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank As the Group earns interest on loans and advances and other assets 9.2. operating and Financial Review and pays interest to its depositors and other creditors, the Group’s results of operations are highly dependent on the Group’s net inter- The following review is based on the restated performance indica- est income. Net interest income accounted for 68% of the Group’s tors and financial ratios, presented on pp. 51-63. total core income in 2011, 62% in 2010 and 67% in 2009. The Group’s net interest margin, which is the difference between the yield on its interest-bearing assets and the cost of its interest-bearing liabili- 9.3. primary Factors Affecting the Group’s ties, varies according to prevailing interest rates and is a significant Results of Operations factor in determining the profitability of the Group. Interest rate drops and the narrowing interest rate spread could cause a decline The Group’s business, results of operations and financial position in the Group’s net interest income and its net interest margin. have been affected, and may continue to be affected, by various factors, the most significant of which are described below. The impact The Group’s net interest income is driven by a combination of lend- of these and other potential factors may vary significantly in the ing and deposit volumes and margins. The deposit margin is gener- future. ally more sensitive to rising interest rates than the lending margin as the interest rate payable on customer deposits in a period of low Macroeconomic Environment interest rates approaches the minimum level of zero, limiting the The Group derives a substantial part of its income from its opera- possibility of controlling deposit margins. tions in Denmark. Accordingly, the Group’s business, results of ope rations and financial position primarily depend upon the economic The Group’s net interest income rose by 2% in 2011 as the Group conditions in Denmark, in particular economic growth and the managed to widen lending margins, which more than offset the general level of interest rates. higher funding costs. In 2010, net interest income was down 9% as a result of lower interest income from the Bank’s bond portfolio and The period from 2008 to 2011 was characterised by a difficult higher interest expenses on Hybrid Core Capital, senior loans and macroeconomic environment, with financial markets throughout the issued bonds. western world experiencing tremendous turbulence and volatility. This great degree of uncertainty resulted in generally increasingly Impairment of loans and advances difficult business conditions, major drops in share prices, stagnat- The Group’s core earnings are materially affected by the credit qua ing or declining property prices, significantly wider credit spreads, lity of retail and business customers and, thus, the level of impair- frozen interbank and money markets and stalling economic growth. ment of loans and advances. The Group’s impairment of loans and advances amounted to DKK 404 million, DKK 356 million and DKK The financial market unrest and general economic slump had a 468 million in 2011, 2010 and 2009, respectively. While the Group’s negative impact on the Group’s operating profits in the years ended impairment losses in 2011 and 2010 were down on 2009, the level 31 December 2009, 2010 and 2011. The Group’s earnings and profit- was nonetheless high relative to the Group’s historical levels. ability were weakened by declining demand for its products and services, increased funding costs, contributions to sector-targeted In 2011, 2010 and 2009, impairment losses predominantly related to solutions, fluctuating fair values of financial instruments and in- business customers. In the business segment, the main contribu- creased loan impairment losses. tors to the high level of impairment were agricultural customers, as well as customers in the property, trade and transport industries. Interest Rates and Interest Margin In reaction to the economic recession, the European Central Bank The following table illustrates impairment losses on retail custom- and Danmarks Nationalbank have since 2008 made a series of ers and business customers for the years 2009-2011. interest rate cuts. In 2010 and 2011, interest rates remained at a very low level. Table 18 – Impairment Losses on Retail and Business Customers The following table shows the average three-month interbank rate in Denmark and in the eurozone for 2011, 2010 and 2009. Financial year (DKKm) 2011 2010 2009 Table 17 – Average Three-Month Interbank Rate in Denmark and the Eurozone Retail customers 65 57 96 Business customers 339 299 372

Financial year Impairment losses are stated exclusive of Spar Nord Leasing A/S (%) 2011 2010 2009

Denmark 1.38 1.25 2.48 Contributions to Sector-targeted Solutions Eurozone 1.39 0.81 1.22 As a result of the financial market unrest, the Danish parliament in 2008 passed the Financial Stability Act (Bank Package I), among Source: EcoWin AB other things introducing a general guarantee scheme under which the Danish State guaranteed unsubordinated creditors’ claims against Danish banks if such claims were not otherwise covered. The current account rate and the rate of interest on the Group’s demand accounts with Danmarks Nationalbank was 0.25% at 31 The Group participated in Bank Package I and, when it expired, the December 2011, against 0.60% at 31 December 2010 and 0.85% at Group’s payment of annual guarantee commission of DKK 177 mil- 31 December 2009. lion and the guarantee against losses on distressed banks ceased. On expiry of Bank Package I, two new bills called Bank Package III and Bank Package IV were introduced, which will be deployed to

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 49 secure depositors and financial stability in the event of future bank Impairment of loans and advances failures. See “Part I—Description of the Bank—The Danish Banking Testing for impairment of individual loans and advances requires System and Regulation—Regulatory Initiatives to Secure Financial estimates of factors subject to great uncertainty. The test involves Stability” for a more detailed review of statutory and regulatory estimates of the most probable future cash flows that the customer initiatives. can generate.

In 2010 and 2011, the Group incurred total expenses of DKK 76 mil- Loans for which there is no objective indication of impairment lion in relation to the Guarantee Fund’s deposit guarantee scheme. are included in a group that is subjected to impairment testing at portfolio level. The Group has incurred significant expenses for sector-targeted solutions, which have impacted the Group’s business, results of In connection with testing a group of loans and advances for impair- operations and financial position. If the number of Danish financial ment, it is essential to identify the events that give an objective businesses encountering serious difficulties remains high and the indication of losses on the group. The assessment of the present Group’s contributions to Deposit Guarantee Schemes thus remain at value of cash flows generated by customers in the group is subject a high level or increase, this may have a continued negative impact to uncertainty when historical data and empirical assessments are on the Group’s business, results of operations and financial posi- used to adjust the assumptions based on historical data and for the tion. purpose of reflecting the current situation.

Loans and advances are assigned to groups having uniform credit 9.4. bUsiness Segments risk properties using the Bank’s score model. Customers are subjected to ongoing scoring, and if calculations show that customers’ The Group comprises the business segments Spar Nord’s Local credit risk properties have changed, they will be transferred to new Banks; Trading, Financial Markets & the International Division and score classes on an ongoing basis. Thus the downgrading of a cus- Spar Nord Leasing A/S, of which the latter was classified to Dis- tomer to a weaker group serves as an indicator of the deterioration. continuing Activities as at 1 October 2011. In addition, Other areas comprises the organisational entities of Corporate Coordination & If the Group is aware at the balance sheet date that circumstances Support, Staff Functions, Unallocated, Eliminations and Earnings have occurred that have either worsened or improved expected from Investment Portfolios. future cash flows, and these changes have not been taken into account in the models, the appropriate action will be taken to correct this, based on a qualified management estimate. 9.5. accounting Estimates and Judgments The Bank uses a credit system incorporating statistically based The consolidated financial statements have been presented in ac- scoring models for both retail and business customers. cordance with IFRS as adopted by the EU. Management is required to make a number of estimates and judgments of future events that In addition to its scoring systems, the Bank uses an impairment will significantly affect the carrying amounts of assets and liabilities model in which customers showing danger signals are credit- in the preparation of the consolidated financial statements. The quality flagged. Credit-quality flagging may be performed both areas in which estimates and judgments are deemed critical to the decentrally and centrally. Credit-quality flagging corresponds to a financial statements for 2011 are: downgrading to the weakest score class.

• impairment of loans and advances; Credit-quality flagging is based on significant management estimates. In light of the current financial sector situation and • fair value of investment and corporate properties; developments in the national economy, these estimates have led to a increase in the number of credit-quality flagged customers of 295 • fair value of financial instruments; from 7,499 at the beginning of 2011 to 7,794 at the end of 2011 and a DKK 406 million increase in total credit-quality flagged exposures • classification of equity investments; from DKK 6.5 billion at 1 January 2010 to DKK 6.9 billion at the end of 2011. • contributions to sector-targeted solutions The factors particularly affecting management’s estimates during The estimates and judgments are based on assumptions that man- 2011 were falling property prices, increasing unemployment and agement considers reasonable, but which are inherently uncertain declining demand for numerous products and services. A minor and unpredictable. The assumptions may be incomplete, unexpect- increase in the risk exposure was seen in 2011 for retail as well as ed future events or circumstances may occur, and other parties may business customers. Management expects impairment of loans and arrive at other estimated values. A detailed description of the ac- advances to remain high in 2012 due to the sustained challenging counting policies applied by the Group in preparing the consolidated economic situation. financial statements for 2011 is set forth in the notes to the audited consolidated financial statements, incorporated by reference in this To reduce the risk attaching to individual exposures in the Group, Prospectus. Spar Nord accepts collateral consisting mainly of mortgages and charges on physical assets, securities and vehicles, of which mort- In addition to the above, the financial statements for 2009 listed gages on real property are the most common type. The valuation of business acquisition as a significant accounting estimate, and the such collateral is based on significant estimates made by manage- financial statements for 2010 listed impairment testing of goodwill ment. and other intangible assets as a significant accounting estimate. These are not deemed to have a significant impact on the financial At 31 December 2011, loans and advances accounted for approxi- reporting for 2011. mately 55% of the Group’s assets.

50 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Fair Value of Investment and Corporate Properties At 31 December 2011, equity investments accounted for approxi- The fair value of the Group’s investment and corporate properties is mately 2.6% of the Group’s assets. determined based on the so-called asset return model. Future cash flows are determined based on the Group’s estimate of the future Contributions to Sector-targeted Solutions profit/loss on ordinary operations and the required rate of return for Like all other Danish financial institutions, the Bank is comprised each property taking into account factors such as location and state by the Depositors’ Guarantee Fund and is thus under an obligation, of maintenance. An external valuation is obtained for each property jointly with other banks, to cover the deposits, etc. made by deposi- to support such estimates. A number of assumptions and estimates tors up to EUR 100,000 in banks being wound up or in bankruptcy. have a significant impact on the calculations, including such parameters as inflation, developments in rent, cost and required rate of The Bank recognises a liability to cover the Bank’s share of the ob- return. Any changes to these parameters, for example as a result of ligation towards the Guarantee Fund from the time when the Bank changed market conditions, will affect the expected return, and thus becomes aware that a bank is being wound up or is in bankruptcy, the fair value of the investment and corporate properties. and when sufficient information is available to reliably recognise the expected liability. At 31 December 2011, investment and corporate properties accounted for approximately 1% of the Group’s assets. The uncertainty attaching to the calculation of the dividend rate and the amount covered in banks being wound up or in bankruptcy Fair Value of Financial Instruments means that the recognised liability is subject to uncertainty. The Bank measures a number of financial instruments at fair value, including all derivative financial instruments, as well as shares and bonds. 9.6. consolidated Financial Statements for 2011 with Comparative Figures for 2010 Assessments are made in connection with determining the fair value of financial instruments in the following areas: Review of Income Statement The following table sets forth a summary of the Group’s results of • choosing valuation method; operations for the years ended 31 December 2011 and 2010.

• determining when available listed prices do not reflect the fair value; Table 19 – Summary of the Group’s Results of Operations

• calculating fair value adjustments to provide for relevant risk factors, such as credit, model and liquidity risks; Financial year (DKKm) 2011 2010 • assessing which market parameters are to be monitored; Income statement • making estimates of future cash flows and return requirements Net interest income 1,471.7 1,438.3 for unlisted securities. Net income from fees, charges and commissions 476.8 498.5 In these situations, the decisions are based on judgments in accordance with the Group’s accounting policies. All such decisions are Market-value adjustments and dividends 130.3 270.2 approved by the relevant group functions. Other operating income 40.3 34.1 Profit/loss on equity investments in As part of its day-to-day operations, the Bank has acquired strategic associates and group enterprises 39.0 61.0 equity investments. Strategic equity investments are measured at Core income 2,158.1 2,302.1 fair value based on the available information about trading in the relevant company’s equity investments or, alternatively, by using a Salaries 882.5 875.5 valuation model based on generally accepted methods and current Operating expenses 504.2 529.4 market data, including an assessment of expected future earnings Depreciation, amortisation and impairment 73.3 63.7 and cash flows. The valuation will also be affected by co-ownership, trading with the relevant company and shareholders’ agreements, Costs 1,460.0 1,468.6 etc. If a reliable fair value cannot be determined, the investment will Core earnings before impairment 698.1 833.5 be valued at cost less any impairment charges. Impairment of loans, advances and receivables, etc. 404.4 356.3 At 31 December 2011, derivative financial instruments accounted Core earnings 293.7 477.2 for some 26% of the Group’s total assets. Purchases and sales of financial instruments are recognised at fair value at the settlement Earnings from investment portfolios 3.0 -22.2 date. Profit/loss on ordinary operations 296.7 455.0 Contributions to sector-targeted solutions 6.0 -324.2 Classification of Equity Investments Equity investments are recognised and measured differently, de- Profit/loss on continuing activities before tax 302.7 130.8 pending on their classification. Estimates are required to determine Spar Nord Leasing A/S (Discontinuing Activities) 42.2 2.2 whether the assumptions for making the relevant classification Profit/loss before tax 344.9 133.0 have been observed. Of particular significance are the distinction Tax on continuing activities 52.9 27.1 between associates (significant influence) and other investments, as well as the determination of whether the criteria for using the fair Tax on Discontinuing Activities 17.2 0.9 value option have been met. Profit/loss 274.8 105.0

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 51 The following table sets forth the Group’s financial ratios for the of DKK 270 million. The decline was attributable to lower market- years ended 31 December 2011 and 2010. value adjustments on the Group’s bond portfolio, lower earnings from customers’ hedging of interest rate and currency (agio) risks and slightly lower market-value adjustments on the Group’s shares Table 20 – Financial Ratios in sector companies (primarily DLR Kredit, BankInvest, Danish Ship Finance, and others).

As at 31 December The profit on equity investments in associates in 2011 amounted to 2011 2010 DKK 39 million, which was 36% lower than in 2010, when a profit of DKK 61 million was recorded. The decrease was attributable to the Earnings per share, DKK 4.8 1.9 Bank’s ownership interest in Nørresundby Bank A/S. Return on equity before tax (%) 7.7 3.1 Cost share of core income from Costs continuing activities 0.68 0.64 The Group’s total costs in 2011 amounted to DKK 1,460 million, which was in line with 2010, when costs amounted to DKK 1,469 Solvency ratio 14.0 13.4 million. Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 13.3 13.2 Salaries amounted to DKK 883 million in 2011, which was 1% higher Common Equity (Tier 1) ratio 10.4 9.5 than in 2010, when salaries amounted to DKK 876 million. The higher costs were due in part to salary increases under collective Number of employees (full-time, end of year) agreements and in part to higher payroll tax. (continuing activities) 1,355 1,360 Number of employees (full-time, end of year) Operating costs amounted to DKK 504 million, down 5% relative (Discontinuing Activities) 42 111 to 2010, when operating costs amounted to DKK 529 million. The reduction related to all cost types other than marketing costs.

The realised core income and costs corresponded to a Cost/Income The following table sets forth the profits/losses before tax of the Ratio in 2011 of 0.68, against 0.64 in 2010. Group’s business segments for the years ended 31 December 2011 and 2010. Impairment of Loans and Advances The Group’s total impairment of loans and advances, etc. in 2011 amounted to DKK 404 million, corresponding to an increase of Table 21 – Profit/loss before tax of the Group’s business segments 13% relative to 2010, when impairment of loans and advances, etc. totalled DKK 356 million.

Financial year In 2011, DKK 339 million of the DKK 404 million was attributable (DKKm) 2011 2010 to business customers, equalling an impairment ratio on this customer group of 1.5. Of this, DKK 133 million constituted impairment Spar Nord’s Local Banks 231.1 129.9 charges on agricultural customers, equalling an impairment ratio Trading, Financial Markets and of 3.8. Finally, DKK 65 million was attributable to retail customers, International Division 188.2 281.8 equalling an impairment ratio of 0.4. Other Areas -116.6 -280.9 Profit/Loss Before Tax Spar Nord Leasing A/S (Discontinuing Activities) 42.2 2.2 The Group’s profit before tax amounted to DKK 345 million in 2011, Profit/loss before tax 344.9 133.0 a DKK 212 million increase, corresponding to 159%, relative to DKK 133 million in 2010.

Tax Core Income The Group’s overall tax totalled DKK 70 million in 2011, an increase The Group’s core income for 2011 was DKK 2,158 million, cor- of DKK 42 million, or 150%, relative to DKK 28 million in 2010. The responding to a 6% decrease relative to 2010, when core income overall tax rate for continuing and discontinuing activities in 2011 amounted to DKK 2,302 million. was 20%, against 21% in 2010. The lower tax rate relative to the Danish corporate tax rate of 25% was due in part to non-taxable Net interest income amounted to DKK 1,472 million, a 2% increase income, mainly profits in associates and market-value adjustment from DKK 1,438 million in 2010. The main reason for the increase is of shares, and in part to a number of non-recurring items in 2011. a widening of lending margins combined with 1% growth in lending volumes. Profit/Loss for the Year The Group’s profit for 2011 amounted to DKK 275 million, an in- Net income from fees, charges and commissions for 2011 amounted crease of DKK 170 million relative to DKK 105 million for 2010. to DKK 477 million, 4% down on 2010, when the amount was DKK 499 million. The decline was due mainly to reduced guarantee commission due to a continued decrease in the number of pending land registration cases. Favourable factors were a 14% increase in loan processing fees and a 9% increase in asset management fees.

Market-value adjustments and dividends amounted to DKK 130 million, which was 52% lower than market-value adjustments for 2010

52 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Business Segments Deposits excluding repo transactions amounted to DKK 28.0 billion Spar Nord’s Local Banks at year end 2011 against DKK 27.6 billion at year end 2010.

Trading, Financial Markets and International Division Table 22 – Profit/Loss in Spar Nord’s Local Banks

Table 23 – Profit/loss in the Trading, Financial Markets and Financial year International Division (DKKm) 2011 2010

Net interest income 1,313.1 1,244.4 Financial year Net income from fees, charges and (DKKm) 2011 2010 commissions 456.0 482.5 Net interest income 206.9 203.6 Market-value adjustments and dividends 90.8 93.9 Net income from fees, charges Other operating income 9.3 27.0 and commissions 14.0 8.6 Profit/loss on equity investments in associates 0.0 0.0 Market-value adjustments and dividends 32.4 138.5 Core income 1,869.2 1,847.8 Other operating income 2.1 7.8 Operating expenses and depreciation Profit/loss on equity investments in associates 0.0 0.0 and amortisation 1,233.8 1,277.4 Core income 255.4 358.5 Core earnings before impairment 635.4 570.4 Operating expenses and depreciation Impairment of loans, advances and and amortisation 67.1 64.1 receivables, etc. 404.3 355.7 Core earnings before impairment 188.3 294.4 Profit/loss on ordinary operations 231.1 214.7 Impairment of loans, advances and Contributions to sector-targeted solutions 0.0 -84.8 receivables, etc. 0.1 0.0 Profit/loss on continuing activities before tax 231.1 129.9 Profit/loss on ordinary operations 188.2 294.4 Contributions to sector-targeted solutions 0.0 -12.6

Spar Nord’s Local Banks realised net interest income of DKK 1,313 Profit/loss on continuing activities before tax 188.2 281.8 million, a 6% increase relative to 2010, when net interest income amounted to DKK 1,244 million. The increase was mainly due to a widening of lending margins combined with 1% growth in lending The Trading, Financial Markets and International Division in 2011 volumes. realised net interest income of DKK 207 million, a 1% increase relative to 2010, when net interest income amounted to DKK 204 million. Net income from fees, charges and commissions amounted to DKK 456 million, down 5% from DKK 483 million in 2010. The decline was The other significant income item of the business area, market-val- due to reduced guarantee commission due to a continued decrease ue adjustments and dividends, amounted to DKK 32 million, equal in the number of pending registration cases. Favourable factors to a 77% decrease relative to 2010, when market-value adjust- were an increase in loan processing fees and an increase in asset ments and dividends amounted to DKK 139 million. The decrease management fees. was explained by a development in the spread between short-term mortgage bonds and interest rate swaps that was unfavourable for Operating expenses and depreciation and amortisation amounted the Bank. to DKK 1,234 million, slightly below the DKK 1,277 million reported in 2010. The explanation of the decline was lower internal costs Operating expenses and depreciation and amortisation amounted to combined with general cost restraint. DKK 67 million, slightly above the DKK 64 million reported in 2010.

Impairment losses on loans and advances for 2011 amounted to Core earnings amounted to DKK 188 million in 2011, representing DKK 404 million, corresponding to a 14% increase relative to 2010, a 36% drop relative to 2010, when core earnings stood at DKK 294 when impairment losses amounted to DKK 356 million. million. After contributions to sector-targeted solutions of DKK 0 million, a profit before tax of DKK 188 million was reported, relative Core earnings amounted to DKK 231 million in 2011, against DKK to DKK 282 million in 2010. 215 million in 2010. After contributions to sector-targeted solutions of DKK 0 million, a profit before tax of DKK 231 million was reported, relative to DKK 130 million in 2010.

The total business volume (deposits, loans and advances and guarantees) in Spar Nord’s Local Banks at year end 2011 amounted to DKK 62.3 billion, against DKK 62.7 billion at year end 2010. Loans and advances excluding reverse transactions amounted to DKK 30.9 billion, against DKK 30.3 billion in 2010. During the year, mortgage- credit loans arranged by Spar Nord’s Local Banks grew DKK 2.1 billion, with a loan total of DKK 41.3 billion having been arranged at year end 2011. Accordingly, the total volume of loans arranged (loans and advances excluding reverse transactions and arranged mortgage-credit loans) grew by DKK 2.7 billion to DKK 72.2 billion.

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 53 Other Areas Spar Nord Leasing A/S (Discontinuing Activities)

Table 24 – Profit/loss in Other Areas Table 25 – Profit/loss in Spar Nord Leasing A/S (Discontinuing Activities)

Financial year (DKKm) 2011 2010 Financial year (DKKm) 2011 2010 Net interest income -48.3 -9.7 Net income from fees, charges Net interest income 204.4 169.6 and commissions 6.8 7.4 Net income from fees, charges Market-value adjustments and dividends 7.1 37.8 and commissions 6.3 7.1 Other operating income 28.9 -0.7 Market-value adjustments and dividends 0.0 -1.9 Profit/loss on equity investments Other operating income 180.3 98.4 in associates 39.0 61.0 Profit/loss on equity investments Core income 33.5 95.8 in associates 0.0 0.0 Operating expenses and depreciation Total net income 391.0 273.2 and amortisation 159.1 127.1 Operating expenses and depreciation Core earnings before impairment -125.6 -31.3 and amortisation 278.1 173.7 Impairment of loans, advances and Profit/loss before impairment 112.9 99.5 receivables, etc. 0.0 0.6 Impairment of loans, advances Earnings from investment portfolios 3.0 -22.2 and receivables, etc. 70.7 97.3 Profit/loss on ordinary operations -122.6 -54.1 Profit/loss before tax 42.2 2.2 Contributions to sector-targeted solutions 6.0 -226.8 Profit/loss on continuing activities before tax -116.6 -280.9 Spar Nord Leasing A/S in 2011 realised net interest income of DKK 204 million, a 20% increase relative to 2010, when net interest income amounted to DKK 170 million. The increase was attributable Other Areas comprises “Corporate Coordination & Support”; “Staff to an increased level of activity, including a large customer inflow functions”; “Unallocated” and “Eliminations” as well as “Earnings and a high level of new loans and advances. from investment portfolios”, which were presented separately in the Group’s annual reports for 2011 and 2010 in the note “Business Other operating income, mainly comprising income from operating Segments”, to which reference is made. leases for cars, amounted to DKK 180 million, up 84% relative to 2010, when other operating income amounted to DKK 98 million. In terms of amounts, the largest segment by far is “Unallocated”, The increase was attributable to a large customer inflow. which includes contributions to sector-targeted solutions and part of the Group’s shared marketing costs. The segment’s income in- Operating expenses and depreciation and amortisation amounted cludes profit/loss on the Group’s equity investment in Nørresundby to DKK 278 million, an increase relative to DKK 174 million reported Bank and market-value adjustments of a minor portion of the in 2010. The increase was in part related to the high level of activity Group’s strategic shareholdings. and a number of one-off costs in connection with the transfer of forward-looking activities to Jyske Bank. Total core earnings of Other Areas amounted to a loss of DKK 126 million in 2011, against a loss of DKK 31 million in 2010. The change Impairment of loans and other receivables for 2011 amounted was attributable to reduced profit on the equity investment in Nør- to DKK 71 million, 27% down on 2010, when impairment losses resundby Bank and a higher internal cost level. amounted to DKK 97 million.

Contributions to sector-targeted solutions, primarily in connection A profit before tax of DKK 42 million was realised in 2011, against with the bankruptcies of Amagerbanken, Fjordbank Mors and Max DKK 2 million in 2010. Bank, amounted to DKK 6 million, against a negative contribution of DKK 227 million in 2010. The change was mainly due to the expiry of Bank Package I, as well as the Group’s expensing of its expected contribution to the Guarantee Fund in connection with the bankruptcy of Amagerbanken in 2010. As the dividend rate of Amager- banken in 2011 was upgraded from the originally forecast 58.8% to 84.4%, the Group recognised DKK 46 million as income. The Group expensed DKK 25 million in respect of Fjordbank Mors and DKK 18 million in respect of Max Bank – both amounts inclusive of the Group’s share of Nørresundby Bank’s contribution. Overall, Other Areas realised a loss on continuing activities before tax of DKK 117 million for 2011, against a loss of DKK 281 million for 2010.

54 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Balance Sheet Items Table 27 – The Group’s Shareholders’ Equity and Liabilities

Table 26 – The Group’s Assets As at 31 December (DKKm) 2011 2010

As at 31 December Shareholders’ equity and liabilities (DKKm) 2011 2010 Payables to credit institutions and central banks 12,090.9 7,314.0 Assets Deposits and other payables 31,087.6 31,203.7 Cash balances and demand deposits with central banks 641.0 578.1 Deposits in pooled schemes 6,327.1 5,678.5 Receivables from credit institutions and Issued bonds 8,021.3 7,806.2 central banks 2,428.3 2,227.8 Other non-derivative financial liabilities Lending, banking activities 31,189.1 30,754.0 at fair value 769.8 1,211.4 Lending, reverse transactions 393.2 1,516.6 Current tax liabilities 7.3 2.4 Lending, leasing activities 7,119.8 7,681.5 Other liabilities 4,326.0 6,708.6 Loans, advances and other receivables Deferred income 53.8 190.1 at amortised cost, total 38,702.1 39,952.1 Total liabilities other than provisions 62,683.8 60,114.9 Bonds at fair value 16,421.2 13,637.3 Shares etc. 1,040.4 1,121.7 Provisions for deferred tax 394.9 333.7 Equity investments in associates 765.1 745.8 Provisions for losses on guarantees 1.8 4.5 Assets linked to pooled schemes 6,327.1 5,678.5 Other provisions 56.8 131.2 Intangible assets 131.4 157.5 Total provisions for liabilities 453.5 469.4 Investment properties 48.5 61.4 Corporate properties 456.6 452.8 Subordinated debt 2,316.8 2,477.0 Land and buildings, total 505.1 514.2 Operating lease assets 404.0 437.4 Total liabilities 65,454.1 63,061.3 Other property, plant and equipment 139.6 166.4 Other property, plant and equipment, total 543.6 603.8 Shareholders’ equity Current tax assets 10.3 1.4 Share capital 570.7 570.7 Temporary assets 87.5 79.8 Revaluation reserves 62.4 64.6 Other assets 2,401.7 2,064.5 Accumulated changes in value, total 62.4 64.6 Prepayments 76.6 73.2 Statutory reserves 450.7 440.1 Total assets 70,081.4 67,435.7 Statutory reserves, total 450.7 440.1 Retained earnings 3,543.5 3,299.0 Total shareholders’ equity 4,627.3 4,374.4 Assets The Group’s total assets at 31 December 2011 amounted to DKK 70,081 million, against DKK 67,436 million at 31 December 2010. Total shareholders’ equity and liabilities 70,081.4 67,435.7 The Group’s assets at 31 December 2011 were in all material respects related to lending, banking activities, lending, leasing activities, bonds at fair value and assets linked to pooled schemes. Shareholders’ Equity and Liabilities The Group’s total shareholders’ equity and liabilities at 31 Decem- The DKK 2,646 million increase in total assets was mainly attribut- ber 2011 amounted to DKK 70,081 million, of which DKK 4,627 mil- able to: (1) an increase in bonds at fair value of DKK 2,784 million lion was shareholders’ equity, against DKK 67,436 million, of which and (2) an increase in assets linked to pooled schemes of DKK 649 DKK 4,374 million was shareholders’ equity, at 31 December 2010. million as a result of general growth in this business area. The Group’s shareholders’ equity and liabilities at 31 December 2011 largely consisted of payables to credit institutions and central The increases in the above-mentioned assets were partially offset banks, deposits and other payables, deposits in pooled schemes, by a DKK 1,250 million drop in loans, advances and other receiva- issued bonds and other liabilities. bles at amortised cost, due in part to the phasing-out of the Group’s leasing activities. The DKK 2,646 million increase in total shareholders’ equity and liabilities was mainly attributable to: (1) an increase in payables to credit institutions and central banks of DKK 4,777 million as a result of increased financing through repo transactions and (2) an increase in deposits in pooled schemes of DKK 649 million as a result of general growth in this business area.

The increases in the above-mentioned liabilities were partially offset by a DKK 2,383 million drop in other liabilities as a reduction of clearing accounts.

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 55 Cash Flows

Table 28 – The Group’s Cash Flows

Financial year (DKKm) 2011 2010

Operations Profit/loss on continuing activities before tax 302.7 130.8 Profit/loss on Discontinuing Activities before tax 42.2 2.2 Foreign currency translation, subsidiaries 0.8 10.2 Fair-value changes, investment properties -3.2 2.3 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 215.4 125.2 Gains and losses on the sale of intangible assets and property, plant and equipment -1.2 0.4 Adjustment of impairment of loans and advances, etc. 115.9 -72.7 Provisions for liabilities -77.1 -33.3 Profit/loss on equity investments in associates and group enterprises -44.9 -40.5 Corporate income tax paid -3.1 -2.5 Operations, total 547.5 122.1

Working capital Movement in credit institutions and central banks, net 4,855.9 -4,909.3 Movement in loans, advances and other receivables at amortised cost 1,134.1 -1,564.0 Movement in bonds at fair value -2,783.9 -1,058.5 Movement in equity portfolio 81.3 -251.9 Movement in issued bonds at amortised cost 215.1 1,361.0 Movement in other assets and other liabilities, net -3,311.3 5,455.6 Movement in deposits and other payables -116.1 -727.0 Working capital, total 75.1 -1,694.1

Cash generated from operations, total 622.6 -1,572.0

Investments Net investment in associates and group enterprises 1.0 0.6 Net investment in intangible assets -4.7 0.0 Net investment in property, plant and equipment -121.2 -346.6 Net investment in treasury shares -16.4 116.8 Dividends from associates and group enterprises 21.3 12.9 Investments, total -120.0 -216.3

Financing Subordinated debt -160.2 -204.1 Financing, total -160.2 -204.1

Movement in cash and cash equivalents for the year 342.4 -1,992.4

Cash and cash equivalents, beginning of year 2,372.7 4,365.1 Movement in cash and cash equivalents for the year 342.4 -1,992.4 Cash and cash equivalents, end of year 2,715.1 2,372.7

Cash, cash equivalents and demand deposits with central banks 641.0 578.1 Receivables from credit institutions and central banks with less than 3 mths to maturity 2,074.1 1,794.6 Total 2,715.1 2,372.7

56 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Total cash flows from operating activities amounted to an inflow The following table sets forth the Group’s financial ratios for the of DKK 623 million in 2011, constituting an increase of DKK 2,195 years ended 31 December 2010 and 2009. million against a net cash outflow of DKK 1,572 million in 2010. The change was due to the increased profit from operations and the increase in payables to credit institutions. An increase in the Group’s Table 30 – Financial Ratios bond portfolio and a reduction of clearing accounts had a negative effect. As at 31 December Total cash flows from investing activities amounted to an outflow 2010 2009 of DKK 120 million in 2011, constituting an improvement of DKK 96 million relative to a net cash outflow from investing activities of DKK Earnings per share, DKK 1.9 2.1 216 million in 2010. The improvement was due to a reduction in the Return on equity before tax (%) 3.1 3.5 extent of investment in property, plant and equipment, primarily as Cost share of core income from a consequence of the commenced phasing-out of the Group’s leas- continuing activities 0.64 0.62 ing activities. Solvency ratio 13.4 14.2 Total cash flows from financing activities amounted to an outflow of Core Capital (Tier 1) ratio, incl. DKK 160 million in 2011, against an outflow of DKK 204 million in Hybrid Core Capital 13.2 13.2 2010. The change was mainly attributable to subordinated debt. Common Equity (Tier 1) ratio 9.5 9.3 Number of employees (full-time, end of year) 9.7. consolidated Financial Statements for 2010 (continuing activities) 1,360 1,423 with Comparative Figures for 2009 Number of employees (full-time, end of year) (Discontinuing Activities) 111 107 Review of Income Statement The following table sets forth a summary of the results of operations of the Group for the years ended 31 December 2010 and 2009. The following table sets forth the profit/loss before tax of the Group’s business segments for the years ended 31 December 2010 and 2009. Table 29 – Summary of the Group’s Results of Operations

Table 31 – Profit/Loss Before Tax of the Group’s Business Segments Financial year (DKKm) 2010 2009 Financial Year Income statement (DKKm) 2010 2009 Net interest income 1,438.3 1,611.5 Spar Nord’s Local Banks 129.9 97.2 Net income from fees, charges and commissions 498.5 410.1 Trading, Financial Markets and International Division 281.8 380.0 Market-value adjustments and dividends 270.2 300.2 Other Areas -280.9 -304.2 Other operating income 34.1 30.8 Spar Nord Leasing A/S (Discontinuing Activities) 2.2 -28.3 Profit/loss on equity investments in associates and group enterprises 61.0 35.9 Profit/loss before tax 133.0 144.7 Core income 2,302.1 2,388.5 Salaries 875.5 845.1 Core Income Operating expenses 529.4 559.8 The Group’s core income for 2010 was DKK 2,302 million, cor- Depreciation, amortisation and impairment 63.7 68.9 responding to a 4% decrease relative to 2009, when core income amounted to DKK 2,389 million. Costs 1,468.6 1,473.8 Core earnings before impairment 833.5 914.7 Net interest income amounted to DKK 1,438 million, equal to a Impairment of loans, advances and decline of 11% relative to 2009, when net interest income amounted receivables, etc. 356.3 467.6 to DKK 1,612 million. The principal reasons for the decline were reduced interest income from the Group’s bond portfolio, increasing Core earnings 477.2 447.1 interest expenses for Hybrid Core Capital, senior loans and issued Earnings from investment portfolios -22.2 17.1 bonds and the generally low level of interest rates. Profit/loss on ordinary operations 455.0 464.2 Contributions to sector-targeted solutions -324.2 -291.2 Net income from fees, charges and commissions for 2010 amounted to DKK 499 million, 22% higher than in 2009 when the amount was Profit/loss on continuing activities before tax 130.8 173.0 DKK 410 million. The increase was broadly based as all fee types Spar Nord Leasing A/S (Discontinuing Activities) 2.2 -28.3 showed progress. In particular, the housing area (guarantees and Profit/loss before tax 133.0 144.7 loan transaction fees) and the capital market-related areas (securities trading and asset management) showed fair growth in activity, Tax on continuing activities 27.1 33.9 and thus in fee income. Tax on Discontinuing Activities 0.9 -6.7 Profit/loss 105.0 117.5 Market-value adjustments and dividends amounted to DKK 270 million, which was 10% below market-value adjustments for 2009

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 57 of DKK 300 million. The decline was attributable to lower earnings Business Segments from customers’ hedging of interest rate and currency (agio) risks Spar Nord’s Local Banks and slightly lower market-value adjustments on the Group’s shares in sector companies (primarily DLR Kredit, BankInvest, Danish Ship Finance, and others), while market-value adjustments on the Table 32 – Profit/Loss in Spar Nord’s Local Banks Group’s bond portfolio showed improvement. Financial year The profit on equity investments in associates for 2010 was DKK 61 million, up 69% from 2009, when the profit was DKK 36 million. (DKKm) 2010 2009 The increase was attributable to the Group’s stakes in Nørresundby Net interest income 1,244.4 1,476.5 Bank and ValueInvest Asset Management. Net income from fees, charges Costs and commissions 482.5 404.9 The Group’s total costs for 2010 amounted to DKK 1,469 million, Market-value adjustments and dividends 93.9 92.6 which was in line with 2009, when costs amounted to DKK 1,474 Other operating income 27.0 -12.0 million. Profit/loss on equity investments in associates 0.0 2.2 Salaries amounted to DKK 876 million in 2010, which was 4% higher Core income 1,847.8 1,964.2 than in 2009, when salaries amounted to DKK 845 million. The Operating expenses and depreciation increases were due to pay rises under collective agreements and and amortisation 1,277.4 1,282.7 extraordinary severance pay and disestablishment costs in 2010. Core earnings before impairment 570.4 681.5 Operating costs amounted to DKK 529 million, down 5% relative Impairment of loans, advances and to 2009, when operating costs amounted to DKK 560 million. The receivables, etc. 355.7 467.6 reduction could be ascribed to a number of cost types. Profit/loss on ordinary operations 214.7 213.9 Contributions to sector-targeted solutions -84.8 -116.7 The realised core income and costs corresponded to a Cost/Income Ratio of 0.64 in 2010, against 0.62 in 2009. Profit/loss on continuing activities before tax 129.9 97.2

Impairment of Loans and Advances The Group’s total impairment of loans and advances in 2010 Spar Nord’s Local Banks recorded net interest income of DKK 1,244 amounted to DKK 356 million (excluding the Private Contingency million for 2010, a 16% drop relative to net interest income of DKK Association), corresponding to a reduction of 24% relative to 2009, 1,477 million in 2009. The decline could be ascribed in part to the when impairment of loans and advances totalled DKK 468 million. lower customer demand and resulting reduced loans and advances excluding reverse transactions and in part to the higher funding In 2010, DKK 299 million of the DKK 356 million was attributable costs. Also, net interest income for Spar Nord’s Local Banks was to business customers, equalling an impairment ratio on this cus- affected by the change in internal interest rates and the intra-group tomer group of 1.4. Of this, DKK 98 million constituted impairment distribution of long-term funding, which resulted in an additional charges on agricultural customers, equalling an impairment ratio internal interest expense of DKK 107 million in 2010. This had the of 2.5. Finally, DKK 57 million was attributable to retail customers, reverse effect on the unit Other areas, in particular. equalling an impairment ratio of 0.4. Net income from fees, charges and commissions amounted to DKK Profit/Loss Before Tax 482 million, up 19% from DKK 405 million in 2009. The increase was The Group’s profit before tax amounted to DKK 133 million in 2010, a due to increased customer activity, including in the housing and sav- DKK 12 million decrease, corresponding to 8%, relative to DKK 145 ings and investments areas. million in 2009. Operating expenses and depreciation and amortisation amounted to Tax DKK 1,277 million, slightly below the DKK 1,283 million reported in The Group’s overall tax totalled DKK 28 million in 2010, a DKK 1 2009. The fall should be seen in the context a staff reduction at Spar million increase, corresponding to 4%, relative to DKK 27 million in Nord’s Local Banks from 995 to 931 during the year. 2009. The overall tax rate for continuing and discontinuing activities in 2010 was 21%, against 19% in 2009. The lower tax rate relative Impairment of loans and advances for 2010 amounted to DKK 356 to the Danish corporate tax rate of 25% was due to non-taxable million, corresponding to a 24% decrease relative to 2009, when income, mainly profits in associates and market-value adjustment impairment of loans and advances amounted to DKK 468 million. of shares, which accounted for a relatively large proportion of the profit before tax. Core earnings amounted to DKK 215 million in 2010, against DKK 214 million in 2009. After contributions to sector-targeted solu- Profit/Loss for the Year tions of DKK 85 million, a profit before tax of DKK 130 million was The Group’s profit for 2010 amounted to DKK 105 million, a de- reported, relative to DKK 97 million in 2009. crease of DKK 13 million relative to DKK 118 million for 2009. The total business volume (deposits, loans and advances and guarantees) in Spar Nord’s Local Banks at year end 2010 amounted to DKK 62.7 billion, against DKK 65.2 billion at year end 2009. Loans and advances excluding reverse transactions amounted to DKK 30.3 billion, against DKK 30.1 billion in 2010. During the year, mortgage- credit loans arranged by Spar Nord’s Local Banks grew DKK 3.8 billion, with a loan total of DKK 39.2 billion having been arranged at year end 2010. The total volume of loans arranged (loans and

58 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank advances excluding reverse transactions and arranged mortgage- Other Areas credit loans) grew by DKK 4.0 billion to DKK 69.5 billion.

Deposits excluding repo transactions amounted to DKK 27.6 billion Table 34 – Profit/Loss in Other Areas at year end 2010 against DKK 29.5 billion at year end 2009. The decline reflected the fact that in response to the low interest rate level, Financial year many customers chose to invest funds in various types of securities rather than make cash deposits. (DKKm) 2010 2009 Net interest income -9.7 -170.1 Trading, Financial Markets and International Division Net income from fees, charges and commissions 7.4 3.3 Table 33 – Profit/loss in the Trading, Financial Markets and Market-value adjustments and dividends 37.8 71.5 International Division Other operating income -0.7 39.5 Profit/loss on equity investments in associates 61.0 33.7 Financial year Core income 95.8 -22.1 (DKKm) 2010 2009 Operating expenses and depreciation Net interest income 203.6 305.1 and amortisation 127.1 137.5 Net income from fees, charges Core earnings before impairment -31.3 -159.6 and commissions 8.6 1.9 Impairment of loans, advances and Market-value adjustments and dividends 138.5 136.1 receivables, etc. 0.6 0.0 Other operating income 7.8 3.3 Earnings from investment portfolios -22.2 17.1 Profit/loss on equity investments in associates 0.0 0.0 Profit/loss on ordinary operations -54.1 -142.5 Core income 358.5 446.4 Contributions to sector-targeted solutions -226.8 -161.7 Operating expenses and depreciation Profit/loss on continuing activities before tax -280.9 -304.2 and amortisation 64.1 53.6 Core earnings before impairment 294.4 392.8 Other Areas comprises “Corporate Coordination & Support”; “Staff Impairment of loans, advances and functions”; “Unallocated” and “Eliminations” as well as “Earnings receivables, etc. 0.0 0.0 from investment portfolios”, which were presented separately in Profit/loss on ordinary operations 294.4 392.8 the Group’s annual reports for 2010 and 2009 in the note “Business Contributions to sector-targeted solutions -12.6 -12.8 Segments”, to which reference is made.

Profit/loss on continuing activities before tax 281.8 380.0 In terms of amounts, the largest segment by far is “Unallocated”, which includes contributions to sector-targeted solutions and part of the Group’s shared marketing costs. The segment’s income in- The Trading, Financial Markets and International Division in 2010 cludes profit/loss on the Group’s equity investment in Nørresundby realised net interest income of DKK 204 million, a decrease of 33% Bank and market-value adjustments of a minor portion of the relative to 2009, when net interest income amounted to DKK 305 Group’s strategic shareholdings. million. The decrease was due to an increased proportion of low- yield bonds. Overall, Other Areas realised negative core earnings of DKK 31 million in 2010, against negative core earnings of DKK 160 million in The other significant income item of the business area, market-val- 2009. The change was principally a result of the change in inter- ue adjustments and dividends, amounted to DKK 139 million, equal nal interest rates and in the intra-group distribution of long-term to a 2% increase relative to 2009, when market-value adjustments funding mentioned in the comments on Spar Nord’s Local Banks and dividends amounted to DKK 136 million. above. Another contributing factor was a rise in profit on equity investments in associates, while lower market-value adjustments Operating expenses and depreciation and amortisation amounted on strategic shareholdings had the opposite effect. to DKK 64 million, up 20% relative to DKK 54 million for 2009. The increase resulted from the establishment of a new bond division and Contributions to sector-targeted solutions were realised at a nega- the hiring of staff. tive DKK 227 million as compared with a negative DKK 162 million in 2009 as a consequence of the increased number of bank collapses Core earnings amounted to DKK 294 million in 2010, representing and the greater amount of losses for the sector than in the previous a 25% drop relative to 2009, when core earnings stood at DKK 393 year. million. After contributions to sector-targeted solutions of DKK 13 million, a profit before tax of DKK 282 million was reported, relative Overall, Other Areas realised a loss on continuing activities before to DKK 380 million in 2010. tax of DKK 281 million for 2010, against a loss of DKK 304 million for 2009.

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 59 Spar Nord Leasing A/S (Discontinuing Activities) Balance Sheet Items

Table 35 – Spar Nord Leasing A/S (Discontinuing Activities) Table 36 – The Group’s Assets

Financial year As at 31 December (DKKm) 2010 2009 (DKKm) 2010 2009

Net interest income 169.6 156.2 Assets Net income from fees, charges Cash balances and demand deposits and commissions 7.1 6.7 with central banks 578.1 841.5 Market-value adjustments and dividends -1.9 3.8 Receivables from credit institutions and Other operating income 98.4 69.0 central banks 2,227.8 4,013.7 Profit/loss on equity investments in associates 0.0 0.0 Lending, banking activities 30,754.0 30,791.8 Total net income 273.2 235.7 Lending, reverse transactions 1,516.6 0.0 Operating expenses and depreciation Lending, leasing activities 7,681.5 7,523.6 and amortisation 173.7 147.6 Loans, advances and other receivables Profit/loss before impairment 99.5 88.1 at amortised cost, total 39,952.1 38,315.4 Impairment of loans, advances Bonds at fair value 13,637.3 12,578.8 and receivables, etc. 97.3 116.4 Shares etc. 1,121.7 869.8 Profit/loss before tax 2.2 -28.3 Equity investments in associates 745.8 718.8 Assets linked to pooled schemes 5,678.5 4,066.5 Intangible assets 157.5 165.9 Spar Nord’s Leasing A/S in 2010 realised net interest income of DKK Investment properties 61.4 60.4 170 million, a 9% increase relative to 2009, when net interest in- Corporate properties 452.8 462.8 come amounted to DKK 156 million. The increase could be ascribed Land and buildings, total 514.2 523.2 to growing business volume. Operating lease assets 437.4 199.2 Other operating income, mainly comprising income from operat- Other property, plant and equipment 166.4 152.9 ing leases for cars, amounted to DKK 98 million, up 43% relative to Other property, plant and equipment, total 603.8 352.1 2010, when other operating income amounted to DKK 69 million. The rise was due to significant growth in operating lease activities. Current tax assets 1.4 3.5 Temporary assets 79.8 96.7 Operating expenses and depreciation and amortisation amounted to Other assets 2,064.5 1,907.4 DKK 174 million, up 18% relative to DKK 148 million for 2009. The Prepayments 73.2 75.9 rise was explained by an expansion of the business area Easyfleet (operating leases for cars), resulting in higher staff costs and in- Total assets 67,435.7 64,529.2 creased depreciation of operating assets.

Impairment of loans, advances and other receivables for 2010 Assets amounted to DKK 97 million, 16% down on 2009, when it amounted The Group’s total assets at 31 December 2010 amounted to DKK to DKK 116 million. 67,436 million, against DKK 64,529 million at 31 December 2009. The Group’s assets at 31 December 2010 were in all material re- A profit before tax of DKK 2 million was realised in 2010, against a spects related to lending, banking activities, lending, leasing activi- loss of DKK 28 million in 2009. ties, assets linked to pooled schemes and bonds at fair value.

The DKK 2,907 million increase in total assets was mainly attributable to: (1) a DKK 1,058 million increase in bonds at fair value mainly related to mortgage bonds and financial issuers, principally issuers with ratings of A or better; (2) a DKK 1,612 million increase in assets linked to pooled schemes due to the deposits of new pension pool customers being invested in bonds and shares and (3) a DKK 1,517 million increase in reverse transactions with customers.

The increases in the above-mentioned assets were partially offset by a DKK 1,786 million drop in receivables from credit institutions and central banks following a decline in reverse transactions with credit institutions and certificates of deposit with Danmarks Natio- nalbank.

60 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Table 37 – The Group’s Shareholders’ Equity and Liabilities Shareholders’ Equity and Liabilities The Group’s total shareholders’ equity and liabilities at 31 Decem- ber 2010 amounted to DKK 67,436 million, of which DKK 4,374 mil- As at 31 December lion was shareholders’ equity, against DKK 64,529 million, of which (DKKm) 2010 2009 DKK 4,143 million was shareholders’ equity, at 31 December 2009. The Group’s shareholders’ equity and liabilities at 31 December Shareholders’ equity and liabilities 2010 largely consisted of payables to credit institutions and central Payables to credit institutions and banks, deposits and other payables, deposits in pooled schemes, central banks 7,314.0 9,327.3 issued bonds and other liabilities. Deposits and other payables 31,203.7 31,930.7 The DKK 2,907 million increase in total shareholders’ equity and li- Deposits in pooled schemes 5,678.5 4,066.5 abilities was mainly attributable to: (1) a DKK 1,612 million increase Issued bonds 7,806.2 6,445.2 in deposits in pooled schemes mainly as a result of deposits from Other non-derivative financial liabilities new pooled pension customers; (2) a DKK 1,361 million increase in at fair value 1,211.4 86.0 issued bonds due to the diversification of funding sources initiated in 2008 with the establishment of an EMTN programme supple- Current tax liabilities 2.4 0.1 mented by the option of issuing guaranteed bonds under Bank Other liabilities 6,708.6 5,210.8 Package I; (3) a DKK 1,125 million increase in other non-derivative Deferred income 190.1 158.7 financial liabilities at fair value due to a changed bond trading pat- Total liabilities other than provisions 60,114.9 57,225.3 tern; and (4) a DKK 1,498 million increase in other liabilities.

The increases in the above-mentioned liabilities were partially off- Provisions for deferred tax 333.7 311.1 set by a DKK 2,013 million drop in payables to credit institutions and Provisions for losses on guarantees 4.5 133.8 central banks as a result of the repayment of senior loans in connection with the above-mentioned diversification of funding sources. Other provisions 131.2 35.2 Total provisions for liabilities 469.4 480.1

Subordinated debt 2,477.0 2,681.1

Total liabilities 63,061.3 60,386.5

Shareholders’ equity Share capital 570.7 570.7 Revaluation reserves 64.6 54.7 Accumulated changes in value, total 64.6 54.7 Statutory reserves 440.1 411.9 Statutory reserves, total 440.1 411.9 Retained earnings 3,299.0 3,105.4 Total shareholders’ equity 4,374.4 4,142.7

Total shareholders’ equity and liabilities 67,435.7 64,529.2

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 61 Cash Flows

Table 38 – The Group’s Cash Flows

Financial year (DKKm) 2010 2009

Operations Profit/loss on continuing activities before tax 130.8 173.0 Profit/loss on Discontinuing Activities before tax 2.2 -28.3 Foreign currency translation, subsidiaries 10.2 3.8 Fair-value changes, investment properties 2.3 2.5 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 125.2 111.6 Gains and losses on the sale of intangible assets and property, plant and equipment 0.4 -3.8 Adjustment of impairment of loans and advances, etc. -72.7 493.6 Provisions for liabilities -33.3 127.8 Profit/loss on equity investments in associates and group enterprises -40.5 -17.1 Corporate income tax paid -2.5 1.5 Operations, total 122.1 864.6

Working capital Movement in credit institutions and central banks, net -4,909.3 -8,485.7 Movement in loans, advances and other receivables at amortised cost -1,564.0 6,566.9 Movement in bonds at fair value -1,058.5 -3,825.1 Movement in equity portfolio -251.9 -288.1 Movement in issued bonds at amortised cost 1,361.0 3,024.5 Movement in other assets and other liabilities, net 5,455.6 2,452.3 Movement in deposits and other payables -727.0 -1,902.4 Working capital, total -1,694.1 -2,457.6

Cash generated from operations, total -1,572.0 -1,593.0

Investments Net investment in associates and group enterprises 0.6 163.3 Net investment in intangible assets 0.0 -1.6 Net investment in property, plant and equipment -346.6 -196.4 Net investment in treasury shares 116.8 7.5 Dividends from associates and group enterprises 12.9 3.5 Investments, total -216.3 -23.7

Financing Subordinated debt -204.1 1,028.8 Financing, total -204.1 1,028.8

Movement in cash and cash equivalents for the year -1,992.4 -587.9

Cash and cash equivalents, beginning of year 4,365.1 4,953.0 Movement in cash and cash equivalents for the year -1,992.4 -587.9 Cash and cash equivalents, end of year 2,372.7 4,365.1

Cash, cash equivalents and demand deposits with central banks 578.1 1,519.0 Receivables from credit institutions and central banks with less than 3 mths to maturity 1,794.6 2,846.1 Total 2,372.7 4,365.1

62 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank Total cash flows from operating activities amounted to an outflow cember 2009 due to longer case processing times for home loans of DKK 1,572 million in 2010, constituting an increase of DKK 21 following IT problems in connection with the introduction of a new million against a net cash outflow of DKK 1,593 million in 2009. The digital land registration system. change was due to a combination of a drop in loans and advances and a rise in bonds at fair value, net amounts outstanding with Financial guarantees, which primarily consist of payment guaran- credit institutions and central banks and the net change in other tees, totalled DKK 1,658 million at 31 December 2011, DKK 2,064 assets and other liabilities. million at 31 December 2010 and DKK 1,849 million at 31 December 2009. Total cash flows from investing activities amounted to an outflow of DKK 216 million in 2010, constituting a decline of DKK 192 million, Loss guarantees for mortgage loans, which are generally provided against a net cash outflow for investing activities of DKK 24 million for the highest-risk portion of mortgage loans to private individuals in 2009. The decline was mainly linked to investments in associates and businesses, amounted to DKK 783 million at 31 December 2011, and acquisitions of property, plant and equipment, partially offset by DKK 668 million at 31 December 2010 and DKK 598 million at 31 sales of the Bank’s treasury shares. December 2009.

Total cash flows from financing activities amounted to an outflow of Registration and refinancing guarantees, which are furnished in DKK 204 million in 2010, constituting a decline of DKK 1,233 million connection with Land Registry processing upon the arranging and from a net cash inflow from financing activities of DKK 1,029 mil- refinancing of mortgage loans, amounted to DKK 964 million at 31 lion in 2009. The decline was mainly due to a drop in the supply of December 2011, DKK 1,983 million at 31 December 2010 and DKK subordinated debt, mainly in the form of Hybrid Core Capital from 3,064 million at 31 December 2009. The decline during the period the Danish State. was mainly due to the fact that, especially in 2009 but also in 2010, as described above, case processing times were extraordinarily long due to IT problems in connection with the introduction of the new 9.8. off-Balance Sheet Liabilities digital land registration system.

The following table sets forth the Group’s contingent liabilities and Other contingent liabilities amounted to DKK 433 million at 31 other obligating agreements as at 31 December 2011, 2010 and December 2011, DKK 422 million at 31 December 2010 and DKK 724 2009. million at 31 December 2009. The decline was primarily attributable to the expiry of the guarantee in connection with Bank Package I.

Table 39 – The Group’s Contingent Liabilities and other Obligating In addition, the Group has contingent liabilities and other obligat- Agreements ing agreements corresponding to the relative ownership interests in associates. Such contingent liabilities are not different in type from the Group’s other contingent liabilities. Other obligating As at 31 December agreements comprise an agreement with the Bank’s provider of IT (DKKm) 2011 2010 2009 services, SDC, regarding the provision of such services. The Bank may withdraw from the agreement or be terminated at a notice of Contingent liabilities three years to expire at the end of any SDC financial year. However, Financial guarantees 1,658.2 2,064.2 1,848.9 the Bank is entitled to terminate the agreement at shorter notice Loss guarantees for against payment of compensation to SDC. Such compensation will mortgage loans 783.0 667.5 598.2 equal the average monthly payment from the Bank to SDC until the date of termination, multiplied by the number of months the notice Registration and refinancing is shorter than three years, less actual amounts saved by SDC by guarantees 963.5 1,983.4 3,063.9 not having to provide the service. The maximum compensation for Other contingent liabilities 433.0 422.4 724.3 withdrawing from the agreement would have been DKK 431 million Total 3,837.7 5,137.5 6,235.3 in 2011, DKK 460 million in 2010 and DKK 450 million in 2009.

The Group is a party to a number of lawsuits. Other obligating agreements Irrevocable credit commitments 0.0 0.0 0.0 The lawsuits are assessed regularly and necessary provisions are Other 520.9 581.7 575.5 made based on an assessment of the risk of loss. As at the Prospec- tus Date, the Group is not a party to any lawsuits that are expected Total 520.9 581.7 575.5 to have a material impact on the Group’s financial position.

Total off-balance-sheet items 4,358.6 5,719.2 6,810.8 9.9. sIgnificant Events After the Balance Sheet Date Off-balance-sheet items amounted to DKK 4,359 million at 31 December 2011 against DKK 5,719 million at 31 December 2010 and Except for the matters described in “Part II—The Offering—Key DKK 6,811 million at 31 December 2009. Information on Capitalisation and Use of Proceeds—Reasons for the Offering and Use of Proceeds”, no events have occurred after the The drop from 31 December 2010 to 31 December 2011 of DKK balance sheet date of the annual report for 2011 which would have 1,361 million, or 24%, was mainly attributable to lower guarantees a material impact on the Group’s assets and liabilities or financial as a result of fewer pending land registration cases. position at 31 December 2011 and the Group’s results of operations and cash flows for 2011. The fall from 31 December 2009 to 31 December 2010 of DKK 1,092 million, or 16%, was mainly attributable to registration and refinancing guarantees, which were extraordinarily high at 31 De-

Spar Nord Bank – Prospectus PART I – 9. Operating and Financial Review 63 that affect its operating environment. As a reaction to the global 9.10. Government, Economic, Fiscal, Monetary or economic downturn, a number of countries, including Denmark, Political Initiatives introduced various support schemes in order to support the banking sector. The business, results of operations and financial position of Spar Nord Bank A/S, due to its status as a bank, are subject to the effects See “Part I—Description of the Bank—The Danish Banking System of government, economic, fiscal, monetary and political initiatives and Regulation”.

64 PART I – 9. Operating and Financial Review Prospectus – Spar Nord Bank 10. Capital Resources

The following review of the Group’s capital and cash resources is There are no restrictions on the Bank’s use of capital resources oth- based on figures at 31 December 2011, 2010 and 2009. However, the er than the restrictions that follow from Danish legislation or those figures in “Part I—Description of the Bank—Capital Resources—Ef- described in “Part I—Description of the Bank—Material Contracts”. fect of the Offering” have been adjusted to reflect the Offering, assuming full subscription. The Group’s primary source of funding is customer deposits, and the Group seeks to maintain a solid and well-diversified base of deposits. Customer deposits amounted to DKK 31.1 billion at 31 10.1. Policies and Goals December 2011, DKK 31.2 billion at 31 December 2010 and DKK 31.9 billion at 31 December 2009. The Group has adopted a number of policies and instructions to ensure that it consistently has adequate capital and cash resources Funding also derives from issued bonds and senior loans, which to comply with statutory requirements and to support the Group’s amounted to DKK 10.1 billion at 31 December 2011, DKK 9.4 billion future activities and growth. at 31 December 2010 and DKK 10.4 billion at 31 December 2009. Bonds are issued primarily under the Group’s EMTN programme, In 2011, the Bank pursued a target of a Common Equity (Tier 1) ratio and in recent years bonds have represented a substantial part of the of 8%, and at the beginning of 2012, it raised that target to 9%. The Group’s funding base. At the Prospectus Date, the Bank has four target Core Capital (Tier 1) ratio, incl. Hybrid Core Capital is now non-expired issues under the EMTN Programme for a total amount 12%. In addition, the Bank aims to have a solvency ratio that as a of DKK 7,954 million, of which DKK 3,717 million expires on 10 July minimum is three percentage points higher than the Bank’s ICAAP 2012, DKK 1,487 million expires on 23 May 2013, DKK 2,500 million ratio. expires on 15 July 2013 and DKK 250 million expires on 30 June 2014. See “Part I—Description of the Bank—Material Contracts— With respect to cash resources, the Group has defined the target Euro Medium Term Note Programme”. On 20 February 2012, the that deposits excl. repo transactions, senior loans, issued bonds, Group repaid a subordinated loan of DKK 211 million and expects subordinated debt and shareholders’ equity should exceed lending to repay a subordinated loan of DKK 297 million on 23 March 2012. excl. reverse transactions. Subordinated debt, senior loans and However, as a result of the Group phasing out its leasing activities, issued bonds falling due within 12 months are not included in this the Group expects lending and deposits to approach the same level, calculation. Furthermore, the Bank has defined a target of having and this is expected to reduce the future need for issuing bonds. a liquidity excess cover ratio relative to the statutory minimum requirement of 50% and a funding structure that complies with the The sum of the Group’s subordinated debt and shareholders’ equity stable funding threshold value in the DFSA’s Supervisory Diamond. amounted to DKK 6.9 billion at 31 December 2011, DKK 6.9 billion at 31 December 2010 and DKK 6.8 billion at 31 December 2009. In relation to the Bank’s overall funding, the sum of the Group’s 10.2. Liquidity subordinated debt and shareholders’ equity accounted for 12% at 31 December 2011, 13% at 31 December 2010 and 13% at 31 December The Group’s activities are funded through four funding sources: 2009.

• Customer deposits Deposits, senior loans, issued bonds and subordinated debt and shareholders’ equity together accounted for 83% of the Bank’s total • Loans from or repo transactions with other credit institutions and funding at 31 December 2011, 89% at 31 December 2010 and 89% at central banks 31 December 2009.

• Issued bonds The table below shows the Group’s funding structure at 31 Decem- ber 2011, 2010 and 2009. • Subordinated debt and shareholders’ equity

Table 40 – The Group’s Funding Structure

2011 2010 2009 2011 2010 2009 (DKKm) (DKKm) (DKKm) (%) (%) (%)

Central banks and credit institutions 4,965.2 4,577.1 3,656.6 8.6 8.6 6.7 Repo transactions and repurchases 5,010.8 1,163.3 1,697.0 8.6 2.2 3.1 Senior loans < 1 year 1,636.8 82.7 2,408.0 2.8 0.2 4.4 Issued bonds < 1 year 3,731.1 1,992.4 794.7 6.4 3.7 1.4 Deposits, business customers 12,049.7 13,088.6 13,854.7 20.7 24.6 25.4 Deposits, retail customers 19,037.9 18,115.1 18,076.0 32.7 34.1 33.2 Senior loans > 1 year 478.1 1,490.9 1,565.7 0.8 2.8 2.9 Issued bonds > 1 year 4,290.2 5,813.8 1,650.5 7.4 10.9 10.4 Subordinated loans 2,316.8 2,477.0 2,681.1 4.0 4.7 4.9 Shareholders’ equity 4,627.3 4,374.4 4,142.7 8.0 8.2 7.6 Total 58,143.9 53,175.3 50,527.0 100.0 100.0 100.0

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 65 10.3. Deposits and Payables to Credit Institutions and Central Banks

The table below shows information about the Group’s deposits and payables to credit institutions and central banks at 31 December 2011, 2010 and 2009.

Table 41 – The Group’s Deposits and Payables to Credit Institutions and Central Banks

As at 31 December (DKKm) 2011 2010 2009

Payables to credit institutions and central banks Payables to central banks 237.2 527.0 229.5 Payables to credit institutions 11,853.7 6,787.0 9,097.8 Total payables to credit institutions and central banks 12,090.9 7,314.0 9,327.3

Shown by term to maturity On demand 2,350.7 2,366.0 2,277.5 Up to 3 months 9,103.5 3,451.9 3,440.6 Between 3 months and 1 year 161.4 0.7 2,043.5 Between 1 and 5 years 309.5 1,491.6 1,561.7 Over 5 years 165.8 3.8 4.0 Total 12,090.9 7,314.0 9,327.3

Of which, genuine sale and repo transactions Repo transactions 5,010.8 813.3 1,697.0

Mortgage debt on real property 0.0 4.7 4.8 The carrying amount of the mortgaged properties amounts to 0.0 8.5 8.0

Deposits and other payables On demand 19,484.7 21,439.9 21,122.8 Subject to notice 4,990.1 2,763.9 4,127.9 Time deposits 3,389.1 3,987.3 3,194.9 Special types of deposits 3,223.7 3,012.6 3,485.1 Total deposits and other payables 31,087.6 31,203.7 31,930.7

Shown by term to maturity On demand 19,484.7 21,439.9 21,122.8 Up to 3 months 4,231.0 4,104.4 3,355.3 Between 3 months and 1 year 1,826.1 991.2 4,260.4 Between 1 and 5 years 3,336.0 2,550.8 673.9 Over 5 years 2,209.8 2,117.4 2,518.3 Total 31,087.6 31,203.7 31,930.7

66 PART I – 10. Capital Resources Prospectus – Spar Nord Bank 10.4. Maturity Structure of Capital Market Funding

The table below shows the maturity structure of the Group’s capital market funding at 31 December 2011. It is assumed that, in accordance with the Group’s practice in the area and subject to approval by the DFSA, the Subordinated Loan Capital and Hybrid Core Capital will be repaid at the maturity dates.

Table 42 – Maturity Structure of the Group’s Capital Market Funding at 31 December 2011

(DKKm) 2012 2013 2014 2015 2016-> Total

Senior loans 1,636.8 150.0 150.0 0.0 178.1 2,114.9 Issued bonds covered by state guarantee 3,731.1 2,491.6 0.0 0.0 0.0 6,222.7 Issued bonds not covered by state guarantee 0.0 1,505.0 274.1 19.5 0.0 1,798.6 Subordinated Loan Capital 608.3 0.0 0.0 0.0 0.0 608.3 Hybrid Core Capital* 0.0 0.0 1,331.3 377.2 0.0 1,708.5 Total 5,976.2 4,146.6 1,755.4 396.7 178.1 12,453.0

*Hybrid Core Capital does not fall due in full or in part at any specific date. Accordingly, the table above shows when the Bank plans to repay the Hybrid Core Capital.

As shown in the table above, most of the Group’s capital market 2012 concerning senior funding for DKK 150 million. Management funding will mature in 2012 and 2013. believes that the Bank thus does not need additional issues under the EMTN programme to meet its long-term liquidity target. The long-term liquidity target is calculated relative to the Bank’s internal target of positive strategic liquidity and the stable funding This may to a great extent be attributed to the phasing out of the requirement of the Supervisory Diamond. The short-term liquidity Group’s leasing activities, which contribute a positive amount of target is calculated relative to the requirement of the Supervisory DKK 2.7 billion in 2012 and another DKK 2.3 billion in 2013. As the Diamond on Excess liquidity coverage (above 50%), cf. section 152(1) Group’s remaining leasing activities will be phased out as the leases (ii) of the Danish Financial Business Act. expire, however, these figures are based on assumptions about the repayment period for existing leases, which may have to be Based on cash flow projections for the next two years and the changed. maturity structure set out above, Management believes that, for the period until the end of 2013, the Group will not require additional Even though the Group has no immediate additional funding re- funding as it meets both the short-term and the long-term liquid- quirement, the Bank will consider the possibility of issuing longer- ity targets for the entire period. The projections do not take bond duration capital market funding to further consolidate the Group’s issuance throughout the period under review into account, with the funding structure. exception of an agreement already concluded in the first quarter of

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 67 10.5. Term to Maturity

The table below shows a breakdown by expected term to maturity of the Group’s balance sheet items at 31 December 2011, 2010 and 2009.

Table 43 – Balance Sheet Items Broken Down by Expected Term to Maturity

As at 31 december 2011 2010 2009 (DKKm) < 1 year > 1 year < 1 year > 1 year < 1 year > 1 year

Assets Cash balances and demand deposits with central banks 641.0 0.0 578.1 0.0 841.5 0.0 Receivables from credit institutions and central banks 2,133.4 294.9 1,856.5 371.3 3,785.7 228.0 Loans, advances and other receivables at amortised cost 18,553.4 20,148.7 19,542.5 20,409.6 19,063.6 19,251.8 Bonds at fair value 9,382.1 7,039.1 5,458.1 8,179.2 5,035.9 7,542.9 Shares etc. 82.0 958.4 169.8 951.9 75.2 794.6 Equity investments in associates 0.0 765.1 0.0 745.8 0.0 718.8 Assets linked to pooled schemes 813.8 5,513.3 660.3 5,018.2 369.3 3,697.2 Intangible assets 6.5 124.9 5.1 152.4 8.4 157.5 – Investment properties 48.5 0.0 61.4 0.0 60.4 0.0 – Corporate properties 11.1 445.5 10.8 442.0 10.8 452.0 Land and buildings, total 59.6 445.5 72.2 442.0 71.2 452.0 – Operating lease assets 85.7 318.3 92.4 345.0 42.5 186.7 – Other property, plant and equipment 37.0 102.6 46.3 120.1 38.4 114.5 Other property, plant and equipment, total 122.7 420.9 138.7 465.1 80.9 301.2 Current tax assets 10.3 0.0 1.4 0.0 3.5 0.0 Temporary assets 87.5 0.0 79.8 0.0 96.7 0.0 Other assets 1,175.1 1,226.6 1,174.2 890.3 1,230.9 676.5 Deferred income 76.6 0.0 73.2 0.0 75.9 0.0 Total 33,144.0 36,937.4 29,809.9 37,625.8 30,738.7 33,820.5

Liabilities Payables to credit institutions and central banks 11,615.6 475.3 5,818.6 1,495.4 7,761.6 1,565.7 Deposits and other payables 6,057.1 25,030.5 5,095.5 26,108.2 7,615.7 24,315.0 Deposits in pooled schemes 813.8 5,513.3 660.3 5,018.2 369.3 3,697.2 Issued bonds at amortised cost 3,731.1 4,290.2 1,992.4 5,813.8 794.7 5,650.5 Other non-derivative financial liabilities at fair value 769.8 0.0 1,211.4 0.0 86.0 0.0 Current tax liabilities 7.3 0.0 2.4 0.0 0.1 0.0 Other liabilities 2,980.3 1,345.7 5,818.7 889.9 4,420.7 790.1 Deferred income 53.8 0.0 190.1 0.0 158.7 0.0 Total liabilities other than provisions 26,028.8 36,655.0 20,789.4 39,325.5 21,206.8 36,018.5

Provisions for deferred tax 0.0 394.9 0.0 333.7 0.0 311.1 Provisions for losses and guarantees 1.8 0.0 4.5 0.0 133.8 0.0 Other provisions 36.4 20.4 115.3 15.9 20.1 15.1 Subordinated debt 608.3 1,708.5 204.5 2,272.5 251.4 2,429.7 Total 26,675.3 38,778.8 21,113.7 41,947.6 21,612.1 38,774.4

68 PART I – 10. Capital Resources Prospectus – Spar Nord Bank The table below shows a breakdown by contractual term to maturity of the Group’s financial liabilities at 31 December 2011, 2010 and 2009.

Table 44 – Breakdown by Contractual Term to Maturity of the Group’s Financial Liabilities at 31 December 2011

Contractual Carrying cash Within 1 – 5 After (DKKm) amount flow 1 year years 5 years

Non-derivative instruments Payables to credit institutions and central banks 12,090.9 12,139.9 11,637.3 336.8 165.8 Deposits and other payables 31,087.6 31,642.8 25,657.9 3,540.8 2,444.1 Deposits in pooled schemes 6,327.1 6,327.1 813.8 1,656.0 3,857.3 Issued bonds at amortised cost 8,021.3 8,198.2 3,852.2 4,346.0 0.0 Other liabilities, excl. derivative instruments 2,460.2 2,460.2 2,460.2 0.0 0.0 Subordinated debt 2,316.8 2,592.4 753.9 1,838.5 0.0 Irrevocable credit commitments and guarantees 3,837.7 3,837.7 2,518.8 671.8 647.1

Derivatives Forward contracts used as hedging instruments (netted) 1,865.8 1,819.6 510.1 580.9 728.6

31 December before liabilities destined for sale 68,007.4 69,017.9 48,204.2 12,970.8 7,842.9

Liabilities destined for sale 0.0 0.0 0.0 0.0 0.0

31 December adjusted for liabilities destined for sale 68,007.4 69,017.9 48,204.2 12,970.8 7,842.9

Table 45 – Breakdown by Contractual Term to Maturity of the Group’s Financial Liabilities at 31 December 2010

Contractual Carrying cash Within 1 – 5 After (DKKm) amount flow 1 year years 5 years

Non-derivative instruments Payables to credit institutions and central banks 7,314.0 7,341.7 5,838.0 1,497.7 6.0 Deposits and other payables 31,203.7 31,572.6 26,589.5 2,676.6 2,306.5 Deposits in pooled schemes 5,678.5 5,678.5 660.3 1,559.8 3,458.4 Issued bonds at amortised cost 7,806.2 8,028.8 2,144.8 5,884.0 0.0 Other liabilities, excl. derivative instruments 5,044.8 5,044.8 5,044.8 0.0 0.0 Subordinated debt 2,477.0 2,952.0 360.0 2,592.0 0.0 Irrevocable credit commitments and guarantees 5,137.5 5,137.5 3,774.6 851.0 511.9

Derivatives Forward contracts used as hedging instruments (netted) 1,663.8 1,617.6 752.5 522.8 342.3

31 December before liabilities destined for sale 66,325.5 67,373.5 45,164.5 15,583.9 6,625.1

Liabilities destined for sale 0.0 0.0 0.0 0.0 0.0

31 December adjusted for liabilities destined for sale 66,325.5 67,373.5 45,164.5 15,583.9 6,625.1

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 69 Table 46 – Breakdown by Contractual Term to Maturity of the Group’s Financial Liabilities at 31 December 2009

Contractual Carrying cash Within 1 – 5 After (DKKm) amount flow 1 year years 5 years

Non-derivative instruments Payables to credit institutions and central banks 9,327.3 9,386.4 7,799.4 1,580.5 6.5 Deposits and other payables 31,930.7 32,540.6 28,589.1 1,118.9 2,832.6 Deposits in pooled schemes 4,066.5 4,066.5 369.3 1,135.4 2,561.8 Issued bonds at amortised cost 6,445.2 6,744.0 927.0 5,797.0 20.0 Other liabilities, excl. derivative instruments 4,137.3 4,317.3 4,137.3 0.0 0.0 Subordinated debt 2,681.1 3,349.6 412.6 2,583.3 353.7 Irrevocable credit commitments and guarantees 6,235.3 6,235.3 5,005.5 776.7 453.1

Derivatives Forward contracts used as hedging instruments (netted) 1,073.5 1,023.7 277.0 475.6 271.1

31 December before liabilities destined for sale 65,896.9 67,663.4 47,517.2 13,467.4 6,498.8

Liabilities destined for sale 0.0 0.0 0.0 0.0 0.0

31 December adjusted for liabilities destined for sale 65,896.9 67,663.4 47,517.2 13,467.4 6,498.8

The above information on maturity structure is based on the con- DKK 1,615 million (2010: DKK 1,615 million) (2009: DKK 2,602 mil- tractual, undiscounted cash flows and comprises agreed payments, lion) after five years. including principal and interest. As concerns liabilities with variable cash flows, such as floating-rate financial liabilities, the information Combined, the Group has subordinated debt with a perpetual term is based on the conditions existing at the balance sheet date. totalling DKK 1,615 million (2010: DKK 1,615 million), (2009: DKK 1,615 million). For loans with a perpetual term, no interest has been Issued bonds at amortised cost and subordinated debt are deemed calculated for the period after five years in the table above. The an- to fall due at the time when the Group may choose between re- nual interest on loans with a perpetual term amounted to DKK 141 deeming the debt and paying a higher interest rate/higher redemp- million in 2011. tion price. Under the agreements made, customers can usually demand repay- If the Group instead chooses to extend the loans beyond this date, ment of their deposits at short notice. However, in practice they are DKK 158 million (2010: DKK 161 million) (2009: DKK 170 million) considered a stable funding source, as amounts disbursed largely falls due for payment within one year, DKK 1,210 million (2010: DKK equal deposits received. 1,435 million) (2009: DKK 934 million) within one to five years and

70 PART I – 10. Capital Resources Prospectus – Spar Nord Bank 10.6. Financial Assets and Liabilities in the Trading 10.7. Solvency and Capital Portfolio and Outside the Trading Portfolio The Group is authorised to conduct banking business and is as such Assets and liabilities in the trading portfolio comprise securities and subject to a capital requirement pursuant to the Danish Financial actively managed derivatives measured at fair value. The portfolio Business Act. The Danish rules on capital adequacy are based on does not comprise derivatives used for hedging purposes. the CRD and apply to the Bank as well as to the Group.

The table below shows the composition of the Group’s assets and The capital adequacy rules stipulate a minimum capital of 8% of the liabilities in and outside the trading portfolio at 31 December 2011, calculated risks in the so-called Pillar I defined by the CRD plus any 2010 and 2009. additional capital requirement to cover all relevant risks, including risks not adequately covered under Pillar I. Such risks could include business risks and special credit risks. Table 47 – Composition of the Group’s Assets and Liabilities In and Outside the Trading Portfolio Detailed risks have been defined for the calculation of capital and risks (risk-weighted assets). The capital consists of Common Equity (Tier 1) and capital in the form of Hybrid Core Capital and Sup- As at 31 December plementary Capital. Common Equity (Tier 1) more or less equals Fair value in DKKm 2011 2010 2009 shareholders’ equity for accounting purposes, except that goodwill and other intangible assets etc. have been deducted. The difference Financial assets in the between the shareholders’ equity for accounting purposes and the trading portfolio Core Capital appears from the calculation of the Group’s Capital Mortgage bonds 14,646.3 11,773.5 11,374.0 Base. Under certain assumptions and subject to certain limitations, Government bonds 252.3 119.6 43.4 the Group’s Hybrid Core Capital and Supplementary Capital can be included in the Capital Base. Other bonds 1,522.6 1,744.2 1,161.4 Bonds, unlisted 177.7 193.6 133.2 The table below shows the Group’s Capital Base at 31 December Shares, listed 82.0 169.8 75.2 2011, 2010 and 2009. Shares, unlisted 40.6 61.9 43.0 Positive market value of Table 48 – The Group’s Capital Base derivative financial instruments 1,740.8 1,613.2 1,436.7 Total assets 18,462.3 15,675.8 14,266.9 As at 31 December

(DKKm) 2011 2010 2009 Financial liabilities in the trading portfolio Share capital 570.7 570.7 570.7 Negative market value of Other reserves 450.7 440.1 411.8 derivative financial instruments 1,853.0 1,656.9 1,068.5 Retained earnings 3,543.5 3,299.0 3,105.5 Other non-derivative instruments 769.8 1,211.4 86.0 Proposed dividend 0.0 0.0 0.0 Total liabilities 2,622.8 2,868.3 1,154.5 Intangible assets -131.4 -157.5 -165.9

Goodwill in associates -34.9 -37.1 -37.1 As at 31 December Common Equity (Tier 1) Fair value in DKKm 2011 2010 2009 after primary deductions 4,398.6 4,115.2 3,885.0

Financial assets outside Deduction for equity the trading portfolio investments in associates -361.1 0.0 0.0 Shares, unlisted 917.8 890.0 751.6 Deduction for equity investments > 10% -27.0 -23.8 -21.2 Equity investments in associates 765.1 745.8 718.8 Deduction for the sum of Positive market value of equity investments < 10% 0.0 -43.4 0.0 hedging instruments 96.7 57.3 26.4 Hybrid Core Capital 1,611.1 1,669.5 1,638.2 Total assets 1,779.6 1,693.1 1,496.8 Core Capital (incl. Hybrid Core Capital) after deductions 5,621.6 5,717.5 5,502.0 Financial liabilities outside Supplementary Capital 608.3 807.5 1,042.8 the trading portfolio Revaluation reserves 62.4 64.6 54.7 Negative market value of hedging instruments 12.8 6.9 5.0 Deduction for equity investments in associates -361.1 -702.0 -672.1 Total liabilities 12.8 6.9 5.0 Deduction for equity investments > 10% -27.0 -23.8 -21.2 Deduction for the sum of equity investments < 10% 0.0 -43.4 0.0 Capital base 5,904.2 5,820.4 5,906.2

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 71 The executive order on the calculation of Capital Base, which Risk-weighted Items are impacted by a number of factors such as entered into force on 1 July 2011, contained material changes to the the breakdown of credit exposure by customer types and products. rules on deduction. Risk-weighted Items regarding credit risk and market risk are calculated on the basis of the CRD standard method. Counterparty risk Previously, equity investments in associates had to be deducted is calculated using the market value approach, while Risk-weighted 100% from the Capital Base. The executive order on the calcula- Items regarding operational risk are based on the basic indicator tion of Capital Base stipulates that 50% of the equity investments approach. In addition, the Bank exercises the option to apply lower must be deducted from Core Capital and 50% from Supplementary weighting to credit risk, including the use of the exposure catego- Capital. The implementation of the more stringent deduction rules ries retail customers and mortgages on real property as well as the triggered a reduction of the Group’s Core Capital (Tier 1) ratio incl. extended method for financial collateral. Hybrid Core Capital of about 0.9 percentage point. The table below shows information on the Group’s capital require- Risk-weighted Items is an important risk target used for example ment and the Risk-weighted Items at 31 December 2011, 2010 and to recalculate the most important risk indicators such as the Core 2009. Capital (Tier 1) ratio and the solvency ratio. Moreover, Risk-weighted Items are used in connection with the calculation of the Bank’s ICAAP ratio.

Table 49 – The Group’s Capital Requirement and Risk-weighted Items

Risk type Capital requirement* Risk-weighted Items (DKKm) 2011 2010 2009 2011 2010 2009

Credit risk Central governments or central banks 0.0 0.0 0.0 0.0 0.0 0.0 Regional or local authorities 0.0 0.0 0.0 0.0 0.0 0.0 Public entities 1.7 0.0 0.0 20.7 2.1 3.4 Institutions 78.0 76.7 27.0 974.8 958.5 337.4 Business customers etc. 1,153.0 1,170.9 1,116.3 14,412.8 14,635.9 13,953.2 Retail customers 1,175.4 1,209.3 1,213.2 14,692.8 15,116.6 15,164.7 Exposure secured by mortgages on real property 92.2 101.8 131.8 1,153.1 1,272.8 1,647.6 Exposure in arrears or overdrawn 52.9 105.2 104.3 661.6 1,314.4 1,304.2 Exposure with short-term rating 0.0 0.0 17.4 0.0 0.0 217.7 Collective investment schemes 0.0 0.0 0.0 0.2 0.0 0.0 Other exposures 95.5 99.3 80.7 1,193.1 1,241.3 1,009.1 Counterparty risk 114.8 110.9 105.5 1,435.2 1,386.2 1,318.8 Total credit risk 2,763.5 2,874.1 2,796.2 34,544.3 35,927.8 34,956.1

Market risk Debt instruments 226.0 207.5 193.3 2,824.2 2,593.9 2,416.7 Shares etc. 27.1 33.5 18.8 338.9 419.1 235.2 Foreign-exchange risk 31.2 13.1 12.8 390.4 163.2 160.6 Commodity risk 0.0 0.0 0.0 0.0 0.0 0.0 Total market risk 284.3 254.1 224.9 3,553.5 3,176.2 2,812.5 Total operational risk 327.2 344.1 313.9 4,090.0 4,301.5 3,923.6 Total 3,375.0 3,472.3 3,335.0 42,187.8 43,405.5 41,692.2

* The capital requirement is calculated as 8% of Risk-weighted Items

72 PART I – 10. Capital Resources Prospectus – Spar Nord Bank The table below shows information on the Group’s capital adequacy ties, large facilities, concentration risks and risks attaching to ratios at 31 December 2011, 2010 and 2009. granted, unutilised credit lines.

• Market risk: Comprises the risk of loss because the fair value of Table 50 – The Group’s Capital Adequacy Ratios the Group’s assets and liabilities varies due to price fluctuations in the financial markets.

(%) 2011 2010 2009 • Operational risk: Comprises the risk of financial loss due to in appropriate or inadequate internal processes, human or system Solvency ratio 14.0 13.4 14.2 error and similar errors and losses as a result of external events. Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 13.3 13.2 13.2 • Other risks: Comprises the risk of loss due to the business Common Equity (Tier 1) ratio 10.4 9.5 9.3 profile, strategic risks, reputational risk, property risk, risk relating to capital procurement, liquidity risk and other risks (group risks, Bank size, settlement risk, external risks and the like). The The Group must publish its ICAAP ratio on a quarterly basis. The capital required to cover these risks is reduced by the recognised calculation builds on the DFSA’s guidelines on adequate Capital profit before loan impairment losses etc. Base and solvency need for credit institutions, employing the probability method. • Statutory requirements: Comprises situations in which the Dan- ish Financial Business Act stipulates a lower threshold for the The overall ICAAP ratio is divided into risk areas according to the ICAAP ratio. following principles: The table below shows information on the Group’s ICAAP ratio, • Credit risk: Comprises the risk of loss from borrowers or other including a calculation of the Group’s capital buffer at 31 December counterparties failing to meet their payment obligations, includ- 2011, 2010 and 2009. ing the risks attaching to customers having financial difficul-

Table 51 – Information on the Group’s ICAAP Ratio, Including a Calculation of the Group’s Capital Buffer

Adequate Capital Base Group ICAAP ratio 2011 2010 2009 2011 2010 2009 (DKKm) (DKKm) (DKKm) (%) (%) (%)

Credit risk 2,886.0 2,669.0 2,402.0 6.8 6.2 5.9 Market risk 742.0 710.0 666.0 1.8 1.6 1.6 Operational Risk 369.0 398.0 357.0 0.9 0.9 0.8 Other risks -276.0 -72.0 100.0 -0.7 -0.2 0.2 Surcharge due to statutory requirements 0.0 0.0 0.0 0.0 0.0 0.0 Adequate capital base 3,721.0 3,705.0 3,525.0 8.8 8.5 8.5 Capital base 5,904.2 5,820.4 5,906.2 Capital buffer 2,183.2 2,115.4 2,381.2 Excess coverage ratio 58.7 57.1 67.6

At 31 December 2011, the adequate Capital Base was calculated credit-reservation method assumes that the minimum solvency re- at DKK 3,721 million (31 December 2010: DKK 3,705 million), (31 quirement of 8% generally covers a bank’s ordinary risks. However, December 2009: DKK 3,525 million). This translates into a solvency a bank may be exposed to a higher risk in certain areas, typically ratio of 8.8% (2010: 8.5%), (2009: 8.5%). in the credit area. In such cases, the 8% minimum requirement will typically not be sufficient, and an addition should therefore be Of the total capital requirement, DKK 2,886 million or 78% at 31 De- calculated. cember 2011 was ascribable to credit risk (2010: DKK 2,669 million, or 72%), (2009: DKK 2,402 million, or 68%). At 31 December 2011, As there are still no detailed guidelines for using this method, esti- market risk represented 20% of the total capital requirement (2010: mating its impact on the Group’s calculated solvency need is subject 19%), (2009: 19%). to substantional uncertainty. Management’s preliminary estimate is that the Group’s solvency need using the new method will be The DFSA has acknowledged that, in future inspections of the sol- unchanged or raised by 0.0 to 0.5 of a percentage point. vency area, it will use the so-called credit-reservation method. The

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 73 Equity (Tier 1) ratio by 1.8 percentage points and increasing the 10.8. Effect of the Offering Group’s strategic cash resources by DKK 7.1 billion.

The table below illustrates the effect of the Offering on the Group’s solvency ratio, the Common Equity (Tier 1) ratio and the Core 10.10. e ffect of Future Rules on the Group’s Capital (Tier 1) ratio incl. Hybrid Core Capital at 31 December 2011, Capital and Cash Resources assuming full subscription of the Offering. On 16 December 2010, the Basel Committee announced the Basel III proposals (“Basel III”) containing, among other things, new Table 52 – Effect of the Offering requirements for capital and liquidity.

On 20 July 2011, the EU Commission presented a proposal for a (%) 2011 revision of the capital requirements directive, also referred to as CRD IV (“CRD IV”). As the rules of CRD IV are expected to apply in Solvency ratio 16.0 Denmark, this section primarily deals with the Bank’s compliance Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 15.3 with CRD IV. Common Equity (Tier 1) ratio 12.4 See “Part I—Description of the Bank—The Danish Banking System and Regulation—Regulation—Expected Legislative Amendments, Adjusted to reflect the net proceeds from the Offering and assuming including due to CRD IV and Basel III”, for further information about full subscription, at 31 December 2011, the Group would have had a the reform package. solvency ratio of 16.0, a Core Capital (Tier 1) ratio incl. Hybrid Core Capital of 15.3 and a Common Equity (Tier 1) ratio of 12.4. Core Capital Adjusted to Reflect CRD IV For purposes of complying with the Danish solvency requirements, As described in “Part I—Description of the Bank—Capital Resourc- the Capital Base is divided into two main categories, Core Capi- es—Maturity Structure”, DKK 5,976 million of the Group’s capital tal and Supplementary Capital. Core Capital comprises Common market funding will mature in 2012, of which DKK 508 million Equity (Tier 1), which mainly consists of share capital and reserves relates to Subordinated Loan Capital, which is expected to be repaid (excluding revaluation reserves) and Hybrid Core Capital adjusted in the first quarter of 2012. for statutory deductions.

The table below illustrates the effect of the Offering on the Group’s The expected implementation of CRD IV will lead to a consider- solvency ratio, Common Equity (Tier 1) ratio and Core Capital (Tier ably stricter minimum capital requirement for the banks, as the 1) ratio incl. Hybrid Core Capital at 31 December 2011, adjusted for requirement for Common Equity (Tier 1) will be phased in gradually repayment of DKK 508 million of Subordinated Loan Capital assum- from the current 2% of risk-weighted assets to 7% in 2019. The 7% ing full subscription of the Offering. requirement will include a capital conservation buffer of 2.5%, and if a bank does not maintain the buffer, restrictions will be placed on its ability to pay dividends and make other payments. Table 53 – Effect of the Offering, Adjusted to Reflect Repayment of Subordinated Loan Capital In addition, the expected implementation of CRD IV will entail a redefinition of the capital to be included as Core Capital and changes to the calculation of Risk-weighted Items. On the basis (%) 2011 of the proposals, the Bank estimates that Common Equity (Tier 1) as a percentage of Risk-weighted Items, which was 10.4% at 31 Solvency ratio 14.8 December 2011, will be reduced by about 1.4 percentage point when Core Capital (Tier 1) ratio, incl. Hybrid Core Capital 14.8 calculated on the basis of fully phased-in CRD IV rules. Common Equity (Tier 1) ratio 12.4 The expected reduction will primarily be attributable to a new capital charge on counterparty risk and the fact that the basis for calculating deductions is moved from Capital Base to Core Capital after deductions. 10.9. Impact of Phasing Out the Activities of Spar Nord Leasing A/S (previously Finans Nord A/S) CRD IV also comprises a countercyclical buffer of up to 2.5% of the risk-weighted assets. This buffer will only be applied if a country’s At 30 September 2011, Spar Nord Leasing A/S had total assets of lending growth relative to GDP deviates from the long-term devel- DKK 8.5 billion, of which DKK 7.7 billion was loans and advances. At opments, and only if the national authorities believe that the lending 1 October 2011, Finans Nord Easyfleet A/S and the future activities growth may represent an economic risk to society. Under CRD IV, of Spar Nord Leasing A/S were transferred to the Jyske Bank group. only Core Tier 1 Capital may be used to comply with the countercy- It has been resolved to phase out the Group’s remaining leasing ac- clical buffer. tivities in Denmark and Sweden as the lease contracts expire. Most of the assets are expected to be phased out by the end of 2015, and Definition of Instruments Included in Capital Base under CRD IV about 45% of the assets will be phased out by the end of 2012, about CRD IV sharpens the criteria for inclusion of instruments in Core 70% by the end of 2013 and about 90% by the end of 2014. Capital and Supplementary Capital as the expected new rules only allow the inclusion of instruments without incentive for the banks to The Group’s capital and cash resources will gradually improve as redeem. the leasing activities are phased out. From the end of 2011 and until the phase-out is fully completed, the phase-out will, other things According to CRD IV, instruments that no longer qualify for inclusion being equal, have contributed to improving the Group’s Common in Core Capital or Supplementary Capital will be phased out over a 9-year period beginning on 1 January 2013. In addition, instru-

74 PART I – 10. Capital Resources Prospectus – Spar Nord Bank ments that carry an incentive for redemption must be phased out as Liquidity they mature. Existing public sector capital contributions, including The EU has not yet determined the final form of liquidity require- State Hybrid Capital, can be included in the Capital Base until 31 ments for financial institutions. If the liquidity requirements adopted December 2017. in Denmark are based on Basel III, the Bank will need to make significant changes to its funding structure and the composition of There are moderate incentives for redemption of the Bank’s Hybrid its liquidity buffer because of the proposed restriction on inclusion Core Capital and subordinated debt, so the transitional rules are of covered bonds in the liquidity buffer. expected to apply to these instruments. Basel III proposes that covered bonds, including mortgage bonds Leverage Ratio and other (so-called) level 2 assets, can only represent up to 40% CRD IV introduces rules on the calculation of a so-called leverage of the liquidity buffer in a bank’s liquidity coverage ratio, whereas ratio. In contrast to the current rules for calculating Risk-weighted government bonds and other (so-called) level 1 assets must account Items, the leverage ratio does not take into account that different for at least 60%. The proposed requirement is fundamentally differ- activities on banks’ balance sheets are subject to different degrees ent from the structure of the Danish bond market, where mortgage of risk. Basel III contains a proposal for a requirement that Core bonds represent approximately 80%. Capital must constitute at least 3% of the total exposure. Under CRD IV, the effect of the determined gearing ratio will be monitored with According to CRD IV, it will be possible to recognise covered bonds a view to making it a binding Pillar 1 benchmark in 2018. The Bank as level 1 assets, if the bonds pass the liquidity test. The EBA will estimates that its leverage ratio at the end of 2011 stood at 6.5% present the draft technical standards on or before 1 January 2013. adjusted to reflect CRD IV conditions. As a result of the current uncertainty with respect to which assets The table below shows information on the Bank’s leverage ratio qualify as level 1 assets and level 2 assets, respectively, under CRD under CRD IV calculated as at December 2011, December 2010 and IV, it is assessed that the Group, subject to certain adjustments, will December 2009. be able to meet the Liquidity Coverage Ratio.

Table 54 – Bank’s Leverage Ratio under CRD IV

As at 31 December (DKKm) / (%) 2011 2010 2009

Exposure value assets 51,760.8 48,714.0 50,095.1 Intangible assets -166.3 -194.6 -203.0 Adjusted exposure value assets 51,594.5 48,519.4 49,892.0

Guarantees and other obligating agreements 4,358.6 5,719.2 6,810.8 Loan offers and other irrevocable credit commitments 4,688.0 6,516.2 4,722.5

Total adjusted exposure 60,641.1 60,754.8 61,425.3

Core Capital, CRD IV, fully phased in 3,920.0 3,600.7 3,484.2

Leverage ratio under CRD IV, % 6.5 5.9 5.7

Spar Nord Bank – Prospectus PART I – 10. Capital Resources 75 11. Risk, Liquidity and Capital Management

The Executive Board has set up a number of committees which con- 11.1. Overview tribute to the Group’s risk management in specific areas, and which prepare issues and themes for consideration by the Executive Board The Group is exposed to a number of risks, which it manages at dif- and the Board of Directors. ferent organisational levels. The most important types of risk are: The Group’s internal audit department is accountable to the Board • Credit risking: The risk of loss resulting from borrowers or other of Directors and reports to the Board of Directors and the Execu- counterparties failing to meet their payment obligations, includ- tive Board. Internal Audit’s activities are based on the annual plan ing the risks attaching to customers with financial difficulties, adopted by the Board of Directors and include test examinations large facilities, concentration risk and risks attaching to granted, of business procedures and internal control in key areas subject to unutilised credit lines. Credit risk includes also settlement risk, including in connection with the financial reporting process. and counterparty risk. Settlement risk is the risk arising when payments are settled, such as payments in respect of currency The Group’s Compliance function is responsible for monitoring transactions and trades in financial instruments, including de- compliance with financial legislation, banking sector standards and rivatives. The risk arises when the Group remits payments before the Group’s internal guidelines in all areas. The Compliance func- it can ascertain that the counterparty has fulfilled its obligations. tion is accountable to the Executive Board and reports to the Board Counterparty risk is the risk of loss resulting from a customer’s of Directors. Its members are compliance officers and representa- default on over-the-counter derivatives and securities financing tives from a cross-section of the Group’s business areas responsible instruments. for decentralised compliance activities. The Compliance function’s work is based on the annual plan adopted by the Board of Directors. • Market risk: The risk of loss because the fair value of the Group’s assets and liabilities varies with changes in market conditions. The Group’s independent auditors are appointed by the shareholders at the annual general meeting for terms of one year. The frame- • Operational risk: The risk of loss resulting from inappropriate work for the auditors’ duties, including audit and other services, is or inadequate internal processes, human or system error, or agreed annually between the Board of Directors and the auditors on external events, including legal risk, strategic risk and reputa- the recommendation of the audit committee. tional risk.

• Liquidity risk: The risk of loss caused by the Group’s funding costs increasing significantly, lack of funding preventing the Group from concluding new business, or lack of funding ulti- Figure 3 – Risk Management Organisation mately preventing the Group from meeting its obligations.

11.2. Risk Management Organisation board of directors The Group has a two-tier management structure, comprising an ex- Internal Audit ecutive board and a board of directors. In the risk area, the Board of Audit Committee Department Directors has laid down written guidelines for the Executive Board, clearly defining responsibilities for each management level. The executive Board of Directors lays down overall policies, while the Executive board Board is in charge of the Group’s day-to-day management.

The Board of Directors must ensure that the Group is properly or- Credit Committee ganised, and that risk policies and limits are defined for all material risk types. In addition, all large credit facilities are submitted to the Market Risk Risk review officer Board of Directors for approval. The Board of Directors also decides Committee on general principles for managing and monitoring risk. Regular reporting enables the Board of Directors to monitor whether the overall risk policies and the defined limits are being complied with. Solvency Committee Compliance

The Board of Directors has established an audit committee which is responsible for monitoring and controlling accounting and auditing Spar Nord’s Finance & Accounts Credit Rating matters and for drafting material to be used by the Board of Direc- Local Banks tors when considering matters relating to accounting and auditing. The audit committee has three members, including a member who Trading, Fin. Markets Risk Management Central Credit has special qualifications in auditing and accounting as defined by & the Int. Division legislation and who is also independent.

Capital and Liquidity Spar Nord Leasing Credit Quality The Executive Board is responsible for the day-to-day management Management of the Group. This involves, among other things, that the Executive Board establishes specific instructions for the Group’s risks and risk management practices. The Executive Board reports regularly Controller function to the Board of Directors on the Group’s risk exposure.

76 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank Credit Committee quality of all exposures and performs systematic quality control of Credit applications that exceed the lending authorities of Credit the entire portfolio of exposures. Rating or involve a matter of principle are submitted to the Credit Committee, which consists of the Chief Credit Officer and a member The Credit Quality function reviews all new retail customer facilities of the Executive Board. Frequently, matters considered by the Credit exceeding DKK 100,000 and business customer facilities exceeding Committee will be prepared for subsequent consideration by the DKK 300,000. New customers with weak credit quality are regis- Board of Directors. tered on an ongoing basis.

Market Risk Committee The Group has developed IT tools for managing and monitoring The Market Risk Committee is composed of representatives of credit risk. Monitoring is performed, for example, through the the Executive Board, Finance & Accounts and Trading, Financial Group’s credit analysis system, which records key data regarding Markets & the International Division. The Committee meets on a credit facilities and customers’ financial situation. This is done to quarterly basis and reviews developments in the Bank’s positions detect danger signals at an early stage and also to monitor changes and risk exposure as well as liquidity and expectations regarding in the credit quality of portfolios and organisational units. market developments and future plans. In addition, the Committee receives input from the more operationally orientated Capital Mar- A statistically-based scoring of both retail and business customers ket Committee, for example regarding any issues of fundamental is performed each month based on behaviour. Credit scoring has importance that need to be discussed. been introduced across the Bank and is used for local credit granting purposes in order that the risk categories accorded the least Solvency Committee risk exposure may be granted larger extensions than those with the The Solvency Committee is composed of members of the Executive greatest risk exposure. The systems are also used for managing Board, Credit Rating and Finance & Accounts. The objective of the overdrafts and for pricing purposes. Committee is to formulate targets and principles for calculating the appropriate Capital Base and the ICAAP result. The Solvency Risk and settlement lines for trading partners in the financial Committee prepares a recommendation for the ICAAP result for sector are granted by the Credit Committee. Exposures exceeding approval by the Board of Directors. the authority of the Credit Committee are granted by the Board of Directors. Overall monitoring of lines is performed by the credit Risk Review Officer organisation, and all lines are assessed at least once a year based, The Risk Review Officer is responsible for the Group’s activities that among other things, on the financial statements of individual trad- are subject to risk exposure across risk areas and organisational ing partners in the financial sector. units as well as risks related to outsourced functions. The Risk Review Officer is responsible for the Group’s risk management Market Risk being performed in an appropriate manner, including for providing The Bank’s Board of Directors defines the general policies, frame- an overview of the Group’s risks and the overall risk exposure. The works and principles, and the Middle Office function of Finance Risk Review Officer has overall responsibility for the Group’s risk & Accounts is responsible for monitoring and controlling that the policies and for monitoring and reporting on risks across risk types Group’s market risk does not exceed the defined limits. and organisational units. The Risk Review Officer reports to the Executive Board. A three-tier instruction hierarchy has been established for the management of market risk. At the top tier, the Board of Directors defines the limits for the Group. At the next tier, the Executive Board 11.3. Risk Management delegates limits to the Group’s other units, with Trading, Financial Markets & the International Division being by far the largest unit. At Credit Risk the third and final tier, the executives of Trading, Financial Markets The credit process is managed centrally. Decentralised lending & the International Division are allocated the limits within which authorities are between DKK 2 million and DKK 10 million for exist- they may operate. ing customers. With respect to new customers, lending authorities are typically half the amounts applicable to existing customers. The Group has contingency plans in place to handle critical areas Authorities in the credit area are governed by two factors: The indi- such as capital and liquidity. In addition, the Group has contingency vidual local managers’ skills and needs, and the wish that a certain plans in the event of a prolonged IT breakdown. proportion of the authorities from the local banks should be dealt with by Credit Rating. In practice, this work is organised through guidelines, business procedures and processes covering the different areas of the Bank’s The day-to-day management of credit risk is handled by the cus- activities. tomer advisers in collaboration with the local managers. Facilities exceeding the local lending authorities are considered by Credit Operational Risk Rating, the Credit Committee (Chief Credit Officer and an Executive Business procedures and processes for critical areas are reviewed Board member) or the Board of Directors. on an ongoing basis by the Compliance function with a view to assessing risks and recommendations for limiting individual risks. Credit Rating may authorise facilities up to DKK 20 million for exist- The Group continuously develops its IT systems, business proce- ing customers and DKK 15 million for new customers. dures and processes. In this context, the relevant units are responsible for managing risk. The Credit Committee may authorise all facilities up to DKK 60 million, and up to DKK 30 million for new customers. All facilities A risk assessment setting out risks, potential consequences and exceeding DKK 60 million and all new facilities exceeding DKK 30 measures to limit such risks must be prepared in connection with million are subject to approval by the Board of Directors. internal development projects.

The Credit Quality function performs overall monitoring of the The Group’s security policy, including IT security policy, is reviewed Group’s credit risk exposure. It monitors developments in the credit annually and approved by the Bank’s Board of Directors.

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 77 Liquidity Risk Table 55 – The Group’s total credit exposure Liquidity management comprises short-term liquidity management and long-term liquidity management, respectively. Trading, Finan- cial Markets & the International Division is responsible for short- As at 31 December term liquidity management, while long-term liquidity management (DKKm) 2011 2010 2009 is handled by Finance & Accounts. Repo loans 393.2 1,516.6 0.0 The Group’s overall liquidity is managed using a number of manage- Loans and advances ment tools. Short-term liquidity is based on a fixed measure for the at amortised cost 38,308.9 38,435.5 38,315.4 day-to-day liquidity buffer combined with a stress test. Long-term Loans and advances 38,702.1 39,952.1 38,315.4 liquidity is managed through a focused approach to strategic liquid- Contingent liability 3,837.7 5,137.5 6,235.3 ity and by stress testing. Net credit exposure relating to loans, advances 11.4. Credit Risk and guarantees 42,539.8 45,089.6 44,550.7

The Group’s overall credit risk is managed on the basis of the Impairment of loans, Group’s credit policy, which the Bank’s Board of Directors deter- advances and guarantees 1,142.8 1,026.9 1,099.5 mines together with the other general policies and frameworks for the Group’s credit risk. The key objective of the Group’s credit policy Gross credit exposure is to ensure that earnings and risks are balanced, and that risk- relating to loans, advances taking is always quantified. and guarantees 43,682.6 46,116.5 45,650.2

The Group believes that all credits should be granted on the basis Demand deposits of an understanding of the customer’s financial circumstances, with central banks 641.0 578.1 841.5 and that creditworthiness – the customer’s ability and willingness Repo loans with credit to meet present and future obligations – is a key parameter in all institutions and central banks 818.9 811.8 1,750.3 customer relationships. Amounts owed by credit As a basic rule, the Group does not grant loans and credit facilities institutions and central banks 1,609.4 1,416.0 2,263.4 based on collateral alone. Thus, customers must be willing and able Demand deposits and amounts to repay loans granted without the Group having to realise collat- due from credit institutions eral. and central banks 3,069.3 2,805.9 4,855.2

In its efforts to ensure sound risk diversification of its credit exposure, Spar Nord has defined a number of internal targets. Credit exposure for financial The Group does not want to be exposed to individual customers or reporting purposes relating industries that might solely and separately jeopardise the Bank’s to lending activities, net 45,609.1 47,895.5 49,405.9 independence. Consequently, credit facilities have been capped at DKK 400 million, and the unsecured portion may not exceed DKK Counterparty risk 1,837.5 1,670.5 1,463.1 150 million of this exposure. Exposures to trading partners in the fi- Credit exposure relating to nancial sector subject to supervision are not comprised by this cap. assets in the trading portfolio 16,543.8 13,869.0 12,697.0 In determining exposure amounts, so-called “particularly secure Credit exposure relating to other claims” are deducted, as defined in the DFSA Executive Order on financial investment assets 917.8 890.0 751.6 large exposures. Trading partners in the financial sector subject Pools – contracts with to supervision and rated investment grade by an external rater are customers bearing full risk 6,327.1 5,678.5 2,668.2 thus subject to the statutory limitations, and other trading partners Pools – contracts with the in the financial sector subject to supervision are subject to an inter- Bank bearing full risk 0.0 0.0 1,398.3 nally defined limit of DKK 600 million.

Furthermore, the Group has defined a number of industry limita- Credit exposure for financial tions. Among other things, the Group’s long-term target is for agri- reporting purposes 71,235.3 70,003.5 68,384.1 cultural exposures not to exceed 10% of the Group’s loans, advances and guarantees, and that property exposures should make up a lower proportion of the Group’s loans, advances and guarantees than the Danish banking sector average. Finally, the Group aims for Credit Exposure Related to Lending Activities the proportion of retail customers to exceed the sector average and For purposes of the ongoing risk monitoring, the Group’s gross to account for more than 30% of the Group’s total loans, advances credit exposure related to lending activities is broken down into four and guarantees. groups:

Credit Exposure • Retail customers with Spar Nord’s Local Banks The Group’s total credit exposure consists of lending activities and trading activities, such as trading in bonds and other financial • Business customers with Spar Nord’s Local Banks instruments. • Financial customers The following table sets forth the Group’s total credit exposure at 31 December 2011, 2010 and 2009. • Lease customers

78 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank The following table sets forth the Group’s total gross credit exposure The retail customer scoring model is based on customers’ historic to each of the four groups at 31 December 2011, 2010 and 2009. behaviour and quantifies the likelihood of a customer defaulting on its payment obligations within the next 12 months (socalled “Probability of default” or “PD”). The model is based on 10–20 vari- Table 56 – The Group’s total gross credit exposure broken down by ables selected from a comprehensive master list as those that best subgroups describe previously defaulted facilities.

A statistically-based application score is used for risk classification (DKKm) 2011 2010 2009 of new loan customers. Application scoring involves fewer variables than behavioural scoring. When a credit facility has been estab- Spar Nord’s Local Banks lished, the models are gradually adapted with full application of the – Retail customers 13,938.9 15,187.1 16,309.0 behaviour model after six months. Spar Nord’s Local Banks – Business customers 21,171.1 20,594.1 20,071.3 Business customers are divided into nine risk groups (with 1 being Financial customers 1,308.4 2,491.9 1,616.5 the best) based on financial data, a group designated 0 for pub- Spar Nord Leasing A/S 7,264.2 7,843.3 7,653.5 lic customers and a default group. The default group comprises customers written down for impairment or customers with zero- Group 43,682.6 46,116.4 45,650.3 interest accounts. The business customer model is a PD model classifying customers based on their probability of default within the next 12 months. Beginning in 2010, the model was statistically The following table sets forth the industry breakdown of the Group’s based, and in the spring of 2011 it was expanded to include a behav- total gross credit exposure related to lending activities, broken down ioural model for business customers and a business assessment for by industry, at 31 December, 2011, 2010 and 2009. each customer. Finally, the model was expanded to include macro variables adding information about cyclical trends. The model has been implemented and is continuously being developed, among Table 57 – The Group’s total gross credit exposure relating to other things with a view to obtaining IRB approval. In the follow- lending activities, broken down by industry ing table setting forth business customers with Spar Nord’s Local Banks broken down by risk group, data for 2010 and 2009 have been adjusted to make them comparable with 2011 data. (%) 2011 2010 2009 The groups “Not scored” and “Not rated” primarily comprise new Public authorities 4.0 2.3 1.4 customers. Agriculture, hunting and forestry 12.0 11.9 12.5 Fisheries 0.4 0.3 0.5 Retail Customers with Spar Nord’s Local Banks Industry and raw The following table sets forth retail customers with Spar Nord’s materials extraction 3.7 3.8 4.2 Local Banks broken down by risk group at 31 December 2011, 2010 and 2009. Energy supply 3.9 3.0 2.6 Building and construction 5.0 4.9 4.4 Trade 8.6 8.4 7.7 Table 58 – Retail customers with Spar Nord’s Local Banks broken down by risk group Transport, hotels and restaurants 6.4 6.6 7.0 Information and communication 0.4 0.2 0.2 Financing and insurance 5.5 7.9 4.5 (DKKm) 2011 2010 2009 Real property 11.3 10.7 11.0 1 1,332.7 1,676.4 1,660.0 Other industries 6.6 6.7 7.3 2 1,962.9 2,214.0 2,312.9 Total business customers 67.8 66.7 63.3 3 2,537.3 2,764.5 2,928.5 Total retail customers 32.2 33.3 36.7 4 2,789.6 2,904.9 3,250.3 Total 100.0 100.0 100.0 5 1,891.7 2,053.8 2,212.3 6 673.5 782.2 961.3 7 214.6 272.1 249.8 Risk Classification Credit-watchlist 1,911.4 1,766.9 1,778.8 As part of the credit process, the Group classifies customers according to risk. Not scored 625.2 752.4 955.1 Total 13,938.9 15,187.1 16,309.0 Retail customers are divided into seven risk groups based on behav ioural data (with 1 being the best) and a credit-watchlist group. The credit-watchlist group comprises exposures which in the Bank’s qualitative assessment show danger signs. With respect to retail Business Customers with Spar Nord’s Local Banks customers, such danger signs could include unemployment, divorce The following table sets forth business customers with Spar Nord’s or wealth loss, and for business customers they may include unex- Local Banks broken down by risk group at 31 December 2011, 2010 pected losses, sales problems in important markets and the loss of and 2009. key employees.

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 79 Table 59 – Business customers with Spar Nord’s Local Banks broken Table 61 – Gross credit exposure relating to loans and advances in down by risk group Spar Nord Leasing broken down by industry

(DKKm) 2011 2010 2009 (DKKm) 2011 2010 2009

0 1,763.6 1,058.9 650.8 Public authorities 12.4 12.0 14.9 1 785.1 1,090.8 786.0 Agriculture and forestry 1,869.1 1,821.5 1,695.1 2 1,201.3 2,016.7 1,425.0 Industry and raw 3 2,093.9 2,872.0 3,000.4 materials extraction 742.5 768.3 854.7 4 3,191.7 2,959.7 3,647.7 Building and construction 1,171.3 1,155.2 992.1 5 3,348.1 2,517.5 4,130.9 Trade 562.5 614.6 638.4 6 1,964.4 2,346.4 1,559.0 Transport, hotels and restaurants 1,740.4 2,064.1 2,193.4 7 1,790.1 1,518.8 1,488.0 Financing and insurance 101.1 120.6 631.9 8 1,727.0 1,268.3 788.3 Real property 111.8 146.4 262.8 9 1,193.7 1,009.9 1,022.4 Other industries 945.4 1,132.3 365.8 Default 1,862.7 1,530.6 1,278.3 Total business customers 7,256.5 7,835.0 7,649.1 Not rated 249.5 404.9 294.5 Total retail customers 7.7 8.3 4.4 Total 21,171.1 20,594.5 20,071.3 Total 7,264.2 7,843.3 7,653.5

Collateral 6,646.8 6,892.8 6,365.4 Financial Customers Total secured by collateral, % 91.5 87.9 83.2 The following table sets forth the Group’s credit exposure to financial customers at 31 December 2011, 2010 and 2009.

Concentration Risks Table 60 – The Group’s credit exposure to financial customers In its efforts to ensure sound risk diversification of its credit exposure, Spar Nord has defined a number of internal targets. The Group does not want to be exposed to individual customers or (DKKm) 2011 2010 2009 industries that might solely and separately jeopardise the Bank’s independence. Consequently, credit facilities have been capped at Reverse loans 393.2 1,516.6 0.0 DKK 400 million, and the unsecured portion may not exceed DKK Other banks’ customers 462.9 541.9 829.0 150 million of this exposure. Exposures to trading partners in the The Bank’s own commitments financial sector subject to supervision are not subject to this limita- and key customers, etc. 452.3 433.4 787.5 tion. Total financial customers 1,308.4 2,491.9 1,616.5 In determining exposure amounts, so-called “particularly secure claims”, as defined in the DFSA Executive Order on large exposures, are deducted. Trading partners in the financial sector subject to su- Customers with Spar Nord Leasing A/S pervision and rated investment grade by an external rater are thus At 31 December 2011, Spar Nord Leasing A/S accounted for 17% of subject to the statutory limitations, and other trading partners in the the Group’s total credit exposure. financial sector subject to supervision are subject to an internally defined limit of DKK 600 million. Credit processing in Spar Nord Leasing A/S is based on an assessment of customers’ ability and willingness to meet present and The sum of large exposures calculated pursuant to the DFSA Execu- future obligations. tive Order on large exposures was 13.4% at 31 December 2011. Calculated according to the method used in the DFSA Supervisory Spar Nord Leasing A/S always takes security in the assets, either by Diamond, the sum is 0.0%. way of ownership or charge. Spar Nord Leasing’s credit portfolio is composed of 88% leases and 12% purchase contract financing and Most of the Group’s exposures are well below the internal limit of loans. DKK 400 million. At 31 December 2011, 86% of the Group’s customer exposures was below DKK 100 million. The following table sets forth loans and advances in Spar Nord Leasing broken down by industry at 31 December 2011, 2010 and The following table sets forth the number and total value of the 2009. Group’s large exposures at 31 December 2011, 2010 and 2009.

80 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank Table 62 – Number and total amount of the Group’s large exposures

2011 2010 2009 Exposure Exposure Exposure Number (DKKm) Number (DKKm) Number (DKKm)

Exposures > 10% of Core Capital, calculated pursuant to section 145 1 788.0 3 2,087.7 1 641.8 Exposures > 10% of Core Capital, calculated pursuant to section 145, adjusted for exposures to credit institutions, etc. of less than DKK 1 billion 0 0 0 0 0 0

Risk Mitigation Table 63 – The Group’s credit exposure broken down by unsecured A key element in the Group’s management of credit risk is to miti- exposure gate the risk of individual exposures by requiring collateral in the form of charges on physical assets, securities and guarantees, etc. Proportion of total The most commonly used collateral is mortgages on real property, credit exposure, % 2011 2010 2009 securities and vehicles. < 10% 32.7 37.1 33.2 The Group monitors on an ongoing basis the value of collateral pro- 10–50% 17.0 19.3 24.7 vided. If the risk exposure to a counterparty increases, the collateral is subjected to a particularly critical review. 50–75% 12.3 12.1 10.6 > 75% 38.0 31.5 31.5 The following table sets forth the Group’s credit exposure broken down by unsecured exposure at 31 December 2011, 2010 and 2009.

Unsecured exposure arises among other reasons because when assessing collateral, the Bank has in many cases not attached any collateral value to the security provided, and sureties are generally not accorded any collateral value.

The following table sets forth the Group’s credit exposure and average unsecured exposure broken down by industry at 31 December 2011, 2010 and 2009.

Table 64 – The Group’s credit exposure and average unsecured exposure by industry

2011 2010 2009 (DKKm) (%) (DKKm) (%) (DKKm) (%)

Public authorities 1,735.4 99.5 1,035.4 99.1 650.9 100.0 Agriculture, hunting and forestry 1,898.9 36.3 1,881.2 34.4 2,121.3 37.2 Fisheries 83.6 47.1 83.2 48.6 78.3 37.8 Industry and raw materials extraction 790.6 48.4 876.3 50.4 1,032.9 54.6 Energy supply 747.7 43.6 477.8 34.2 402.2 33.4 Building and construction 763.5 34.9 757.4 33.2 728.8 36.4 Trade 2,626.8 70.1 2,554.2 66.1 2,532.6 72.3 Transport, hotels and restaurants 776.7 27.6 710.9 23.4 968.6 30.4 Information and communication 148.0 81.0 41.9 50.0 47.1 44.9 Financing and insurance 1,382.6 58.1 1,425.8 39.1 947.1 44.3 Real property 2,784.1 56.5 2,528.9 51.3 2,278.2 45.4 Other industries 1,525.5 53.2 1,578.7 51.2 1,513.1 45.4 Total business customers 15,263.4 51.6 13,951.7 45.4 13,301.1 46.0 Total retail customers 6,260.6 44.5 6,014.8 39.1 6,882.7 41.2 Total 21,524.0 49.3 19,966.5 43.3 20,183.8 44.2

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 81 The following table sets forth the Group’s collateral that may be Table 66 – The Group’s losses and impairment charges used for credit risk mitigation purposes broken down by type of collateral at 31 December 2011, 2010 and 2009. (DKKm) 2011 2010 2009

Losses, including losses Table 65 – The Group’s collateral that may be used for credit risk covered by provisions/ mitigation purposes broken down by type of collateral impairment charges 452.7 482.4 282.1 Loss guarantee, the Bank’s (DKKm) 2011 2010 2009 pension pool 4 0.0 0.0 0.0 Covered by provisions/ Real property 8,373.2 8,338.2 8,768.3 impairment charges -250.4 -277.8 -177.1 Custody accounts/securities 2,021.0 3,828.6 2,230.7 Losses not covered by Guarantees/sureties 652.2 799.2 973.8 provisions/impairment charges 202.3 204.6 105.0

Vehicles 860.6 723.2 912.8 Losses on sector-targeted Cash 653.4 739.4 792.5 solutions, including losses covered Other collateral 399.2 1,093.8 1,093.8 by provisions/impairment charges 0.0 224.0 0.0 Total collateral 12,959.6 15,522.4 14,771.9 Covered by provisions/ impairment charges 0.0 -130.4 0.0 Specially secured transactions Losses on sector-targeted (mortgage-credit solutions, not covered by institution guarantees) 2,552.2 3,734.8 4,329.1 provisions/impairment charges 0.0 93.6 0.0 Total collateral, excluding Spar Nord Leasing A/S 15,511.8 19,257.2 19,101.0 New provisions/impairment Collateral accepted charges, excluding sector- Spar Nord Leasing A/S 6,646.8 6,892.8 6,365.4 targeted solutions 489.5 484.2 608.5 New provisions on Total 22,158.6 26,150.0 25,466.4 sector-targeted solutions 0.0 0.0 107.3 Reversal of provisions/ impairment charges -123.2 -148.5 -45.0 Impairment Interest accrued on loans Based on the provisions of IAS 39, the Group has defined a large subject to impairment charges -63.9 -56.1 -62.5 number of risk events that qualify as OEI. Some risk events are Net provisions/ registered automatically in the Group’s systems, while others are impairment charges 302.4 279.6 608.3 registered manually by customer advisers and credit officers. Recoveries of prior losses -35.9 -30.6 -23.1 Individually assessed loans not subject to impairment and all other loans and advances are divided into groups to assess the need for Losses and impairment impairment charges. A collective assessment involves groups of charges for the year 468.8 547.2 690.2 loans with uniform credit risk characteristics. Collective impairment Other losses 4.8 3.0 1.6 charges are made, among other things, to cover a deterioration of the payment pattern from the relevant portfolio and changes in Total losses and impairment circumstances which, based on experience, are related to the extent charges for the year 473.6 550.2 691.8 of default in the relevant group of loans and advances. Recognised in the income Exposures with suspended interest accrual are subjected to particu- statement under: larly critical review, and if a loss is considered unavoidable, the loan Impairment of loans, advances is written off, either partly or fully. No interest accrues on the part of and receivables, etc. 402.9 452.9 575.4 the exposure that has been written down for impairment. Profit/loss on Discontinuing Activities 70.7 97.3 116.4 The following table sets forth the Group’s losses and impairment Total amount recognised in charges for 2011, 2010 and 2009. the income statement 473.6 550.2 691.8 – of which sector- targeted solutions 0.0 93.6 107.3 – of which Profit/loss on Discontinuing Activities 70.7 97.3 116.4 Impact on income statement, excluding sector-targeted solutions 402.9 359.3 468.1 – of which Erhvervsinvest Nord A/S -1.5 3.0 0.5 Impact on income statement – Continuing activities excluding Erhvervsinvest Nord 404.4 356.3 467.6

82 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank The following table sets forth the Group’s losses and impairment Table 68 – The Group’s non-performing and impaired loans, charges and loans with suspended interest accrual for 2011, 2010 impairment charges and losses recognised for 2011 and 2009.

Non-performing Table 67 – The Group’s losses and impairment charges and loans and impaired Impairment Recognised with suspended interest accrual (DKKm) (at 31 December) charges losses Public authorities 0.0 0.0 0.0 (DKKm) 2011 2010 2009 Agriculture, hunting and forestry 886.3 302.0 52.0 Fisheries 17.3 2.4 7.0 Gross loans, advances and guarantees, end of year 43,682.6 46,116.5 45,650.0 Industry and raw materials extraction 136.6 60.3 16.6 Losses and impairment charges for the year Energy supply 23.7 6.4 0.0 Impairment of loans, Building and construction 103.1 45.1 16.9 advances and receivables 402.9 452.9 575.4 Trade 189.8 88.7 68.8 Impairment charges Transport, hotels recognised in Profit/loss and restaurants 185.3 48.2 39.9 on Discontinuing Activities 70.7 97.3 116.4 Information and communication 8.6 5.0 0.2 Total losses and impairment Financing and insurance 94.9 61.7 54.8 charges for the year 473.6 550.2 691.8 Real property 296.1 102.7 66.0 in % of loans, advances and guarantees 1.1 1.2 1.5 Other industries 208.4 114.5 55.7 Impairment balance 1,142.8 1,026.9 1,099.6 Total business customers 2,150.1 837.0 377.9 in % of loans, advances Total retail customers 374.8 215.2 74.8 and guarantees 2.6 2.2 2.4 Total 2,524.9 1,052.2 452.7 Impairment balance, excluding sector-targeted solutions 1,142.8 1,026.9 969.2 in % of loans, advances Table 69 – The Group’s non-performing and impaired loans, and guarantees 2.6 2.2 2.1 impairment charges and losses recognised for 2010 Loans subject to suspended interest accrual, end of year 122.3 105.4 103.4 Non-performing in % of loans, advances and impaired Impairment Recognised and guarantees 0.3 0.2 0.2 (DKKm) (at 31 December) charges losses Impairment balance as % of loans subject to suspended Public authorities 0.0 0.0 0.0 interest accrual 934.4 974.3 1,063.4 Agriculture, hunting and forestry 595.3 219.3 38.2 Fisheries 13.5 6.1 0.0 Industry and raw materials extraction 101.0 48.3 79.0 The following table sets forth the Group’s non-performing and impaired loans, impairment charges and losses recognised for 2011, Energy supply 5.9 1.0 0.1 2010 and 2009. Building and construction 126.6 50.1 18.3 Trade 279.3 123.6 72.7 Transport, hotels and restaurants 226.9 71.4 58.5 Information and communication 8.1 3.9 0.9 Financing and insurance 84.3 55.5 31.5 Real property 233.8 87.9 52.8 Other industries 144.5 72.3 33.4 Total business customers 1,819.2 739.4 385.4 Total retail customers 319.2 196.1 97.0 Total 2,138.4 935.5 482.4

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 83 Table 70 – The Group’s non-performing and impaired loans, Utilisation of lines for financial contracts is calculated on a gross impairment charges and losses recognised for 2009 basis as the weighted principals of all transactions made, to which is added the sum of all positive market values. Negative market values are not offset. The weighting of the principal of the individual Non-performing financial transaction is based on the volatility of the interest rate and impaired Impairment Recognised and currency, and the term to maturity of the transaction is also (DKKm) (at 31 December) charges losses taken into account. Public authorities 0.0 0.0 0.0 The Group’s business procedures specify the maximum term to Agriculture, hunting and forestry 452.7 157.5 24.2 maturity for the individual financial transactions, and compliance Fisheries 11.4 4.6 0.0 therewith is monitored on a daily basis, as is compliance with the Industry and raw authorised lines. materials extraction 124.5 93.3 26.9 In connection with authorising and encoding lines, the Group checks Energy supply 11.5 0.4 0.0 whether encoded lines are in accordance with the authorisation. Building and construction 100.5 43.5 27.9 Furthermore, the Bank has a controller function that performs spot Trade 295.3 125.4 43.4 checks of compliance with authorisations, processes and business procedures. Transport, hotels and restaurants 257.9 76.8 23.9 Risk Mitigation Information and communication 1.5 1.0 3.8 To mitigate counterparty risk, the Bank enters into framework, net- Financing and insurance 86.9 43.1 8.3 ting and collateral agreements to the extent possible. Real property 132.9 66.9 12.4 As concerns small Danish credit institutions, such agreements Other industries 149.6 63.5 39.0 will be based on the framework agreement prepared by the Danish Total business customers 1,624.7 676.0 209.8 Bankers Association for foreign exchange and securities trans- Total retail customers 278.5 184.2 72.1 actions and, when deemed necessary, also a collateral agreement providing that if the net market value of concluded financial Total 1,903.2 860.2 281.9 contracts exceeds a maximum fixed individually for each credit institution, collateral must be provided, usually in the form of a cash deposit of DKK. Counterparty Risk Counterparty risk is the risk of loss resulting from a trading partner For foreign and large Danish credit institutions, netting and frame- in the financial sector defaulting on its obligations under a financial work agreements will be based on the international ISDA Master contract. In addition, the Group may be exposed to settlement risk Agreements, often with associated Credit Support Annexes (CSA), when financial contracts are concluded and settled, as principals in which provide that if the net market value of concluded financial different currencies are not necessarily exchanged at the same time contracts exceed an individually fixed maximum for each agree- or as securities are not received simultaneously with the relevant ment, collateral must be exchanged, usually in the form of a cash payment. deposit of EUR.

Before granting lines to trading partners in the financial sector, the In addition, when relevant, Global Master Repurchase Agreements Group makes a thorough credit assessment of its counterparties (GMRA) and Global Master Securities Lending Agreements (GMSLA) based on the financial statements of the individual credit institu- are concluded to secure repo/reverse transactions and equity loan tion. With respect to foreign and large Danish credit institutions, transactions, respectively. the Group also considers their rating by internationally recognised rating agencies, such as Moody’s, Standard & Poor’s or Fitch. Both Danish and international collateral agreements are subject to follow-up on a daily basis, and collateral is exchanged as required The Group works with a number of small Danish credit institutions, by fluctuations in the market values of transactions concluded. providing services within clearing, securities and forex transac- Furthermore, the Group settles transactions, to the extent possible, tions. The Group has developed a rating model to assess such credit through Clearstream, VP Securities or Euroclear, thereby minimis- institutions, using specific key ratios to calculate a score for the ing settlement risk. individual institution. Together with the financial statements of the individual credit institution, this model forms the basis for recom- mending and authorising lines.

84 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank types for all units subject to instructions, and any failure to comply 11.5. Market Risk with instructions will be reported upwards in the organisation.

The Group assumes market risk in connection with transactions To ensure independence, the Middle Office function has no position- in the financial markets. Market risk is the risk of losses resulting taking authority. All trades are settled by Back Office pursuant to from variations in the fair value of the Group’s assets and liabilities the DFSA guidelines on separation of functions. due to changes in market conditions. Market risk is thus a consequence of the Group’s open positions in the financial markets. It Interest-rate Risk may be divided into: Interest-rate risk is the risk of losses caused by changes in interest rates. It involves deposits and lending as well as trading and • Interest-rate risk position-taking in interest-related products. The Group’s activities comprise interest rate products such as interest swaps, bonds, • Bond spread risk futures and standardised interest rate options.

• Equity risk The Group’s interest-rate risk is calculated based on duration and agreed cash flow. For managing its portfolio of convertible Danish • Foreign-exchange risk mortgage bonds, the Group uses model-based key risk indicators that take the embedded option element into account. As concerns • Own properties interest-rate options, these key indicators are supplemented by the most important risk factors expressing the sensitivity of the option Most of the Group’s activities relating to turnover and position-tak- premium based on the underlying parameters. ing primarily involve interest rate-related products. The Group also trades in and takes positions in listed shares and forex instruments. Interest-rate risk is assessed on a daily basis, and decisions are made in the light of expectations for macroeconomic and market The Group’s market risks are calculated, monitored, controlled and developments. Interest-rate risk in foreign currencies is translated reported by the Middle Office function of Finance & Accounts. The into DKK. In calculating net interest-rate risk, the negative interest- market risk calculation is used for regular reporting to the Execu- rate risk is offset against the positive interest-rate risk. tive Board and the Board of Directors, reporting of regulatory capital for use by the DFSA, and daily follow-up on individual business The following table sets forth the Group’s total net interest-rate risk units. in case of a 1 percentage point interest rate increase at 31 Decem- ber 2011, 2010 and 2009. This implies a parallel shift of all yield Market risks are managed and monitored through an integrated risk curves. management system involving daily follow-up on all market risk

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 85 Table 71 – The Group’s total net interest-rate risk in case of a 1 percentage point interest rate increase at 31 December 2011

Less than 3 months 1 years 3 years More than Currency, (DKKm) 3 months – 1 years – 3 years – 7 years 7 years Total

DKK 1.7 3.4 -23.7 17.1 16.2 14.7 EUR 1.9 -5.0 -19.4 -22.0 -0.9 -45.4 USD 0.3 0.0 0.1 -0.2 0.0 0.2 GBP 0.0 0.0 0.0 0.0 0.0 0.0 NOK 0.0 0.0 0.0 0.0 0.0 0.0 CHF -0.6 -0.2 -0.3 -0.3 0.1 -1.3 JPY -0.1 -0.2 0.0 0.0 0.0 -0.3 SEK 2.7 0.2 0.3 0.0 0.0 3.2 Other -0.1 0.3 0.1 0.0 0.0 0.3 Total 5.8 -1.5 -42.9 -5.4 15.4 -28.6

Table 72 – The Group’s total net interest-rate risk in case of a 1 percentage point interest rate increase at 31 December 2010

Less than 3 months 1 years 3 years More than Currency, (DKKm) 3 months – 1 years – 3 years – 7 years 7 years Total

DKK 10.7 4.2 -43.9 35.5 17.7 24.2 EUR 4.1 -5.0 8.2 -27.4 -1.8 -21.9 USD -1.3 -1.5 0.0 0.4 0.0 -2.4 GBP 0.0 0.0 0.0 0.0 0.0 0.0 NOK 0.0 -0.1 -0.1 0.1 0.0 -0.1 CHF 0.1 3.5 -0.4 -0.4 0.4 3.2 JPY 0.3 0.0 0.0 0.0 0.0 0.3 SEK -0.5 0.0 0.1 0.4 0.0 0.0 Other 0.1 0.1 0.2 0.1 0.0 0.5 Total 13.5 1.2 -35.9 8.7 16.3 3.8

Table 73 – The Group’s total net interest-rate risk in case of a 1 percentage point interest rate increase at 31 December 2009

Less than 3 months 1 years 3 years More than Currency, (DKKm) 3 months – 1 years – 3 years – 7 years 7 years Total

DKK 9.0 -12.7 16.3 -2.1 7.2 17.7 EUR -1.8 -14.7 -15.5 -12.8 5.6 -39.2 USD 0.0 0.0 0.0 0.0 0.0 0.0 GBP 0.1 0.0 0.0 0.0 0.0 0.1 NOK -0.3 -0.2 -0.3 0.0 0.0 -0.8 CHF 2.4 0.2 -0.4 -0.4 0.8 2.6 JPY 0.3 0.1 0.1 0.0 0.0 0.5 SEK -0.1 -0.1 -0.2 0.0 0.0 -0.4 Other -0.2 0.2 0.3 0.0 0.0 0.3 Total 9.4 -27.2 0.3 -15.3 13.6 -19.2

86 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank Bond Spread Risk exchange rates. The second calculation is based on foreign ex- The value of the Group’s bond portfolio depends on market assess- change indicator 1 in the DFSA Executive Order on capital adequacy, ments of credit quality and liquidity. The risk of losses because of which is calculated on the basis of the sums of all currencies in changes in the market’s assessment of these factors is known as which the Bank has a net payable (short position) and all curren- bond spread risk. cies in which the Bank has a net receivable (long position). Foreign exchange indicator 1 is calculated by correlating the higher of the As the Group has a relatively large holding of Danish mortgage two sums to the Bank’s Core Capital after deductions. bonds, most of the bond spread risk is related to bonds issued to finance real property. The following table sets forth foreign exchange indicator 1, foreign exchange indicator 1 relative to Core Capital, and foreign-exchange Government bonds make up a small proportion of the Group’s bond risk broken down by currency at 31 December 2011, 2010 and 2009. portfolio. It should be noted in this connection that the Group does not have bond exposure to the debt-ridden EU countries Portugal, Italy, Ireland, Greece and Spain. Table 76 – Foreign exchange indicator 1, foreign exchange indicator 1 relative to Core Capital, and foreign exchange risk broken down At 31 December 2011, the Group’s bond portfolio amounted to DKK by currency 13.9 billion.

The following tables set forth the Group’s bond portfolio broken Foreign exchange risk 2011 2010 2009 down by issuer type and rating at 31 December 2011, 2010 and 2009. Foreign exchange indicator 1 (DKKm) 390.4 163.2 160.6 Table 74 – The Group’s bond portfolio broken down by issuer type Foreign exchange indicator 1 as % of Core Capital (including Hybrid Core Capital) after deductions 6.9 2.9 2.9 (DKKm) 2011 2010 2009

Government bonds 20.8 -133.8 -41.0 (DKKm) Mortgage bonds 12,320.2 10,833.2 10,243.0 EUR -1.1 -0.4 -1.5 Financial issuer 1,400.0 1,504.0 977.0 SEK -2.4 0.0 -0.3 CDO 0.0 0.0 36.0 USD -0.2 -1.4 -0.1 Credit bonds 125.4 238.1 127.0 CHF -1.0 -1.1 -1.0 Bonds 13,866.4 12,441.5 11,342.0 JPY 0.0 -0.4 0.0 Bond portfolio plus spot and forward purchases and sales Other currencies 0.6 -0.4 -0.3 Total foreign-exchange risk 5.3 -3.7 -3.2 Table 75 – The Group’s bond portfolio broken down by rating Equity Risk (DKKm) 2011 2010 2009 Equity risk is the risk of losses caused by changes in equity prices. Equity positions are calculated as the net value of long and short AAA 6,268.6 8,097.2 7,189.8 equity positions and equity-related instruments. Equity positions AA 6,071.2 3,221.1 3,724.5 are calculated depending on whether they are a part of the trading portfolio or not. A 1,490.2 983.7 416.9 BBB 3.9 2.0 0.0 The following table sets forth the Group’s shares forming part of the BB 4.3 123.2 0.0 trading portfolio at 31 December 2011, 2010 and 2009. B 14.9 0.0 0.0 CCC 0.4 0.0 10.6 Table 77 – Shares forming part of the trading portfolio CC 2.1 12.0 0.0

Not rated 10.8 2.3 0.2 (DKKm) 2011 2010 2009 Bonds 13,866.4 12,441.5 11,342.0 Listed shares forming part Bond portfolio plus spot and forward purchases and sales of the trading portfolio 82.0 169.8 75.2 Foreign-exchange Risk Unlisted shares forming part Foreign-exchange risk is the risk of losses on foreign currency posi- of the trading portfolio 40.6 61.9 43.0 tions resulting from a change in exchange rates. Foreign exchange Total shares in the options are included in the calculation at the Delta-adjusted posi- trading portfolio 122.6 231.7 118.2 tion.

The Group calculates foreign-exchange risk in two ways. The first The following table sets forth the Group’s shares outside the trading calculation is based on an adverse development of 2% of all foreign portfolio at 31 December 2011, 2010 and 2009.

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 87 Table 78 – Shares outside the trading portfolio • The Group should have free liquidity to comply with section 152 of the Financial Business Act and also have supplementary cash reserves. (DKKm) 2011 2010 2009 • The Board of Directors has defined certain minimum require- Shares in credit and ments for short-term liquidity, including maturity requirements if financing institutions 458.4 439.5 359.6 capital market funding is unavailable. Shares in management companies and investment Short-term Liquidity associations 53.3 48.0 46.0 The Group has for many years employed a firm model for managing Shares in pension institutions 16.1 18.5 21.1 short-term liquidity. The model is based on a model developed by Shares in data supplier 174.8 171.9 126.8 the DFSA. Shares in payment The model calculates the Group’s liquidity and changes therein services business 161.4 161.4 157.2 assuming that all capital market funding falls due as provided in Other equities 53.8 50.7 40.9 the respective contracts and is not renewed. This is done on a daily Total shares in strategic basis over a period of eight weeks. business partners 917.8 890.0 751.6 The Board of Directors has defined a minimum requirement for the Realised gain 0.6 0.0 0.0 Group’s cash resources of DKK 9.5 billion. Furthermore, the Group Unrealised gain 14.4 43.6 47.8 should always have positive liquidity for the subsequent five-week Total associates 765.1 745.8 718.8 period, calculated according to the above model.

Strategic Liquidity Total shares outside The following table sets forth a statement of the Group’s strategic the trading portfolio 1,682.9 1,635.8 1,470.4 liquidity at 31 December 2011, 2010 and 2009.

Table 79 – The Group’s strategic liquidity 11.6. Operational Risk

Operational risk is the risk of direct or indirect losses as a result of (DKKbn) 2011 2010 2009 inadequate or faulty internal processes, human error, system error Deposits excluding repo or losses resulting from external events. Operational risk includes transactions 31.1 30.4 31.9 business and reputational risk, compliance risk and legal risks. Senior loans and bond issues 10.2 9.3 10.4 The Board of Directors has defined the Group’s overall policy for Equity and Supplementary Capital 6.9 6.9 6.8 operational risk. A risk facilitator anchored in the Bank’s legal Liquidity procurement 48.2 46.6 49.1 department is in charge of operational risk management, including registration of events and risks. The facilitator reports to the Bank’s Loans and advances, Risk Review Officer and the Executive Board. banking activities 31.2 30.7 30.8 Loans and advances, The risk owners in the individual business areas have risk man- leasing activities 7.1 7.7 7.5 agement responsibility. Operational risk is thus managed across Maturity, senior loans, the Group through a system of business procedures and control issued bonds and measures designed to optimise the process environment. The Group Supplementary Capital < 1 year -6.0 -2.3 -3.4 seeks to minimise operational risks by such means as keeping the Liquidity target (>0) 3.9 5.9 7.4 execution of activities separate from the control thereof.

11.7. Liquidity Risk For rating purposes, Moody’s makes specific requirements on the Group’s liquidity position and liquidity management. Moody’s The Group’s liquidity risk management efforts aim to ensure 12-month scenario with no access to funding thus defines a capital adequate liquidity for the timely payment of the Group’s payment market crisis with a survival horizon of 12 months, in which all capi- obligations and for reasonable financing costs. This work, which is tal market funding falls due according to the terms of the relevant carried out at three levels, has the following general targets: contracts without any access to renewal or raising of new funding.

• Deposits excluding repo transactions, senior loans, issued bonds, The following table sets forth the Group’s liquidity position on the subordinated debt and equity should exceed lending excluding requirements defined by Moody’s at 31 December 2011, 2010 and reverse transactions. Only the portion of senior loans, issued 2009. bonds and subordinated debt that has a term to maturity of more than one year is included.

88 PART I – 11. Risk, Liquidity and Capital Management Prospectus – Spar Nord Bank Table 80 – The Group’s liquidity position on the requirements defined by Moody’s

(DKKm) End of year 1 month 2 months 3 months 4 months 5 months 6 months 9 months 12 months

2011 17,061.9 9,260.1 9,295.4 7,739.4 7,739.4 7,739.4 7,739.4 4,022.3 3,906.6 2010 14,215.5 10,531.8 10,465.7 10,254.5 10,254.5 10,254.5 10,254.5 9,543.5 8,300.6 2009 13,420.3 11,491.9 11,216.3 10,862.5 10,848.0 10,869.1 10,854.7 10,631.1 8,682.3

Liquidity Reserves Stress Testing and Liquidity Contingency Plan Section 152 of the Financial Business Act provides that the Group The Group conducts regular stress testing that estimates liquidity must at all times have adequate liquidity, which means that its risks in various scenarios in order to measure the current liquidity liquidity must amount to at least 15% of the liabilities which the risk level and to be able to respond as quickly as possible in a crisis Group, irrespective of any payment conditions, must pay on demand situation. Stress tests performed have a time horizon of up to 12 or at a notice of less than one month, and 10% of the Group’s total months. liabilities and guarantee commitments less subordinated debt that may be included in the calculation of the Capital Base. In addition, pursuant to the executive order under section 71 of the Financial Business Act, the Group has made a liquidity contin- The Group’s excess liquidity cover relative to the latter requirement gency plan containing a catalogue of potential actions intended to was DKK 10.9 billion at 31 December 2011, DKK 7.3 billion at 31 strengthen the Group’s liquidity position in a crisis situation. The December 2010, and DKK 10.0 billion at 31 December. Converted catalogue specifies the impact and time horizon of each action. to percentages, the excess cover was 164% at 31 December 2011, 109% at 31 December 2010 and 157% at 31 December 2009. The liquidity contingency plan will become effective if the Group can only with difficulty meet the defined guidelines and where this The following table sets forth the Group’s excess liquidity cover rela- would involve a substantial increase in funding costs. tive to the requirements of section 152 of the Financial Business Act at 31 December 2011, 2010 and 2009.

Table 81 – The Group’s excess liquidity cover

(%) 2011 2010 2009

Section 152 164 109 157

Spar Nord Bank – Prospectus PART I – 11. Risk, Liquidity and Capital Management 89 12. The Danish Banking System and Regulation

(andelskasser). At the Prospectus Date, there were 112 banks in 12.1. The Danish Banking System Denmark, including four in the Faroe Islands and one in Greenland.

Danmarks Nationalbank Danmarks Nationalbank is the central bank of Denmark. Danmarks 12.2. Regulation Nationalbank is organised under, and its operations are governed by, the Danmarks Nationalbank Act (Act no. 116 of 7 April 1936 as Overview of the Regulation Framework regarding Capital amended). Although ultimately subject to the legislative control of Danish banks are subject to the rules set forth in the Financial Busi- the Danish parliament (the Folketing), Danmarks Nationalbank is an ness Act, the Companies Act, Executive Orders issued by the Min- autonomous institution. istry of Business and Growth and the DFSA, as well as guidelines issued by the DFSA. The DFSA is the public agency responsible for The objective of Danmarks Nationalbank is to ensure a stable and the supervision of credit institutions (including banks and mortgage well-functioning financial system in Denmark. Danmarks Nation- credit institutions), insurance companies, pension funds, insurance albank has a number of obligations which other banks do not have. brokers, the Danish Labour Market Supplementary Pension (ATP), Danmarks Nationalbank produces and distributes Danish bank- the Danish Employees’ Capital Fund (LD), the Danish Labour Market notes and coins; conducts monetary and foreign-exchange policies Occupational Diseases Fund (AES), investment companies, invest- to ensure the stability of the Danish krone vis-à-vis the euro; ment management companies and investment associations (UCITS manages the foreign-exchange reserve; is a banker to banks and and non-UCITS). mortgage-credit institutions and to the Danish State; handles overall tasks in relation to payment systems; analyses financial stability; The Financial Business Act and the regulations issued pursuant collects, collates and publishes financial statistics; and represents thereto set up requirements for the protection of depositors includ- Denmark internationally in a number of areas. ing by establishing total capital ratios that require banks to have sufficient capital to cover the risk in relation to assets etc. (see be- The Ministry of Finance and Danmarks Nationalbank are together low). In addition, liquidity rules require banks to maintain adequate responsible for the management of the central government debt. liquid assets to meet depositor claims on demand or otherwise. Danmarks Nationalbank undertakes the administrative tasks, while To further safeguard the assets of banks, the Financial Business the Ministry of Finance is responsible for the central government’s Act establishes rules limiting the possibility of a bank to concen- borrowing and debt management, including relations with the trate its assets in lending or other exposures to single customers Folketing. or customer groups. See “Part I—Description of the Bank—Risk, Liquidity and Capital Management”. The rules apply to Danish banks Monetary Policy individually as well as on a consolidated basis. Danish monetary policy is conducted in accordance with the principle of freedom of capital movements. Emphasis is placed Solvency is established by measuring all assets etc. weighted ac- on market-oriented instruments. Interest policy is determined in cording to credit, market and operational risk etc. (“Risk-weighted light of the objective of keeping the exchange rate of the Danish Items”) against the capital of a bank. Accordingly, the capital of a krone stable against the euro within the Exchange Rate Mechanism bank must amount to a certain minimum percentage (as described 2-framework. below) of a bank’s Risk-weighted Items, subject to a minimum of EUR 5 million. The liquidity impact of the central government deficit is offset by sales of government securities. Short term changes in liquidity may The solvency requirement for credit risk is based on the defined be absorbed by Danmarks Nationalbank by the issuance of 14-day credit risks of various groups of assets, taking into consideration certificates of deposit, which can be traded among the banks. the nature of the counterparty and the counterparty’s obligation. Liquidity will mainly be supplied through the repurchase of cer- Under the EU directive on solvency requirements, which has been tificates of deposit or through treasury bills and government bond implemented into Executive Order no. 1399/2011 issued pursuant repurchase agreements. to section 143 of the Financial Business Act, it is possible to apply a standard method or an advanced method (IRB method) to calculate Foreign Exchange Regulation credit risks. According to the standard method, claims on OECD The Consolidating Act on Foreign Exchange Regulations etc. (Act governments and Danish local authorities are given a risk weight- no. 279 of 11 April 1988) grants authority to the Danish Ministry of ing of e.g. zero, whereas unsecured claims on banks, business and Business and Growth and Danmarks Nationalbank to regulate the retail customers are typically risk weighted in the range of 20% to import and export of goods, purchase and sale of foreign currencies 150%. According to the advanced method, the bank determines the and cross-border payment transactions, including transactions to credit risk based on a method approved by the DFSA. and from Danish and foreign banks. The current, very liberal system is based upon Executive Order no. 658 of 11 July 1994 pursuant to In addition to credit risk assessment, Danish banks are required which a free cross-border flow is permitted for practically all trans- to maintain a certain minimum capital to cover the market risks actions. Due to an increased focus on measures to prevent money to which the bank is subject. Market risks include the risk of loss laundering and financing of terrorist activities, the Danish Customs resulting from market price movements involving debt instruments Act was amended in 2002 to include a provision pursuant to which and equity securities in a bank’s trading portfolio, as well as foreign anyone who enters or leaves the Danish customs area carrying exchange risk and commodities risk incurred by such bank. Finally, “money, etc.” exceeding EUR 10,000 in value shall, at their own Danish banks are required to maintain a certain minimum capital initiative, go through a customs check and declare all money, etc. to to cover operational risks. Operational risks include the risk of loss the customs and tax authorities. The expression “money, etc.” com- resulting from inappropriate or inadequate internal procedures, prises cash, as well as bearer papers such as traveller’s cheques. human or system error, or external events. Operational risks also include legal risks. Banking and Other Financial Institutions Denmark’s banking system includes commercial banks, such as the For the purpose of complying with the Danish solvency require- Bank, savings banks (sparekasser) and cooperative savings banks ments, the Capital Base is divided into two main categories, Core Capital and Supplementary Capital. Core Capital comprises Com-

90 PART I – 12. The Danish Banking System and Regulation Prospectus – Spar Nord Bank mon Equity (Tier 1), which mainly consists of share capital and re- The DFSA may lay down a higher individual solvency requirement serves (excluding revaluation reserves) and Hybrid Core Capital ad- than 8% if it finds that the calculated solvency need does not reflect justed for statutory deductions. In consolidated statements, certain the risk of the bank’s activities. minority interests in a bank’s consolidated subsidiaries may also be included. The Core Capital is reduced by, among other items, poten- The Bank discloses its solvency ratio as a note to its balance sheet tial losses incurred during the current financial year and intangible as at 31 March, 30 June, 30 September and 31 December of each assets. Certain capital interests in other financial institutions in year. Prior to such disclosure, the solvency ratio and the basis for excess of certain limited amounts have to be deducted from the the calculation thereof must be filed with the DFSA. The Bank is sum of the Core Capital and the Supplementary Capital. Pursuant also obliged to submit the solvency ratio to the DFSA and publish to CRD IV, the minimum requirements for Core Tier 1 Capital will the individual solvency need at the same intervals. be increased from 2% to 4.5%, while the minimum requirement for Core Capital will be increased from 4% to 6%. In 1987, Denmark established a Deposit Guarantee Scheme. The current scheme is based on an EU directive. The Guarantee Fund Supplementary Capital for banks consists mainly of revaluation was established to cover payments under the scheme. The scheme reserves and Subordinated Loan Capital which may be issued by a covers in full deposits made in certain accounts established ac- bank. Subordinated Loan Capital comprises loans which, in case of cording to law, including certain pension accounts, and up to EUR bankruptcy or liquidation, are subordinated to ordinary claims on 100,000 of a customer’s aggregate net deposits with a bank. Inves- the issuing bank. Agreements on Subordinated Loan Capital must tors who hold securities in institutions that are not able to redeliver include interest deferral and principal reduction features, and can the securities to the investors as a result of suspension of payments thus be applied towards covering losses of the issuing bank even or bankruptcy are covered up to the equivalent of EUR 20,000 per if that bank is allowed to carry on its business. However, the use of investor. Subordinated Loan Capital in complying with the capital requirement is subject to both general and specific limitations. For exam- Pursuant to the Financial Business Act, Danish banks must adopt ple, the amount of Subordinated Loan Capital applied to the Capital the form of a public limited company and, accordingly, are subject Base may together with other Supplementary Capital not exceed to the rules of the Companies Act, except for certain areas that are 100% of the Core Capital after deductions. Moreover, the possibility governed by special provisions of the Financial Business Act. of including Subordinated Loan Capital with a fixed maturity is reduced by 25% in each of the last three years of the term of the debt. Expected Legislative Amendments etc. regarding Capital and Liquidity The Financial Business Act also provides for inclusion of so-called On 16 December 2010, the Basel Committee announced the Basel Hybrid Core Capital, which may be included in the Core Capital III proposals (“Basel III”) containing, among other things, new to meet the capital requirement subject to certain conditions and requirements for capital and liquidity. limitations. The limitations are that Hybrid Core Capital, which may be converted into share capital, guarantee capital or cooperative On 20 July 2011, the EU Commission presented a proposal for a capital if the bank becomes distressed and/or at the initiative of revision of the capital requirements directive, also referred to as the DFSA, may not exceed 50% of the Core Capital (after deduc- CRD IV. The rules of CRD IV are expected to apply in Denmark. If im- tions). Hybrid Core Capital without incentive for the bank to redeem plemented, the rules will entail changes to the current legislation. (apart from certain exemptions for the State Hybrid Capital) may not exceed 35% of the Core Capital (after deductions). Other types of CRD IV Hybrid Core Capital, including instruments with moderate incentive In summary, CRD IV includes the following changes: for redemption, may not exceed 15% of a bank’s Core Capital (after deductions). If a bank has excess Hybrid Core Capital in accordance • An increase of the requirement for Common Equity (Tier 1) from with this rule, the excess will be added to the bank’s calculation of 2% to 4.5%. This requirement will be phased in until 1 January its Supplementary Capital. 2015.

The Financial Business Act prescribes a minimum solvency ratio • A general capital conservation buffer of 2.5% will be introduced, of 8%. The solvency ratio is calculated by dividing the Capital Base which will have to be maintained by all banks in order to with- (Core Capital and Supplementary Capital after deductions) by the stand future periods of crisis. This change will be phased in from Risk-weighted Items. Pursuant to CRD IV, the aggregate capital re- 1 January 2016 and will be fully applicable from 1 January 2019. quirement of 8% will be maintained, but the Core Capital must total at least 6% of the Risk-weighted Items. • If there is excess credit growth in any given country resulting in a system-wide build up of risk, a countercyclical buffer in the Pursuant to the Financial Business Act, the board of directors and form of Common Equity (Tier 1) determined by the authorities the executive board of a bank must ensure that the bank’s Capital of the individual countries within a range of 0% to 2.5% of the Base is adequate and that the bank has internal procedures for Risk-weighted Items (but it may be higher) is to be applied as an risk measurement and risk management for regular assessments extension of the conservation buffer. and maintenance of a Capital Base of a size, type and composition adequate to cover the risks of the institution. • The aggregate solvency requirement of 8% will be maintained, but the capital must include at least 6% Core Capital. This The board of directors and the executive board must, on the basis of change will be phased in from 1 January 2013 and will be fully the above-mentioned assessment pursuant to the Financial Busi- applicable from 1 January 2015. ness Act, calculate the individual solvency need of the bank (ICAAP). The solvency need shall be expressed as the adequate Capital Base Moreover, it is expected that supplementary capital requirements as a percentage of the Risk-weighted Items. The ICAAP result may will be determined for systemically important financial institutions not be less than the solvency requirement and the minimum capital (“SIFIs”). This will take place as a supplementary requirement for requirement. the Common Equity (Tier 1). On 4 November 2011, the Basel Com- mittee resolved that the supplementary requirement should be between 1% and 2.5% depending on the systemic importance of the

Spar Nord Bank – Prospectus PART I – 12. The Danish Banking System and Regulation 91 individual bank, with a potential for increasing the requirement to they would have to make under an acute stress test scenario for 3.5% for banks with the highest supplementary requirement, which a 30-day time horizon. expand their activities to become even more systemically important. • A Net Stable Funding Ratio, being a minimum requirement to the No actual Liquidity Coverage Ratio is determined in CRD IV, as bank’s stable funding (i.e. funding expected to be stable over a CRD IV only determines that the Liquidity Coverage Ratio should be 12-month time horizon) (Available Stable Funding). Such fund- prudent. However, a number of filing requirements are determined, ing will be measured relative to the bank’s balance sheet and which will form the basis of the rules scheduled to come into force off-balance sheet items (such as drawings under credit facilities) in 2015. that may result in a cash requirement during the same 12-month period (Required Stable Funding). The ratio of Available Stable There is no final clarification as to whether Danish mortgage bonds Funding to Required Stable Funding must be at least 1:1 (100%). can be included under most liquid assets, but it appears from CRD The Net Stable Funding Ratio is intended to limit the reliance on IV that an asset class will be introduced, which will be designated short-term wholesale funding and has been developed to provide “transferable assets that are of extremely high liquidity and credit a sustainable maturity structure of assets and liabilities. quality” which can be fully included in the above-referenced reporting. Mortgage bonds could potentially be included in this category. With respect to the Liquidity Coverage Ratio, Basel III’s treatment of By 31 December 2013, the European Banking Authority (the “EBA”) the Danish mortgage-credit system may make compliance difficult shall propose a definition of this concept based on testing of differ- based on the Bank’s current financing structure. The EU has not yet ent assets according to a number of criteria. determined the final form of liquidity requirements. If the liquidity requirements adopted in Denmark are based on the current Basel From 1 January 2013, reporting of a number of liquid assets, includ- III framework, the Bank will need to make significant changes to ing covered bonds (mortgage-covered bonds and covered bonds), its funding structure and the composition of its liquidity buffer must take place to the competent authorities. because of the proposed restriction on inclusion of covered bonds in the liquidity buffer. Basel III proposes that covered bonds, includ- CRD IV does not include a Net Stable Funding Ratio. From 1 January ing mortgage bonds and other so-called level 2 assets, can only 2013, reporting of stable funding and items requiring funding must represent a maximum of up to 40% of the liquidity buffer in a bank’s take place. Based on this, it will be considered whether a Net Stable Liquidity Coverage Ratio, whereas government bonds and other Funding Ratio should be determined from 2018. highly liquid assets must account for at least 60% of the liquidity buffer. The proposed requirement is fundamentally different from One of the key objectives of CRD IV is to strengthen the quality of the current structure of Danish fixed income market where mort- the instruments (other than share capital) that can be included gage bonds represent approximately 80%. Another reason is the in the Capital Base. The EU Commission has therefore proposed exclusion of funding with a remaining maturity of less than one year stricter criteria for the inclusion of instruments in the Core Capital from the Net Stable Funding Ratio irrespective of the fact that the and the Supplementary Capital. In relation to the definitions of refinancing risk is borne by the borrowers in the case of mortgage Core Capital and Supplementary Capital, the only instruments that loans granted by mortgage credit institutions. can be included are those where there is no incentive for the issuer to redeem them, in the form of step-up interest rate clauses, According to CRD IV, it will be possible to recognise covered bonds for example. Most of the Bank’s current Hybrid Core Capital and as level 1 assets, if the bonds are able to pass the liquidity test. Subordinated Loan Capital has moderate incentives for redemption. The EBA will present the draft technical standards on or before 1 The transitional rules should therefore apply to these instruments. January 2013. As a result of the current uncertainty with respect to According to CRD IV, instruments that no longer qualify as Core which assets qualify as level 1 assets and level 2 assets, respec- Capital or Supplementary Capital will be phased out over the period tively, under CRD IV, it is assessed that the Group, subject to certain from 1 January 2013 to 31 December 2021. In addition, instruments adjustments, will be able to meet the Liquidity Coverage Ratio. that carry an incentive for redemption will be phased out at their effective maturity dates. Existing public sector capital, including Basel III also proposes the introduction of a so-called leverage ratio. State Hybrid Capital, can be included in the Capital Base until 31 In contrast to the CRD approach to calculating Risk-weighted Items, December 2017. However, capital elements issued on or after 20 the leverage ratio does not take into account that different activities July 2011 must comply with the requirements of CRD IV, if a bank on financial institutions’ balance sheets have different degrees of wishes to include the capital in the Capital Base from 1 January risk. The Basel Committee has proposed a requirement that Core 2013 onwards. Capital must constitute at least 3% of the total exposure. However, the Basel Committee proposes that it will not be implemented as a CRD IV does not determine a gearing ratio, but the EBA must specific requirement until 2018. The Bank believes that at the end of prepare a report by 31 December 2016 which assesses whether 3% 2011 its leverage ratio, adjusted for Basel III terms, was 6.5%. is adequate, after which it will probably become a requirement from 2018. In CRD IV, this ratio is called “leverage ratio”. Changed Rules and Practice regarding Loan Impairment Charges The Danish Ministry of Business and Growth has submitted a From 1 January 2015, banks must publish a leverage ratio, and CRD proposed amendment of the Financial Business Act to consultation. IV requires banks to monitor their leverage. Among other things, the proposed amendment makes it mandatory for financial businesses to apply the Danish accounting rules Basel III in their annual financial statements. It appears from the explana- Basel III contains proposals for global minimum requirements for tory notes to the bill that the objective of making it mandatory to liquidity, which can be described as follows: apply the Danish accounting rules in annual financial statements is to ensure that the adjustments which are deemed appropriate to • A short term Liquidity Coverage Ratio defining requirements on implement in the Danish accounting rules regarding loan impair- the volume of highly liquid assets a bank must hold. Such as- ment charges shall apply to all banks. Listed financial businesses sets are highly marketable (including cash, government bonds, will still be required to apply the international accounting standards etc.), and the test will require banks to hold a sufficient volume as adopted by the EU in their consolidated financial statements. of highly liquid assets to allow them to honour all net payments

92 PART I – 12. The Danish Banking System and Regulation Prospectus – Spar Nord Bank The DFSA has furthermore revised part 10 of the DFSA’s guidelines Stability Act, which contains rules on the determination and calcula- on adequate Capital Base and solvency need for credit institutions. tion of the guarantee commission, among other provisions. This change implies, among other things, that large banks (group 1 banks) are required to calculate expected loan impairment charges During the period when the guarantees are valid, the Bank is sub- under different combinations of interest rate increases and fall ject to certain limitations in various areas, including that dividends in collateral values, a so-called sensitivity matrix. In addition, the may only be distributed to the extent that they can be financed by DFSA has announced that it contemplates introducing a semi-annu- the Bank’s net profits after taxes, which may be added to the dis- al reporting scheme for the sensitivity matrix. tributable reserves, as generated in the period following 1 October 2010. The Bank may not embark on capital reduction programmes In a letter from the DFSA dated 22 December 2011, it is stated, or similar programmes and the Bank may not initiate new share among other things, that due to the substantial risks faced by the option programmes or other similar plans for the Executive Board agricultural sector, the DFSA will base future reviews of agricultural or prolong or renew existing programmes. exposures on a valuation of cultivable land in the lower range of the land price interval assessed by the DFSA. State Hybrid Capital (“State Hybrid Capital”) Pursuant to Danish Act no. 67 of 3 February 2009 on state capital The DFSA has submitted a proposed amendment of the “Executive injections in credit institutions etc., as amended (“Bank Package Order on the presentation of financial reports by credit institutions II”), a scheme was set up, whereby the Danish State offered to inject and investment companies etc.” for consultation. If adopted in the state funded Hybrid Core Capital and to underwrite issues of Hybrid form proposed, the amendment would mainly introduce stricter Core Capital for Danish banks and mortgage-credit institutions. rules for banks’ loan impairment charges. In connection with the The capital injection was in the form of Hybrid Core Capital without proposal being submitted for consultation, the DFSA has stated on a set maturity and a possibility for redemption after three years. its website that the key issue of the proposed amendment is that Redemption is subject to approval by the DFSA. Banks and mort- in future loans granted to distressed property customers must be gage credit institutions that were in compliance with the solvency written down to the actual value of the property, that is, the amount requirements in the Financial Business Act were eligible to apply for at which the property can be expected to be sold within six months. a capital injection from the Danish State. This also applies to loans granted by banks on the basis of particularly risky business practices. These include so-called parking The Act generally required that any State Hybrid Capital injection transactions in which non-performing exposures are transferred to should be of a size ensuring that the credit institution attained a other customers on favourable terms. According to the consulta- minimum Core Capital of 12%. Credit institutions with a Core Capi- tion letter, the draft executive order has been prepared with a view tal of 9% or higher before any State Hybrid Capital injection were to entry into force for semi-annual and annual reports in respect of entitled to apply for an injection of Hybrid Core Capital of 3 percent- reporting periods beginning on 1 January 2012. age point, but could choose a lower amount if the minimum requirement of 12% was met after the injection. However, credit institutions with a Core Capital of less than 9% had to apply for a State Hybrid 12.3. Regulatory Initiatives to Secure Financial Capital injection equivalent to the difference between 12% Core Stability Capital and their existing Core Capital, and credit institutions with a Core Capital of less than 6% could apply for an individual solution. Bank Package I (“Bank Package I”) As a result of the turmoil in the financial markets, the Danish par- The credit institutions were required to pay interest on State Hybrid liament adopted the Financial Stability Act. The Financial Stability Capital injections at individual rates ranging from approximately 9% Act introduced, among other things, a general guarantee scheme, to approximately 11.25% p.a. After a period of three years, the rate under which the Danish State provided an unconditional guarantee used will be the higher of (i) the interest rate fixed and (ii) an inter- for the claims of unsecured creditors against banks to the extent est rate calculated by multiplying (a) 125% of the individual institu- such claims were not otherwise covered. The Bank participated in tion’s dividend payments to its shareholders by (b) the amount of Bank Package I, which pursuant to the Financial Stability Act took the State Hybrid Capital injection divided by an amount equal to the effect from 5 October 2008 and expired on 30 September 2010. market value of the credit institution at the time of the State Hybrid When Bank Package I expired, the Bank’s payment of annual guar- Capital injection. antee commission of DKK 177 million and the guarantee against losses on distressed banks ceased. The Danish State determined interest rates, terms for early redemption, and other provisions of the hybrid injections on a bank- Transition Scheme (the “Transition Scheme”) by-bank basis. The dividend-indexed coupon presupposed that State Part 4a of the Financial Stability Act established a transition scheme Hybrid Capital had been approved by a bank’s general meeting or whereby applications could be made for an individual state guaran- meeting of the board of representatives. tee of existing and new unsubordinated and unsecured debt and of supplementary collateral for covered bonds issued by credit institu- For additional information about the agreement with the Danish tions or mortgage credit institutions (junior covered bonds), in each State, see “Part I—Description of the Bank—Material Contracts”. case issued with a maturity of up to three years. Applications for a state guarantee under the Transition Scheme had to be submitted Danmarks Nationalbank’s Liquidity Facilities no later than 31 December 2010. The Bank made three bond issues With effect from 1 October 2011, Danmarks Nationalbank has under the Transition Scheme in 2010 for a total amount of DKK 7.2 expanded the collateral base to include high-quality loans. The billion, of which DKK 6.2 billion concerns expiries in July 2012 and specific terms and conditions are defined in the guidelines prepared July 2013. The Transition Scheme has now expired. by Danmarks Nationalbank, which provide, among other things, that the types of loans against which loans may be raised are The state guarantees falling under the Transition Scheme are unsecured claims in the form of loans granted in Danish kroner or subject to the payment of a guarantee commission which is fixed euro and drawings under overdraft facilities where the debtor is a individually for each bank. Under the authority of the Act, the Danish non-financial business, a Danish public authority or a household. Ministry of Economic and Business Affairs issued an Executive Or- The guidelines further provide that the debtor must be a resident der on application for individual state guarantee under the Financial of Denmark and that the debtor must not be a related party of the

Spar Nord Bank – Prospectus PART I – 12. The Danish Banking System and Regulation 93 institution. A debtor is not allowed to account for more than 10% and to carry on banking operations within the framework of the of the loan portfolio which the institution pledges as collateral Financial Business Act. vis-à-vis Danmarks Nationalbank. In addition, guidelines have been defined for valuation and collateral value. The transfer amount for the assets will be determined on the basis of the break-up value by agreement between Finansiel Stabilitet A/S Danmarks Nationalbank’s Three-year Lending Facility and the distressed bank. The final valuation will be made as soon as With a view to temporarily increasing the access of banks and possible by two auditors appointed by the Institute of State Author- mortgage credit institutions to longer-term financing, Danmarks ised Public Accountants in Denmark. Nationalbank has introduced an opportunity to raise loans with a three-year maturity. The loans are secured against the collateral The financial risks to the banks consist first and foremost of the basis of Danmarks Nationalbank. The interest on the three-year Guarantee Fund’s protection of depositors and investors within the loan facility will be variable and will track Danmarks Nationalbank’s framework of the Guarantee Fund. The Guarantee Fund (banking seven-day monetary-policy lending rate. The new loans are offered division) is financed by Danish banks. in addition to Danmarks Nationalbank’s existing loans with maturi- ties of seven days and six months. A new separate division, the winding-up division, has been established by the Guarantee Fund.The winding-up division must provide Supervisory Diamond an unlimited guarantee to Finansiel Stabilitet A/S for the newly In June 2010, the DFSA introduced the Supervisory Diamond (in established subsidiary bank’s repayment to Finansiel Stabilitet A/S Danish: “Tilsynsdiamanten”) which identifies a series of special risk of the funding of the bank and the liquidity line. The winding-up areas with associated limits which the banks as the starting point division must also provide an unlimited guarantee for any losses should be within from the end of 2012. The limits will be included Finansiel Stabilitet A/S may incur in connection with the winding-up in the DFSA’s organisation of supervisory activities and will also of the subsidiary bank. The winding-up division will receive a risk imply that, going forward, the DFSA will initiate a dialogue with the premium for the guarantee. banks on their risk profiles at an earlier stage. The DFSA will from late 2012 make an individual and specific assessment of whether The winding-up division’s capital amounts to DKK 3.2 billion and is a so-called “risk warning” should be issued in situations where financed through guarantees from Danish banks. If the winding- the institution exceeds the Supervisory Diamond limits. This risk up division’s capital is used up because the guarantees have been warning must be published. If the Bank is unable to comply with invoked, the division may raise loans against state guarantee. These the limits defined in the Supervisory Diamond, a publication of the loans will be settled through claims on the banks. The banks’ total breach of the limits could lead to a reputational risk for the Bank, contribution to the winding-up division during a financial year can- and the Supervisory Diamond may indirectly lead to restrictions in not exceed an amount equal to 0.2% of the banks’ deposits. The the Bank’s opportunities for doing business after 2012. individual bank’s contribution will equal its current share of the total covered net deposits and its share of assets in custody accounts. Winding-up of Banks Bank Package III Under the Financial Stability Act, the board of directors must, at In connection with the expiry of Bank Package I on 30 September the upcoming general meeting of banks or meeting of the board 2010, Danish Act no. 721 of 25 June 2010, as amended, established of representatives of savings banks, ask the meeting to decide a framework model under the auspices of Finansiel Stabilitet A/S whether or not it wants to state whether the bank or savings bank for the controlled winding up of a distressed bank as a going con- will use the winding-up scheme under the Financial Stability Act in cern (“Bank Package III”). the situation described above. The bank is free to decide whether or not to consider a type of winding-up. This means that the bank is If a bank fails to meet the capital requirements of the Financial not required to consider a type of winding-up or otherwise decide on Business Act, and the bank fails to provide the capital required a type of winding-up. within a time limit fixed by the DFSA, the bank’s board of directors must decide whether the bank should be wound up by Finansiel At the Bank’s annual general meeting held on 27 April 2011, the Stabilitet A/S under the provisions of the Financial Stability Act or shareholders resolved to state that they do not want to decide on a wound up under the general rules of the Financial Business Act. type of winding-up.

If the bank’s board of directors decides to have the bank wound up The scheme was first used in connection with the winding up of by Finansiel Stabilitet A/S, Finansiel Stabilitet A/S will establish a Amagerbanken and was also used in connection with the winding up new subsidiary bank. This subsidiary bank will take over all assets of Fjordbank Mors. of the distressed bank and will, moreover, take over a proportionate share of the unsubordinated debt, including deposits and other Pursuant to Act no. 619 of 14 June 2011, as amended (supplement debt to unsecured creditors to the extent that the value of the assets to Bank Package III) amending the Act on a guarantee fund for covers such claims. Deposits under the Guarantee Fund are fully depositors and investors, the Financial Stability Act and the Tax covered. Assessment Act, a scheme has furthermore been introduced under which the Guarantee Fund may resolve to participate in the winding The distressed bank will then be wound up under the general rules up of a bank by contributing funds or providing a guarantee for the of the Financial Business Act. Hence, this applies to the liabilities coverage of all of the bank’s unsubordinated creditors, see section not taken over, including share capital, guarantee capital and co- 16k of the Financial Stability Act (“dowry”). The Guarantee Fund will operative capital and other subordinated capital or unsubordinated resolve to do so when it is deemed that such winding-up will entail debt not taken over by the subsidiary bank, including depositors’ fewer costs to the Guarantee Fund than a winding-up according to claims which are not covered by the Guarantee Fund. sections 16e–16i of the Financial Stability Act, and the solution is deemed viable from a business point of view. Finansiel Stabilitet A/S will fund the subsidiary bank and make a certain amount of liquidity available for the subsidiary bank to Bank Package IV enable it to finance the acquisition of the distressed bank’s assets Pursuant to Document no. 181 prepared by the Danish Ministry of Economic and Business Affairs on 29 August 2011, adopted by a

94 PART I – 12. The Danish Banking System and Regulation Prospectus – Spar Nord Bank majority of the members of the Finance Committee on 7 September the institution intends to handle the situation when the individual 2011, the Minister for Business and Growth was authorised to cause state guarantee expires; the implementation of an expansion of the possibilities for rescuing distressed banks (“Bank Package IV”). Bank Package IV provides • that Finansiel Stabilitet A/S assesses that the merger between Finansiel Stabilitet A/S with an option to offer a dowry to a bank the two banks reduces the Danish State’s overall risk with re- which takes over a distressed bank (excluding share capital and spect to the continuing institution’s liabilities relative to the risk other subordinated capital) and to pay the expenses related thereto. to which the Danish State would have been exposed if the institu- Furthermore, it is a prerequisite that the state dowry does not make tions had continued on their own; up a greater proportion of the individual state guarantees in the distressed bank than the proportion which the Guarantee Fund’s dowry • that at least one of the merging institutions is not subject to makes up of the covered deposits with the distressed bank. increased supervision by the DFSA and that the DFSA assesses that the merged bank will not directly qualify for increased Bank Package IV also provides Finansiel Stabilitet A/S with an supervision. option to offer a dowry in case a subsidiary (bank) of Finansiel Stabilitet A/S takes over a distressed bank (excluding share capital Applications may be submitted by Danish banks complying with the and other subordinated capital) and immediately divests a part to solvency requirement of 8%, the requirement for the institution’s another bank and to pay the expenses related thereto. The dowry individual solvency need and any higher individual solvency require- paid will be used to cover the loss in connection with the winding ment determined by the DFSA in accordance with section 124 of the up of the remaining part of the acquired bank which the subsidiary Financial Business Act. would otherwise be expected to incur. As with Bank Package III, the winding-up division of the Guarantee Fund provides a loss guaran- Pursuant to a political agreement of 25 August 2011, which also tee which will cover any loss incurred by Finansiel Stabilitet A/S’ contained Bank Package IV, it was agreed to set up a committee of subsidiary (after recognition of the dowry provided by the Guarantee experts under the Ministry of Economic and Business Affairs (today Fund on the takeover of the distressed bank, the state dowry and the current Ministry of Business and Growth), which will consider the proceeds from the sale of the green part) when the winding-up the criteria and terms applicable to SIFIs. The expert committee will of the red part of the distressed bank has been completed. base its considerations on the upcoming EU regulation regarding SIFIs under CRD IV. Agreements on dowry must contain provisions stipulating that a subsequent adjustment of the dowry will take place if, during a pe- Modification of Bank Package IV riod of three years after the takeover, the acquiring bank generates On 14 February 2012, the Minister for Business and Growth submit- greater gains on a specifically agreed part of the exposures taken ted Document no. 51 to the Finance Committee for approval. Docu- over than had been expected at the time of the takeover. ment no. 51 is a modification of Document no. 181 (bank package IV) and proposes to align the individual state guarantee scheme The expenses to Finansiel Stabilitet A/S and hence to the Danish described in Document no. 181 of 7 September 2011 with grants by State in connection with the dowry scheme cannot exceed the losses the Commission of state subsidy for banks in connection with the which could be expected on individual state guarantees provided, if financial crisis. Among other things, it is proposed that the scheme the institutions had been wound up pursuant to the rules of Bank be amended to the effect that it can be applied by all Danish banks Package III. in connection with a merger, regardless of whether the banks in question have previously been granted an individual state guar- Bank Package IV also contains possibilities for extending the indi- antee, provided, however, that at least one of the banks involved is vidual state guarantees provided in connection with Part 4a of the distressed or is expected to become distressed. The upper limit of Financial Stability Act or for providing new guarantees. the overall guarantees issued under the scheme is maintained at DKK 40 billion. Against payment of guarantee commission, Finansiel Stabilitet A/S may provide individual state guarantees to replace existing indi- Document no. 51 states as follows, among other things: vidual state guarantees in specific instances where two banks wish to merge and at least one of the merging banks have an individual - In the event of issuance of a new individual state guarantee to state guarantee. Guarantees issued under this scheme must not replace an existing individual state guarantee, application of exceed DKK 40 billion in aggregate. Not later than in the spring of the scheme is subject to the Danish state’s risk of loss on the 2012, the DKK 40 billion limit will be reassessed in light of develop- guarantees and any state-funded capital injections being reduced ments. significantly as compared with a situation in which the two banks would continue as individual entities. In accordance with Bank Package IV, Finansiel Stabilitet A/S may, against payment of guarantee commission, issue an individual state - In the event of issuance of a new individual state guarantee which guarantee to a bank which has merged and where the merger has does not replace an existing guarantee, the issuance should take caused senior debt to fall due for repayment. An upper limit of DKK place in a prudent manner, see the assessment of the previ- 10 billion has been determined for the overall guarantees issued ous individual state guarantee scheme in Danish Act no. 68 of 3 under this scheme. February 2009.

The conclusion by Finansiel Stabilitet A/S of agreements on indi- - Individual state guarantees will be issued in accordance with the vidual state guarantees assumes: requirements, terms and prerequisites for application and issuance of guarantees set forth in Document no. 181 of 7 September • that the agreement concerns a merger as defined in Danish 2011. Competition Act; - The conclusion by Finansiel Stabilitet A/S of agreements on • that a business plan for the merging bank has been prepared individual state guarantees assumes, among other things: and approved by the DFSA in accordance with section 204 of the Financial Business Act. The business plan shall describe how

Spar Nord Bank – Prospectus PART I – 12. The Danish Banking System and Regulation 95 • that the agreement concerns a merger as defined in the Danish the requirement for approval of business plan and amalgama- Competition Act; tion. In connection with the assessment of viability, the DFSA will focus, among other things, on whether the continuing bank has • that a credible liquidity plan has been prepared; adequate capital to absorb realistic future stress scenarios over the next two years, and whether the bank has realistic and realis- • that the DFSA assesses that the continuing bank has a viable able plans in relation to handling foreseeable challenges such as business model, see section 344(3) of the Financial Business Act; future funding and upcoming stricter capital requirements. and In addition, Document no. 51 lays down a number of requirements • that the DFSA is able to approve the amalgamation, see section for the contents of agreements on individual state guarantees and 204 of the Financial Business Act. determines that for the time being banks can apply for and be granted an individual state guarantee at least until 30 June 2012 but - If both merging banks are subject to increased DFSA supervision, in no case later than until the end of 2013. Document no. 51 has not any application for an individual state guarantee will be subject yet been approved by the Finance Committee. to the DFSA assessing that the continuing bank is viable, see

96 PART I – 12. The Danish Banking System and Regulation Prospectus – Spar Nord Bank 13. Research and Development, Patents and Licences

The Group has no research or development activities giving rise to registrable intellectual property rights and has incurred no costs in this respect in the past three financial years. However, the Group engages in ordinary product development within the Group’s business segments.

Spar Nord Bank – Prospectus PART I – 13. Research and Development, Patents and Licences 97 14. Trend Information

The Current Financial Situation in Denmark Overall, Danish economic indicators suggest a moderate GDP im- Following the financial crisis, the western world experienced provement in the upcoming period, including gradual improvement a general economic crisis with increasing unemployment and in 2012, but the growth outlook is uncertain. Indicators of a poor economic recession. This also applied to Denmark. In Danmarks growth outlook include the economic turmoil’s impact on consumer Natinalbank’s most recent estimate of Denmark’s GDP, published and business confidence, and the growth in the total volume of in the monetary review, 2011 4th quarter, growth is stated as 1.3% loans granted to households and businesses. Indicators of stronger for 2010, while growth was expected at a rate of 1.0% for 2011. growth include the current savings surplus in the private sector, low Consequently, the growth rate was expected to be positive, but short-term interest rates, falling long-term interest rates, falling significantly lower than in Denmark’s neighbouring countries such oil prices and continued high growth rates in the growth economies. as Sweden and Germany, where OECD expects growth rates of 4.1% Danmarks Nationalbank expects Danish GDP growth of 1.1% in and 3.0%, respectively. 2012 and 1.6% in 2013 and, by extension, that the Danish economy will not return to the same level as that prevailing at the onset of In 2011, the OMXC20 index decreased by 15.3%, whereas the the financial crisis in 2008 until in 2013. increase in the OMXC20 index for 2010 was 36.5%. Generally, the prices of Danish shares have tended towards the levels seen prior Developments in Legislation to the financial crisis, even though falling prices were seen in the As a result of the financial crisis, a number of legislative initiatives second half of 2011. were launched both nationally and at EU level, especially with a view to helping out distressed banks and prevent future financial crises. Recently, the financial turmoil related to the European sovereign debt crisis has continued. Consequently, the EU countries entered More specifically, Denmark has introduced four bank packages into a number of agreements at the end of 2011 with a view to since 2008, intended to secure depositors and the financial stability solving the soverign debt crisis in certain eurozone countries and in the event of a bank collapse. In addition, an implementation of secure financial stability. However, it remains uncertain whether Basel III and CRD IV is expected at EU level, entailing stricter capital the relief measures will be implemented as planned and whether and liquidity requirements and thus aiming to avoid banks experi- they are adequate to restore market confidence in the debt-ridden encing financial difficulties. This tendency to increase regulation of eurozone countries. In addition, economic indicators for the inter- the financial sector is expected to continue in the years ahead. national economy are weak and the IMF, OECD and the EU have all downgraded their growth forecasts or announced downward adjust- See “Part I—Description of the Bank—The Danish Banking System ments of growth forecasts. Against this background, a continued and Regulation—Regulation Initiatives to Secure Financial Stability” weak development in the global economy is expected in 2012. This is for a more detailed review of legislative and regulatory initiatives. expected to influence the Danish economy, which has seen relatively weak growth rates in recent years compared to the other OECD countries.

98 PART I – 14. Trend Information Prospectus – Spar Nord Bank 15. Prospective Financial Information

15.1. Management’s Statement on Consolidated Prospective Financial Information for 2012

Management’s prospective financial information for 2012 is presented below in “Part I—Description of the Bank—Prospective Financial Information for 2012”.

We have prepared and presented prospective financial information for the financial year ended 31 December 2012, including the key assumptions set out in “Methodology and Assumptions Applied in Prospective Financial Information for 2012”. The prospective financial information has been prepared according to the same accounting policies as those applied in the consolidated financial statements for the year ended 31 December 2011, included in this Prospectus.

The prospective consolidated financial information for the financial year ended 31 December 2012 has been prepared for the purposes of this Prospectus.

The prospective financial information for the financial year ended 31 December 2012 is based on a number of factors, including certain estimates and assumptions. The material assumptions on which the prospective consolidated financial information for the financial year ended 31 December 2012 is based are described in “Methodology and Assumptions Applied in Prospective Financial Information for 2012”.

Actual results are likely to be different from the prospective financial information for the financial year ending 31 December 2012 since anticipated events frequently do not occur as expected, and the variance may be material. The prospective consolidated financial information for the financial year ended 31 December 2012 in this section should be read in conjunction with “Risk Factors”, included elsewhere in this Prospectus.

Aalborg, 5 March 2012

Spar Nord Bank A/S

Board of Directors

Torben Fristrup Per Nikolaj Bukh Carsten Normann (Chairman) (Deputy Chairman)

Hans Østergaard Niels Kristian Kirketerp Ole Skov

Jannie Skovsen Jan Høholt Jensen

Executive Board

Lasse Nyby John Lundsgaard Lars Møller (Chief Executive Officer) (Managing Director) (Managing Director)

Spar Nord Bank – Prospectus PART I – 15. Prospective Financial Information 99 15.2. Independent auditors’ report on the consolidated prospective financial information for 2012

To the readers of this Prospectus Report from the Bank’s independent auditors regarding the consolidated prospective financial information for the financial year 2012 This report has solely been prepared in accordance with Danish practice in order to accommodate the requirements under European Com- mission Regulation No. 809/2004, as amended, and should not be relied upon for any other purpose.

We have examined the consolidated prospective financial information for the financial year 2012 of Spar Nord Bank A/S as set out in “Part I— Description of the Bank—Prospective Financial Information—Consolidated Prospective Financial Information for 2012” below.

The consolidated prospective financial information for 2012 has been prepared by Management based on the accounting policies applied in 2011. The Bank’s accounting policies applied in 2011 are set forth in Note 1 to the Bank’s 2011 audited consolidated financial statements.

Management is responsible for the consolidated prospective financial information for 2012 and the assumptions on which it is based. Our responsibility is, on the basis of our examinations, to express an opinion on the consolidated prospective financial information for 2012.

Basis of opinion We conducted our examination of the consolidated prospective financial information for 2012 in accordance with the Danish Standard on As- surance Engagements “Examination of Prospective Financial Information” (RS 3400).

This standard requires that we plan and perform our examinations in order to obtain limited assurance that the applied assumptions are well founded and do not contain material misstatement, and reasonable assurance that the consolidated prospective financial information for 2012 has been prepared on the basis of these assumptions.

Our examinations comprised a review of the consolidated prospective financial information for 2012 in order to assess whether the assumptions applied by Management are documented, well founded and complete. We also tested whether the consolidated prospective financial information for 2012 was prepared in accordance with the assumptions set out and tested whether the figures in the consolidated prospective financial information for 2012 correlate.

We believe that our examinations provide a reasonable basis for our opinion.

Opinion Based on our examinations of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the consolidated prospective financial information for 2012. Furthermore, in our opinion, the consolidated prospective financial information for 2012 has been prepared on the basis of the assumptions set out and is presented in accordance with the Bank’s accounting policies applied in 2011, which are described in note 1 to the Bank’s audited consolidated financial statements for 2011. Actual results for 2012 are likely to be different from the consolidated prospective financial information for 2012 since anticipated events frequently do not occur as expected, and the variation may be material.

Aalborg, 5 March 2012

KPMG Statsautoriseret Revisionspartnerselskab

Per Gunslev Lisbet Kragelund State Authorised Public Accountant State Authorised Public Accountant

100 PART I – 15. Prospective Financial Information Prospectus – Spar Nord Bank The Bank’s prospective financial information is based on a number 15.3. Prospective Financial Information for 2012 of assumptions and estimates which, while presented with numerical specificity and considered reasonable by Management, are Methodology and Assumptions Applied in Prospective Financial inherently subject to significant business, operational and economic Information for 2012 uncertainties, many of which are beyond the Bank’s control. Man- Introduction agement finds that the Bank solely has direct influence on those The Bank has prepared the prospective consolidated financial assumptions regarding the Group in general, Spar Nord’s Local information for the financial year ended 31 December 2012 herein Banks, Spar Nord Leasing and the assumptions about unchanged for use in this Prospectus in compliance with applicable laws and income and zero cost growth in the Trading, Financial Markets and regulations. The Board of Directors and the Executive Board are International Division. responsible for the information. The prospective financial information is, among other things, The prospective financial information for the financial year ended 31 based on the assumption that the Bank’s strategy is implemented. December 2012 is based on a number of assumptions and esti- Whether this strategy is successful is subject to uncertainties and mates which, while presented with numerical specificity and con- contingencies beyond the Bank’s control, and there can be no as- sidered reasonable by the Bank, are inherently subject to significant surance that the strategy will be realised within the forecast period, business, operational, economic and competitive uncertainties and if at all. Accordingly, there can be no assurance that the forecast contingencies, and are based on assumptions with respect to future results will materialise. Actual results may therefore differ from the business decisions that are subject to change. budgeted results, and the variance may be material.

The Bank’s expectations in relation to future developments may dif- The prospective financial information for 2012 represents Manage- fer significantly from actual developments, and realised results are ment’s best estimates at the Prospectus Date. The prospective likely to differ from the stated estimates, and such variance may be financial information contains estimates and assertions that are material. Accordingly, potential investors should treat this infor- subject to considerable uncertainty. See “Risk Factors”. mation with caution and not place undue reliance on the following prospective financial information. Actual results may differ significantly from the Bank’s assumptions as a result of other circumstances including, but not limited Methodology and Assumptions to, those described in “Risk Factors”. See “Part I—Operating and The prospective consolidated financial information for the financial financial review—Primary Factors Affecting the Group’s Results of year ended 31 December 2012 has been prepared on the basis of Operations” for further information on the primary factors that, in the Bank’s accounting policies, which are in accordance with the the Bank’s opinion, could potentially have a significant effect on its recognition and measurement provisions of IFRS as adopted by the results. EU and are identical to the accounting policies applied in the audited consolidated financial statements for 2011 set out in note 1 to the In preparing the prospective consolidated financial information for Bank’s audited consolidated financial statements for the financial the financial year ended 31 December 2012, the Bank’s assumptions year ended 31 December 2011, included in this Prospectus, and included the following: the accounting estimates described therein. In note 1, “Information on standards that have not yet come into force”, it is stated that no Uncertainty as to Economic Outlook changes to the accounting policies are expected in 2012. During 2011, the brighter economic outlook perceived in 2010 gave way to expectations of very subdued growth or outright recession in The prospective consolidated financial information for the finan- 2012. The economic outlook is still subject to considerable uncer- cial year ended 31 December 2012 has been prepared for use in tainty as a result of, among other things, the political situation sur- this Prospectus using the Bank’s usual analysis and budgeting rounding the resolution of the sovereign debt problems in Greece, procedures and on a basis comparable to the historical financial Italy, Spain, Ireland and Portugal. information included elsewhere in this Prospectus. However, the prospective consolidated financial information is based on a large The uncertainty as to the economic situation in 2012 impacts the number of estimates made by the Bank on the basis of assumptions prospects for 2012 with flat lending growth, moderate growth in of future events that are subject to numerous and significant un- deposits and continued limited activity in the investment area. certainties as a result of business, economic, competitive and other risks and uncertainties that may cause the Bank’s actual results Core Income to differ significantly from the prospective financial information The Bank’s core income is expected to increase relative to 2011. presented herein. The increase is largely linked to the interest rate increases in 2011, which will take full effect in 2012. Some of the assumptions, uncertainties and unforeseen events relating to the prospective consolidated financial information are Based on expectations of a poor economic outlook and uncertain beyond the Bank’s control, including those relating to changes in market conditions in 2012, lending growth is expected to be flat. political, legal, fiscal, market or economic conditions, improvements in macroeconomic conditions, currency fluctuations and customers’ A minor increase in deposits is expected, which is expected to have or competitors’ actions. The Bank has full or partial control over limited impact on net interest income. certain other assumptions, uncertainties and contingencies, including events related to the implementation of the Bank’s strategy and Net interest income is affected by increased funding costs. Bond restructuring projects. and senior loans in the amount of DKK 5.4 billion mature during 2012. To the extent that these are refinanced, this is expected to be Even though the material assumptions applied in preparing the at a higher margin than the matured loans. prospective financial information are set out below, there is a possibility that one or more of the assumptions applied by the Bank will Net income from fees, charges and commissions for 2012 is ex- not be realised. pected to be in line with 2011. Net income from fees, charges and

Spar Nord Bank – Prospectus PART I – 15. Prospective Financial Information 101 commissions for 2012 will be positively affected by the increase at • repayment in accordance with agreements with customers; 1 April 2012 in the administration fee on arranged Totalkredit loans. • extraordinary instalments due to transfers of whole customers to Costs other leasing companies. Total costs for 2012 are expected to be in line with 2011. Among other measures, this has been ensured by an alignment of the A profit on Discontinuing Activities is expected for 2012. organisation towards the end of 2011. Contributions to Sector-Targeted Solutions Impairment Losses Based on the available draft Deposit Guarantee Scheme, contribu- Impairment of loans and advances is highly sensitive to cyclical tions to sector-targeted solutions for 2012 are expected to be an changes, and for 2012 is subject to considerable uncertainty. expense in the range of DKK 35-65 million.

Impairment losses are expected to remain high due to the sustained Consolidated Profit Forecast for 2012 challenging situation. Based on the above, the Bank expects to realise core earnings before impairment of around DKK 800 million for 2012. The profit forecast set out below is stated as core earnings before impairment losses. The Bank’s financial and operational performance is affected by various factors. See “Risk Factors” for a description of some of the Discontinuing Activities factors that could have an adverse effect on the Bank’s operational The remaining part of Spar Nord Leasing in Denmark and Swe- and financial performance and should, therefore, be read in con- den is expected to be phased out during the year, to the effect that junction with the prospective financial information. loans and advances at year end 2012 will amount to DKK 4.4 billion, against DKK 7.1 billion at year end 2011. This development in loans and advances is based on the following assumptions:

102 PART I – 15. Prospective Financial Information Prospectus – Spar Nord Bank 16. Board of Directors, Executive Board and Supervisory Bodies

The Bank has a two-tier management system encompassing a The business address of the current members of the Board of Di- Board of Directors and an Executive Board. rectors is Skelagervej 15, DK-9100 Aalborg, Denmark.

Torben Fristrup 16.1. Board of Directors Torben Fristrup was born in 1951 and has been Chairman of the Bank’s Board of Directors since 2004. Torben Fristrup holds a The Board of Directors has the overall responsibility for the man- degree in engineering and has completed an executive education agement of the Bank and supervises the Executive Board. Under the programme at IMD Business School in Switzerland. Torben Fristrup current management structure, the Board of Directors defines the is Chief Executive Officer of CUBIC-Modulsystem A/S and has man- overall principles governing the affairs of the Group. The Execu- agement experience from several companies. tive Board is the supreme decision-making body as concerns the day-to-day management of the Bank, observing the guidelines Current Directorships and instructions issued by the Board of Directors. The Board of Chairman Directors must give specific authorisation to transactions which • Brønderslev Industrilakering A/S are unusual or significant to the Bank. The Board of Directors shall • Sjørring Maskinfabrik A/S also consider from time to time whether the capital resources of the • CUBIC Norge AS Bank are adequate in the context of the Bank’s operations and shall • CUBIC – Modular System Ltd. ensure that the Bank’s bookkeeping and asset management func- • CUBIC Svenska AB tions are subject to the appropriate control. Board member The Board of Directors, which consists of non-executive directors, • The Spar Nord Foundation (Spar Nord Fonden) is elected by the shareholders of the Bank at the general meeting of • CUBIC-Modulsystem A/S shareholders with the exception of those directors who are elected • Direktør Erik Kauffeldts Fond pursuant to applicable law concerning employee representation • Keflico A/S on the Board of Directors (currently three members). Employees • Rigmor Nielsens Fond of companies that employ more than 35 employees are entitled to elect directors corresponding to half of the directors elected by the Managing Director general meeting. Board members elected by the employees are • CUBIC-Modulsystem A/S elected for terms of four years, and they hold the same rights and • Regulus ApS obligations as any member of the Board of Directors elected by • Fristrup Holding Aalborg ApS the shareholders. Board members elected by the shareholders in general meeting are elected for terms of two years, and the number Resigned Directorships within the past five years of such directors may range from four to six (currently five mem- Chairman bers). Members of the Board of Directors must retire at the date of • Cabinet System A/S the first general meeting following their 70th birthday. According to Danish law, members of the Executive Board may not also be Board member members of the Board of Directors of the Bank. • Nordjysk Lånefond • CUBIC-Holding, Brønderslev A/S (dissolved by merger) • A/S Dybvad Stålindustri Table 82 – The current members of the Board of Directors • Newline A/S • Aalborg Træindustri af 1992 A/S (dissolved by merger) • AAT Investment A/S Member of Year of the Board of Expiry Managing Director Name birth Position Directors since of term • CUBIC-Holding, Brønderslev A/S (dissolved by merger)

Torben Fristrup 1951 Chairman 2003 2012 Per Nikolaj Bukh Per Nikolaj Bukh 1965 Deputy Chairman 2007 2013 Per Nikolaj Bukh was born in 1965 and has been Deputy Chairman Carsten Normann 1962 Member of the Board 2004 2012 of the Bank’s Board of Directors since 2009. Per Nikolaj Bukh holds of Directors an MSc and a PhD in economics. Per Nikolaj Bukh works as a pro- Hans Østergaard 1946 Member of the Board 2009 2013 fessor at Aalborg University and also has management experience of Directors from several directorships.

Niels Kristian Current Directorships Kirketerp 1947 Member of the Board 2005 2012 Board member of Directors • Jurist- og Økonomforbundets Forlag A/S Ole Skov 1959 Member of the Board 2000 2012 • Jurist- og Økonomforbundets Forlag Holding A/S of Directors • Jurist- og Økonomforbundets Forlagsfond Jannie Skovsen 1965 Member of the Board 2008 2012 • The Spar Nord Foundation (Spar Nord Fonden) of Directors • Padborg Ejendomme ApS Jan Høholt Jensen 1965 Member of the Board 2004 2012 Managing Director of Directors • P. N. Bukh ApS On 20 December 2011, Per Søndergaard Pedersen resigned from • Value Spread 1 ApS the Board of Directors as a result of the Group identifying an indica- • Danmarksgade 28, Frederikshavn ApS tion of impairment of a minor commitment with a company, in which Per Søndergaard Pedersen is a minority shareholder and a member of the Board of Directors.

Spar Nord Bank – Prospectus PART I – 16. Board of Directors, Executive Board and Supervisory Bodies 103 Resigned Directorships within the past five years tification from Board Governance. Hans Østergaard is a professional Chairman board member. • MBL A/S Current Directorships Board member Chairman • Akva Waterbeds A/S • C.S. Electric ApS • Kapitalpleje A/S (dissolved by merger) • HNC Group A/S • Berty A/S • C.S. Electric Nord ApS • C.S.E. Holding A/S Managing Director • Berty A/S Board member • Dyrlægerne Himmerland Kvæg A/S Carsten Normann Carsten Normann was born in 1962 and has been a member of the Resigned Directorships within the past five years Bank’s Board of Directors since 2004. Carsten Normann holds an Chairman MSc in international business economics, has also completed a • Ejendomsselskabet Reskavej 1 A/S directorship training course targeted at financial companies and • Nordjysk Entreprenør – Materiel A/S has achieved board certification from Board Governance. Carsten • Flexodan A/S (dissolved by merger) Normann is a professional board member and has previously been • Nordjysk Reservedelslager A/S managing director of Dagrofa and Biva. Board member Current Directorships • Nordjysk Reservedelslager Aalborg A/S (deputy chairman) Board member • Go’on gruppen A/S Niels Kristian Kirketerp • K/S Laboris I, Horsens Niels Kristian Kirketerp was born in 1947 and has been a member • Zap-In Kontorsupermarked A/S of the Bank’s Board of Directors since 2005. Niels Kristian Kirketerp • K/S Søborg Hovedgade 25-29, 2000 Aps has agricultural training and is a farm owner.

Managing Director Current Directorships • Cano Holding ApS Board member • Selskabet af 31. august 2010 A/S (in bankruptcy) • The Spar Nord Foundation (Spar Nord Fonden) • K/S Wellen Resigned Directorships within the past five years Chairman Resigned Directorships within the past five years • Dreisler Storkøb A/S Chairman • ISO Supermarked A/S (dissolved by merger) • Pensionskassen for Kost- og Ernæringsfaglige • Jacodan A/S (dissolved by merger) • Pensionskassen for Jordmødre • Norddata A/S • Jordmødrenes Ejendomsaktieselskab • Foodservice Danmark A/S • Jordmødrenes Personforsikringsselskab A/S (dissolved by • KIWI Danmark A/S merger) • Supergros Danmark A/S • Kost- og Ernæringsfagliges Ejendomsaktieselskab • Ove Juel Catering A/S • Kost- og Ernæringsfagliges Personforsikringsselskab A/S (dis- • Catering Engros A/S solved by merger) • Dagrofa Detail A/S • Pisiffik A/S Board member • Pensionskassernes Administration A/S Board member • Ejendoms- og Finansieringsfonden for Nordjyllands Videnpark • Sügro Danmark A/S • Novi Management A/S • Spar Danmark A/S (deputy chairman) • Ergoterapeuternes og Fysioterapeuternes Ejendomsaktieselskab • Dansk Handelsblad A/S • Hobro Golfbane ApS • Inco Food A/S • Pensionskassen for Kontorpersonale (alternate member) • Dagrofa Finansiering A/S (deputy chairman) • Pensionskassen for Ergoterapeuter og Fysioterapeuter • EG Retail & Medie A/S • Pensionskassen for Sygeplejesker (alternate member) • The Spar Nord Foundation (Spar Nord Fonden) • Mariagerfjord Vand A/S (dissolved by merger) • The Danish Chamber of Commerce (Dansk Erhverv) • Mariagerfjord Spildevand A/S • Torndalsgård A/S Managing Director • Pensionskassen for Lægesekretærer (alternate member) • SOVI-1109 ApS • Ergoterapeuternes og Fysioterapeuternes Personforsikrings- • 12. januar 2009 Holding A/S selskab A/S (dissolved by merger) • Dagrofa A/S • Pensionskassen for sundhedsfaglige • BIVA A/S • Danish Regions (Danske Regioner) • CaPa Holding I ApS (dissolved by demerger) Managing Director Hans Østergaard • NK Kirketerp ApS (dissolved by declaration) Hans Østergaard was born in 1946 and has been a member of the Bank’s Board of Directors since 2009. Hans Østergaard holds a Ole Skov BCom in accounting, has also completed a directorship training Ole Skov was born in 1959 and has been an employee elected course targeted at financial companies and has achieved board cer- member of the Bank’s Board of Directors since 2000. Ole Skov has

104 PART I – 16. Board of Directors, Executive Board and Supervisory Bodies Prospectus – Spar Nord Bank a financial services background and holds a business diploma in The business address of the current members of the Executive accounting and financing and also completed a directorship training Board is Skelagervej 15, DK-9100 Aalborg, Denmark. course targeted at financial companies. Ole Skov is a senior workplace representative of Spar Nord Bank A/S. Lasse Nyby Lasse Nyby was born in 1960 and was appointed Chief Executive Current Directorships Officer of the Bank in 2000. Lasse Nyby has a financial services Chairman background and holds a BCom in management and accounting • The Financial Services Union “Spar Nord Kreds” and has completd an executive education programme at INSEAD in France. Lasse Nyby also has management experience from several Board member directorships. • The Personnel Foundation at Spar Nord (Personalefonden i Spar Nord) (deputy chairman) Current Directorships • The Spar Nord Foundation (Spar Nord Fonden) Chairman • The Financial Services Union executive committee • Regionale Bankers Forening • Spar Nord Ejendomsselskab A/S Resigned Directorships within the past five years • Erhvervsinvest Nord A/S None • Spar Nord Leasing A/S • SN Finans Nord AB Jannie Skovsen • JSNA Holding A/S Jannie Skovsen was born in 1965 and has been an employee- • Finanssektorens Pensionskasse elected member of the Bank’s Board of Directors since 2008. Jannie • Komplementarselskabet Advizer ApS Skovsen has a financial services background and holds a business diploma in marketing. Jannie Skovsen is a workplace representative Board member of Spar Nord Bank A/S. • Finans Nord Cross Border A/S • Pras A/S Current Directorships • Nykredit Holding A/S Board member • Vækst-Invest Nordjylland A/S • The Spar Nord Foundation (Spar Nord Fonden) • The Danish Bankers Association (Finansrådet) • The Financial Services Union “Spar Nord Kreds” (deputy chairman) Liquidator • Spar Nords Pensionskasse Resigned Directorships within the past five years None Resigned Directorships within the past five years Board member Jan Høholt Jensen • Totalkredit A/S Jan Høholt Jensen was born in 1965 and has been an employee- • Erhvervsinvest Management A/S elected member of the Bank’s Board of Directors since 2004. Jan • Easyfleet A/S Høholt Jensen has a financial services background and is project consultant of Spar Nord Bank A/S. John Lundsgaard John Lundsgaard was born in 1964 and was appointed Managing Di- Current Directorships rector of the Bank in 2000. John Lundsgaard has a financial services • None background and holds a Master in Business Administration (MBA). John Lundsgaard also has management experience from several Resigned Directorships within the past five years directorships. • The Spar Nord Foundation (Spar Nord Fonden) • The Financial Services Union “Spar Nord Kreds” Current Directorships Chairman • Høgsberg Assurance Service A/S 16.2. Executive Board • Factor Insurance Brokers A/S • Skandinavisk Data Center A/S The Executive Board is in charge of the day-to-day management of • Nordisk Finans IT P/S the Group as laid down in the Rules of Procedure for the Executive • Komplementarselskabet NFIT A/S Board. Board member • letpension A/S Table 83 – The current members of the Executive Board • Datakomm A/S • Spar Nord Ejendomsselskab A/S • The Danish Employers’ Association for the Financial Sector Year of H has held the (FA Finanssektorens Arbejdsgiverforening) Name birth Position position since • MultiData Holding A/S (alternate member) • MultiData A/S (alternate member) Lasse Nyby 1960 Chief Executive Officer 2000 John Lundsgaard 1964 Managing Director 2000 Resigned Directorships within the past five years Lars Møller 1957 Managing Director 2000 Chairman • Factor Insurance Brokers Jylland A/S (dissolved by merger)

Spar Nord Bank – Prospectus PART I – 16. Board of Directors, Executive Board and Supervisory Bodies 105 Board member • Finanssektorens Pensionskasse 16.4. Statement of Convictions, Indictments and • Maestro Business Group A/S Conflicts of Interest, if any • Bankpension Livs- og Pensionsforsikringsselskab A/S • letpension IT A/S (dissolved by merger) During the past five years, none of the members of the Board of Di- rectors or the Executive Board have (i) been convicted of fraudulent Liquidator offences or (ii) been the object of public prosecution and/or public • Spar Nords Pensionskasse sanctions by authorities or supervisory bodies (including appointed professional bodies) or (iii) been disqualified from acting as a mem- Lars Møller ber of an issuer’s board of directors, executive board or supervisory Lars Møller was born in 1957 and was appointed Managing Director body or being in charge of an issuer’s management or other affairs. of the Bank in 2000. Lars Møller has a financial services background and has completed an executive education programme at INSEAD in During the past five years, none of the members of the Board of France. Lars Møller also has management experience from several Directors or the Executive Board have been a member of the board directorships. of directors, executive board or supervisory bodies or a senior manager of any company that has commenced insolvency proceed- Current Directorships ings or other receivership, or entered into solvent liquidation, except Chairman for Carsten Normann, who is registered as managing director of • BI Holding A/S Selskabet af 31. august 2010 A/S in bankruptcy. • BI Management A/S • BI Asset Management Fondsmæglerselskab A/S No actual or potential conflicts of interest exist between any of the duties of the members of the Board of Directors and the Executive Board member Board and their private interests or other duties. • DLR Kredit A/S • Erhvervsinvest Nord A/S The Bank is not aware of any members of the Board of Directors or • BankInvest Private Equity A/S (deputy chairman) Executive Board having been appointed pursuant to an agreement • Spar Nord Ejendomsselskab A/S or understanding with the Bank’s major shareholders, customers, suppliers or other parties. Resigned Directorships within the past five years None 16.5. Restrictions on Securities Trading

16.3. Statement of kinship No restrictions have been imposed on the Board of Directors’ or the Executive Board’s trading in the Bank’s shares except as provided To the best of the Bank’s knowledge, no kinship exists between any by law and the guidelines set out in the Group’s internal rules. The members of the Board of Directors and/or the Executive Board. Group’s internal rules contain no unusual restrictions.

106 PART I – 16. Board of Directors, Executive Board and Supervisory Bodies Prospectus – Spar Nord Bank 17. Remuneration and Benefits

17.1. Remuneration in Financial Businesses 17.2. Remuneration of the Board of Directors

In connection with the adoption of the Danish bank packages, cer- The members of the Board of Directors receive a fixed fee and are tain restrictions on incentive schemes to members of management not covered by any type of incentive schemes or performance- in financial businesses were introduced. based remuneration. The basic fee of each member is set at a level that reflects market standards considering the competencies and In December 2010 and August 2011, the Financial Business Act resource requirements of board members. was amended, among other things, to implement the provisions of Directive 2010/76/EU regarding remuneration policies. These The Chairman receives remuneration corresponding to two and a provisions were most recently revised in Executive Order no. 122 half times the amount of the basic fee, and the Deputy Chairman of 7 February 2012 on remuneration policy and disclosure require- receives one and a half time the amount of the basic fee. In addition ments on remuneration in financial companies and financial holding to the basic fee, members receive compensation if they serve as companies issued by the DFSA. members of the Board’s audit committee.

The provisions introduced restrictions on incentive schemes in No agreements have been made with members of the Board of financial businesses, including in the Bank. The restrictions provide, Directors, and the Board members are not entitled to severance pay. among other things, that no financial undertaking or financial holding company may remunerate members of its board of directors or No members of the Board of Directors have entered into service executive board with variable remuneration components, includ- contracts with the Bank’s subsidiaries. ing share options and warrants exceeding 50% of the fixed basic remuneration, including pension; however, only 20% if the company The following table sets forth the remuneration of the members of receives government subsidies, and the board of directors and ex- the Board of Directors for the financial year ended 31 December ecutive board may not receive share options or similar instruments 2011. exceeding 12.5% of the basic remuneration, including pension.

There is an additional requirement that at least 50% of the variable Table 84 – Remuneration of the members of the Board of Directors pay must consist of shares or share-based instruments of the fi- for the financial year ended 31 December 2011 nancial undertaking or its parent company. Variable pay below DKK 100,000 is, however, generally excepted from this. Furthermore, a substantial portion of the variable remuneration components must (DKKm) be deferred over a period of four years, and may only be paid if the Torben Fristrup 0.5 financial businesses fulfil the statutory requirements with regard to solvency and capital at the time of the payment. In the event that Per Nikolaj Bukh 0.4 variable remuneration components have been paid on the basis of Carsten Normann 0.2 information on results, and the information later proves to be er- Hans Østergaard 0.3 roneous, the financial undertaking is entitled to reclaim the variable remuneration, provided, however, that the person to whom it was Per Søndergaard Pedersen (resigned 20 December 2011) 0.2 paid received it in bad faith with regard to the correctness of the Niels Kristian Kirketerp 0.2 information. Ole Skov 0.2 Jan Høholt Jensen 0.3 Similar rules apply for employees whose activities have a material effect on the financial undertaking’s risk profile (so-called risk Jannie Skovsen 0.2 takers).

Further restrictions on incentive schemes apply to financial busi- 17.3. Remuneration of the Executive Board nesses that have received State Hybrid Capital pursuant to Bank Package II or have issued bonds under the Transition Scheme. For Executive Board members are employed on a contractual basis and such financial businesses, variable remuneration paid to members their contract terms including remuneration are subject to annual of the Executive Board, including share options and warrants, may assessment. The Board of Directors aims at combining the remu- not exceed 20% of the fixed basic remuneration, including pension, neration packages for the members of the Executive Board on the and financial businesses may not introduce new or renew existing basis of market practice and at a level that makes it possible for the programmes for remuneration with share options and similar in- Bank to attract and retain a competent Executive Board. struments. These additional restrictions on incentive schemes apply until all amounts payable under the State Hybrid Capital, including The remuneration of the members of the Executive Board consists interest and costs, have been repaid in full, cancelled or converted of a fixed salary and pension, as well as a company car and free into equity, or the Danish State has transferred all notes subscribed telephone. Executive Board members do not receive variable re- for in connection with the payment of the State Hybrid Capital and muneration components. If the Group terminates the employment, has thus ceased to be creditor of all or part of the loan. The Bank the current members of the Executive Board have a notice period of has issued bonds under the Transition Scheme and received State 12 months and will be entitled to severance pay equal to two years’ Hybrid Capital. See “Part I—Description of the Bank—The Danish salary unless the member of the Executive Board is in of breach of Banking System and Regulation—Regulatory Initiatives to Secure the executive service contract. If members of the Executive Board Financial Stability”. terminate their employment, they have a notice period of six months and no right to termination benefits. Members of the Executive The Group complies with the restrictions described above. Board are entitled to pension from the first month following their 60th birthday by giving six months’ notice, and they are entitled to pension payments until their 64th birthday.

Spar Nord Bank – Prospectus PART I – 17. Remuneration and Benefits 107 In addition, the Bank is obligated to pay remuneration for a period John Lundsgaard of 36 months to a managing director in the event of a merger or takeover in which the managing director does not form part of the executive board of the continuing company, and such managing Table 86 – Remuneration of John Lundsgaard for the financial year director cannot be offered a relevant position with a salary cor- ended 31 December 2011 responding to his/her previous salary, and such managing director does not terminate his/her contract with or without notice. (DKKm)

Fees to the members of the Executive Board for external director- Base salary 3.0 ships are set off against the pay from the Bank. – fees received from directorships 0.6 With regard to share options granted to the members of the Execu- The Bank’s expense, base salary 2.4 tive Board, see “Part I–Description of the Bank–Employees” for Pension 0.3 more details. Total 2.7

No members of the Executive Board have entered into service contracts with the Bank’s subsidiaries. Lars Møller The following table sets forth the remuneration of the Executive Board for the financial year ended 31 December 2011. Table 87 – Remuneration of Lars Møller for the financial year ended Lasse Nyby 31 December 2011

Table 85 – Remuneration of Lasse Nyby for the financial year ended (DKKm) 31 December 2011 Base salary 2.9 – fees received from directorships 0.5 (DKKm) The Bank’s expense, base salary 2.4 Base salary 3.3 Pension 0.3 – fees received from directorships 0.5 Total 2.7 The Bank’s expense, base salary 2.8 Pension 0.4 Total 3.2 Provisions have been made in the event that the Executive Board relies on special terms applicable on termination in relation to the transition to pension. The provision amounted to DKK 0.7 million at 31 December 2011.

108 PART I – 17. Remuneration and Benefits Prospectus – Spar Nord Bank 18. Board Practices

a strategy seminar and three meetings with the chairmen of the 18.1. Practices of the Board of Directors regional bank committees. Until the Prospectus Date, the Board of Directors has held five meetings in 2012. It is the task and responsibility of the Board of Directors to be in charge of the overall management of the Group including exercising Members of the Board of Directors and the Executive Board cannot control of the work performed by the Executive Board and establish- be present during discussions of their own accounts and facilities ing appropriate strategies. or discussions of accounts and facilities available to a company in which they are members of the board of directors or the executive Pursuant to the Articles of Association, the Board of Directors must board, or in any discussions regarding lawsuits against them. This consist of not less than four and not more than six members elected also applies to discussions of other matters if a member of the by the general meeting. In addition to the members elected by the Board of Directors or of the Executive Board has a significant inter- general meeting, the employees of the Group are entitled to elect est that may conflict with the Group’s interests. Finally, the Execu- a number of employee representatives corresponding to half of the tive Board cannot be present in case the Board wishes to discuss number of members elected by the general meeting. the business of the Bank without their presence.

Members of the Board of Directors elected by the general meeting The external auditors and the head of the Internal Audit Department are elected for terms of two years and employee representatives are are always entitled to attend meetings of the Board of Directors dur- elected for terms of four years and are eligible for re-election. ing the transaction of business of importance to the audit or to the preparation of accounts. The external auditors and the head of the Members of the Board of Directors must retire at the date of the Internal Audit Department are obliged to participate in meetings of first general meeting following their 70th birthday. the Board of Directors dealing with these matters if so requested by a member of the Board of Directors. Other participation takes place Pursuant to the Financial Business Act, a member of the Board under an agreement with the Chairman of the Board of Directors. of Directors may not serve on the Executive Board. The current members of the Board of Directors have served as Board members The Board of Directors is continuously kept informed of the auditors’ as set out below. work through submission of long-form audit reports to the Board, and the Board evaluates this work in connection with the signing of the reports. Table 88 – Year of election of members to the Board of Directors and expiration of the term for the current members of the Board of According to the Financial Business Act, the Board of Directors Directors must (i) determine and continuously consider what business activities the Bank is to perform, (ii) identify and quantify the Bank’s risk profile, including assessing the risks that the Bank may assume and Elected to Expiration (iii) establish internal policies for the management of the Bank’s the Board of current business activities and risk profile. Based on the Bank’s risk profile of Directors terms and its internal policies, the Board of Directors must prepare written guidelines for the Executive Board. These guidelines must, as a Torben Fristrup 2003 2012 minimum, contain the following. Per Nikolaj Bukh 2007 2013 Carsten Normann 2004 2012 • the framework for the risks that the Executive Board may expose Hans Østergaard 2009 2013 the Bank to, the principles upon which different types of risk are determined; Niels Kristian Kirketerp 2005 2012 Ole Skov 2000 2012 • the transactions that the Executive Board may execute without Jan Høholt Jensen 2004 2012 the approval of the Board of Directors; Jannie Skovsen 2008 2012 • the procedure for the Executive Board’s reporting to the Board of Directors with regard to the risks associated with the Bank’s activities. After the Bank’s annual general meeting of shareholders, the members of the Board of Directors elect a chairman and a deputy The rules of procedure contain the information required by the chairman from among themselves. Financial Business Act.

The Board of Directors shall form a quorum when more than half of its members are represented. All resolutions are adopted by a 18.2. Practices of the Executive Board simple majority of votes. In case of an equality of votes, the Chair- man, or in his absence the Deputy Chairman, shall have the casting According to the Articles of Association, the Executive Board shall vote pursuant to the rules of procedure of the Board of Directors. manage the day-to-day business and affairs of the Bank and shall However, when appointing and dismissing members of the Executive consist of not less than one and not more than five members. The Board, the head of the Internal Audit Department, general manag- Rules of Procedure of the Executive Board are established by the ers in charge of finances and credit rating and the general manager Board of Directors and according to these, the Board of Directors of Trading, Financial Markets & the International Division, it is has decided that the Executive Board shall consist of three mem- required that at least half of all members of the Board of Directors bers. vote in favour thereof. The current members of the Executive Board have had their current Generally, the members of the Executive Board take part in the positions as set out below. Board meetings. In 2011, the Board of Directors held 11 ordinary Board meetings, five extraordinary Board meetings, a first meeting,

Spar Nord Bank – Prospectus PART I – 18. Board Practices 109 Table 89 – Title and year of appointment in current position consideration of matters relating to remuneration, including the Group’s remuneration policy.

Current The remuneration committee currently consists of Torben Fristrup Title position since and Per Nikolaj Bukh. Lasse Nyby Chief Executive Officer 2000 John Lundsgaard Managing Director 2000 18.5. Management Reporting and Internal Control Lars Møller Managing Director 2000 Systems

A written agreement has been concluded (the so-called Section 70 instruction) between the Board of Directors and the Executive The duties of the Executive Board include the following: Board, specifying the powers and authority of the latter. The Board of Directors lays down overall policies, while the Executive Board is • performing competent day-to-day management of the Group; in charge of the Group’s day-to-day management.

• management of the Group’s credit risk, including credit approvals Various risk management issues are recurrent items on the agenda up to DKK 60 million for existing customers and DKK 30 million of Board of Directors meetings, and the Group has implemented a for new customers; number of procedures and systems intended to ensure that risks are identified and managed appropriately and in compliance with • setting forth policies for and control of the Group’s market risks applicable legislation. management and liquidity reserves; The Board of Directors makes an annual review of the organisation, • management of the Group’s liquidity risk; its focus areas and resource allocation and also annually assesses the risk of fraud in all business areas. • authorising lines to Danish banks with respect to investment and settlement risk in trading with interest-, share-, commodity- and Risk Management and Control Systems in connection with Financial currency-related products; Reporting The Board of Directors and the Executive Board share the overall • reporting to the Board of Directors; responsibility for the Group’s risk management and controls in connection with its financial reporting. The Board of Directors and the • ensuring sound and adequate bookkeeping and asset manage- Executive Board are composed so as to ensure that the appropri- ment; ate internal control and risk management expertise is present to ensure appropriate financial reporting. • preparing drafts of annual, half-year and quarterly financial statements; and The Board of Directors approves general policies, procedures and controls, and also prepares a detailed annual plan for the internal • submitting cases to the Board of Directors and performing spe- audit and compliance functions. Policies, manuals and procedures cific directives of the Board of Directors. within important areas in connection with the financial reporting are available, including a business procedure for financial reporting, a business procedure for the finance function and other key functions, 18.3. Service Contracts with the Board of and an IT security policy. Directors and the Executive Board

See “Part I–Description of the Bank–Remuneration and Benefits– 18.6. Declaration on Corporate Governance Remuneration of the Executive Board” and “Part I–Description of the Bank–Remuneration and Benefits–Remuneration of the Board The Bank supports initiatives to promote good corporate govern- of Directors”. ance and has therefore chosen to comply with the vast majority of the most recent recommendations from the Committee on Corpo- rate Governance (the “Recommendations”) and the supplementary 18.4. Committees, including Audit recommendations from the Danish Bankers Association. On an and Compensation Committees annual basis, the Board of Directors considers all recommendations applying the “comply or explain” principle. The areas where The Board of Directors has established an audit committee which is the Bank does not comply with the Recommendations are explained responsible for monitoring and controlling accounting and auditing below. matters and drafting material for the Board of Directors’ consideration of matters relating to accounting and auditing. Term The Committee on Corporate Governance recommends that the The audit committee has three members, including a member who members of the supreme governing body elected by the general has special qualifications within auditing and accounting as defined meeting be up for re-election every year at the annual general by legislation and who is also independent. meeting (section 5.9.1 of the Recommendations). The Bank does not comply with this recommendation as the members of the Board The audit committee currently consists of Hans Østergaard (chair- of Directors are elected for terms of two years. The members of man), Per Nikolaj Bukh and Jan Høholt Jensen. the Board of Directors serve staggered terms, meaning that three members are up for election every year. With terms of two years In addition, the Board of Directors has set up a remuneration and staggered terms, the Board of Directors aims at ensuring the committee with two members. The remuneration committee is necessary continuity in the work of the Board of Directors. responsible for the preparatory work for the Board of Directors’

110 PART I – 18. Board Practices Prospectus – Spar Nord Bank Composition and Organisation of the Supreme Governing Body Audit The committee recommends that the supreme governing body sets The committee recommends that the Board of Directors and the au- up a nomination committee responsible for (i) describing the quali- dit committee meet with the auditor at least once every year without fications required to have a position in management, how much the the Executive Board being present. This also applies to the internal expected time commitment for a position in management is and the auditor, if any (section 9.1.3 of the Recommendations ). The Bank skills, knowledge and experience available in management, (ii) an- partly complies with this recommendation as the Board of Directors nually evaluating the structure, size, composition and performance assesses each year whether it is necessary to have a meeting with of the governing bodies and making recommendations to manage- the auditor without the presence of the Executive Board. ment, (iii) annually evaluating the skills, knowledge and experience of the individual members of the governing bodies and reporting such details to the Board of Directors, and (iv) identifying and rec- 18.7. Guidelines for Incentive Schemes ommending to the supreme governing body candidates for the governing bodies (section 5.10.7 of the Recommendations). The Bank As a result of its participation in Bank Package I, the Bank suspend- does not comply with this recommendation as the relevant tasks are ed all additional grants under the ongoing incentive plans. undertaken by the Board of Directors. Selection and nomination is carried out in a transparent and formal process and in collaboration According to the Bank’s current remuneration policy, no incentive with the chairmen of the regional bank committees. plans can be set up, and any introduction of new incentive plans and the principles thereof must be approved by the General Meeting. Remuneration of Management The Bank complies with the Recommendations, and in this con- For additional information see “Part I–Description of the Bank–Em- nection it should be emphasised that share-based remuneration ployees–Employee Remuneration Programmes”. of Management was put on hold in connection with the Bank’s participation in Bank Package I. According to the Bank’s current remuneration policy, no incentive plans can be set up.

Spar Nord Bank – Prospectus PART I – 18. Board Practices 111 19. Employees

For a number of years, most recently in 2011, the Group’s employ- 19.1. Overview of Employees ees have also had the opportunity to receive compensation packages in which part of the gross salary is converted into shares in the As at the Prospectus Date, the Group had a total of 1,396 employees. Bank. The grant of shares in the Bank has taken place each quarter.

In 2007, 2008 and 2009, the Group’s employees, with the exception Table 90 – Number of full-time employees of each of the Group’s of employees of SN Finans Nord AB, had the opportunity to convert business segments part of their salary to employee bonds in the Bank. The employee bonds were issued on 10 December 2007, 2008 and 2009, maturing on 10 January 2013, 2014 and 2015, respectively. As at 31 December 2011 2010 2009 The bonds carry interest corresponding to the minimum interest rate, but bonds issued in 2009 carry the minimum interest rate Spar Nord’s Local Banks 959 931 995 plus 0.5 percentage point, and may be called at par at maturity. The Trading, Financial Markets bonds are held in restricted accounts and can therefore not be sold, and International Division 73 73 67 pledged or otherwise be at the employee’s disposal until maturity. Other Areas 323 356 361 As at 31 December 2011, the bonds had a total value of DKK 65 million. Continuing activities 1,355 1,360 1,423 Spar Nord Leasing A/S (Discontinuing Activities) 42 111 107 19.3. Holdings of Securities Total 1,397 1,471 1,530 Table 91 – The Board of Directors’ and the Executive Board’s shareholdings and share option holdings in the Bank as at the Collective agreements are made periodically between the Group and Prospectus Date the Danish Financial Services Union.

Number 19.2. Employee Remuneration Programmes Number of share Name of Shares options During the period from 2005 to 2007, the Group’s management team Board of Directors (the Executive Board, business segments managers, other managers and heads of staff), a total of 52 persons of which 3 formed part Torben Fristrup 5,750 0 of the Executive Board, were covered by an incentive scheme based Per Nikolaj Bukh 4,100 0 on share options. The share options were granted on the basis of Carsten Normann 1,380 0 results achieved in 2005, 2006 and 2007, and the granted share options could not be exercised until after three years and had to be Hans Østergaard 2,000 0 exercised within five years after the date of grant during a period Niels Kristian Kirketerp 7,155 0 of six weeks after the publication of annual or interim reports. The Ole Skov 3,527 0 maximum annual grant of share options was 930,000. The exercise Jannie Skovsen 2,469 0 price of the share options was fixed as a simple average of “price all trades” five trading days before and five trading days after the Jan Høholt Jensen 3,488 0 publication of the annual report for the relevant period of grant. The Board of Directors’ total holdings 29,869 0

The last share options can be exercised on or before 7 March 2013. The exercise price of the share options not yet exercised is DKK 147 Executive Board for share options granted in 2007 on the basis of the 2006 finan- Lasse Nyby 24,032 67,078 cial results and DKK 102 for share options granted in 2008 on the basis of the 2007 financial results. Share options granted will not John Lundsgaard 30,800 67,078 be affected by the participants’ resignation. As a general rule, the Lars Høgh Møller 30,609 67,078 granted share options may not be transferred. Special provisions The Executive Board’s apply in case of death. total holdings 85,441 201,234 There are currently no plans to establish new share-option The Board of Directors schemes. and the Executive Board’s total holdings 115,310 201,234 During the same period from 2005 to 2007, the Group’s other employees have been eligible for free employee shares for up to DKK 8,000 through a central bonus scheme. The grant took place in As can be seen from the table above, the Board of Directors and the accordance with common and known objective criteria related to the Executive Board hold a total of 115,310 Shares, corresponding to Group’s and each individual business unit’s fulfilment of financial 0.2% of the Bank’s share capital. and non-financial goals. The shares are tied up for seven years from the year of grant. In addition, a total of 201,234 share options have been granted to the Executive Board as at the Prospectus Date, corresponding to 0.35% of the Bank’s share capital.

112 PART I – 19. Employees Prospectus – Spar Nord Bank The average term to maturity of the outstanding options was 0.2 year (2010: 0.8 year) as at 31 December 2011, and the exercise prices range from DKK 92.5 – 139.1 per option (2010: DKK 92.5 – 139.1 per option).

No options were exercised in 2009, 2010 and 2011.

Spar Nord Bank – Prospectus PART I – 19. Employees 113 20. Major Shareholders

Pursuant to section 29 of the Securities Trading Act and section 55 In addition, Finanssektorens Pensionskasse has informed the Bank of the Companies Act, the Bank has received notifications of hold- that as at the Prospectus Date it holds 1.6% of the Bank’s share ings of 5% or more of the share capital or voting rights from the capital before the Offering. shareholders below. The Bank is not authorised to issue company announcements regarding major shareholdings unless the Bank has received a prior Table 92 – Major shareholders notice to that effect from a shareholder. Thus, changes may have occurred to the stated share capital or voting rights of major shareholders relative to the specification above. Ownership Voting Number of interest rights See “Part II–The Offering–Information concerning the Offer Shares– Shares before before the before the Rights Attached to the Pre-emptive Rights and the Offer Shares– Shareholder the Offering Offering Offering Rights to Attend and Vote” for a description of voting rights. The Spar Nord Foundation 16,542,320 29.0% 29.0% The Bank is not aware of being owned or controlled, directly or indi- Nykredit Realkredit A/S 4,380,000 7.7% 7.7% rectly, by others, and the Bank is not aware of any agreements that could later result in others taking over the control of the Bank. Percentage of voting rights is based on the total share capital without taking treasury shares into account, for which the Bank does not have voting rights.

114 PART I – 20. Major Shareholders Prospectus – Spar Nord Bank 21. Related Party Transactions

Pursuant to IFRS, parties are considered to be related if one party Table 94 – The Group’s transactions with parties with significant has the ability to control the other party or exercise significant influ- influence ence over the other party’s financial or operational decisions, as defined by IAS 24 “Related Party Disclosures”. In determining each possible related party relationship, the substance of the relation- Financial year ship, and not merely the legal form, must be considered. (DKKm) 2011 2010 2009

The Bank enters into a significant number of transactions with Deposits 72.1 91.7 52.9 related parties, substantially all of which occur in the normal course Interest expenses 1.0 0.9 1.4 of business. Payment services, securities trading, investment and Other expenses* 2.8 3.0 6.9 placement of excess liquidity and the provision of short-term and long-term financing are the primary services provided by the Bank. * Other expenses includes the Spar Nord Foundation’s consideration to the Bank for the Bank’s management of administrative Transactions with related parties are settled on market terms. Dur- matters on behalf of the Spar Nord Foundation. ing the period from 1 January 2012 to the Prospectus Date, transactions were only effected in connection with what is mentioned below, and these transactions were not significant. 21.3. Transactions with the Board of Directors and the Executive Board

21.1. Transactions with Associates The following table sets forth the Group’s transactions with the members of the Board of Directors and the Executive Board as at The following table sets forth the Group’s transactions with as- and for the years ended 31 December 2011, 2010 and 2009. sociates for the financial years ended 31 December 2011, 2010 and 2009. Table 95 – The Group’s transactions with the members of the Board of Directors Table 93 – The Group’s transactions with associates

Financial year Financial year (DKKm) 2011 2010 2009 (DKKm) 2011 2010 2009 Loans and advances 20.2 21.8 40.8 Loans, advances and Unutilised loan and loan commitments 0 16.3 12.9 guarantee commitments 24.9 25.8 53.3 Deposits 55.3 52.7 65.4 Deposits 7.5 4.3 5.6 Guarantees issued 0 0.3 0.3 Guarantees issued 0.0 0.0 12.9 Interest income 0.3 0.7 1.4 Collateral accepted 14.3 17.8 32.7 Interest expenses 0.6 0.6 1.1 Dividends received 21.3 12.9 3.6 Interest income 1.0 0.9 1.2 Impairment 0 13.4 0.0 Interest expenses 0.0 0.2 0.9 Fees, charges and commissions received 0.0 0.1 0.1 Transactions with associates primarily cover transactions with the following companies: Nørresundby Bank A/S, AAT Investment A/S, Trades in the Bank’s shares (no.) JSNA Holding A/S, Core Property Management A/S, Erhvervsinvest Acquisition of shares 708 5,828 300 K/S, Erhvervsinvest Management A/S, Valueinvest Asset Manage- ment S.A. Sale of shares 0 0 0

21.2. Transactions with Parties with Significant Influence

Related parties with significant influence are shareholders with holdings exceeding 20% of the share capital of the Bank. In 2011, 2010 and 2009, the Spar Nord Foundation was such a related party. During this three-year period, no other related parties had significant influence over the Bank.

The following table sets forth the Group’s transactions with parties with significant influence as at and for the financial years ended 31 December 2011, 2010 and 2009.

Spar Nord Bank – Prospectus PART I – 21. Related Party Transactions 115 Table 96 – The Group’s transactions with the members of the The following table sets forth the average interest rates on credit Executive Board facilities granted to members of the Board of Directors and the Executive Board for the financial years ended 31 December 2011, 2010 and 2009. Financial year (DKKm) 2011 2010 2009 Table 97 – The average interest rates on credit facilities granted to Loans and advances 1.3 0.1 0.0 members of the Board of Directors and the Executive Board Unutilised loan and guarantee commitments 1.2 1.4 1.5 Financial year ended 31 December

Interest rate interval (%) 2011 2010 2009 Deposits 3.6 2.7 2.5 Board of Directors 1.25 – 10.23 1.46 – 8.98 1.20 – 9.10 Guarantees issued 1.1 0.0 0.0 Executive Board 1.25 – 3.25 1.46 – 2.46 1.20 – 2.80

Interest expenses 0.0 0.0 0.1

Trades in the Bank’s shares (no.) 21.4. Transactions with Group Enterprises Acquisition of shares 6,226 4,235 0 The Bank previously had a wholly-owned company, Beluni Inc., Sale of shares 0 0 0 which could not be consolidated, and which was liquidated at the beginning of February 2012 after having been in solvent liquidation for a number of years. The company had a deposit account of DKK 0.3 million with the Bank in 2011, 2010 as well as 2009.

116 PART I – 21. Related Party Transactions Prospectus – Spar Nord Bank 22. Information on Assets and Liabilities, Financial Position, Results and Dividend Policy

22.1. Historical Financial Information 22.3. Litigation

See “Appendices–Part F–Financial Information” for financial infor- The Group is regularly involved in litigation in connection with its mation about the Bank. business. Although the outcome of claims, legal proceedings or other litigation against the Bank or the Group cannot be predicted with certainty, neither the Bank nor any of its subsidiaries are 22.2. Dividend Policy involved in governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened) which The Bank aims to generate a competitive return to the sharehold- may have a significant effect on the financial position or profitability ers by way of price performance and dividends. Thus, its policy is to of the Bank or the Group or have had such an effect during the 12 distribute dividends to shareholders in years when profits permit. months preceding the Prospectus Date.

The Bank has defined a strategic goal of creating a basis for repaying Hybrid Core Capital to the Danish State. In tandem with the 22.4. Significant Changes to the Bank’s Financial Bank’s internal solvency targets, this assumes that a significant or Trading Position portion of profits in future years be used for consolidation purposes. No events have occurred since 31 December 2011 that have had or In respect of the financial years ended 31 December 2010 and 2009, may have a significant impact on the Group’s business, results of no dividends were paid. In respect of the financial year ended 31 operations, cash flows and financial position. December 2011, the Bank recommends that no dividends be paid.

Spar Nord Bank – Prospectus PART I – 22. Information on Assets and Liabilities, Financial Position, Results and Dividend Policy 117 23. Additional Information

23.1. Share Capital before and after the Offering

As at the Prospectus Date, the Bank’s share capital has a nominal Shares are subscribed for in the Offering, the Bank’s share capital value of DKK 570,688,100 divided into 57,068,810 Existing Shares will have a nominal value of DKK 1,141,376,200, corresponding to with a nominal value of DKK 10 each. All Existing Shares have been 114,137,620 Shares with a nominal value of DKK 10 each. issued and fully paid up. Assuming that a total of 57,068,810 Offer

23.2. Historical Changes in the Bank’s Share Capital

Table 98 – Changes in the Bank’s share capital from 2000 until the Prospectus Date

Number of shares Share capital Nominal Share capital of DKK 10 nominal prior to change change after change Price value each Date Transaction (DKK) (DKK) (DKK) (DKK) after change

24 November 2005 Cash capital increase 518,848,000 51,840,100 570,688,100 725 57,068,810

The bond loan will be a subordinated bullet loan with no maturity 23.3. Warrants and Share Options according to more specific rules laid down in the Danish Financial Business Act (Hybrid Core Capital). The interest payable per annum In connection with its participation in Bank Package I, the Bank on the loan will be fixed as the sum of (i) a reference rate by way of suspended all additional grants under the ongoing incentive plans. the Danish State’s five-year zero-coupon rate on the last trading According to the Bank’s current remuneration policy, no incentive day before the conclusion of the loan agreement; (ii) with addition of plans can be set up, and any introduction of new incentive plans and 6.375 percentage points; (iii) with addition of 0.1 percentage point; the principles thereof must be approved by the general meeting. (iv) with further addition of 0.4 percentage point, the latter, however, only during the period ending on 12 August 2014. In addition, the However, at present, there are a total of 201,234 share options, interest rate may be raised in proportion to future dividend pay- granted to the management team (the Executive Board, business ments according to conditions specified in the terms of the loan. The segment managers, other managers and heads of staff) in 2007 and convertible bonds may be redeemed by the Bank five years after the 2008. These share options must be exercised on or before 12 March loan was raised pursuant to more specific conditions laid down in 2012 and 7 March 2013, respectively. the terms of the loan. The convertible bonds fall due for redemption in the event of the Bank’s bankruptcy. The Bank has not issued any warrants. The convertible bonds have been issued as bearer securities and as See “Part I–Description of the Bank–Employees–Employee Remu- dematerialised securities in VP Securities. No restrictions apply to neration Programmes” and “Part I–Description of the Bank–Em- the transferability of the convertible bonds. ployees–Holdings of Securities” for a description of share options previously issued. Pursuant to Article 3b(4) of the Articles of Association, the loan or parts thereof may be converted into shares until 12 August 2014 as stated in the terms of the loan if the Bank’s Hybrid Core Capital 23.4. Convertible Bonds amounts to more than 35% of the Core Capital, including Hybrid Core Capital. See the Danish Financial Business Act. If the Hybrid As described in Article 3b(1) of the Articles of Association, the Bank Core Capital amounts to more than 50% of the Core Capital, includ- raised a loan on 30 June 2009 in the amount of DKK 1,265,000.00 by ing the Hybrid Core Capital, the loan will be converted into share way of Hybrid Core Capital, see Bank Package II, without pre-emp- capital up to the same date, until the Hybrid Core Capital amounts tive rights for the Bank’s shareholders in return for a bond offering to less than 35% of the Core Capital, including Hybrid Core Capital. of DKK 0.01 pursuant to an authorisation adopted at the annual general meeting held on 29 April 2009. The loan was raised at par, In the event of a capital increase, a capital reduction, the issuing and the terms of the loan were specified in a separate agreement. of warrants, the issuing of new convertible instruments of debt or See the annex to the Articles of Association (Annex 3). dissolution, including merger and demerger, before conversion has taken place, the procedure stated in the terms of the loan will be On 12 August 2009, the Bank’s extraordinary general meeting followed. See Article 3b(5) of the Articles of Association. The highest resolved that the bonds may be converted into shares in the Bank amount by which the share capital can be increased in connection at the market price prevailing at the time of conversion, calculated with a conversion is DKK 1,265,000,000, and the minimum amount in accordance with the terms of the loan. See Article 3b(2) of the is DKK 50,000,000. The Board of Directors is authorised to make the Articles of Association. alterations to the Articles of Association that are necessary in connection with the conversion.

118 PART I – 23. Additional Information Prospectus – Spar Nord Bank To the extent that dividends are paid on the Bank’s shares, see the Bank’s share capital may be effected either with pre-emptive Danish Act no. 1003 of 10 October 2008 on Financial Stability and rights for the Bank’s shareholders (Article 3(1)) or without pre-emp- Danish Act no. 67 of 3 February 2009 on State-Funded Capital tive rights for the Bank’s shareholders (Article 3(3). If the increase Injections in Credit Institutions, the new shares will rank pari passu is effected with pre-emptive rights for the Bank’s shareholders, the with the Bank’s other shares as from the registration of the capital new shares may be subscribed for at a discount to the market price increase. All other rights will become effective as from the same and must be effected by cash contribution. If the increase is effected time. The shares will be subject to the same rules regarding pre- without pre-emptive rights for the Bank’s shareholders, the new emptive rights as the existing shares and will rank pari passu with shares shall be subscribed for at market price by cash contibution the Bank’s other shares with respect to rights, redeemability and or otherwise. The new shares shall be negotiable instruments is- transferability. sued to named holders and shall rank pari passu for dividends and any other rights in the Bank as from such time as may be determined by the Board of Directors in its decision regarding the capital 23.5. Memorandum of Association and Articles of increase. Association Pursuant to Article 3a of the Articles of Association, the Board of The following is a brief description of certain provisions included in Directors shall be authorised to increase the Bank’s share capital the Articles of Association attached as an appendix to this Prospec- until 11 August 2014 by a maximum of DKK 1,265,000,000 in shares tus. issued to named holders by way of one or more issues. Such shares shall rank pari passu with existing shares. The increase of the Object Bank’s share capital shall take place without pre-emptive rights Pursuant to Article 1(3) of the Articles of Association, the object of for the Bank’s shareholders, meaning that any new shares will be the Bank is to carry on banking pursuant to section 7(1) and (2) of offered at the prevailing market price, however not less than DKK the Financial Business Act. 10.50 per share of DKK 10. The increase can take place by conversion of debt in the form of Hybrid Core Capital. To the extent that Summary of Provisions regarding the Board of Directors and the conversion is effected pursuant to Article 3b of the Articles of As- Executive Board sociation (See Convertible Bonds below), the authorised maximum The Board of Directors shall be composed of not less than four nor shall be reduced by a corresponding amount. The new shares shall more than six members elected by the shareholders in general be negotiable instruments issued to named holders and shall rank meeting and members elected by the employees pursuant to the pari passu for dividends and any other rights in the Bank as from Companies Act. The members of the Board of Directors shall be such time as may be determined by the Board of Directors in its elected for terms of two years, and if a member resigns during his decision regarding the capital increase. term, a new member is elected at the next general meeting for the remaining part of the resigning member’s term. Registrar The Bank’s registrar is: Members of the Board of Directors shall retire not later than four months after the end of the year in which they attain the age of 70. Computershare A/S A member of the Board of Directors who is no longer permitted to Company reg. (CVR) no. 27088899 manage his estate or who no longer complies with the requirements Kongevejen 418 of the DFSA regarding aptitude and integrity shall retire from the DK-2840 Holte Board of Directors. Denmark

The Board of Directors shall elect a Chairman and a Deputy Chair- Issuing Agent man from among its number and shall lay down rules of procedure Spar Nord Bank A/S governing the performance of its duties. Company reg. (CVR) no. 13737584 Skelagervej 15 The members of the Board of Directors shall receive a fee approved P.O. Box 162 by the shareholders in general meeting. DK-9100 Aalborg Denmark Members of the Board of Directors and the Executive Board represent the Bank for external purposes. The Bank shall be bound in Denomination legal transactions by the joint signatures of the Chairman or the The Bank’s Shares have a nominal value of DKK 10 each. Deputy Chairman of the Board of Directors and any one member of the Board of Directors, or by the joint signatures of any one member Treasury Shares of the Executive Board and any one member of the Board of Direc- As at the Prospectus Date, the Group holds 156,842 Existing Shares tors. in the Bank as treasury shares corresponding to a total nominal value of DKK 1,568,420 or 0.27% of the Bank’s share capital. The Authorisations to the Board of Directors Bank’s treasury shares are recognised directly in equity (corre- Pursuant to Article 4 of the Articles of Association, the Board of sponding to a carrying amount of DKK 0). Directors shall be authorised to permit the Bank to receive capital contributions, which may be included when calculating the Bank’s In connection with the Offering, Pre-emptive Rights will be allocated Capital Base, subject to observance of the relevant conditions pro- to the Bank in respect of its treasury shares. Pursuant to the Com- vided by law from time to time. panies Act (as defined), the Bank cannot exercise such Pre-emptive Rights, and the Bank therefore expects to sell the Pre-emptive Pursuant to Article 3 of the Articles of Association, the Board of Rights allocated to it in respect of its treasury shares. Directors shall be authorised to increase the Bank’s share capital until 30 April 2013 by a maximum of nominally DKK 856,032,150 in Registration by Name shares issued to named holders by way of one or more issues. Such Pursuant to Article 1(2) of the Articles of Association, the Shares are shares shall rank pari passu with existing shares. The increase of issued to named holders and may, upon a shareholder’s request,

Spar Nord Bank – Prospectus PART I – 23. Additional Information 119 be registered by name in VP Securities and the Bank’s register of major shareholder, see Article 9(1) of the Articles of Association, shareholders. represents the share capital which has been registered on the date of registration one week before the relevant general meeting, or Negotiability and Transferability of the Shares which such shareholders has requested be registered as belonging The Shares are negotiable instruments. The acquirer of a Share may to the relevant major shareholder. not exercise rights belonging to a shareholder unless such acquirer has been registered in the register of shareholders or has notified To gain access to general meetings and be entitled to vote, a del- and provided proof of his acquisition to the Bank. However, this shall egate or major shareholder, respectively, shall request an admission not apply to the right to dividend or other disbursements nor to the card at least three days before the relevant general meeting. Voting right to new shares in the event of capital increases. may be made by proxy, and delegates may only issue a proxy to another bank committee member from the same region. The instru- The Shares cannot be assigned to bearer. ment of proxy shall be in writing and dated and may only be valid for one general meeting. No bank committee member can represent Pursuant to Article 1(3) of the Articles of Association, no restrictions more than two delegates by proxy. shall apply to the transferability of the Shares. The Articles of Association contain no provisions regarding owner- Redemption and Exchange ship or voting restrictions. No shareholder shall be obligated to let his Shares be redeemed in whole or in part. See Article 1(3) of the Articles of Association. General Meetings The Bank’s annual general meeting shall be held every year before Shareholder Regions and Bank Committees the end of April. Pursuant to Article 10 of the Articles of Association, The Bank’s operational area is divided into 33 shareholder regions. general meetings shall be convened by the Board of Directors giving In connection with the acquisition of shares, a shareholder may not less than three and not more than five weeks’ notice. choose to be registered in any shareholder region. If the shareholder does not specify any region, such shareholder will be registered The convening notice shall be announced in writing to the members according to post code. However, all shareholders resident abroad of the Bank’s bank committees, to the shareholders recorded in the will be included in the Copenhagen shareholder region. register of shareholders who have so requested and on the Bank’s website (www.sparnord.dk). Each shareholder region shall elect a bank committee consisting of eight members from among the shareholders of the region. The The convening notice shall contain the agenda. If any proposals members of the bank committee shall be elected for terms of two are to be considered, the adoption of which is subject to a qualified years to the effect that half of them shall stand for election each majority, the essentials of such proposal shall moreover be stated year. A member of a bank committee shall resign from the commit- in the convening notice. In the event that statutory provisions so tee if such member ceases to hold shares registered in the Bank, or require, the convening notice will contain the complete proposal and if he is no longer permitted to manage his estate. Members of the be sent to each registered shareholder. bank committee are elected at a shareholders’ meeting to be held before 1 April each year and not later than three weeks before the Not later than three weeks before the general meeting, the follow- annual general meeting of the Bank. Bank committees are set up ing shall be available at the Bank’s website (http://www.sparnord. and shareholders’ meetings held pursuant to Articles 6 to 8 of the dk) (i) the convening notice; (ii) the total number of shares and vot- Articles of Association. ing rights as of the date of the notice; (iii) the documents to be presented at the general meeting, including the audited annual report; Rights to Attend and Vote (iv) the agenda and the complete proposals; and (v) the forms to be Against presentation of an admission card, any shareholder who is used for voting by proxy and by letter. registered in the register of shareholders as of the date of registration one week before a general meeting, or who has, as of that date, Extraordinary general meetings shall be convened as directed by requested that his Shares be registered in the register of sharehold- the shareholders in general meeting, by the board of directors or by ers, shall be entitled to attend a general meeting – either in person any one of the Bank’s auditors. An extraordinary general meeting or represented by proxy – and to address the general meeting. shall also be held for the purpose of transacting specified busi- Instruments of proxy shall be in writing and dated and shall be ness when requested by shareholders representing a total of not presented upon obtaining an admission card. Instruments of proxy less than 5% of the share capital. An extraordinary general meeting issued to the management of the Bank shall be in writing and dated shall be convened not later than two weeks after the receipt of the not more than 12 months prior to the relevant general meeting and appropriate request. may only be issued for one specific general meeting. All business transacted at general meetings shall be decided by a Pursuant to Article 10(4) of the Articles of Association, sharehold- simple, relative majority of votes, unless legislation or the Articles ers’ right to vote at general meetings shall be exercised through of Association provide otherwise. See “Part I–Description of the delegates who are members of the Bank’s bank committees. How- Bank–Additional Information–Memorandum of Association and ever, shareholders holding at least 20,000 Shares on the record date Articles of Association–Rights to Attend and Vote” for a description one week before the relevant general meeting (major shareholders) of voting rights at the Bank’s general meetings. shall be entitled to exercise their voting rights at general meetings. See Article 9(1) of the Articles of Association. Amendment of the Articles of Association and Changes to the Rights attaching to the Shares Delegates who are also members of the Bank’s bank committees A resolution to alter the Articles of Association or to dissolve the represent the share capital that has been registered as belonging Bank is subject to the proposal being adopted by two-thirds of the to the relevant shareholder region as of the record date one week votes cast as well as of the voting share capital represented at before the relevant general meeting. Each delegate represents the general meeting. See article 14(2) of the Articles of Associa- equal fractions of the share capital, calculated on the basis of the tion. In calculating the voting share capital, Shares not registered number of delegates immediately prior to the general meeting. A in the name of the holder or Shares regarding which a request for

120 PART I – 23. Additional Information Prospectus – Spar Nord Bank registration in the name of the holder has not been made shall not Conditions governing Changes in the Share Capital of the Bank be included. Pursuant to the Hybrid Agreement included in the Articles of As- sociation as Annex 3, the Bank has undertaken not to reduce the The requirements for adopting amendments to the Articles of As- Bank’s share capital except with a view to covering loss. The restric- sociation and changes to shareholder rights are no more stringent tions are described in “Part I–Description of the Bank–Material than the minimum statutory requirements. Contracts–State Hybrid Capital”.

Pursuant to Article 5(1) of the Articles of Association, a decision to Provisions governing the Level of Equity Investments to be notified combine shareholder regions shall be made by the Bank’s share- Pursuant to Section 29 of the Securities Trading Act, a shareholder holders in general meeting in accordance with the rules on amend- in a listed company is required to notify the listed company and the ment of the Articles of Association. However, a decision to combine DFSA as soon as possible when the shareholder’s stake represents shareholder regions may be made by the Board of Directors if the 5% or more of the voting rights in the company or the nominal value bank committees in question agree. accounts for 5% or more of the share capital, and when a change to a holding already notified entails that the limits of 5%, 10%, 15%, Provisions of the Articles of Association which may cause Delay, 20%, 25%, 50% or 90% and the limits of one-third and two-thirds of Postponement or Prevention of Control the share capital’s voting rights or nominal value are reached or are The Board of Directors is authorised to increase the Bank’s share no longer reached. capital, and convertible bonds that can be converted into share capital in the Bank have been issued as described in “Part I–Description The notification shall provide information about the full name, ad- of the Bank–Additional Information–Authorisations to the Board of dress or, in the case of businesses, registered office, the number Directors” and “Part I–Description of the Bank–Additional Informa- of shares and their nominal value and share classes as well as tion–Convertible Bonds”. information about the basis on which the calculation of the holdings has been made. Apart from the above, the Articles of Association contain no provisions that could delay, postpone or prevent control. Failure to comply with the disclosure requirements is punishable by a fine. Section 61 of the Financial Business Act implies that any acquisition of a qualified share – i.e. a share of at least 10% of the share capital When the company has received a notification, it must publish the or voting rights or a share allowing the holder to exert a significant content of such notification as soon as possible. influence on management – in a financial business or a financial holding company, including the Bank, requires prior approval from Furthermore, the general duty of notification under the Companies the DFSA. Act applies as well as special duties of notification in respect of the Bank’s insider group under the Securities Trading Act.

Spar Nord Bank – Prospectus PART I – 23. Additional Information 121 24. Material Contracts

in the Terms and Conditions of the Notes during the term of the 24.1. State Hybrid Capital loan. In addition to customary disclosure requirements and default provisions, the Terms and Conditions of the Notes contain the fol- The Bank has entered into an agreement with the Danish State on lowing material obligations for the Bank: the Danish State’s subscription for notes (the “Hybrid Agreement”) in a total amount of DKK 1,265 million (“State Hybrid Capital”). (i) The Bank may not (i) effect any capital reductions except to According to the terms and conditions of the notes attached to the cover losses or to write down share capital in accordance with Hybrid Agreement (the “Terms and Conditions of the Notes”), the the loan notes agreement or (ii) purchase own shares, includ- notes are in the nature of Hybrid Core Capital. ing initiate buy back programmes, if such purchase would constitute a violation of Bank Package II. The Bank may not sell In addition to customary disclosure requirements and default provi- own shares on terms and conditions that are more burden- sions, the agreement with the Danish State contains the following some for the Bank than market terms unless it is necessary material obligations for the Bank: to do so in order to honour the Bank’s employee share option programmes. (i) The Bank may not (i) effect any capital reductions except to cover losses or to write down share capital in accordance with (ii) The Bank may not issue share options, warrants, convertible the loan notes agreement or (ii) purchase own shares, includ- debt instruments or similar instruments on terms that are less ing initiate buy back programmes, if such purchase would favourable to the Bank than market terms, unless such issue is constitute a violation of Bank Package II. The Bank may not sell part of a general employee scheme. own shares on terms and conditions that are more burdensome for the Bank than market terms unless it is necessary (iii) The Bank may not at any time pay dividend, repay or buy back to do so in order to honour the Bank’s employee share option any debt that is subordinated to the notes or rank pari passu programmes. with the notes or other Hybrid Core Capital if (i) any coupon that is past due remains unpaid, or (ii) if coupon has not been (ii) After 1 October 2010, the Bank may only distribute dividends paid in full on two consecutive fixed coupon payment dates to the extent that such dividends can be financed by the Bank’s following an alternative coupon payment event (as defined net profit after tax, which may be added to the distributable below) or the date on which a cancellation of coupon has oc- reserves, as generated in the period following 1 October 2010. curred. Notwithstanding the aforementioned, the Bank may for its trading portfolio purchase debt that is subordinated to (iii) The Bank may not use funds to capitalise businesses in viola- the notes or ranks pari passu with the notes or other Hybrid tion of Bank Package II. The Bank may not acquire shares if Core Capital in order to meet purchase orders from the Bank’s such acquisition constitutes a violation of Bank Package II. All customers in respect of the Bank operating as a market maker. intra-Group agreements and transactions shall be concluded on arm’s length terms. (iv) The shareholders of the Bank may not approve any resolution to liquidate the Bank unless where such liquidation is required (iv) The Bank may not introduce restrictions on ownership, voting by law. rights or negotiability in the Articles of Association, nor may the Bank introduce share classes. (v) The Bank may not enter into (i) a merger agreement, and the shareholders of the Bank may not approve such merger agree- (v) The Bank may not (i) initiate new share option programmes or ment, if the valuers declare pursuant to section 241(4) of the other similar plans for the Executive Board or prolong or renew Companies Act that the consideration paid for the shares is existing programmes; (ii) remunerate members of the Execu- not reasonable, or (ii) a demerger agreement, if such agree- tive Board by variable pay elements to an extent exceeding 20% ment may have a material adverse effect on the Danish State’s of the total basic salary including pension; (iii) issue bonus interests. shares at a discount or use similar advantageous schemes for the Executive Board; or (iv) make tax deductions of more than (vi) The Bank may not apply for delisting of the shares from one-half of the Executive Board’s salaries, to the extent that NASDAQ OMX or another regulated market within the EU or EEA. such deductions would constitute a violation of Bank Package II. The Bank shall in a note to the annual report disclose the (vii) The Bank may not complete any transaction or take any other amount for which tax deductions have been made. action which would imply that, in the event of a conversion of coupon or notes pursuant to provisions regarding alternative (vi) No later than on 31 March and 30 September of each year, the coupon payment or the Bank’s conversion option and obliga- Bank shall present a statement of its lending activities in the tion, the economic value of the ACPE Shares (as defined below) immediately preceding period from 1 July to 31 December and or the new shares to be received following the determination from 1 January to 30 June, respectively, to the Danish State in of the ACPE reference price or the reference price is less than accordance with Bank Package II. The statement on lending the value of such ACPE Shares or new shares, respectively, had activities shall be published as provided by Bank Package II. such transaction or action not been completed or taken.

The agreement with the Danish State is effective until the earlier of The agreement with the Danish State contains provisions to the the date when (i) all amounts payable under the loan granted under effect that the Bank may distribute dividends after 1 October 2010 the Hybrid Agreement with the Danish State, including interest and to the extent such dividends can be financed by the Bank’s net profit costs, have been repaid in full, cancelled or converted into equity after tax. If the Bank makes dividend payments, interest pursuant under the Hybrid Agreement with the Danish State and the loan to the Terms and Conditions of the Notes may increase as a variable notes agreement, or (ii) the Danish State has transferred all notes dividend supplement for each note will be payable in addition to a and has thus ceased to be a creditor of all or part of the loan. fixed coupon.

In addition to the special terms agreed between the Bank and the If, following any coupon payment in full or in part, the Bank’s Danish State, the Bank shall comply with the obligations contained solvency would be less than 110% of the solvency requirement (the

122 PART I – 24. Material Contracts Prospectus – Spar Nord Bank “Alternative Coupon Payment Event”) on any fixed coupon payment date, the payment of the relevant coupon or part thereof shall be 24.3. Euro Medium Term Note Programme settled by way of issue of new shares or delivery of existing own shares (the “ACPE Shares”) to the noteholder(s) pro rata to their The Bank has established a possibility for issuing notes of up to EUR holding of notes on the relevant fixed coupon payment date or such 3 million. The framework for such issue is described in the most later date as may be required when the Bank is in possession of recent offering circular for the Euro Medium Term Note Programme price sensitive information (the “ACPE Conversion Date”). The cou- (“EMTN Programme”), dated 31 March 2011. Notes may be issued in pon shall be converted into ACPE Shares on the ACPE Conversion one or more tranches. The terms for each issue will be determined Date by registration of the resulting capital increase with the Danish in connection with the relevant issue and may differ from one issue Business Authority. to the next.

Pursuant to the Terms and Conditions of the Notes, the notes are At the Prospectus Date, the Bank has four non-expired issues under perpetual and will not fall due, in full or in part, at any fixed date. the EMTN Programme for a total amount of DKK 7,954 million, of However, subject to the written consent of the DFSA, the Bank may which DKK 3,717 million expires on 10 July 2012, DKK 1,487 million redeem all or part of the notes with the addition of accrued and due expires on 23 May 2013, DKK 2,500 million expires on 15 July 2013 but unpaid coupon, on or after 30 May 2014. However, if the notes and DKK 250 million expires on 30 June 2014. are redeemed before the first day of the sixth year from the issue date, redemption will be subject to the following conditions being In addition to usual default provisions, the general terms for issues met on the redemption date: under the EMTN Programme contain a provision to the effect that the agreement will be deemed to be breached if the Bank and cer- (i) the Bank’s Core Capital (Tier 1) ratio must be at least 12% after tain affiliated companies default under other agreements on loans such redemption; or or guarantees in a total amount of more than EUR 10 million. The terms also contain a negative pledge provision with respect to the (ii) the total nominal value of the notes to be redeemed has been mortgaging or pledging of and establishment of other security inter- replaced by other Core Capital of at least the same quality as ests on the Bank’s assets to secure payment obligations of the Bank the notes. or the Bank’s subsidiaries for or under negotiable securities with the exception of covered bonds, securitisation in conformity with For a period up to but not including the first day of the sixth year normal market standards and collateral under statutory authority. from the issue date (the “Bank’s Conversion Option Period”), the Bank may at its discretion and at any time require that the notes The terms are primarily governed by English law, although certain be converted at their nominal value with the addition of any ac- provisions are governed by Danish law. Any disputes shall be deter- crued and due but unpaid coupon on the nominal value, in separate mined by the English courts. tranches of 20% of the original number of notes into new shares of the Bank, if the Bank’s Hybrid Core Capital (Tier 1) ratio exceeds 35% (the “Bank’s Conversion Option”). 24.4. Spar Nord Leasing A/S – Business Transfer Agreement If the Bank’s original Core Capital (Tier 1) ratio exceeds 50%, the Bank has an obligation to exercise the Bank’s Conversion Option The Bank’s subsidiary, Spar Nord Leasing A/S (formerly Finans in individual trances of 20% of the original number of notes to the Nord A/S) on 22 September 2011 entered into an agreement to extent (and only to the extent) necessary to bring the Bank’s original transfer certain assets and liabilities to the Jyske Bank Group. The Hybrid Core Capital (Tier 1) ratio (including the effect of the conver- agreement took effect on 1 October 2011. By becoming a party to sion) to 35% or less. certain parts of the agreement, the Bank has assumed the obligations described below.

24.2. Finansiel Stabilitet – Agreement on the Terms The assets and liabilities transferred comprised Spar Nord Leasing for Providing a state Guarantee A/S’ future activities of buying, leasing, managing and selling assets for leasing to the business sector and assets for the leasing of Pursuant to the Financial Stability Act, the Bank has entered into passenger cars to retail customers, shares in Finans Nord Easyfleet an agreement with Finansiel Stabilitet A/S on behalf of the Danish A/S, employees of Spar Nord Leasing A/S and the management of State as guarantor, on the terms for the provision of individual state existing commitments in Spar Nord Leasing A/S. Existing leases guarantees for new, unsubordinated, unsecured debt up to a total and ownership in assets leased under existing leases were not limit of DKK 7.5 billion with a maturity of up to three years for loans transferred, nor were Spar Nord Leasing A/S’ shares in the subsidi- issued on or before 31 December 2010 against payment of guaran- aries SN Finans Nord AB (Sweden) and Finans Nord Crossborder tee commission. A/S transferred. The parties have entered into a cooperation and management agreement with respect to the assets that have not Under this agreement, the Bank has issued a two-year bond expir- been transferred, subject to which the Jyske Bank Group will handle ing on 17 November 2011 for DKK 991 million, three-year bonds management and phase-out of the leases that were not transferred. expiring on 10 July 2012 for DKK 3,717 million, and expiring on 15 July 2013 for DKK 2,500 million. The Bank bears the risk associated with leases established by Spar Nord Leasing A/S prior to the date of transfer. The agreement furthermore contains a provision to the effect that under certain circumstances the agreement will be deemed to be In connection with the transfer, Spar Nord Leasing A/S has given breached if the Bank defaults under agreements with other parties usual warranties, and the Bank has undertaken to ensure that SN on a number of financial obligations of more than EUR 5 million. Finans Nord AB does not sell financing products under the Finans The agreement is governed by Danish law, and any disputes shall be Nord name. This undertaking applies for as long as the Bank owns decided by the City Court of Copenhagen. However, the Danish State Spar Nord Leasing A/S, and as long as Spar Nord Leasing A/S owns may request that the dispute be referred to the Danish Eastern High SN Finans Nord AB. Court.

Spar Nord Bank – Prospectus PART I – 24. Material Contracts 123 Furthermore, Spar Nord Leasing A/S and the Bank have undertaken equal the average monthly payment from the Bank to SDC until not to commence any business that competes with the transferred the date of termination, multiplied by the number of months the business in Denmark for a period of three years from the date of notice is shorter than three years, less amounts saved by SDC by transfer. not having to provide the service. The maximum compensation for withdrawing from the agreement would have been DKK 431 million The agreement is governed by Danish law, and any disputes shall be in 2011, DKK 460 million in 2010 and DKK 450 million in 2009. decided by arbitration (Danish Arbitration). The agreement is governed by Danish law, and any disputes shall be decided by the Copenhagen Maritime and Commercial Court. 24.5. Loan Agreement between Spar Nord Leasing A/S and Jyske Bank A/S 24.7. Totalkredit – Cooperation Agreement On 14 October 2011, Spar Nord Leasing A/S and Jyske Bank A/S entered into an agreement providing for Jyske Bank A/S to grant Together with a number of regional and local banks, the Bank has a loan of DKK 450 million to Spar Nord Leasing A/S. The loan was entered into a cooperation agreement with Totalkredit A/S (“To- granted to reduce Spar Nord Leasing A/S’ debt to the Bank. talkredit”) for arranging Totalkredit loans for residential property and holiday homes within the framework of mortgage credit The loan must be finally repaid on 1 October 2014. Spar Nord Leas- legislation applicable from time to time. The Bank receives a fixed ing A/S may at any time prepay all or parts of the loan giving 14 percentage of the management fee relating to the portfolio written days’ notice to the expiry of an interest period. as commission from Totalkredit. Totalkredit A/S is a subsidiary of Nykredit Realkredit A/S, which is owned by Nykredit Holding A/S. In In addition to usual obligations and default provisions, the loan connection with the agreement, Nykredit Holding A/S and Nykredit agreement contains provisions to the effect that, subject to certain Realkredit A/S signed declarations confirming that the cooperation exemptions, Spar Nord Leasing A/S may not sell, mortgage or agreement will also be observed by Nykredit Holding A/S, Nykredit pledge its assets or participate in any merger, demerger or recon- Realkredit A/S and other companies in the Nykredit group. struction. The cooperation agreement allows Totalkredit a right of setoff of any Spar Nord Leasing A/S’ credit with the Bank may not be reduced losses against commission receivable by the Bank from Totalkredit, to below DKK 3 billion before 1 October 2012, to below DKK 1.5 and the Bank provides a loss guarantee to Totalkredit (i) in cases billion before 1 October 2013, and to below DKK 500 million before with special types of risk, (ii) where the Bank has chosen not to pro- 1 October 2014. If the debt to the Bank is brought below the levels vide the loan case with a special credit risk classification, (iii) until indicated before such dates, the entire outstanding amount of the Totalkredit has approved the loan case and (iv) in the event that the loan will fall due for ordinary repayment at the next interest date. construction of the mortgaged property is not completed.

Spar Nord Leasing A/S must prepay the loan from Jyske Bank A/S The Bank may at any time terminate the cooperation with To- if it becomes illegal for Jyske Bank A/S or Spar Nord Leasing A/S talkredit by notice to Totalkredit. Any termination will be effec- to maintain the loan, or if a physical or legal person or a group of tive from the date when all ongoing cases have been finalised. persons acting in concert gains control of Spar Nord Leasing A/S Totalkredit cannot terminate the agreement unless in the event of (change of control). default.

The Bank has issued a separate, irrevocable statement to Jyske Any disputes shall be decided by an arbitration tribunal appointed Bank A/S declaring that it will be subordinated to Jyske Bank A/S’ by the president of the Danish Supreme Court according to proce- claim under the loan agreement in the event that Spar Nord Leasing dural rules determined by the arbitration tribunal. A/S comes under reconstruction, composition with creditors, mora- torium or bankruptcy. 24.8. DLR Kredit – Cooperation Agreement Spar Nord Leasing A/S may not transfer its rights and/or obligations under the loan agreement. Jyske Bank A/S may transfer it rights DLR Kredit A/S (“DLR”) is owned by a large number of banks, in- and/or obligations under the loan agreement without the consent of cluding the Bank. The Bank has accepted a cooperation agreement Spar Nord Leasing A/S. with DLR regarding intermediary services with respect to mortgage credit loans, primarily for agricultural properties on competitive The agreement is governed by Danish law, and any disputes shall be terms. The Bank receives a customer service commission for these decided by the Danish courts. services together with guarantee commission for the Bank’s share of the limited revolving guarantee described below.

24.6. Skandinavisk Data Center A/S – Data DLR may offset identified losses on mortgage-credit loans arranged Processing Agreement by the Bank in the relevant year against the Bank’s accrued customer service commission and guarantee commission. If the identi- On 14 March 2005, the Bank entered into a data processing agree- fied loss exceeds the commission for the relevant year, the identified ment with SDC under which SDC provides IT services, including loss may be offset against commissions for up to five years. In case development, maintenance and joint procurement of IT systems. identified losses on mortgage-credit loans arranged by the Bank Like most of SDC’s other customers, the Bank is a shareholder of exceed the commission for the relevant year, DLR may request that SDC’s parent company. the Bank provides a guarantee for repayment of the year’s identified loss amounting to a maximum of 0.25% of the portfolio. If the The Bank may withdraw from the agreement or be terminated at a identified loss has not been covered by setoff against commission notice of three years to the end of any SDC financial year. However, over the next five years, DLR may exercise the Bank’s guarantee. If the Bank is entitled to terminate the agreement at a shorter notice such amount also proves insufficient, the loss shall be covered by against payment of compensation to SDC. Such compensation will the common revolving guarantee limit described below.

124 PART I – 24. Material Contracts Prospectus – Spar Nord Bank When making the agreement, the banks comprised by a coopera- area, but not provision of pension and insurance products as such tion agreement with DLR take on a share of a limited revolving products are provided by PFA Pension according to an agreement of guarantee set up to partly cover losses in DLR in excess of what is 1 October 2010. See 24.11 below. After the agreement with PFA Pen- described above. The limited guarantee covers identified losses in sion was made, the remaining obligations under the agreement of DLR exceeding DLR’s prior liability. The total guarantee limit cannot 25 June 2009 continued with letpension A/S (“letpension”) (formerly exceed DLR’s prior liability multiplied by five. The Bank’s share of letpension Holding A/S). the limited guarantee is calculated based on the residual bond debt on loans which the Bank is recorded at the beginning of the year as letpension is owned jointly by a number of banks which are either having arranged, relative to the total residual bond debt involved in members or associated members of the Danish Regional Bankers’ the cooperation agreement. Association or the Association of Local Banks in Denmark, Savings Banks and Cooperative Banks in Denmark, including by the Bank. The cooperation agreement cannot be terminated by the Bank as letpension was created for the purpose of offering attractive and up- long as the Bank is a shareholder of DLR, and it will automatically to-date life and pension insurance products to the owners’ custom- terminate if the Bank sells its shares in DLR, effective from the end ers on competitive terms. of the calendar year in which the sale is effected. By a resolution adopted by the board of directors, DLR may terminate the coopera- The cooperation with letpension will terminate immediately if the tion agreement giving three months’ notice to expire at the end of a Bank sells its shares in letpension in accordance with the share- calendar year. holder agreement, or by resolution by the board of directors if the Bank (i) defaults on its obligations under the agreement; (ii) fails to The agreement is governed by Danish law, and any disputes shall be arrange insurance or pension schemes through letpension for a pe- decided by arbitration according to the rules of the Danish Institute riod of six months; or (iii) ceases to be a member of any of the Dan- of Arbitration. ish Regional Bankers’ Association or the Association of Local Banks in Denmark, Savings Banks and Cooperative Banks in Denmark.

24.9. BankInvest Fondsmæglerselskab – Marketing Any disputes shall be decided by arbitration according to the rules and Investment Advisory Services Agreement of the Danish Institute of Arbitration.

On 25 September 2009, the Bank entered into an agreement with BI Asset Management Fondsmæglerselskab A/S (“BankInvest 24.11. PFA Pension – Agreement on Provision of Fondsmæglerselskab”) relating to the Bank’s sale of and finan- Pension and Insurance Products cial advice relating to financial products marketed by BankIn- vest Fondsmæglerselskab against payment of a commission On 1 October 2010, PFA Pension, forsikringsaktieselskab (“PFA from BankInvest Fondsmæglerselskab to the Bank. BankInvest Pension”) and letpension A/S (“letpension”) (formerly letpension Fondsmæglerselskab is a subsidiary of BI Holding A/S (“BankIn- Holding A/S) entered into an agreement for the sale of and provision vest”), which is owned by a number of Danish banks, including the of intermediary services with respect to pension and insurance Bank. products to letpension shareholders and their customers. The Bank has become a party to the agreement. The agreement runs for a The products comprise units in investment funds, special-purpose preliminary trial period until 1 January 2014. After this date, the funds and hedge funds traded on NASDAQ OMX and investments in parties will decide whether to continue the cooperation. a number of structured products. Under the agreement, PFA Pension will provide pension and insu The agreement may be terminated by either party giving three rance products, letpension will handle general marketing, operation, months’ notice to expire at the end of a calendar year. However, management and further development of the pension and insurance the agreement may be terminated by BankInvest Fondsmægler- products offered, and the Bank together with a number of other selskab giving one month’s notice to expire at the end of a month Banks which are parties to the agreement will be responsible for in case of any merger, demerger or other transfer or conversion of the sale and provision of advisory services relating to pension and all or part of the Bank’s activities. The agreement does not prevent insurance products offered, against receipt of a fee from PFA. cooperation with other providers of similar products. It may not be assigned by the Bank without the written consent of BankInvest It is a condition for the Bank’s participation in the cooperation with Fondsmæglerselskab. PFA Pension that the Bank is a shareholder of letpension. If the Bank ceases to be a shareholder of letpension, the Bank must with- The agreement is governed by Danish law, and any disputes shall be draw from the cooperation on the sale and provision of intermediary decided by an arbitration tribunal set up by the Danish Institute of services with respect to the products referred to. Arbitration. PFA Pension and letpension may terminate the agreement in case of default by another party and terminate the agreement with a bank 24.10. letpension – Intermediary Services relating in case of default by such bank. to Individual Life and Pension Insurance Products Except in the event of default, the agreement cannot be terminated during the trial period until 1 January 2014. The parties will decide On 25 June 2009, the Bank entered into an agreement regarding before 31 July 2013 whether to continue the agreement after 31 the provision of intermediary services with respect to individual life December 2013. Failing a decision to prolong the agreement, it will and pension insurance products with letpension livs- og pensions- automatically terminate on 31 December 2013. If the agreement is forsikringsselskab A/S (now “Bankpension livs- og pensionsfor- maintained, it may subsequently be terminated by the Bank giving sikringsselskab A/S”). three months’ notice to expire at the end of a quarter.

The services currently comprise development and management of advisory and distribution solutions in the pension and insurance

Spar Nord Bank – Prospectus PART I – 24. Material Contracts 125 After expiry of the period of non-terminability, PFA Pension and bers of LOPI and other banks to arrange insurances through the letpension may terminate the agreement giving either a 10-year or a Codan group. The Bank (which is not a member of LOPI) became a 5-year notice, depending on product type. party to the agreement on 11 November 2005 against payment of a fee to LOPI. The agreement contains a provision to the effect that, as long as the Bank is a party to the agreement, it may not, without the consent of All parties, including the Bank, may terminate the agreement giving PFA Pension, (i) offer pension or insurance products; (ii) enter into 12 months’ notice to expire at the end of a calendar year. In addition, new agreements with providers other than PFA Pension regarding the Bank may terminate the agreement giving six months’ notice pension and insurance products; or (iii) take part in the establish- to expire at the end of a calendar month if material changes are ment of any pension insurance and/or personal insurance business introduced to the agreement. competing with PFA Pension. These conditions apply until 1 October 2015 after which date they will lapse in the absence of a prior The Bank receives a regular fee from Codan for arranging insu agreement by the parties to extend such period. rances under the agreement.

The agreement is governed by Danish law, and any disputes shall be The agreement is governed by Danish law, and any disputes shall be decided by arbitration pursuant to the rules of the Danish Institute decided by the Danish courts. of Arbitration. Sparinvest – Intermediary Services Agreement relating to Unit Trust Units 24.12. Other Contracts On 23 March 2008, the Bank entered into a cooperation agreement with ID-SparInvest A/S and SparInvest Fondsmæglerselskab A/S ValueInvest Danmark – Intermediary Services Agreement for the Bank to provide intermediary service with respect to units in On 27 March 2003, the Bank entered into an intermediary services investment funds and sub-funds managed by ID-SparInvest A/S. agreement with Investeringsforeningen ValueInvest Danmark (“ValueInvest”) relating to the sale of units in ValueInvest. Under The Bank receives a fee for providing intermediary and advisory the agreement, the Bank will arrange the sale of units against an services based on the Bank’s customers’ holdings of units in invest- agency commission. ment funds and sub-funds managed by ID-SparInvest A/S.

The agreement may be terminated by either party giving six months’ The agreement may be terminated by ID-SparInvest A/S and SparIn- notice. vest Fondsmæglerselskab A/S giving three months’ notice. However, ID-SparInvest A/S may terminate the agreement with immediate The agreement is governed by Danish law, and any disputes shall be effect if it is in the interest of an association. See the Financial Busi- decided by the Danish courts. ness Act. The Bank may terminate the agreement without notice and without cause. Codan – Cooperation Agreement In 2000, Codan Forsikring A/S (“Codan”) and the Association of The agreement is governed by Danish law, and any disputes shall be Local Banks in Denmark, Savings Banks and Cooperative Banks in decided by arbitration according to the rules of the Danish Institute Denmark (“LOPI”) entered into an agreement enabling the mem- of Arbitration.

126 PART I – 24. Material Contracts Prospectus – Spar Nord Bank 25. Third Party Information, Expert Statements and Declarations of Interest

This Prospectus does not contain any expert statements or expert have been omitted which would render the information provided reports. inaccurate or misleading.

This Prospectus contains information about the market share, Industry publications generally state that the information they con- market position and industry data for the operating areas of the tain has been obtained from sources believed to be reliable, but the Group and its reporting segments. Unless otherwise indicated, the accuracy and completeness of such information is not guaranteed. statistical and other market information relating to such informa- The Bank has not independently verified and cannot give any assur- tion is based on data reported to the central bank in Denmark. Such ance as to the accuracy of such market data and industry forecasts information has been accurately reproduced and, as far as the Bank contained in this Prospectus that were taken or derived from these is aware and is able to ascertain from such information, no facts industry publications.

Spar Nord Bank – Prospectus PART I – 25. Third Party Information, Expert Statements and Declarations of Interest 127 26. Disclosure of Equity Investments

See “Part I–Description of the Bank–Organisational Structure”.

128 PART I – 26. Disclosure of Equity Investments Prospectus – Spar Nord Bank 27. Documents on Display

The following documents are available for inspection at the Bank’s • The Prospectus relating to the Offering head office: • The Bank will, on request, provide copies of annual reports for • Articles of Association the financial years ended 2011 (when available), 2010 and 2009 for the Bank’s subsidiaries • The Board of Directors’ resolutions on the Offering with related reports from the Board of Directors pursuant to section 156(2) of The documents referred to above, with the exception of annual the Companies Act and statements from the Bank’s auditors on reports published for the financial years ended 31 December 2011, the report of the Board of Directors pursuant to section 156(2) of 2010 and 2009 for the Bank’s subsidiaries, are available on the the Companies Act Bank’s website subject to certain limitations.

• The Bank’s annual reports for the financial years ended 31 De- The address of the Bank’s head office and website is stated in “Part cember 2011, 2010 and 2009 I–Description of the Bank–Bank Information–Name and Registered Office”. • The Bank’s interim reports for the financial years ended 31 De- cember 2011, 2010 and 2009 The Bank’s memorandum of association is not available.

Spar Nord Bank – Prospectus PART I – 27. Documents on Display 129 28. Definitions and glossary

The following table sets forth definitions of terms used in this Prospectus.

2010 Amending Directive Directive 2010/73/EU

ACPE Conversion Date See clause 5.1 of Terms and Conditions of the Notes, Annex 3 to the Articles of Association

ACPE Shares See clause 5.1 of Terms and Conditions of the Notes, Annex 3 to the Articles of Association

Allocation Time 12.30 p.m. CET on 9 March 2012. The time at which any person registered with VP Securities as a shareholder of the Bank will be entitled to be allocated one Pre-emptive Right for each Existing Share held

Alternative Coupon Payment Event See clause 5 of Terms and Conditions of the Notes, Annex 3 to the Articles of Association

Articles of Association The Bank’s Articles of Association of 1 March 2012

Bank Spar Nord Bank A/S

Bank Package I Guarantee scheme adopted by the Danish parliament on 5 October 2008 pursuant to which the Danish State guaranteed unsecured creditors’ claims against losses in Danish banks to the extent such claims were not otherwise covered. The scheme expired on 30 September 2010

Bank Package II Danish Act no. 67 of 3 February 2009 on state capital injections in credit institutions, as amended (Consolidating Act no. 876 of 15 September 2009)

Bank Package III Danish Act no. 721 of 25 June 2010 on the establishment of a model under the auspices of Finansiel Stabilitet A/S by which distressed banks may be wound up in a controlled manner as a going concern

Bank Package IV Document no. 181 adopted by the Finance Committee of the Danish parliament on 7 Sep- tember 2011 and Danish Act no. 1061 of 22 November 2011 amending the Danish act on a guarantee scheme for depositors and investors (loss guarantee by application of an extended dowry scheme)

Bank’s Conversion Option See clause 11.1 of Terms and Conditions of the Notes, Annex 3 to the Articles of Association

Bank’s Conversion Option Period See clause 11.1 of Terms and Conditions of the Notes, Annex 3 to the Articles of Association

BankInvest BI Holding A/S, Sundkrogsgade 7, 2100 Copenhagen Ø, Denmark

BankInvest Fondsmæglerselskab BI Asset Management Fondsmæglerselskab A/S, Sundkrogsgade 7, 2100 Copenhagen Ø, Den- mark, a subsidiary of BI Holding A/S, which is owned by a number of Danish banks, including the Bank. BankInvest Fondsmæglerselskab is a fund manager and provider of investment funds

Banking Day A day on which banks in Denmark are generally open for business

Basel III Framework agreement of the Basel Committee on Banking Supervision amending rules on impairment, capital requirements for mortgage lenders, a maximum leverage ratio, countercyclical capital buffers and required liquidity levels, etc.

Board of Directors The Board of Directors of the Bank as at the Prospectus Date

Capital Base Consists of Core Capital and Supplementary Capital less deductions as defined in section 128 of the Financial Business Act

Carnegie Carnegie Bank A/S, Overgaden neden Vandet 9B, 1414 Copenhagen K, Denmark

Carnegie Investment Bank AB Carnegie Investment Bank AB, Regeringsgatan 56, SE-103 38 Stockholm, Sweden. Swedish parent company of the Carnegie Investment Bank group, including Carnegie Bank A/S

Clearstream Clearstream Banking S A

Codan Codan Forsikring A/S, c/o Codanhus, Gammel Kongevej 60, 1850 Frederiksberg C, Denmark

Companies Act Danish Act on public and private limited companies (the Danish Companies Act) (Act no. 322 of 11 April 2011)

Core Capital Core capital, also referred to as Tier 1 capital, comprises Common Equity (Tier 1) and Hybrid Core Capital adjusted for statutory deductions, see section 5(7)(iv) of the Financial Business Act

130 PART I – 28. Definitions and glossary Prospectus – Spar Nord Bank Common Equity (Tier 1) Consists of share capital and reserves (excluding revaluation reserves) and Hybrid Core Capi- tal adjusted for statutory deductions, see section 4 of Executive Order no. 764 of 24 June 2011 on calculation of capital base

CRD European Capital Requirements Directives, 2006/48/EU and 2006/49/EU

CRD IV The European Commission’s overall package proposing a revision of the existing capital requirements directive (2006/48/EC and 2006/49/EC), consisting of a proposal for a directive and a proposal for a regulation (KOM(2011) 453 and KOM(2011) 452, respectively), which is designated CRD IV

Credit Institutions Directive Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions

Danish kroner or DKK The official currency of the Kingdom of Denmark

Danish Prospectus The Prospectus written in Danish

Danish State The Danish State

Danmarks Nationalbank’s Liquidity Facilities Danmarks Nationalbank’s temporary expansion of the collateral base for loans in Danish kroner granted by Danmarks Nationalbank to banks and mortgage-credit institutions by a number of new types of securities. The terms and conditions for pledging of collateral in the form of the above-mentioned securities, including terms and conditions for calculating the collateral value, are set out in “Addendum to Terms and Conditions for Pledging of Collateral for Credit Facilities in Danish Kroner at Danmarks Nationalbank” of 10 August 2011

Danske Bank Danske Bank A/S, Holmens Kanal 2-12, 1092 Copenhagen K, Denmark

Deposit Guarantee Scheme Deposit guarantee schemes and similar funds

DFSA The Danish Financial Supervisory Authority

Discontinuing Activities Discontinuing activities comprise both activities held for sale (Finans Nord Easyfleet A/S) and discontinuing activities (Spar Nord Leasing A/S, Finans Nord Cross Border A/S and SN Finans Nord AB, Sweden)

DLR Kredit DLR Kredit A/S, Nyropsgade 21, 1780 Copenhagen V, Denmark. DLR Kredit is owned by a large number of banks

EBA European Banking Authority established under Regulation no. 1093/2010 of the European Parliament and of the Council of 24 November 2010

EEA The European Economic Area

EMTN Programme The Bank’s Euro Medium Term Note programme, which allows the Bank to issue notes in a total amount of up to EUR 3 billion through the London Stock Exchange on terms and conditions described in a prospectus dated 31 March 2011

English Prospectus The Prospectus written in English

EU The European Union

Euro or EUR The single European currency

Euroclear Euroclear Bank S.A./N.V as operator of the Euroclear System

Executive Board The Executive Board of the Bank as at the Prospectus Date

Existing Shareholders Any person registered with VP Securities as a shareholder of the Bank as at the Allocation Time

Existing Shares Immediately before the Offering, the Bank’s share capital amounted to DKK 570,688,100 nominal value, consisting of 57,068,810 shares with a nominal value of DKK 10 each

Financial Business Act Danish Act on financial business, see Consolidating Act no. 342 of 8 April 2011 as amended

Financial Stability Act Danish Act no. 1003 of 10 October 2008 on financial stability, see Consolidating Act no. 875 of 15 September 2009 on securities trading etc. as amended

Spar Nord Bank – Prospectus PART I – 28. Definitions and glossary 131 Finansiel Stabilitet A/S Finansiel Stabilitet A/S was established by Act no. 1003 of 10 October 2008 and is owned by the Danish State. The company’s objective is to contribute to securing financial stability in Denmark, including by winding up distressed banks. Moreover, it is the company’s objective on behalf of the Danish State to manage the agreements entered into concerning the provision of an individual state guarantee for a specified portion of the institutions’ debt

GDP Gross domestic product

Group The Bank and its consolidated subsidiaries

Group of Shareholders A group of Existing Shareholders, consisting of Spar Nord Fonden, Nykredit Realkredit A/S and Finanssektorens Pensionskasse

Guarantee Fund The Guarantee Fund is a private, self-governing fund established by Act no. 794 of 20 August 2009, the object of which is to provide coverage for private individuals and companies (legal entities) with deposits and securities in Danish banks in connection with suspension of payments or compulsory liquidation. All Danish banks, mortgage-credit institutions and investment and investment management companies licensed to carry on business under the Financial Business Act are required to join and to contribute to the Guarantee Fund. This also applies to Danish branches of foreign institutions which are domiciled outside the EU

Guarantee Scheme Bank Package I

Hybrid Agreement The Bank’s agreement with the Danish State on the subscription of notes by the Danish State. According to the Terms and Conditions of the Notes, the notes are in the nature of Hybrid Core Capital

Hybrid Core Capital Subordinated Loan Capital which complies with the requirements of section 132 of the Finan- cial Business Act

ICAAP Internal capital adequacy assessment process (the individual solvency need)

IFRS International Financial Reporting Standards as adopted by the EU

Investigation Limited analysis of balance sheet and exposures (the “Investigation”) of 70 selected exposures of the Spar Nord Bank A/S Group carried out by PwC. The Investigation was carried out in the period from 10 November to 14 December 2011 on the basis of a statement of exposures at 30 September 2011

IRB Internal Ratings-Based, a method for calculating credit risks pursuant to the EU directive on solvency requirements, which has been implemented into Executive Order no. 1399/2011 on capital adequacy issued pursuant to section 143 of the Financial Business Act

Joint Global Coordinators & Bookrunners Carnegie and Danske Bank letpension letpension A/S, Sundkrogsgade 4, 2100 Copenhagen Ø, Denmark, which is owned by a large number of local and regional banks in Denmark. letpension offers products within life insurance and pension

Liquidity Coverage Ratio Quantitative liquidity standard introduced by the Basel Committee consultative document in December 2009

Listed Shares Shares admitted to trading on a regulated market

LOPI Lokale Pengeinstitutter, c/o P.O. Box 9019, Toldbodgade 33, 1253 Copenhagen K, Denmark

Major Shareholders Shareholders who have notified the Bank that they hold more than 5% of the Bank’s registered share capital

Management The Board of Directors and the Executive Board of the Bank

Moody’s Moody’s Investors Service, Inc. Moody’s is not established in the European Union and has not applied for registration under Regulation (EC) no. 1060/2009 (the Credit Rating Agency Regu- lation), as amended by Regulation (EU) no. 513/2011. With effect from 31 October 2011, the European Securities and Markets Authority (“ESMA”) registered Moody’s European subsidiaries pursuant to the Credit Rating Agency Regulation, and certain of these subsidiaries have further applied for authorisation to certify credit ratings from credit rating agencies outside the European Union, if the supervision of credit rating agencies by the relevant registration countries complies with the requirements of the Credit Rating Agency Regulation. According to ESMA, the USA, where Moody’s is registered, does not yet comply with these requirements, but ESMA has granted an exemption until 30 April 2012 to use credit ratings from credit rating agencies that are not registered in the European Union

132 PART I – 28. Definitions and glossary Prospectus – Spar Nord Bank Mortgage Credit Act Danish Act on mortgage-credit loans and mortgage-credit bonds etc. (Consolidating Act no. 1261 of 15 November 2010)

NASDAQ OMX NASDAQ OMX Copenhagen A/S

Net Stable Funding Ratio Minimum requirement for a bank’s stable funding (i.e. funding expected to remain stable over a period of 12 months), as proposed in Basel III

Nets Nets Danmark A/S, Lautrupbjerg 10, 2750 Ballerup, Denmark. Nets is owned by Danmarks Nationalbank and a number of Danish and Norwegian banks and provides services within debit cards, payment solutions and information exchange, including Betalingsservice and eBoks

Nykredit Nykredit Realkredit A/S, Kalvebod Brygge 1-3, 1780 Copenhagen V, Denmark

Offer Price DKK 16 per Offer Share

Offer Shares The 57,068,810 new shares with a nominal value of DKK 10 each offered in the Offering

Offering Offering of up to 57,068,810 new shares with a nominal value of DKK 10 each at a price of DKK 16 per Offer Share with pre-emptive rights for the Bank’s Existing Shareholders at the ratio of 1:1

OII Objective indication of impairment

PD Probability of default

PFA Pension PFA Pension, forsikringsaktieselskab, Sundkrogsgade 4, 2100 Copenhagen Ø, Denmark

Pillar I Designation for a group of CRD requirements. Pillar I contains generic rules for calculating credit, market and operational risks to determine a bank’s risk-weighted assets. Moreover, Pillar I stipulates the minimum capital requirement for banks. The capital requirement is 8% of the risk-weighted assets

Pillar II Designation for a group of CRD requirements. Pillar II sets forth the framework for the supervisory review process (SREP) and the framework for banks’ internal capital adequacy assessment process (ICAAP). Pillar II concerns banks’ risks in a wider sense, including risks which are not defined under Pillar I (e.g. business, pension and concentration risks as well as their situation and expectations in general). Moreover, it deals with stress testing

Pillar III Designation for a group of CRD requirements. Pillar III presents a large number of disclosure requirements. The objective is to raise the level of market discipline by giving external stakeholders a better understanding of banks’ capital adequacy calculations and the procedures involved

Pre-emptive Right One (1) pre-emptive right allocated for each Existing Share

Privatsikring Forsikringsselskabet Privatsikring A/S, Gammel Kongevej 60, 1790 Copenhagen V, Denmark. Privatsikring is a subsidiary of the Codan group

Probability of Default The probability of a creditor defaulting on a loan within the next 12 months

Prospectus This prospectus dated 5 March 2012

Prospectus Date 5 March 2012

Prospectus Directive Directive 2003/71/EC (and amendments thereto, including the 2010 Amending Directive, to the extent implemented in the Relevant Member State)

Prospectus Regulation Commission Regulation (EC) no. 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements

PwC PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab

Recommendations Recommendations on corporate governance issued by the Danish Corporate Governance Committee in August 2011

Regulation S Regulation S promulgated under the U.S. Securities Act

Spar Nord Bank – Prospectus PART I – 28. Definitions and glossary 133 Relevant Implementation Date Date on which the Prospectus Directive was implemented in a Relevant Member State

Relevant Member State Any member state of the EEA which has implemented the Prospectus Directive

Rights Trading Period Period beginning on 7 March 2012 and ending on 20 March 2012

Risk-weighted Items See section 142(1) of the Financial Business Act

Rules of Procedure The Bank’s rules of procedure for the Board of Directors and the Executive Board

SDC Skandinavisk Data Center A/S, company reg. (CVR) no. 16 98 81 38, Borupvang 1, 2750 Bal- lerup, Denmark

Securities Act United States Securities Exchange Act of 1933, as amended

Securities Trading Act Consolidating Act no. 883 of 9 August 2011 on securities trading etc. as amended

Shares Existing Shares and the Offer Shares

SIFIs Systemically important financial institutions which may become subject to tighter capital requirements pursuant to future regulation. The criteria and conditions to be met in order to be defined as a SIFI have yet to be determined but will be based on common EU regulation

Spar Nord Leasing A/S Spar Nord Leasing A/S (formerly Finans Nord A/S) is a finance company in the Group with activities in Denmark and Sweden

Spar Nord’s Local Banks Business segment of Spar Nord Bank A/S

State Hybrid Capital Agreement with the Danish State on the Danish State’s subscription for notes in a total amount of DKK 1,265,000,000. The notes were issued on 30 June 2009 and are in the nature of Hybrid Core Capital

Subordinated Loan Capital Liabilities (possibly established by issuance of securities) providing that the creditor’s claim is subordinated to all other creditor claims, see section 128 of the Danish Financial Business Act

Subscription Period Period beginning on 10 March 2012 and ending on 23 March 2012 at 5.00 p.m. CET

Supervisory Diamond A model set up by the DFSA containing, among other things, five limit values which Danish banks have to comply with by 31 December 2012

Supplementary Capital Supplementary capital, also referred to as Tier 2 capital, comprises revaluation reserves, Subordinated Loan Capital and contributed capital complying with certain requirements with respect to maturity, repayment, etc. and Hybrid Core Capital which is not included in the Core Capital, see section 24 of Executive Order no. 764 of 24 June 2011 on calculation of capital base

Terms and Conditions of the Notes The terms and conditions of the notes related to the Hybrid Agreement

The Spar Nord Foundation Spar Nord Fonden, Østeraa 12, 9000 Aalborg, Denmark

Totalkredit Totalkredit A/S, Helgeshøj Allé 53, 2630 Taastrup, Denmark. Totalkredit A/S is a subsidiary of Nykredit Realkredit A/S, which is owned by Nykredit Holding A/S

Trading, Financial Markets Business segment of Spar Nord Bank A/S and the International Division

Transition Scheme A transition scheme introduced in February 2009 whereby a Danish bank could apply individually for a state guarantee for its existing and new, unsubordinated debt with a maturity of up to three years

Underwriting Agreement An Underwriting Agreement entered into between the Bank and the Joint Global Coordinators & Bookrunners dated 5 March 2012 which has been accepted by Carnegie Investment Bank AB

ValueInvest ValueInvest Danmark. Member-owned investment association

VP Securities VP Securities A/S

134 PART I – 28. Definitions and glossary Prospectus – Spar Nord Bank Part II. The Offering

Spar Nord Bank – Prospectus PART II – Part II. The Offering 135 1. Persons Responsible for the Offering

For an overview of the persons responsible for this Prospectus, see “Part I—Description of the Bank—Persons Responsible”.

136 PART II – 1. Persons Responsible for the Offering Prospectus – Spar Nord Bank 2. Risk Factors Related to the Offering

For a description of risk factors related to the Offering, see “Risk factors”.

Spar Nord Bank – Prospectus PART II – 2. Risk Factors Related to the Offering 137 3. Key Information on Capitalisation and Use of Proceeds

The table above should be read in conjunction with the financial 3.1. working Capital Statement statements incorporated by reference in this Prospectus.

Management believes that the Bank’s capital resources prior to As at the Prospectus Date, DKK 6.2 billion of the Group’s debt is the Offering will be adequate to cover its present needs for the 12 covered by an individual state guarantee as described in “Part I— months following the Prospectus Date. Description of the Bank—Material Contracts—Finansiel Stabilitet— Agreement on the Terms for Providing a State Guarantee”. Apart from this, the Group’s debt is not guaranteed. 3.2. capitalisation and Indebtedness As adjusted to reflect the expected net proceeds of DKK 837.7 mil- The following table sets forth, as at 31 December 2011, the Bank’s lion from the Offering, the Bank’s shareholders’ equity would have consolidated (i) short-term debt and (ii) capitalisation and indebted- been DKK 5,465.0 million as at 31 December 2011. ness. The following table sets forth certain selected data relating to the Group’s capital and capital adequacy ratios as at 31 December 2011 Table 99 – The Bank’s consolidated short-term debt and (i) on an actual basis and (ii) taking into account the net proceeds capitalisation and indebtedness from the Offering.

(DKKm) As at 31 December 2011 Table 100 – Group’s capital and capital adequacy ratios, actual and adjusted for the Offering Short-term debt (< 1 year) Payables to credit institutions and central banks 11,615.6 As at 31 December 2011 Deposits and other payables 6,057.1 (DKKm) Actual Adjusted Issued bonds at amortised cost 3,731.1 Total 21,403.8 Common Equity (Tier 1) 4,398.6 5,236.3 Core Capital, including Hybrid Core Capital 5,621.6 6,459.3 Secured short-term debt (repo) 5,010.8 Capital base 5,904.2 6,741.9 Secured short-term debt (state guarantee) 3,731.1 Risk-weighted assets 42,187.8 42,187.8 Total secured short-term debt 8,741.9 Solvency ratio (%) 14.0 16.0

Long-term debt (> 1 year) Core Capital (Tier 1) ratio, including Hybrid Core Capital (%) 13.3 15.3 Payables to credit institutions and central banks 475.3 Common Equity (Tier 1) ratio (%) 10.4 12.4 Deposits and other payables 25,030.5 Issued bonds at amortised cost 4,290.2 Total 29,796.0 3.3. natural and Legal Persons’ Interests in the Offering Secured long-term debt (repo) - Secured long-term debt (state guarantee) 2,491.6 Management is not aware of any potential conflicts of interest in relation to the Offering that would be material to the Bank. Total secured long-term debt 2,491.6

Subordinated debt (excluding Supplementary Capital) 1,708.5 3.4. reasons for the Offering and Use of Proceeds Subordinated debt consisting of Supplementary Capital excluding Hybrid Core Capital 608.3 The conditions for carrying on banking business have in many ways Total long-term debt and subordinated debt 32,112.8 changed due to the crisis witnessed in recent years in the financial markets and the legislative and regulatory measures resulting from Hybrid Core Capital and shareholders’ equity the crisis. The main consequences include stricter requirements and higher expectations from investors to the capitalisation of Hybrid Core Capital 1,708.5 banks and, in particular, to their Common Equity (Tier 1). Share capital 570.7 Revaluation reserve 58.2 In 2009, for the purpose of strengthening its capital base and ac- commodating the demand for financing expected then, the Bank Foreign currency translation reserve 4.2 raised a loan with the Danish State of DKK 1,265 million in the form Statutory reserves 450.7 of Hybrid Core Capital, and in 2006 and 2007 the Bank strengthened Proposed dividend - its capital base by DKK 808 million by way of subordinated loans. Retained earnings 3,543.5 The Hybrid Core Capital may be repaid as from the end of June 2014, and part of the subordinated loans was repaid in November Total Hybrid Core Capital and 2011 and February 2012 whereas the remaining part is expected to shareholders’ equity 6,335.8 be repaid by DKK 297 million by 31 March 2012 and by DKK 100 million in December 2012, respectively. Total long-term debt, subordinated debt, Hybrid Core Capital and shareholders’ equity 38,448.6 Accordingly, the reason for the Offering is the wish of increasing the Group’s financial strength and, in particular, of strengthening the Bank’s Common Equity (Tier 1). As a result, the Bank’s Common

138 PART II – 3. Key Information on Capitalisation and Use of Proceeds Prospectus – Spar Nord Bank Equity (Tier 1) ratio will be approximately 12.4% at 31 December Finally, Management expects the next few years to offer opportuni- 2011 (pro forma). ties for minor acquisitions of banking activities that are strategically attractive to the Group, and this too requires a strengthening of In addition, Management aims to strengthen the Bank’s organic the Bank’s capital base. Especially acquisition of activities in those growth through an increased customer inflow and business volume; areas outside the North Jutland region in which the Bank has set especially in the branches that have been acquired or established in up business during the past ten years, and in which it still has unu- recent years. tilised capacity, would be of interest to the Bank, provided that the assets are of high quality and of a scope that allows for integration with the existing business.

Spar Nord Bank – Prospectus PART II – 3. Key Information on Capitalisation and Use of Proceeds 139 4. Information Concerning the Offer Shares

4.1. type of Securities, Allocation Time and ISIN 4.4. Currency Codes The Offering will be carried out and trading in the Pre-emptive Pre-emptive Rights Rights will be effected in Danish Kroner. The Offer Shares are de- The Offering is being made at the ratio of 1:1, which means that nominated in Danish Kroner. each Existing Shareholder will be entitled to and allocated one (1) Pre-emptive Right for every one (1) Existing Share held at the Al- location Time, and that one (1) Pre-emptive Right will be required to 4.5. exchange Control Regulation in Denmark subscribe for one (1) Offer Share. There are no governmental laws, decrees, or regulations in Den- Pre-emptive Rights will be allocated to the Existing Shareholders mark that restrict the export or import of capital (except for certain registered with VP Securities as shareholders of the Bank on 9 investments in areas in accordance with applicable resolutions March 2012 at 12:30 p.m. CET. Shares traded after 6 March 2012 adopted by the United Nations and the European Union), including, will be traded ex Pre-emptive Rights provided that such Shares are but not limited to, foreign exchange, or that affect the remittance traded with customary three-day value. of dividends, interest or other payments to non-resident holders of the Offer Shares. As a measure to prevent money laundering and The ISIN code of the Pre-emptive Rights is DK0060415909. financing of terrorism, persons travelling in and out of Denmark carrying amounts of money (including, but not limited to, cash and The Pre-emptive Rights are expected to be approved for admission travellers’ cheques) worth the equivalent of EUR 10,000 or more to trading and official listing on NASDAQ OMX, and the Pre-emptive must declare such amounts with the Danish Customs and Tax Ad- Rights will be traded on NASDAQ OMX during the period from 7 ministration when travelling in or out of Denmark. March 2012 at 9:00 a.m. CET to 20 March 2012 at 5:00 p.m. CET.

Offer Shares 4.6. rIghts Attached to the Pre-emptive Rights and The Offer Shares to be issued by the Bank upon exercise of the Pre- the Offer Shares emptive Rights will be of the same class as the Existing Shares. The Offer Shares will, when fully paid up and registered with the The Offer Shares are offered at the Offer Price of DKK 16 per Offer Danish Business Authority, have the same rights as the Existing Share. Shares, including with respect to eligibility for any dividends after the completion of the Offering. The Offer Shares will be issued under a temporary ISIN code: DK0060416048. Dividend Rights/Rights to Share in Profits The Offer Shares are eligible for dividends as of the registration with The Offer Shares will be issued under a temporary ISIN code and the Danish Business Authority. are expected to be approved for admission to trading and official listing on NASDAQ OMX as from 7 March 2012. Registration of the Dividends are paid in Danish kroner to the shareholder’s account Offer Shares with the Danish Business Authority will take place with VP Securities. No restrictions on dividends or special proce- following completion of the Offering, expected to take place not later dures apply to holders of Offer Shares who are not residing in Den- than on 27 March 2012, and as soon as possible thereafter, the tem- mark. See “Part II—The Offering—Information concerning the Offer porary ISIN code of the Offer Shares will be merged with the ISIN Shares—Taxation” for a description of the treatment of dividends code of the Existing Shares expected to take place not later than on under Danish tax law. Dividends which have not been claimed by 29 March 2012. Until such merger has been completed, the liquidity shareholders within three years from the time they are payable are of the Offer Shares under the temporary ISIN code may be substan- forfeited and will accrue to the Bank. tially different from the liquidity of the Existing Shares. The Articles of Association of the Bank do not contain any provisions on cumulative dividends. 4.2. governing Law and Jurisdiction Rights to Attend and Vote The Offering is subject to Danish law. This Prospectus has been pre- Against presentation of an admission card, any shareholder who pared in compliance with the standards and requirements of Danish has been recorded as of the record date one week before a general legislation. Any dispute which may arise as a result of the Offering meeting or as of that date has requested that his Shares be regis- shall be brought before the Danish courts of law. tered in the register of shareholders shall be entitled to attend a general meeting – either in person or represented by proxy – and to address the meeting. Instruments of proxy shall be in writing and 4.3. Registration dated and shall be presented upon obtaining an admission card. In- struments of proxy issued to the management of the Bank shall be The Pre-emptive Rights and the Offer Shares will be delivered in in writing and dated not more than 12 months prior to the relevant book-entry form through allocation to accounts with VP Securi- general meeting and may only be issued for one specific general ties through a Danish bank or other institution authorised as the meeting. custodian of such shares. The address of VP Securities is Wei- dekampsgade 14, P.O. Box 4040, 2300 Copenhagen S, Denmark. The Pursuant to Article 10(4) of the Articles of Association, sharehold- Pre-emptive Rights and the Offer Shares will be issued in non- ers’ right to vote at general meetings shall be exercised through certificated bearer form, but may be registered in the name of the delegates who are members of the Bank’s bank committees. How- holder in the Bank’s register of shareholders through the holder’s ever, shareholders holding at least 20,000 Shares on the record date custodian bank. one week before the relevant general meeting (major shareholders) shall be entitled to exercise their voting rights at general meetings. See Article 9(1) of the Articles of Association.

140 PART II – 4. Information Concerning the Offer Shares Prospectus – Spar Nord Bank Delegates who are also members of the Bank’s bank committees Any new shares subscribed for shall be negotiable instruments represent the share capital that has been registered as belonging issued to named holders and shall rank pari passu for dividends and to the relevant shareholder region as of the record date one week any other rights in the Bank as from such time as may be deter- before the relevant general meeting. Each delegate represents mined by the board of directors in its decision regarding the capital equal fractions of the share capital, calculated on the basis of the increase. number of delegates immediately prior to the general meeting. A major shareholder, see Article 9(1) of the Articles of Association, If the Bank’s shareholders in general meeting resolve to increase represents the share capital which has been registered on the the Bank’s share capital by a cash contribution, section 162 of the record date one week before the relevant general meeting, or which Companies Act will apply. Under the said provision, the sharehold- such shareholders has requested be registered as belonging to the ers will have a pre-emptive right to subscribe for new shares pro relevant major shareholder. rata to their shareholdings. However, a majority consisting of not less than two-thirds of the votes cast and not less than two-thirds To gain access to general meetings and be entitled to vote, a del- of the share capital represented at the general meeting may resolve egate or major shareholder, respectively, shall request an admission to deviate from such pre-emptive right, always provided that the card at least three days before the relevant general meeting. Voting capital increase is effected at market price. may be made by proxy, and delegates may only issue a proxy to another bank committee member from the same region. The instru- Other Rights ment of proxy shall be in writing and dated and may only be valid for Pursuant to the Articles of Association, no Shares carry any special one general meeting. No bank committee member can represent rights, and no shareholder is required to have his Shares redeemed more than two delegates by proxy. in whole or in part.

The Articles of Association contain no provisions regarding ownership or voting restrictions. 4.7. resolutions, Authorisations and Approvals of the Offering Rights on Solvent Liquidation In case of dissolution or liquidation of the Bank, the shareholders The Offer Shares will be issued pursuant to Article 3.1 of the Arti- are entitled to participate in the distribution of excess assets in cles of Association, in accordance with which the Board of Directors proportion to their nominal shareholdings after the Bank’s creditors is authorised to increase the Bank’s share capital by a maximum have been satisfied. amount of nominally DKK 856,032,150 through the issue of new shares to named holders by way of one or more issues, such shares Pre-emptive Rights to rank pari passu with existing shares, including at a discount to the Pursuant to Article 4 of the Articles of Association, the board of market price. directors shall be authorised to permit the Bank to receive capital contributions, which may be included when calculating the Bank’s Under the said authorisation, the Board of Directors adopted a Capital Base, subject to observance of the relevant conditions pro- resolution on 5 March 2012 to increase the Bank’s share capital. The vided by law from time to time. maximum capital increase will be DKK 570,688,100 nominal value (57,068,810 Offer Shares with a nominal value of DKK 10 each). The Capital Increase remaining authorisation will subsequently consist of 285,344,050 Pursuant to Article 3 of the Articles of Association, the board of nominal value (28,534,405 Shares with a nominal value of DKK 10 directors is authorised to increase the Bank’s share capital until 30 each). The capital increase will be effected with pre-emptive rights April 2013 by a maximum of nominally DKK 856,032,150 in shares for the Existing Shareholders at the ratio of 1:1. One (1) Pre-emptive issued to named holders by way of one or more issues. Such shares Right will entitle the holder to subscribe for one (1) Offer Share with shall rank pari passu with existing shares. The increase of the a nominal value of DKK 10 each at the Offer Price of DKK 16 per Bank’s share capital may be effected with pre-emptive rights for the Offer Share. Bank’s shareholders (Article 3(1)) or without pre-emptive rights for the Bank’s shareholders (Article 3(3). If the increase is effected with pre-emptive rights for the Bank’s shareholders, the new shares 4.8. date of Allocation of Pre-emptive Rights and may be subscribed for at a discount to the market price and must be Issuance of Offer Shares effected by cash contribution. If the increase is effected without pre- emptive rights for the Bank’s shareholders, the new shares shall Date of Allocation of Pre-emptive Rights be subscribed for at market price by cash contibution or otherwise. On 9 March 2012 at 12:30 p.m. CET (the “Allocation Time”), any per- The new shares shall be negotiable instruments issued to named son registered with VP Securities as an Existing Shareholder of the holders and shall rank pari passu for dividends and any other rights Bank will be allocated one (1) Pre-emptive Right for each Existing in the Bank as from such time as may be determined by the board of Share held. For every one (1) Pre-emptive Right, the holder will be directors in its decision regarding the capital increase. entitled to subscribe for one (1) Offer Share against payment of the Offer Price of DKK 16 per Offer Share. Pursuant to Article 3a of the Articles of Association, the board of directors is authorised to increase the Bank’s share capital until 11 Date of Issuance of the Offer Shares August 2014 by a maximum of DKK 1,265,000,000 in shares issued The subscription period for the Offer Shares will commence on 10 to named holders by way of one or more issues. Such shares shall March 2012 at 9:00 a.m. CET and close on 23 March 2012 at 5:00 rank pari passu with existing shares. The increase of the Bank’s p.m. CET, inclusive. During this period, the Offer Shares will be share capital shall take place without pre-emptive rights for the allocated temporarily through VP Securities upon exercise of Pre- Bank’s shareholders, meaning that any new shares will be offered emptive Rights against payment of the Offer Price. The final date of at the prevailing market price, however not less than DKK 10.50 per issuance of the Offer Shares and registration with the Danish Busi- share of DKK 10. The increase can take place by conversion of debt ness Authority is expected to be 27 March 2012. in the form of Hybrid Core Capital. To the extent that conversion is effected pursuant to Article 3b of the Articles of Association, the authorised maximum shall be reduced by a corresponding amount.

Spar Nord Bank – Prospectus PART II – 4. Information Concerning the Offer Shares 141 4.9. negotiability and Transferability of the Squeeze Out Shares and Offer Shares Pursuant to section 70 of the Companies Act, shares in a company may be redeemed in whole or in part by a shareholder holding more The Shares are negotiable instruments. The acquirer of a Share may than nine-tenths of the shares and the corresponding voting rights not exercise rights belonging to a shareholder unless such acquirer in the company. has been registered in the register of shareholders or has notified and provided proof of his acquisition to the Bank. However, this shall Furthermore, pursuant to section 73 of the Companies Act, a minor- not apply to the right to dividend or other disbursements nor to the ity shareholder may require the majority shareholder holding more right to new shares in the event of capital increases. than nine-tenths of the shares and the corresponding voting rights to redeem the minority shareholder’s shares. The Shares cannot be transferred to bearer. Major Shareholdings Pursuant to Article 1(3) of the Articles of Association, no restrictions Pursuant to section 29 of the Securities Trading Act, a shareholder shall apply to the transferability of the Shares. of a listed company is required to notify the listed company and the DFSA as soon as possible if the shareholder’s stake represents 5% or more of the voting rights in the company or the nominal value 4.10. Danish Regulations Governing Mandatory accounts for 5% or more of the share capital, and when a change Takeover Bids, Redemption of Shares and to a holding already notified entails that the limits of 5%, 10%, 15%, Disclosure Requirements 20%, 25%, 50% or 90% and the limits of one-third and two-thirds of the share capital’s voting rights or nominal value are reached or are Mandatory Bids no longer reached. Applicable provisions on mandatory takeover bids are set out in chapter 8 of the Danish Securities Trading Act and the executive The notification shall provide information about the full name, ad- order issued pursuant thereto. Section 31 of the Securities Trading dress or, in the case of business enterprises, the registered office, Act includes rules concerning public offers to acquire shares in the number of shares and their nominal value and share classes as companies admitted to trading on a regulated market (including well as information about the basis on which the calculation of the NASDAQ OMX) or an alternative market place. holdings has been made.

If a shareholding is transferred, directly or indirectly, in a company Failure to comply with the disclosure requirements is punishable by with one or several share classes admitted to trading on a regulated a fine. market or an alternative market place, the acquirer shall enable all shareholders of the company to dispose of their shares on identical When the company has received notification, it must publish the terms, if such transfer involves the acquirer obtaining a controlling content of such notification as soon as possible. influence. Furthermore, the general duty of notification under the Companies An acquirer has a controlling influence when he directly or indirectly Act applies as well as special duties of notification in respect of the holds more than one-half of the voting rights in a company, unless it Bank’s insider group under the Securities Trading Act. is possible in special cases to clearly demonstrate that such holding does not constitute a controlling interest. An acquirer who does not hold more than one-half of the voting rights in a company, neverthe- 4.11. Public Takeover Bids made by Third Parties less has a controlling influence if the acquirer: for the Shares of the Bank during the Previous or Current Financial Year • has the right to appoint or dismiss the majority of the members of the company’s board of directors or comparable governing No takeover bids have been made by any third party in respect of the body, and such board of directors or any such other body has a Bank’s Shares during previous or the current financial years. controlling influence in the company;

• has the right to control the financial and operational affairs of the 4.12. Taxation company according to the articles of association or an agreement; Taxation in Denmark The following is a description of certain Danish tax considerations • has the right to control the majority of voting rights in the com- relating to an investment in the Offer Shares in connection with the pany in accordance with any agreement with other shareholders; Offering. or The description is for general information only and does not purport • holds more than one-third of the voting rights in the company to constitute exhaustive tax or legal advice. The description is based and the actual majority of the votes on the general meeting or solely upon the tax laws of Denmark in effect on the Prospectus any other governing body and thereby has an actual controlling Date. The Danish tax laws may be subject to change, possibly with influence in the company. retroactive effect. It should be noted that the description does not address all possible tax consequences of an investment in the Offer Warrants, call options and other potential voting rights that may Shares and the Pre-emptive Rights. currently be exercised or converted must be taken into account in the assessment of whether an acquirer has a controlling influence. The description does not cover investors to whom special tax rules apply, including professional investors, and therefore, may not be If special conditions apply, the DFSA may grant an exemption from relevant for example to certain institutional investors, insurance the obligation to make a mandatory takeover bid. companies, pension companies, banks, stockbrokers and investors subject to special rules on corporation tax on shares. The

142 PART II – 4. Information Concerning the Offer Shares Prospectus – Spar Nord Bank description does not cover taxation of individuals and companies Individuals, Investment of Pension Savings who carry on business purchasing and selling shares (in Danish: Subject to certain limits, investors may invest pension savings in “næring”). Sales are assumed to be sales to a third party. Existing shares, and net returns will fall under the scope of the Danish Shareholders and prospective investors in the Offer Shares and the Pension Investment Return Tax Act and be subject to tax at a rate of Pre-emptive Rights are advised to consult their tax advisers regard- 15% on a mark-to-market basis. ing applicable tax consequences of acquiring, holding, managing and disposing of Offer Shares or Pre-emptive Rights based on their The usual dividend tax of 27% will not be withheld if the account is particular circumstances. Investors who may be affected by the tax registered as a pension account. laws of other jurisdictions should consult their own tax advisers with respect to the tax consequences applicable to their particular Capital Gains Tax circumstances, as such consequences may differ significantly from Individuals those described herein. The rules on taxation of individuals were changed effective 1 Janu- ary 2010. The transitional rules regarding these changes and previ- General Rules on Taxation of Dividends and Shares ous changes are not discussed in this section. Taxation of Investors subject to Full Tax Liability in Denmark Individuals residing in Denmark, or having spent at least six months Gains realised are taxed as share income. For the 2012 income year, in Denmark, and companies etc. that are either registered in Den- share income is taxed at the rate of 27% for share income up to DKK mark or the management of which is effectively based in Denmark 48,300 (DKK 96,600 for married couples cohabiting at the end of the are generally subject to full tax liability in Denmark. If individuals or income year) and 42% for share income exceeding that amount. The companies are subject to full tax liability in other countries, special relevant thresholds apply to the 2012 income year and are adjusted rules may apply which are not covered by this Prospectus, including annually. However, the thresholds for 2012 also apply to 2013. The Danish companies with foreign subsidiaries with income triggering said amounts include all share income for the individual or couple Danish CFC taxation. in question.

Taxation of Dividends Losses realised on the sale of shares admitted to trading in a Individuals regulated market may be offset against taxable gains and dividends Dividends paid to individuals are taxed as share income. For the on other shares admitted to trading in a regulated market (“Listed 2012 income year, share income is taxed at the rate of 27% for Shares”). If the individual is married and the total loss realised on share income up to DKK 48,300 (DKK 96,600 for married couples Listed Shares exceeds the individual’s annual income on Listed cohabiting at the end of the income year) and 42% for share income Shares, the residual loss may be offset against the income on Listed exceeding that amount. The relevant thresholds apply to the 2012 Shares realised by his or her spouse, provided that the couple are income year and are adjusted annually. However, the thresholds for cohabiting at the end of the income year. 2012 also apply to 2013. The said amounts include all share income for the individual or couple in question. Dividends paid are generally Any unutilised losses may be carried forward without time limit subject to withholding tax at the rate of 27%. The dividend-distribut- to be offset against taxable gains and dividends on other Listed ing bank is responsible for withholding tax when paying dividends. Shares. However, the right of deduction is subject to the Danish Customs and Tax Administration having received notice of the acqui- Companies, etc. sition of the shares, including the identity and number of the shares, For corporate shareholders, a distinction is made between Subsidi- the date of acquisition and the purchase price, before the final date ary Shares/Group Shares and Portfolio Shares (as defined below) for filing the tax return for the income year in which the acquisition with respect to taxation of dividends and gains on shares: took place.

Dividends paid to a company are tax-exempt, irrespective of owner- Gains and losses are calculated as the sales price less the purchase ship period, in respect of dividends on the following shares: price. Brokerage may be deducted from the sales price in the calculation of the gain. A. “Subsidiary Shares”: Shares of which the shareholder holds at least 10% of the share capital and the dividend-distributing If an investor sells only part of his shares in a company, gains/ company is residing in the EU/EEA or in a state that has signed a losses are determined according to the “average method” as the double taxation treaty with Denmark pursuant to which taxation average of the total purchase price of all the shares in the relevant of dividends is waived or reduced; and company held by the investor. The FIFO method is applied in the determination of which shares are sold, implying that the share first B. “Group Shares”: Shares in a company with which the shareholder acquired will be deemed to be the share first sold. is jointly taxed or where the shareholder and the company meet the criteria for international joint taxation, usually implying that Individuals, Investment of Pension Savings the shareholder controls, directly or indirectly, more than 50% of Subject to certain limits, investors may invest pension savings in the votes or is otherwise deemed to have a controlling influence. the Offer Shares, and net returns will fall under the scope of the Danish Pension Investment Return Tax Act. Net return is defined as Dividends on shares that are neither Subsidiary Shares nor Group the sum of dividends and interest received and the sum of gains less Shares, i.e. “Portfolio Shares”, are included in the calculation of the any losses in the relevant year. The net return is subject to tax at a company’s taxable income. Taxable income is taxed at the rate of rate of 15% on a mark-to-market basis. 25%. According to the mark-to-market principle, each year’s taxable gain Special anti-abuse rules apply to certain holding companies, the or loss is calculated as the difference between the net value of the so-called intermediate holding companies, which own Subsidiary shares at the beginning and end of the tax year. Thus, taxation will Shares or Group Shares. These rules are not described in detail in take place on an accrual basis even though no shares have been this Prospectus. disposed of and no gains or losses have been realised.

Spar Nord Bank – Prospectus PART II – 4. Information Concerning the Offer Shares 143 Companies, etc. or the state in which the company is resident. With respect to group Companies are not subject to taxation on gains and losses attribut- shares, it is also a condition that the dividend-receiving company is able to a sale of Subsidiary Shares and Group Shares. resident in the EU/EEA.

Portfolio Shares are taxable according to the mark-to-market prin- Dividends paid on Portfolio Shares are always subject to taxation, ciple and are therefore included in the calculation of taxable income. irrespective of ownership period. Tax on dividends at the rate of 27% Losses on Portfolio Shares are deductible, also in other taxable is generally withheld by the dividend-distributing company. income. Taxable income is taxed at the rate of 25%. In the event that the dividend-receiving company owns less than Special anti-abuse rules apply to certain holding companies, the 10% of the shares in the company distributing the dividends and the so-called intermediate holding companies, which own Subsidiary shareholder is a resident of a state with which Denmark has signed Shares or Group Shares. These rules are not described in this sec- a double taxation treaty or another arrangement for the exchange tion. of information between the countries’ tax authorities, the dividends may on request be subject to withholding tax at a reduced rate of A change of status from Subsidiary Shares/Group Shares to Portfo- 15%. If the shareholder is a non-EU resident, it is further a condition lio Shares and vice versa will be treated as a disposal of the shares that the shareholder hold, together with consolidated parties, less and reacquisition at the market price of the shares at the relevant than 10% of the company’s share capital. The rate of withholding tax time. is still 27%, but it is possible to seek a refund of the excess tax withheld. However, if the rate of withholding tax is to be reduced to less Taxation of Investors not subject to Full Tax Liability in Denmark than 15% under the relevant double taxation treaty, the withholding Taxation of Dividends tax may be reduced to the rate stipulated in the double taxation Individuals treaty. The distribution of dividends from a Danish company to a non-resident individual is generally subject to withholding tax at the rate of Permanent Establishment in Denmark 27%. The dividend-distributing bank is responsible for withholding In addition, shareholders with a permanent establishment in Den- tax on behalf of the shareholder. mark to which the shares can be attributed will be taxed according to the same rules as for shareholders liable to full tax liability in In the event that the dividend-receiving individual owns less than Denmark. 10% of the shares in the company distributing the dividends and the individual is a resident of a state with which Denmark has signed Capital Gains Tax a double taxation treaty or another arrangement for the exchange Individuals of information between the countries’ tax authorities, the dividends Generally, non-resident investors are not subject to taxation in may on request be subject to withholding tax at a reduced rate of Denmark on capital gains on the sale of shares. Non-Danish share- 15%. If the shareholder is a non-EU resident, it is further a condition holders holding shares in the ordinary course of their business that the shareholder hold, together with consolidated parties, less (“næringsaktier”) through a permanent establishment in Denmark than 10% of the company’s share capital. will be subject to limited tax liability in Denmark with respect to gains and losses on such shares. The rate of withholding tax is still 27%, but it is possible to seek a refund of the excess tax withheld. If the rate of withholding tax is Companies to be reduced to less than 15% under the relevant double taxation Shareholders who are not subject to full tax liability in Denmark treaty, the withholding tax may be reduced to the rate stipulated are generally not subject to Danish tax on the disposal of shares. in the double taxation treaty. Individuals who are residents of the However, gains and losses on Portfolio Shares are subject to Danish United States, the United Kingdom, Norway, Sweden, Switzerland, taxation according to the same rules as apply to investors resi- Canada, Germany, the Benelux countries, Ireland and Greece may dent in Denmark if the income can be attributed to a permanent choose only to pay withholding tax at the rate provided in the double establishment in Denmark, including gains, losses and dividends on taxation treaty between Denmark and the country in which the shares recognised in the fixed capital of the permanent establish- relevant individual is a resident. In order to qualify for this regime, ment. an eligible holder of shares must deposit his shares with a Danish bank, and the shareholding must be registered with VP Securities. Description of Taxation of Pre-emptive Rights to Listed Shares In addition, such shareholder must provide documentation from the Existing Shareholders who receive Pre-emptive Rights may elect (i) relevant foreign tax authority as to the shareholder’s tax residence to exercise the Pre-emptive Rights received to subscribe for Offer and eligibility under the relevant treaty. Documentation must be Shares in the Bank; (ii) to sell the Pre-emptive Rights received; or given by filing a form available from the Danish Customs and Tax (iii) to let the Pre-emptive Rights lapse without exercising them. Administration. The shareholder may generally agree with his custodian bank that the bank procures such form. Taxation of Investors subject to Full Tax Liability in Denmark Individuals Individuals, Investment of Pension Savings The allocation and exercise of Pre-emptive Rights do not result in Non-resident individuals are not subject to full tax liability in Den- tax liability for the shareholders. mark and, therefore, not comprised by the Danish Pension Invest- ment Return Tax Act. Accordingly, tax shall be withheld under the Gains on the sale of Pre-emptive Rights are calculated according to general rules thereon, see above. the share-for-share method as the difference between the purchase price and the selling price. For tax purposes, the Pre-emptive Companies, etc. Rights are deemed to have been acquired at DKK 0 for shareholders Non-resident companies are not subject to taxation in Denmark on who have been allocated Pre-emptive Rights free of charge. dividends received in respect of Subsidiary or Group Shares, when taxation of the dividends must be waived or reduced under the Gains realised on the sale of Pre-emptive Rights are taxed as share provisions of the Parent/Subsidiary Directive (Directive 90/435/EEC) income. For the 2012 income year, share income is taxed at the rate or under a double taxation treaty with the Faroe Islands, Greenland of 27% for share income up to DKK 48,300 (DKK 96,600 for mar-

144 PART II – 4. Information Concerning the Offer Shares Prospectus – Spar Nord Bank ried couples cohabiting at the end of the income year) and 42% for Denmark will be taxed according to the same rules that apply to share income exceeding that amount. The said amounts include all resident shareholders. share income for the individual or couple in question. The relevant thresholds apply to the 2012 income year and are adjusted annually. Withholding Tax in Norway However, the thresholds for 2012 also apply to 2013. Under current Norwegian law, dividends on Offer Shares may be paid without any requirement for withholding any amount at source Companies, etc. for or on account of Norwegian tax. In addition, the Offer Shares The allocation and exercise of Pre-emptive Rights do not result in may be disposed of without any requirement for withholding any tax liability for the shareholders. amount at source for or on account of Norwegian tax.

Gains on the sale of Pre-emptive Rights are generally taxed ac- Withholding Tax in Sweden cording to the mark-to-market principle. For tax purposes, the Under Swedish law, dividends on the Offer Shares may generally be Pre-emptive Rights are deemed to have been acquired at DKK 0 for paid and the Offer Shares may be disposed of without any require- shareholders who have been allocated Pre-emptive Rights free of ment to withhold Swedish tax. charge. However, if a Swedish resident individual holds Offer Shares through Gains on Pre-emptive Rights are taxed at the rate of 25%, provided Euroclear Sweden AB or, with respect to nominee-registered that the underlying shares are Portfolio Shares, see above. For Sub- shares, a Swedish nominee, 30% is generally withheld on dividend sidiary Shares or Group Shares, however, no tax is payable on gains payments in addition to the Danish withholding tax, or such amount on the sale of Pre-emptive Rights. as would imply that the total withholding tax in Denmark and Sweden would amount to 30%. If an individual has shares registered Individuals with Pension Savings with a foreign nominee, other procedures may apply. The allocation and exercise of Pre-emptive Rights do not result in tax liability for the shareholder. Gains realised on the sale of Pre- Withholding Tax in Germany emptive Rights are included in the calculation of net return and will Under current German law, dividends on Offer Shares may be paid be subject to the Danish Pension Investment Returns Tax Act. Net and the Offer Shares may generally be sold without any requirement return is defined as the sum of dividends and interest received and for withholding any amount at source for or on account of German the sum of gains less any losses in the relevant year. The net return tax. is subject to tax at a rate of 15% on a mark-to-market basis. Pen- sion return tax is generally withheld by the custodian bank. In accordance with the information below, dividends and capital gains are generally subject to withholding tax at a rate of 25% plus Taxation of Investors who are Non-residents of Denmark a solidarity surcharge (Solidaritätszuschlag) of 5.5% of the 25% Individuals (26.375% in total) and church tax, in the case of individuals, if the The allocation of Pre-emptive Rights to Non-resident individuals will shares are deposited or managed in a deposit with, or if the sale of not generally result in tax liability in Denmark. Individuals resident Offer Shares is undertaken by, a German bank, a German financial outside Denmark will not generally be liable to tax in Denmark on institution, including German branches of foreign banks or financial gains on Pre-emptive Rights. If a non-resident investor is deemed institutions, a German company trading in securities or a German to be trading in shares (“næringsdrivende”), and the Pre-emptive bank trading in securities (a “German Entity”), and the capital gains Rights can be attributed to a permanent establishment in Denmark, are paid or credited by the German Entity. the Pre-emptive Rights are taxed according to the same rules that apply to resident shareholders. The tax base of withholding tax (26.375% in total) generally equals the dividends approved by the shareholders in general meeting. The exercise of the Pre-emptive Rights does not result in tax liability With respect to capital gains, the tax base equals the difference in Denmark. between the proceeds from sales (less any costs directly related to the sale of the shares) and the purchase price. Companies, etc. The allocation, exercise and sale of Pre-emptive Rights do not gen- Shareholders who have submitted a valid certificate of non-assess- erally result in tax liability in Denmark. ment (Nichtveranlagungs-Bescheinigung) issued by a competent tax authority to the German Entity may receive dividends or gains Shareholders who have received Pre-emptive Rights in respect on the sale of shares without any withholding tax. The same applies of Portfolio Shares or shares held in the ordinary course of their if a shareholder has submitted a certificate of exemption (Freistel- business (“næringsaktier”) through a permanent establishment in lungsbescheinigung).

Spar Nord Bank – Prospectus PART II – 4. Information Concerning the Offer Shares 145 5. Terms and Conditions of the Offering

5.1. terms of the Offering, Subscription Ratio and 5.2. offering and Proceeds Allocation of Pre-emptive Rights The Offering comprises up to 57,068,810 Offer Shares with a nomi- On 9 March 2012 at 12:30 p.m. CET, any person registered with VP Se- nal value of DKK 10 each. Assuming full subscription of the Offer- curities as a shareholder of the Bank will be entitled to and allocated ing, the gross proceeds from the Offering will be DKK 913.1 million one (1) Pre-emptive Right for every one (1) Existing Share held. (estimated net proceeds DKK 837.7 million).

For every one (1) Pre-emptive Right, the holder will be entitled to subscribe for one (1) Offer Share against payment of the Offer Price. 5.3. completion of the Offering

Shares traded after 6 March 2012 will be traded ex Pre-emptive Rights The Offering will only be completed if and when the Offer Shares provided that the Shares are traded with customary three-day value. subscribed for in the Offering are issued by the Bank and the capital increase is registered with the Danish Business Authority, expected The Pre-emptive Rights and the Offer Shares will be delivered in to take place not later than on 27 March 2012. book-entry form through allocation to accounts with VP Securities. The results of the Offering are expected to be announced on 27 The Pre-emptive Rights are expected to be approved for admis- March 2012. See “Part II—The Offering—Terms and Conditions of sion to trading and official listing on NASDAQ OMX to be traded on the Offering—Publication of the Results of the Offering” below. NASDAQ OMX during the period from 7 March 2012 at 9:00 a.m. CET to 20 March 2012 at 5:00 p.m. CET. 5.4. sUbscription Period The Offer Shares will be issued under a temporary ISIN code, DK0060416048, and are expected to be approved for admission to The subscription period for the Offer Shares will commence on 10 trading and official listing on NASDAQ OMX as from 7 March 2012. March 2012 at 9:00 a.m. CET and close on 23 March 2012 at 5:00 Registration of the Offer Shares with the Danish Business Author- p.m. CET, inclusive. ity will take place following completion of the Offering, expected to take place not later than on 27 March 2012, and as soon as possible See “Part II—The Offering—Terms and Conditions of the Offer- thereafter, the temporary ISIN code of the Offer Shares will be ing—Procedure for Exercise of and Dealings in Pre-emptive Rights merged with the ISIN code of the Existing Shares, DK0060036564, and Treatment of Pre-emptive Rights” below for a description of the expected to take place not later than on 29 March 2012. procedure of exercise and subscription.

Upon admission to trading and official listing of the Offer Shares, the Offer Shares will be accepted for clearance through Euroclear and Clearstream.

5.5. expected Timetable of Principal Events

Publication of Prospectus: 5 March 2012

Last day of trading in Existing Shares cum Pre-emptive Rights: 6 March 2012

First day of trading in Existing Shares ex Pre-emptive Rights: 7 March 2012

Rights Trading Period begins: 7 March 2012

Date of listing of the Offer Shares under the temporary ISIN code: 7 March 2012

Allocation Time of Pre-emptive Rights: 9 March 2012 at 12:30 p.m. CET via the computer system of VP Securities

Subscription Period for the Offer Shares begins: 10 March 2012 (the day after the Allocation Time)

Rights Trading Period closes: 20 March 2012 at 5:00 p.m. CET

Subscription Period for the Offer Shares closes: 23 March 2012 at 5:00 p.m. CET

Publication of the results of the Offering: Expectedly two Banking Days after expiry of the Subscription Period, (expectedly on 27 March 2012)

Registration of the Offer Shares with the Danish Business Authority: Expectedly on 27 March 2012

Completion of the Offering: The Offering will only be completed if and when the Offer Shares subscribed for are issued by the Bank and the capital increase is registered with the Danish Business Authority, expected to take place on 27 March 2012

Merger of ISIN codes: Expectedly on 29 March 2012

146 PART II – 5. Terms and Conditions of the Offering Prospectus – Spar Nord Bank investor’s account with VP Securities under the temporary ISIN 5.6. wIthdrawal of the Offering code DK0060416048. Holders of Pre-emptive Rights are required to adhere to the account agreement with their Danish custodian bank The Offering may be withdrawn at any time before registration of or other financial intermediary through which they hold Existing the capital increase relating to the Offer Shares with the Dan- Shares. Financial intermediaries through which a holder may hold ish Business Authority. Any such withdrawal will be notified via Pre-emptive Rights may require payment by an earlier date. NASDAQ OMX. Any Pre-emptive Rights that are not exercised during the Subscription Period will lapse with no value, and the holder of such Pre-emptive Rights will not be entitled to compensation. The 5.11. Publication of the Results of the Offering Rights Trading Period closes on 20 March 2012 at 5:00 p.m. CET, and the Subscription Period closes on 23 March 2012 at 5:00 p.m. The results of the Offering will be communicated in a company CET. If a holder of Pre-emptive Rights does not want to exercise his announcement which is expected to be released through NASDAQ Pre-emptive Rights to subscribe for Offer Shares, the Pre-emptive OMX not later than two Banking Days after the end of the Subscrip- Rights may be sold during the Rights Trading Period. tion Period (expected to be on 27 March 2012).

If the Offering is not completed, any exercise of Pre-emptive Rights that has already taken place will be cancelled automatically. The 5.12. Procedure for Exercise of and Dealings in subscription amount for the Offer Shares will be refunded (less any Pre-emptive Rights and Treatment of Pre- transaction costs) to the last registered owner of the Offer Shares emptive Rights as at the date of withdrawal. All Pre-emptive Rights will be null and void, and no Offer Shares will be issued. The Pre-emptive Rights related to the Offer Shares have been approved for and will be admitted to trading and official listing However, trades of Pre-emptive Rights executed during the Rights on NASDAQ OMX under the ISIN code DK0060415909. Holders of Trading Period will not be affected. As a result, investors who have Pre-emptive Rights wishing to subscribe for Offer Shares must do acquired Pre-emptive Rights will incur a loss corresponding to the so through their own custodian bank or other financial intermedi- purchase price of the Pre-emptive Rights and any transaction costs. ary, in accordance with the rules of such bank or intermediary. The deadline for notification of exercise depends on the holder’s agree- Trades in Offer Shares will also not be affected, and investors who ment with the relevant custodian bank or other financial intermedi- have acquired Offer Shares will receive a refund of the subscrip- ary, and may be earlier than the last day of the Subscription Period. tion amount for the Offer Shares (less any transaction costs). As a Once a holder has exercised its Pre-emptive Rights, such exercise result, investors who have acquired Offer Shares will incur a loss may not be revoked or modified. corresponding to the difference between the purchase price and the subscription price of the Offer Shares and any transaction costs. The Offer Shares will be issued under a temporary ISIN code, DK0060416048, and are expected to be approved for trading and official listing on NASDAQ OMX as from 7 March 2012. Upon exercise 5.7. reduction of Subscription of the Pre-emptive Rights and payment of the Offer Price during the Subscription Period, the Offer Shares will be allocated through VP Reduction of subscription is not applicable. Securities under a temporary ISIN code, DK0060416048, at the end of a business day.

5.8. mInimum and/or Maximum Subscription The Offer Shares may be subscribed for during the period from 10 Amount March 2012 at 9:00 a.m. CET to 23 March 2012 at 5:00 p.m. CET. Registration of the Offer Shares with the Danish Business Author- In connection with the Offering, the minimum number of Offer ity will take place following completion of the Offering, expected to Shares that a holder of Pre-emptive Rights may subscribe for will take place not later than on 27 March 2012, and as soon as possible be one (1) Offer Share, requiring the exercise of one (1) Pre-emptive thereafter, the temporary ISIN code of the Offer Shares will be Right and the payment of the Offer Price. The number of Offer merged with the ISIN code of the Existing Shares, DK0060036564, Shares that a holder of Pre-emptive Rights may subscribe for is expected to take place not later than on 29 March 2012. not capped. However, the number is limited to the number of Offer Shares that may be subscribed for through the exercise of the Pre- Any holders who exercise their Pre-emptive Right shall be deemed emptive Rights held or acquired. to have represented that they have complied with all applicable laws. Custodian banks exercising Pre-emptive Rights on behalf of beneficial holders shall be deemed to have represented that they 5.9. revocation of Subscription Orders have complied with the offering procedures set forth in this Pro- spectus. Neither the Pre-emptive Rights nor the Offer Shares have Instructions to exercise Pre-emptive Rights in connection with the been registered under the Securities Act. The Subscription Period Offering are irrevocable. closes on 23 March 2012 at 5:00 p.m. CET. Holders of Pre-emptive Rights who do not wish to exercise their Pre-emptive Rights to subscribe for Offer Shares may sell their Pre-emptive Rights during 5.10. Payment the Rights Trading Period, and the transferee may use the acquired Pre-emptive Rights to subscribe for Offer Shares. Holders wishing On exercise of the Pre-emptive Rights related to the Offer Shares, to sell their Pre-emptive Rights should instruct their custodian bank the holder is required to pay the Offer Price of DKK 16 per Offer or other financial intermediary accordingly. Upon expiry of the Sub- Share subscribed for. scription Period, the Pre-emptive Rights will lapse without value, and the holders will not be entitled to any compensation. Payment for the Offer Shares shall be made in Danish Kroner on the date of subscription, however, not later than on 23 March 2012 at 5:00 p.m. CET, against registration of the Offer Shares in the

Spar Nord Bank – Prospectus PART II – 5. Terms and Conditions of the Offering 147 The Joint Global Coordinators & Bookrunners may from time to adequacy of this Prospectus. Any representation to the contrary is a time purchase, acquire and sell Pre-emptive Rights and purchase, criminal offence in the United States. sell or subscribe for Offer Shares. Neither the Pre-emptive Rights nor the Offer Shares have been or will be registered under the Securities Act or any state securities 5.13. Jurisdictions in which the Offering will laws in the United States. Accordingly, the Pre-emptive Rights may be Made and Restrictions Applicable to the not be offered, sold, acquired or exercised in the United States, and Offering the Offer Shares may not be subscribed for, offered or sold in the United States unless they are registered under the Securities Act Where the Offering will be Made or an exemption from such registration requirements is available The Offering consists of a public offering in Denmark, Germany, under Regulation S of the Securities Act. Norway and Sweden with pre-emptive rights for the Bank’s Existing Shareholders and private placements in certain other jurisdictions. Restrictions on Offers and Sales in the European Economic Area In relation to each member state of the European Economic Area General Restrictions that has implemented the Prospectus Directive (each a “Relevant The Offering is made pursuant to Danish law. Member State”), no offering of Pre-emptive Rights or Offer Shares to the public will be made in any Relevant Member State prior to the The distribution of this Prospectus and the Offering is, in certain publication of a prospectus concerning the Pre-emptive Rights and jurisdictions, restricted by law, and this Prospectus may not be used the Offer Shares which has been approved by the competent author- for the purpose of, or in connection with, any offer or solicitation to ity in such Relevant Member State or, where relevant, approved anyone in any jurisdiction in which such offer or solicitation is not in another Relevant Member State and notified to the competent authorised, or to any person to whom it is unlawful to make such authority in such Relevant Member State, all pursuant to the offer or solicitation. This Prospectus does not constitute an offer of Prospectus Directive, except that with effect from and including the or an invitation to acquire any Pre-emptive Rights or to subscribe date of implementation of the Prospectus Directive in such Relevant for Offer Shares in any jurisdiction in which such offer or invitation Member State, an offering of Pre-emptive Rights and Offer Shares would be unlawful. Persons into whose possession this Prospec- may be made to the public at any time in such Relevant Member tus may come shall inform themselves of and observe all such State pursuant to the following exemptions from the Prospectus restrictions. Neither the Bank nor the Joint Global Coordinators Directive: & Bookrunners accept any legal responsibility for any violation by any person, whether or not a prospective purchaser of Pre-emptive (a) to any legal entity which is a qualified investor as defined in the Rights or a subscriber or acquirer of Offer Shares, of any such Prospectus Directive; restrictions. (b) to any legal entity which meets at least two or more of the This Prospectus may not be distributed or otherwise made avail- following criteria: (i) an average of at least 250 employees dur- able, and the Offer Shares may not be offered, sold or subscribed ing the last financial year; (ii) a total balance sheet of at least for, directly or indirectly, and the Pre-emptive Rights may not be EUR 43,000,000; and (iii) an annual net turnover of at least offered, sold, acquired or exercised, directly or indirectly, in the EUR 50,000,000, as shown in its latest annual or consolidated United States, Canada, Australia or Japan, unless such distribution, accounts (if the Relevant Member State has implemented the offering, sale, acquisition, exercise or subscription is permitted relevant provision of the 2010 Amending Directive, this exception under applicable laws of the relevant jurisdiction, and the Bank and is no longer valid); the Joint Global Coordinators & Bookrunners receive satisfactory documentation to that effect. The Prospectus may not be distributed (c) to fewer than 100 or, if the Relevant Member State has imple- or otherwise made available, the Offer Shares may not be offered, mented the relevant provision of the 2010 Amending Directive, sold or subscribed for, directly or indirectly, and the Pre-emptive 150, natural or legal persons (other than “qualified investors” Rights may not be offered, sold, acquired or exercised, directly or as defined in the Prospectus Directive), subject to obtaining the indirectly, in any jurisdiction other than Denmark, Germany, Norway prior written consent of the Bank and the Joint Global Coordina- and Sweden, unless such distribution, offering, sale, acquisition, tors & Bookrunners; or exercise or subscription is permitted under applicable laws of the relevant jurisdiction. The Bank and the Joint Global Coordinators & (d) in any other circumstances which do not require the publication Bookrunners may request receipt of satisfactory documentation to by the Bank of a prospectus under Article 3 of the Prospectus that effect. Directive.

Due to such restrictions under applicable laws and regulations, the For the purposes of the above, the expression an “offer of Pre-emp- Bank expects that certain investors residing in the United States, tive Rights and Offer Shares to the public” in relation to Pre-emptive Canada, Australia, Japan and other jurisdictions outside Denmark, Rights and Offer Shares in any Relevant Member State means the Germany, Norway and Sweden, may not have the Prospectus dis- communication in any form and by any means of sufficient informa- tributed to them and may not be able to exercise the Pre-emptive tion on the terms of the Offering, the Pre-emptive Rights and the Of- Rights or subscribe for the Offer Shares. The Bank makes no offer fer Shares so as to enable an investor to decide whether to acquire or solicitation to any person under any circumstances that may be the Pre-emptive Rights and acquire or subscribe for the Offer unlawful. Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Rel- Restrictions on Offers and Sales in the United States evant Member State. The expression “Prospectus Directive” means The Pre-emptive Rights and the Offer Shares have not been ap- Directive 2003/71/EC (and any amendments thereto, including the proved by the U.S. Securities and Exchange Commission, any state 2010 Amending Directive, to the extent implemented in a Relevant securities commission in the United States or any other U.S. regula- Member State), and includes any relevant implementing measure in tory authority, nor have any of such regulatory authorities passed the Relevant Member States, and the expression “2010 Amending upon or endorsed the merits of the Offering or the accuracy or Directive” means Directive 2010/73/EU.

148 PART II – 5. Terms and Conditions of the Offering Prospectus – Spar Nord Bank Restrictions in the United Kingdom subscribe for their proportionate share in the Offering to the extent This Prospectus is only being distributed to, and is only directed at such subscriptions comply with applicable laws and regulations. (i) persons outside the United Kingdom or (ii) “investment profes- sionals” falling within Article 19(5) of the Financial Promotion Order or (iii) “high net worth companies” and other Relevant Persons. 5.15. Plan of Distribution Pre-emptive Rights and Offer Shares are only available to relevant persons and any invitation, offer or agreement to subscribe for, The Offer Shares may be subscribed for by the Existing Sharehold- purchase or otherwise acquire such Pre-emptive Rights or Offer ers of the Bank according to Pre-emptive Rights allocated. Shares will be engaged in only with Relevant Persons. Any person who is not a Relevant Person should not act on or rely upon this Prospectus or any of its contents. 5.16. Over-allotment Information

Restrictions on Offers and Sales in Canada, Australia and Japan There will be no over-allotment of Offer Shares. This Prospectus may not be distributed or otherwise made available, the Offer Shares may not be offered, sold or subscribed for, directly or indirectly, and the Pre-emptive Rights may not be offered, 5.17. Subscription Price sold, acquired or exercised, directly or indirectly, in Canada, Aus- tralia or Japan, unless such distribution, offering, sale, acquisition, The Offer Shares are offered at the Offer Price of DKK 16 per Offer exercise or subscription is permitted under applicable laws of the Share (excluding fees, if any, from the investor’s own custodian bank relevant jurisdiction, and the Bank and the Joint Global Coordina- or brokers). tors & Bookrunners receive satisfactory documentation to that effect. 5.18. Price Disparity Due to such restrictions under applicable laws and regulations, the Bank expects that certain investors residing in Canada, Australia, In connection with the Offering, all Existing Shareholders will be Japan and other jurisdictions may not be able to receive this Pro- granted the right to subscribe for Offer Shares at the Offer Price spectus and may not be able to exercise the Pre-emptive Rights or of DKK16 per Offer Share, and consequently there will be no price subscribe for the Offer Shares. No offer and no solicitation to any disparity with respect to such shares. person are being made by the Bank in any jurisdiction or under any circumstances that would be unlawful. 5.19. Payment Intermediaries

5.14. Intentions of the Major Shareholders, Board Euroclear Bank S.A./N.V. of Directors or Executive Board of the Bank 1 Boulevard du Roi Albert II to Participate in the Offering B-1210 Brussels Belgium A group of Existing Shareholders, consisting of the Spar Nord Foundation, Nykredit Realkredit A/S and Finanssektorens Pension- Clearstream Banking S A skasse (the “Group of Shareholders”), have made binding advance 42 Avenue JF Kennedy undertakings, subject to the satisfaction of certain conditions, to L-1855 Luxembourg exercise Pre-emptive Rights corresponding to the subscription of Luxembourg an aggregate of 7,161,020 Offer Shares, corresponding to total gross proceeds of DKK 114.6 million. The Spar Nord Foundation’s proportion thereof represents 1,875,000 Offer Shares, corresponding to a 5.20. Placement subscription amount of approximately DKK 30.0 million, Nykredit Realkredit A/S’ proportion represents 4,380,000 Offer Shares, corre- Carnegie and Danske Bank act as the Joint Global Coordinators & sponding to a subscription amount of approximately DKK 70.1 mil- Bookrunners. lion, and Finanssektorens Pensionskasse’s proportion represents 906,020 Offer Shares, corresponding to a subscription amount of approximately DKK 14.5 million. Thus, Nykredit Realkredit A/S and 5.21. Underwriting Agreement Finanssektorens Pensionskasse have made binding undertakings to exercise all Pre-emptive Rights allocated to them, whereas the Spar On 5 March 2012, in connection with the Offering, the Bank signed Nord Foundation’s subscription amount corresponds to approxi- an underwriting agreement with the Joint Global Coordinators & mately 50% of its available funds. In addition to the undertakings Bookrunners, which has been accepted by Carnegie Investment referred to above, the Spar Nord Foundation has, subject to certain Bank AB (the “Underwriting Agreement”). Subject to the satisfac- conditions, made an undertaking to subscribe for Offer Shares on tion of certain conditions in the Underwriting Agreement, Carnegie a cash-neutral basis (after transaction costs) of the remaining part Investment Bank AB and Danske Bank have severally but not jointly of the Pre-emptive Rights allocated to the Spar Nord Foundation by undertaken to ensure the subscription for such number of Offer subscribing for the maximum number of Offer Shares that the Spar Shares as would correspond to the difference between (i) the num- Nord Foundation can finance through the sale of Pre-emptive Rights ber of Offer Shares subscribed for by exercise of Pre-emptive Rights alone. Such Pre-emptive Rights will, during the Rights Trading and (ii) the total number of Offer Shares. The Underwriting Agree- Period, be sold by the Joint Global Coordinators & Bookrunners on ment is subject to, among other conditions, the Group of Sharehold- behalf of the Spar Nord Foundation in open market transactions, ers having subscribed for Offer Shares on the basis of Pre-emptive privately negotiated transactions, block trades or otherwise. Rights allocated as assumed under their binding advance undertakings as described in “Part II—Terms and Conditions of the Offer- The Board of Directors and the Executive Board have informed the ing—Advance Undertakings and Underwriting Commitment”. The Bank that they will exercise their respective Pre-emptive Rights to Underwriting Agreement is further subject to the condition that certain Existing Shareholders and other institutional and private inves-

Spar Nord Bank – Prospectus PART II – 5. Terms and Conditions of the Offering 149 tors who have made binding agreements with Carnegie Investment Underwriting Agreement is subject to the condition that the Group Bank AB and Danske Bank A/S to acquire from Carnegie Investment of Shareholders (as defined below) exercises Pre-emptive Rights Bank AB and Danske Bank A/S additional Offer Shares at the Offer under agreements on binding advance undertakings. Price not having withdrawn their undertakings as described in “Part II—Terms and Conditions of the Offering—Advance Undertakings A group of Existing Shareholders, consisting of the Spar Nord and Underwriting Commitment”. Foundation, Nykredit Realkredit A/S and Finanssektorens Pensions kasse (the “Group of Shareholders”), have made binding advance Under the Underwriting Agreement, the Bank has given certain undertakings, subject to the satisfaction of certain conditions, to customary representations and warranties to the Joint Global Co- exercise Pre-emptive Rights corresponding to the subscription ordinators & Bookrunners and Carnegie Investment Bank AB and of an aggregate of 7,161,020 Offer Shares, corresponding to total has also undertaken to indemnify the Joint Global Coordinators & gross proceeds of DKK 114.6 million. The Spar Nord Foundation’s Bookrunners and Carnegie Investment Bank AB for certain liability proportion thereof represents 1,875,000 Offer Shares, correspond- obligations related to the Offering, including liabilities under ap- ing to a subscription amount of approximately DKK 30.0 million, plicable securities laws. Nykredit Realkredit A/S’ proportion represents 4,380,000 Offer Shares, corresponding to a subscription amount of approximately Under the Underwriting Agreement, the Joint Global Coordinators DKK 70.1 million, and Finanssektorens Pensionskasse’s proportion & Bookrunners may, at any time prior to registration of the capital represents 906,020 Offer Shares, corresponding to a subscription increase relating to the Offer Shares with the Danish Business Au- amount of approximately DKK 14.5 million. Accordingly, Nykredit thority, require that the Bank withdraw the Offering upon termina- Realkredit A/S and Finanssektorens Pensionskasse have made tion of the Underwriting Agreement. The Joint Global Coordinators binding advance undertakings to exercise all Pre-emptive Rights & Bookrunners may terminate the Underwriting Agreement if any of allocated to them. In addition to the undertakings referred to above, the closing conditions are not met or if certain unexpected circum- the Spar Nord Foundation has, subject to certain conditions, made stances such as force majeure occur. Furthermore, the Underwrit- an undertaking to subscribe for Offer Shares on a cash-neutral ba- ing Agreement contains closing conditions which the Bank believes sis (after transaction costs) of the remaining part of the Pre-emptive are customary for offerings such as the Offering and the closing Rights allocated to the Spar Nord Foundation by subscribing for the of the Offering is dependent on compliance with all of the closing maximum number of Offer Shares that the Spar Nord Foundation conditions set forth in the Underwriting Agreement. can finance through the sale of Pre-emptive Rights alone. Such Pre- emptive Rights will, during the Rights Trading Period, be sold by Carnegie Investment Bank AB guarantees 20.2% of the Offering, the Joint Global Coordinators & Bookrunners on behalf of the Spar corresponding to DKK 184.9 million, and Danske Bank A/S guaran- Nord Foundation in open market transactions, privately negotiated tees 79.8% of the Offering, corresponding to DKK 728.2 million. transactions, block trades or otherwise.

Furthermore, a number of Existing Shareholders, Nykredit Re- 5.22. Advance Undertakings and Underwriting alkredit A/S, Finanssektorens Pensionskasse and other institu- Commitment tional and private investors, including Fondsmæglerselskabet Maj Invest A/S, Skandinaviska Enskilda Banken A/S and SmallCap As described in “Part II—The Offering—Terms and Conditions of Danmark A/S, have made binding agreements with Carnegie Invest- the Offering—Underwriting Agreement”, the Offering is underwrit- ment Bank AB and Danske Bank A/S to acquire from Carnegie ten. Subject to the satisfaction of certain conditions set forth in the Investment Bank AB and Danske Bank A/S an additional 44,296,875 Underwriting Agreement (as defined), any Offer Shares which have Offer Shares at the Offer Price, corresponding to an amount of ap- not been subscribed for by holders of Pre-emptive Rights will be proximately DKK 708.8 million, if and to the extent the Offer Shares subscribed for by Carnegie Investment Bank AB and Danske Bank are not subscribed for by holders of Pre-emptive Rights. A/S, and, subject to the satisfaction of certain conditions, the Bank has thus been guaranteed the subscription of a total of 57,068,810 Thus Carnegie Investment Bank AB and Danske Bank A/S have Offer Shares corresponding to the total gross proceeds of DKK 913.1 received binding advance undertakings and binding agreements to million in connection with the Offering. Carnegie Investment Bank acquire Offer Shares at the Offer Price for an amount corresponding AB and Danske Bank A/S are not jointly and severally liable. The to DKK 823.3 million in aggregate.

150 PART II – 5. Terms and Conditions of the Offering Prospectus – Spar Nord Bank 6. Admission to Trading and Official Listing

The Bank’s Existing Shares have been admitted to trading and of- merged with the ISIN code of the Existing Shares expected to take ficial listing on NASDAQ OMX under the ISIN code DK0060036564. place not later than on 29 March 2012. Until such merger has been completed, the liquidity of the Offer Shares under the temporary In connection with the Offering, the Pre-emptive Rights are ex- ISIN code may be substantially different from the liquidity of the pected to be approved for admission to trading and official listing on Existing Shares. NASDAQ OMX to be traded on NASDAQ OMX during the period from 7 March 2012 to 20 March 2012. 6.1. market Making Agreement The Offer Shares will be issued under a temporary ISIN code and are expected to be approved for admission to trading and official The Group has not entered into any market making agreement. listing on NASDAQ OMX as from 7 March 2012.

Registration of the Offer Shares with the Danish Business Author- 6.2. stabilisation and Short Positions ity will take place following completion of the Offering, expected to take place not later than on 27 March 2012, and as soon as possible No stabilisation measures will be taken in connection with the Of- thereafter, the temporary ISIN code of the Offer Shares will be fering.

Spar Nord Bank – Prospectus PART II – 6. Admission to Trading and Official Listing 151 7. Selling Shareholders and Lock-up Agreements

fer or dispose of any Shares or other shares of the Bank, or any se- 7.1. shareholders that have Indicated that They curities convertible into or exercisable or exchangeable for Shares Expect to Sell Their Shares or Pre-emptive or other shares of the Bank, or file any prospectus or any similar Rights document with any securities regulator, stock exchange or listing authority or file any registration statement under the Securities Act The Bank has received an indication from the Spar Nord Founda- with respect to any of the foregoing, or (B) enter into any swap or tion with respect to subscription in respect of Pre-emptive Rights any other agreement or any transaction that transfers, in whole or allocated of approximately DKK 30.0 million, corresponding to in part, directly or indirectly, the economic implication of ownership approximately half of the foundation’s available funds, as well as of any Shares or other securities in the Bank, whether or not any subscription on a cash-neutral basis in respect of Pre-emptive such transaction described in clause (A) or (B) above is to be settled Rights allocated in excess thereof. by delivery of Shares or other securities, in cash or otherwise or (C) publicly announce such an intention to effect any such transaction.

7.2. lock-up Agreements in connection with the The foregoing restrictions do not apply to (1) the subscription or sale Offering of the Offer Shares in the Offering, (2) the grant or exercise of share options or other rights to acquire Shares or rights related to Shares The Bank has agreed that, during a period from the date of the as well as the issuance of Shares under the Bank’s employees Underwriting Agreement up to and including 180 days after the share and incentive schemes and related hedging arrangements, (3) completion of the Offering, it will ensure that neither the Bank nor market making, hedging, brokerage and asset management activi- any person acting on its behalf will, without the written consent of ties in the ordinary course of trading and brokering, (4) hedging by the Joint Global Coordinators & Bookrunners (which consent shall the Bank of its exposures under existing and new employee option not be unreasonably withheld or delayed), (A) directly or indirectly, or long-term incentive programmes, (5) the issuance of Shares issue, offer, pledge, sell, contract to sell, sell or grant any option, required by (i) the DFSA and (ii) pursuant to terms and conditions right, warrant or contract to purchase, exercise any option to sell, applying to the convertible loans as described in the Articles of As- purchase any option or contract to sell, or lend or otherwise trans- sociation of the Bank, (6) Shares traded on behalf of customers.

152 PART II – 7. Selling Shareholders and Lock-up Agreements Prospectus – Spar Nord Bank 8. Net Proceeds and Total Costs

The gross proceeds from the Offering will be approximately DKK The estimated costs payable by the Bank in connection with the 913.1 million (estimated net proceeds of DKK 837.7 million, if the Offering, assuming subscription of the maximum number of Offer maximum number of Offer Shares (57,068,810 Offer Shares) is sub- Shares (57,068,810 Offer Shares), are DKK 75.4 million. scribed for. The estimated net proceeds equal the gross proceeds less the estimated costs payable by the Bank in connection with the This amount includes subscription commission to custodian banks Offering as set out below. of 0.25%.

Spar Nord Bank – Prospectus PART II – 8. Net Proceeds and Total Costs 153 9. Dilution

The Bank’s share capital will be increased as a result of the Offer- Equity per Existing Share is determined by dividing shareholders’ ing. equity by the total number of Existing Shares. After giving effect to the issue of the maximum number of Offer Shares (57,068,810 Offer If an Existing Shareholder exercises its Pre-emptive Rights in full in Shares) at DKK 16 per Offer Share, and deducting commissions and connection with the Offering, such shareholder’s proportionate own- estimated expenses, the pro forma equity value as at 31 December ership interest will not be further diluted. If the Pre-emptive Rights 2011 would have been approximately DKK 5,465.0 million or DKK are not exercised, the Existing Shareholder’s ownership interest will 47.44 per Share. This represents an immediate reduction in equity be diluted by 50%. value per Share of DKK 33.20, corresponding to dilution of 40.95% for the Bank’s shareholders, and an immediate dilution in adjusted As at 31 December 2011, the shareholders’ equity of the Bank equity per Share of DKK 31.88, corresponding to dilution of 199.26% amounted to DKK 4,627.3 million, or DKK 81.08 per Existing Share. for subscribers of the Offer Shares.

Table 101 – Per Share dilution if Existing Shareholders do not exercise their Pre-emptive Rights in connection with the Offering

Offer Price per Share, DKK 16 Equity per Share on 31 December 2011, DKK 81.08 Reduction in equity value per Share attributable to new investors, DKK 33.20 Equity per Share after the Offering, DKK 47.88 Dilution per Share for new investors, DKK (dilution is calculated as the Offer Price per Offer Share less equity per Share after the Offering) 31.88 Dilution in per cent 199.26

154 PART II – 9. Dilution Prospectus – Spar Nord Bank 10. Additional Information

10.1. Advisers

Joint Global Coordinators & Bookrunners Carnegie Bank A/S Overgaden neden Vandet 9B DK-1414 Copenhagen K Denmark

Danske Bank A/S Holmens Kanal 2-12 DK-1092 Copenhagen K Denmark

Legal adviser to the Bank in connection with the Offering Accura Advokatpartnerselskab Tuborg Boulevard 1 DK-2900 Hellerup Denmark

Legal adviser to the Joint Global Coordinators & Bookrunners in connection with the Offering Kromann Reumert Sundkrogsgade 5 DK-2100 Copenhagen Ø Denmark

Auditors The Bank’s independent auditors are:

KPMG Statsautoriseret Revisionspartnerselskab Oswald Helmuths Vej 4 DK-2000 Frederiksberg Denmark

10.2. Availability of the Prospectus

Requests for copies of the Prospectus may be made to:

Carnegie Bank A/S Overgaden neden Vandet 9B DK-1414 Copenhagen K Denmark Tel.: +45 32 88 02 00 E-mail: [email protected]

Danske Bank A/S Corporate Actions Holmens Kanal 2-12 DK-1092 Copenhagen K Denmark Tel.: +45 70 13 42 00 E-mail: [email protected]

The distribution of this Prospectus and the offering of the Pre-emptive Rights and the Offer Shares are, in certain jurisdictions, restricted by law. This Prospectus does not constitute an offer to sell or an invitation to subscribe for or purchase any of the Pre-emptive Rights or the Offer Shares in any jurisdiction in which such offer or invitation is not authorised, or to any person to whom it is unlawful to make such an offer or invitation. Persons into whose possession this Prospectus may come are required to inform themselves about and to observe such restrictions.

Spar Nord Bank – Prospectus PART II – 10. Additional Information 155 Appendix 1

Articles of Association of Spar Nord Bank A/S (3). The Board of Directors shall be authorized to increase the Com- Name, registered office and objects of the Company pany’s share capital in the period ending on 30 April 2013 by a maxi- Article 1 mum of nominally DKK 856,032,150 in new shares issued to named (1). holders by way of one or more issues. Such shares shall rank pari The company’s name is Spar Nord Bank A/S (“the Company”). passu with existing shares. The increase in the Company’s share The Company also carries on business under the ancillary names capital can be made by way of cash contribution or otherwise. stated in Annex 1 to the Articles of Association. The increase in the Company’s share capital shall be made without pre-emptive rights for the Company’s shareholders. Such an in- (2). crease must be subscribed at the market price. The Company’s registered office is located in the Municipality of Aalborg. (4). The new shares subscribed for pursuant to the authorization in (3). Article 3(1) shall be negotiable instruments, shall be issued to The object for which the Company is established is to carry on bank- named holders and shall rank for dividends and any other rights in ing pursuant to section 7(1) and (2) of the Danish Act on Financial the Company as from such time as is determined by the Board of Operations. Directors in its decision regarding the capital increase.

(4). (5). The Company’s Register of Shareholders shall be kept by Comput- Pursuant to the authorizations in Articles 3(1) and 3(3) above, the ershare A/S, CVR no. 27088899. Board of Directors may not increase the Company’s share capital by more than a total of nominally DKK 856,032,150. Capital and shares Article 2 Article 3a (1). (1). The Company’s share capital amounts to DKK 570,688,100, divided The Board of Directors shall be authorized to increase the Com- into shares in the denomination of DKK 10. The share capital has pany’s share capital in the period ending on 11 August 2014 by a been paid up in full. maximum of DKK 1,265,000,000 by way of one or more issues. The new shares, which shall be issued to named holders, shall rank pari (2). passu with existing shares. The shares are issued to named holders and may, upon the appro- The increase of the Company’s capital shall take place without a priate shareholder’s request, be inscribed as such in the inscription pre-emptive right for the Company’s existing shareholders, mean- system kept by VP Securities A/S and in the Company’s Register of ing that any new shares will be offered at the prevailing market Shareholders. price, however not less than DKK 10.50 per share of DKK 10. The increase can take place by conversion of debt in the form of hybrid The shares cannot be transferred to bearer. The shares are nego- core capital. To the extent that conversion is effected pursuant to tiable instruments. The acquirer of a share cannot exercise rights Article 3 b, the authorized maximum shall be reduced by a cor- embodied in the share certificate unless it has been recorded in the responding amount. name of the person in question in the Register of Shareholders, or unless the acquirer has given substantiated notification in writing (2). to the Company of his acquisition. But this provision shall affect The new shares subscribed for pursuant to the authorization in neither the right to dividend and other disbursements nor the right Article 3 a (1) shall be negotiable instruments, shall be issued to to new shares in the event of an increase of the share capital. named holders and shall rank for dividends and any other rights in the Company as from such time as is determined by the Board of (3). Directors in the decision regarding the capital increase. The shares shall be freely transferable instruments. No shareholder shall be obligated to let the Company or any third party redeem his Article 3b shares, whether in whole or in part. (1). Pursuant to the authorization adopted at the Company’s Annual Article 3 General Meeting on 29 April 2009, the Company raised a loan in (1). the amount of DKK 1,265,000,000 by way of hybrid core capital on The Board of Directors shall be authorized to increase the Com- 30 June 2009 without a pre-emptive right for the Bank’s existing pany’s share capital in the period ending on 30 April 2013 by a maxi- shareholders, see Danish Act no. 67 of 3 February 2009 regarding mum of nominally DKK 856,032,150 in new shares issued to named contributions to credit institutions, in return for a bond offering at a holders by way of one or more issues. Such shares shall rank pari price of DKK 0.01 per bond. The loan was raised at par. passu with existing shares. The increase in the Company’s share The terms of the loan were specified in a separate agreement, see capital must be made by way of cash contribution. the annex to the Articles of Association (Annex 3). The increase in the Company’s share capital shall be made with pre-emptive rights for the Company’s shareholders. Such an in- (2). crease may be subscribed at a discount to the market price. At the Company’s Extraordinary General Meeting on 12 August 2009, a decision was made to the effect that the bonds may be converted (2). into Spar Nord Bank shares at the market price prevailing at the The new shares subscribed for pursuant to the authorization in time of conversion, calculated in accordance with the terms of the Article 3(1) shall be negotiable instruments, shall be issued to loan. named holders and shall rank for dividends and any other rights in the Company as from such time as is determined by the Board of Directors in its decision regarding the capital increase.

156 Appendix 1 Prospectus – Spar Nord Bank (3). Shareholder regions The bond loan will be a subordinated bullet loan with no maturity Article 5 date according to more specific rules laid down in the Danish Finan- (1). cial Business Act (hybrid core capital). The interest rate payable per The Company’s operational area is divided into shareholder regions. annum on the loan will be fixed as the sum of The division details appear from Annex 2, which constitutes an 1) a reference rate by way of the Danish Government’s five-year integral part of the Articles of Association. zero-coupon rate on the last trading day before the conclusion of A decision to combine shareholder regions shall be made by the the loan agreement; shareholders in general meeting pursuant to the provisions on 2) with addition of 6.375 percentage points; alteration of the Articles of Association laid down in Article 14(2). 3) with addition of 0.1 percentage point; and But a decision to combine shareholder regions can be made by the 4) with addition of 0.4 percentage points, Company’s Board of Directors if the Bank Committees in question the latter however only during a period ending on 12 August 2014. In so agree. addition, the interest rate may be raised in proportion to future dividend payments according to conditions specified in the terms of the (2). loan. The convertible bonds may be redeemed by the Company five In connection with the acquisition of shares through one of the years after the loan was raised pursuant to more specific conditions branches of Spar Nord Bank, a shareholder may choose to be laid down in the terms of the loan. The convertible bonds fall due for registered as a shareholder in any shareholder region. If he does redemption in the event of the Company’s bankruptcy. not specify any region, or if the acquisition takes place through The convertible bonds have been issued as bearer instruments and another bank, for example, then the shareholder will be registered as dematerialized securities recorded in the inscription system kept as belonging to the shareholder region which – according to Annex by VP Securities A/S. No restrictions apply to the transferability of 2 to the Articles of Association – includes the address or postal code the convertible bonds. initially reported through VP Securities A/S to the Company as the shareholder’s address or business address. (4). If the Company’s hybrid core capital amounts to more than 35% of A shareholder can only be registered in one shareholder region, the core capital, including hybrid core capital, see the Danish Finan- but may request in writing to be transferred to another shareholder cial Business Act, the loan or parts thereof may be converted into region. shares until 12 August 2014 as stated in the terms of the loan. If the hybrid core capital amounts to more than 50% of the core capital, (3). including hybrid core capital, the loan will be converted into share A shareholder with permanent residence or business address capital up to the same date, until the hybrid core capital amounts to abroad is included in the Copenhagen shareholder region, unless less than 35% of the core capital, including hybrid core capital. the relevant shareholder has chosen another region.

(5). Bank Committees In the event of a capital increase, capital reduction, the issuing of Article 6 warrants, the issuing of new convertible instruments of debt or (1). dissolution, including merger and demerger, before conversion has The shareholders shall elect a Bank Committee in each shareholder taken place, the procedure stated in the terms of the loan will be region. Such Bank Committee shall have eight members. followed. Members of a Bank Committee shall be elected for a term of two The highest amount by which the share capital can be increased in years at a time, and half of them shall be eligible for re-election connection with a conversion is DKK 1,265,000,000, and the mini- each year. mum amount will be DKK 50,000,000. The Board of Directors is authorized to make the alterations to the The election shall be held before 15 April, but no later than two Articles of Association that are necessary in connection with the weeks before the Annual General Meeting of the Company, and the conversion. electoral term shall commence as from the time of election. Retir- ing members shall be eligible for re-election. To the extent that dividend is paid on the Company’s shares, see Danish Act no. 1003 of 10 October 2008 regarding financial stability When combining the Company’s shareholder regions, all Bank and Danish Act no. 67 of 3 February 2009 regarding governmental Committee members from the combined shareholder regions shall capital contributions to credit institutions, the new shares will rank run for re-election at the next Shareholders’ Meeting. The Compa- pari passu with the Company’s other shares as from the registration ny’s internal auditors draw lots to determine which members of the of the capital increase. Bank Committee shall be up for re-election the following year. All other rights shall become effective as from the same time. The shares shall be subject to the same rules regarding pre-emptive (2). rights as the existing shares and shall rank pari passu with the The object of the Bank Committees shall be to promote the activi- Bank’s other shares with respect to rights, redeemability and trans- ties of Spar Nord Bank in the shareholder region and exercise the ferability. voting rights as delegates for the shareholders at the Company’s General Meetings. Article 4 The more specific rules and regulations governing the function of The Board of Directors shall be authorized to permit the Com- the Bank Committees appear from the Rules of Procedure for Bank pany to receive capital contributions, which may be included when Committees laid down by the Board of Directors. calculating the Company’s capital base, subject to observance of the relevant conditions therefor laid down in the legislation from time applicable.

Spar Nord Bank – Prospectus Appendix 1 157 Article 7 The major shareholders mentioned in Article 9(1) shall not be enti- (1). tled to vote at Shareholders’ Meetings. The following shareholders are eligible to the Bank Committee: shareholders in propria persona who are of age and have full legal (5). capacity, and who can prove that they have been registered prior to Voting for election of members of a Bank Committee can take place 1 January immediately before the relevant Shareholders’ Meeting, at Shareholders’ Meetings by letter or by electronic voting. In other or who have requested that their shares be registered as belonging respects, voting shall take place according to electoral rules laid to the shareholder region in question, or who still own shares in the down by the Board of Directors. Company registered in the relevant shareholder region as of the date when the pertinent Shareholders’ Meeting is convened. Major shareholders Article 9 The major shareholders mentioned in Article 9(1) and employees (1). in the Company or its subsidiaries cannot be elected to the Bank A shareholder who owns at least 20,000 shares (a major sharehold- Committee. er) on the cut-off date one week before the General Meeting shall be entitled to exercise his voting rights at the General Meeting. (2). The shareholders in the region may nominate candidates to General Meetings the Bank Committee. Proposals for nomination shall reach the Article 10 Company by 15 January. If 15 January is a Saturday or a Sunday, (1). the deadline will be postponed to the following Monday. The list of The shareholders at the General Meeting have supreme authority in candidates will be published at the same time as the Shareholders’ all Company affairs within the limits laid down by these Articles of Meeting is convened. Association.

(3). (2). A member of a Bank Committee whose shares are no longer regis- General Meetings shall be convened by the Board of Directors send- tered in the appropriate region, or who is divested of the manage- ing written notice to the members of the Bank Committees and the ment of his estate, shall retire from the Bank Committee. shareholders recorded in the Register of Shareholders who have so requested. (4). In addition, the convening notice shall be announced on the Com- If a member of a Bank Committee retires during his term of office, a pany’s website. new member shall be elected at the next Shareholders’ Meeting. (3). Shareholders’ Meetings Annual General Meetings shall be convened no sooner than five Article 8 weeks nor later than three weeks in advance, and the convening (1). notice shall contain the agenda of the Meeting. If any proposals Shareholders in each shareholder region shall be convened for a are to be considered, the adoption of which is subject to a qualified Shareholders’ Meeting to be held before 1 April and no later than majority, the essentials of such proposal shall moreover be stated in three weeks before the Annual General Meeting of the Company. the convening notice. The Shareholders’ Meeting can be held over a period of several days. In the event that statutory provisions so require, the convening Common Shareholders’ Meetings may be held for several share- notice shall contain the complete text of the proposal and be sent to holder regions. each shareholder of record.

(2). (4). Shareholders’ Meetings shall be convened with not less than 14 The right of shareholders to exercise their voting rights at a General days’ notice by an advertisement inserted in one or more of the Meeting shall be exercised through the delegates. newspapers published in the region and by notifying the share- But this shall not apply to the shareholders referred to in Article 9 holders entitled to vote; see clause (4). Meetings may be convened (1). electronically according to more specific agreement with the shareholder. (5). Against presentation of an admission card, any shareholder who has The Board of Directors may resolve that shareholders must obtain been recorded as of the cut-off date one week before the General admission cards in order to attend the Shareholders’ Meetings. Meeting or as of that date has requested that his shares be registered in the Register of Shareholders shall be entitled to attend a (3). General Meeting – either in person or represented by a proxy – and At the Shareholders’ Meeting, a report shall be given on the Compa- to address the Meeting. ny’s activities, with special emphasis on development in the region. In addition, the election of members of the Bank Committee shall (6). be held. At the same time, the elected members shall be deemed Admission cards are available on request by shareholders com- elected as delegates to the Annual General Meeting. prised by Article 10(5) at the Company’s offices or at any other place specified in the convening notice until three days before the General (4). Meeting. Shareholders who can prove that they are listed as belonging to the shareholder region in question as of the date when the Sharehold- ers’ Meeting is convened are entitled to vote at the Shareholders’ Meeting.

158 Appendix 1 Prospectus – Spar Nord Bank (7). (2). The instrument of proxy shall be dated and shall be produced upon Minutes shall be taken of the proceedings and the decisions made obtaining an admission card. at the General Meeting, such minutes to be signed by the Chairman Instruments of proxy issued to the Company’s Board of Directors of the Meeting. shall be in writing and dated not more than 12 months before the relevant General Meeting, and may only be issued for one specific No later than two weeks after the General Meeting, a transcript of General Meeting. the minutes of the General Meeting and of the voting results shall be available at the Company’s website, www.sparnord.dk. (8). No later than three weeks before the General Meeting, the follow- Article 14 ing information shall be available at the Company’s website, www. (1). sparnord.dk: All business transacted at the General Meeting shall be decided by 1. The convening notice a simple, relative majority of votes, unless the Danish legislation or 2. The total number of shares and voting rights as of the date of these Articles of Association provide otherwise. convening the General Meeting 3. The documents to be produced at the General Meeting, including (2). the audited annual report A resolution to alter the Articles of Association or to dissolve the 4. The agenda and the complete proposals Company is subject to the proposal being adopted by 2/3 of the 5. Forms to be used for voting by proxy and by letter. votes cast as well as of the voting stock represented at the General Meeting. In calculating the voting stock, shares that are not regis- Article 11 tered in the name of the holder or shares regarding which a request for registration in the name of the holder has not been made shall Extraordinary General Meetings shall be held whenever the holding not be included. of such a meeting is requested by either the shareholders in Gen- eral Meeting, by the Board of Directors or by any one of the auditors. (3). An Extraordinary General Meeting shall also be held for the purpose Ballot cards with printed information about the number of votes of transacting specified business when shareholders representing shall be used in the election of members to the Board of Directors. in the aggregate not less than 5% of the Company’s total share capi- The number of delegates desired to be elected shall be entered tal request the holding of such a meeting. Such an Extraordinary on the ballot cards. A ballot card is valid if it does not contain the General Meeting shall be convened no later than two weeks after names of more candidates than the number to be elected at the the receipt of the appropriate request. relevant General Meeting.

Article 12 Article 15 (1). (1). Annual General Meetings shall be held in every year before the end Delegates who are also members of the Bank Committee represent of April. the share capital that has been registered as belonging to the relevant shareholder region as of the cut-off date one week before the (2). relevant General Meeting. Each delegate represents equal fractions The agenda of the Annual General Meeting shall include the follow- of the share capital, calculated based on the number of delegates ing business: immediately prior to the General Meeting. 1. Election of the Chairman of the Meeting. 2. The Board of Directors’s report regarding the Company’s activi- (2). ties during the past year. A major shareholder, see Article 9(1), represents the share capital 3. The presentation of the audited financial statements and the that has been registered as of the cut-off date one week before the consolidated financial statements, together with a resolution for General Meeting, or regarding which a request for registration has their adoption. been made as of the same date. 4. A resolution regarding the application of the profits or the covering of any loss according to the financial statements as adopted. (3). 5. A resolution to empower the Board of Directors to buy treasury In order to be entitled to vote at the General Meeting, a delegate or shares. the major shareholder shall have requested an admission card no 6. Election of members to the Board of Directors. later than three days before a General Meeting. 7. Appointment of auditors. 8. Any proposals from the Board of Directors or shareholders. (4). 9. Any other business. Voting may be made by proxy.

(3). (5). Any shareholder shall be entitled to have specific business trans- A delegate may only issue a proxy to another Bank Committee acted at the Annual General Meeting if he submits a requisition in member from the same region. The instrument of proxy, which shall writing to the Board of Directors no later than six weeks before the be dated, is only valid for one General Meeting. No Bank Committee Annual General Meeting in the year in question. member can represent more than two delegates by proxy.

Article 13 (6). (1). It is possible to vote electronically or by letter prior to the General The shareholders at the General Meeting shall elect a Chairman to Meeting. The ballot paper to be used for this purpose can be down- officiate at the General Meeting and decide all questions regarding loaded from the Company’s website. the transaction of business, the voting and the result thereof.

Spar Nord Bank – Prospectus Appendix 1 159 The Board of Directors Incentive pay Article 16 Article 19 (1). The Board of Directors shall be composed of not less than four nor General guidelines have been prepared for the Company’s incentive more than six members elected by the shareholders at the General pay scheme for members of the Board of Directors and the Execu- Meeting and members elected by the employees pursuant to section tive Board. These guidelines have been adopted by the shareholders 49 of the Danish Companies Act. at the Company’s Annual General Meeting and have been published on the Company’s website. (2). The members of the Board of Directors shall be elected for a term Powers to bind the Company of two years at a time. Article 20 (1). (3). The members of the Board of Directors and the Executive Board Members of the Board of Directors shall retire no later than four represent the Company in all external affairs. months after the end of the year in which they attain the age of 70. (2). (4). The Company shall be bound in legal transactions by the joint A member of the Board of Directors who is divested of the manage- signatures of the Chairman or the Deputy Chairman of the Board of ment of his estate or who no longer complies with the requirements Directors and any one member of the Board of Directors, or by the of the Danish Financial Supervisory Authority regarding his aptitude joint signatures of any one member of the Executive Board and any and integrity shall retire from the Board of Directors. one member of the Board of Directors.

(5). Financial year Any vacancy occurring in the Board of Directors may be filled by the Article 21 election of a new member at the next General Meeting. A Director elected to fill a vacancy shall be elected for the unexpired term of The Company’s financial year shall coincide with the calendar year. his predecessor in office. Audit Article 17 Article 22 (1). The Board of Directors shall elect a Chairman and a Deputy Chair- One or two auditors elected by the shareholders in General Meeting man from among their number and shall lay down rules of proce- shall audit the Company’s financial statements. The auditors thus dure governing the discharge of their duties. elected shall serve for a term of one year at a time.

(2). The members of the Board of Directors shall receive a fee approved Aalborg, 1 March by the shareholders at the Annual General Meeting.

The Executive Board Article 18 Torben Fristrup Hans Østergaard Per Nikolaj Bukh

The Board of Directors shall appoint an Executive Board composed of from one to five members to be in charge of day-to-day management of company affairs. The terms of employment of the Executive Jannie Skovsen Ole Skov Jan Høholt Jensen Board shall be laid down in agreement between the Executive Board and the Board of Directors.

Carsten Normann Niels Kristian Kirketerp

160 Appendix 1 Prospectus – Spar Nord Bank Annex 1

The company’s name is Spar Nord Bank A/S (“the Company”).

The Company also carries on operations under the names of SBN Bank A/S (Spar Nord Bank A/S), Sparbank Nord A/S (Spar Nord Bank A/S), Telefonbanken A/S (Spar Nord Bank A/S), Spar Nordjyl- land Bank A/S (Spar Nord Bank A/S), Spar Nordjylland Bankaktie- selskab A/S (Spar Nord Bank A/S), Sparekassen Nordjylland A/S (Spar Nord Bank A/S), Spar Nord Bankaktieselskab A/S (Spar Nord Bank A/S), Aars Bank A/S (Spar Nord Bank A/S). Lokalbank Aabybro A/S (Spar Nord Bank A/S), Lokalbank Aalborg A/S (Spar Nord Bank A/S), Lokalbank Aars A/S (Spar Nord Bank A/S), Lokalbank Brønderslev A/S (Spar Nord Bank A/S), Lokalbank Danmark A/S (Spar Nord Bank A/S), Lokalbank Esbjerg A/S (Spar Nord Bank A/S), Lokalbank Fredericia A/S (Spar Nord Bank A/S), Lokalbank Frederikshavn A/S (Spar Nord Bank A/S), Lokalbank Fåborg A/S (Spar Nord Bank A/S), Lokalbank Grenaa A/S (Spar Nord Bank A/S), Lokalbank Haderslev A/S (Spar Nord Bank A/S), Lokalbank Had- sund A/S (Spar Nord Bank A/S), Lokalbank Hasseris A/S (Spar Nord Bank A/S), Lokalbank Herning A/S (Spar Nord Bank A/S), Lokalbank Hirtshals A/S (Spar Nord Bank A/S), Lokalbank Hjallerup A/S (Spar Nord Bank A/S), Lokalbank Hjørring A/S (Spar Nord Bank A/S), Lokalbank Hobro A/S (Spar Nord Bank A/S), Lokalbank Holbæk A/S (Spar Nord Bank A/S), Lokalbank Holstebro A/S (Spar Nord Bank A/S), Lokalbank Horsens A/S (Spar Nord Bank A/S), Lokalbank Kolding A/S (Spar Nord Bank A/S), Lokalbank København A/S (Spar Nord Bank A/S), Lokalbank Køge A/S (Spar Nord Bank A/S), Loka- lbank Løgstør A/S (Spar Nord Bank A/S), Lokalbank Nakskov A/S (Spar Nord Bank A/S), Lokalbank Nyborg A/S (Spar Nord Bank A/S), Lokalbank Nykøbing Falster A/S (Spar Nord Bank A/S), Lokalbank Næstved A/S (Spar Nord Bank A/S), Lokalbank Nørresundby A/S (Spar Nord Bank A/S), Lokalbank Odense A/S (Spar Nord Bank A/S), Lokalbank Randers A/S (Spar Nord Bank A/S), Lokalbank Ringsted A/S (Spar Nord Bank A/S), Lokalbank Silkeborg A/S (Spar Nord Bank A/S), Lokalbank Skagen A/S (Spar Nord Bank A/S), Loka- lbank Skanderborg A/S (Spar Nord Bank A/S), Lokalbank Skive A/S (Spar Nord Bank A/S), Lokalbank Skjern A/S (Spar Nord Bank A/S), Lokalbank Slagelse A/S (Spar Nord Bank A/S), Lokalbank Støvring A/S (Spar Nord Bank A/S), Lokalbank Svendborg A/S (Spar Nord Bank A/S), Lokalbank Sæby A/S (Spar Nord Bank A/S), Lokalbank Sønderborg A/S (Spar Nord Bank A/S), Lokalbank Terndrup A/S (Spar Nord Bank A/S), Lokalbank Thisted A/S (Spar Nord Bank A/S), Lokalbank Vejgaard A/S (Spar Nord Bank A/S), Lokalbank Vejle A/S (Spar Nord Bank A/S), Lokalbank Viborg A/S (Spar Nord Bank A/S), Lokalbank Østeraa A/S (Spar Nord Bank A/S), Lokalbank Århus A/S (Spar Nord Bank A/S).

Spar Nord Bank – Prospectus Appendix 1 161 Annex 2

List of number of shareholder regions – shown by postal codes.

Shareholder region postal code numbers allocated

Esbjerg 6240, 6261, 6270, 6280, 6510, 6520, 6534, 6535, 6660, 6670, 6682, 6683, 6690, 6700, 6705, 6710, 6715, 6720, 6731, 6740, 6752, 6753, 6760, 6771, 6780, 6792, 6800, 6818, 6823, 6830, 6840, 6851, 6852, 6853, 6854, 6855, 6857, 6862, 6870 Frederikshavn 9900, 9940, 9970, 9981, 9982 Lillebælt 5464, 5466, 5500, 5580, 5592, 7000, 7007 Helsingør 2970, 2980, 2990, 3000, 3050, 3060, 3070, 3080, 3100, 3120, 3140, 3150, 3230, 3250, 3330, 3480, 3490 Herning 6880, 6893, 6900, 6920, 6933, 6940, 6950, 6960, 6971, 6973, 6980, 6990, 7270, 7280, 7330, 7361, 7263, 7400, 7430, 7441, 7442, 7451, 7470, 7480, 7490, 7500, 7540, 7550, 7560, 7570, 7600, 7620, 7650, 7660, 7673, 7680, 8765, 8766 Hillerød 3200, 3210, 3220, 3300, 3310, 3320, 3360, 3370, 3390, 3400 Holbæk 4060, 4070, 4174, 4190, 4270, 4281, 4291, 4293, 4295, 4296, 4300, 4320, 4330, 4340, 4350, 4360, 4370, 4390, 4400, 4420, 4440, 4450, 4460, 4470, 4480, 4490, 4500, 4520, 4532, 4534, 4540, 4550, 4560, 4571, 4572, 4573, 4581, 4583, 4591, 4592, 4593 Horsens 7130, 8350, 8700, 8723, 8732, 8740, 8751, 8752, 8762, 8763, 8781, 8783 Kolding 6000, 6051, 6052, 6064, 6070, 6091, 6092, 6093, 6094, 6100, 6580, 6600, 6621, 6622, 6630, 6640, 6650 København 1000-1999, 2000, 2100, 2200, 2300, 2400, 2450, 2500, 2600, 2605, 2610, 2620, 2625, 2630, 2635, 2640, 2650, 2660, 2665, 2670, 2690, 2700, 2720, 2730, 2740, 2750, 2760, 2765, 2770, 2791, 2800, 2820, 2830, 2840, 2850, 2860, 2870, 2880, 2900, 2920, 2930, 2942, 2950, 2960, 3460, 3500, 3520, 3670, 3700, 3720, 3730, 3740, 3751, 3760, 3770, 3782, 3790, 3900-3992 Køge 2680, 4100, 4140, 4600, 4623, 4632, 4640, 4652, 4653, 4654, 4660, 4671, 4672, 4673, 4681, 4682, 4683, 4690 Mariagerfjord 9500, 9510, 9550, 9560, 9610 Midtvendsyssel 9320, 9330, 9340, 9480, 9700, 9740 Nordvestvendsyssel 9760, 9800, 9830, 9850, 9870, 9881 Nyborg 5540, 5800, 5853, 5856, 5871 Næstved-Slagelse 4160, 4171, 4173, 4180, 4200, 4220, 4230, 4241, 4242, 4243, 4250, 4261, 4262, 4684, 4700, 4720, 4733, 4735, 4736, 4750, 4760, 4771, 4772, 4773, 4780, 4791, 4792, 4793, 4800, 4840, 4850, 4862, 4863, 4871, 4872, 4873, 4874, 4880, 4891, 4892, 4894, 4895, 4900, 4912, 4913, 4920, 4930, 4941, 4943, 4944, 4951, 4952, 4953, 4960, 4970, 4983, 4990 Nørresundby 9310, 9362, 9370, 9380, 9381, 9382, 9400, 9430 Odense 5000, 5100, 5200, 5210, 5220, 5230, 5240, 5250, 5260, 5270, 5290, 5300, 5320, 5330, 5350, 5370, 5380, 5390, 5400, 5450, 5462, 5463, 5471, 5474, 5485, 5491, 5492, 5550, 5560, 5591, 5600, 5610, 5620, 5631, 5642, 5672, 5683, 5690, 5750, 5772, 5792, 5854, 5863 Randers 8370, 8500, 8581, 8585, 8586, 8860, 8870, 8900, 8920, 8930, 8940, 8950, 8960, 8961, 8963, 8970, 8981, 8983, 8990 Rebild 9230, 9240, 9293, 9520, 9530, 9541, 9574, 9575 Roskilde 3450, 3540, 3550, 3600, 3630, 3650, 3660, 4000, 4030, 4040, 4050, 4130, 4621, 4622 Silkeborg 8472, 8600, 8620, 8632, 8641, 8643, 8653, 8654, 8882, 8883 Skagen 9990 Skive 7800, 7830, 7840, 7850, 7860, 7870, 7884 Corporate Banking Pursuant to Article 5(2) of the Articles of Association Svendborg 5700, 5762, 5771, 5874, 5881, 5882, 5883, 5884, 5892, 5900, 5932, 5935, 5953, 5960, 5970, 5985 Sæby 9300, 9352, 9750 Vejgaard 9210, 9220, 9260, 9270, 9280 Vejle 6040, 6200, 6230, 6300, 6310, 6320, 6330, 6340, 6360, 6372, 6392, 6400, 6430, 6440, 6470, 6500, 6541, 6560, 6623, 7080, 7100, 7120, 7140, 7150, 7160, 7171, 7173, 7182, 7183, 7184, 7190, 7200, 7250, 7260, 7300, 7321, 7323, 8721, 8722 Vesthimmerland 7900, 7950, 7960, 7970, 7980, 7990, 9600, 9620, 9631, 9632, 9640, 9670, 9681 Aalborg 9000, 9100, 9200 Aabybro 7700, 7730, 7741, 7742, 7752, 7755, 7760, 7770, 7790, 9440, 9460, 9490, 9492, 9493, 9690 Aarhus 8000, 8100, 8200, 8210, 8220, 8230, 8240, 8245, 8250, 8260, 8270, 8300, 8305, 8310, 8320, 8330, 8340, 8355, 8361, 8362, 8380, 8381, 8382, 8400, 8410, 8420, 8444, 8450, 8462, 8464, 8471, 8520, 8530, 8541, 8543, 8544, 8550, 8560, 8570, 8592, 8660, 8670, 8680, 8800, 8830, 8831, 8832, 8840, 8850, 8881

162 Appendix 1 Prospectus – Spar Nord Bank Annex 3 – Agreement on state-funded capital injection

Between Spar Nord Bank A/S as Borrower and The Danish State represented by the Ministry of Economic and Business Affairs as Lender

Dated: 29 June 2009

CONTENTS

1. BACKGROUND AND PURPOSE 1

2. DEFINITIONS 1

3. LOAN IN THE FORM OF HYBRID TIER 1 CAPITAL 4

4. SUBSCRIPTION OF NOTES AND PAYMENT OF THE LOAN 4

5. CONDITIONS PRECEDENT 5

6. REPRESENTATIONS AND WARRANTIES

7. OBLIGATIONS 8

8. BREACH OF AGREEMENT 10

9. NOTICES 10

10. AMENDMENTS, COSTS AND PRECEDENCE 11

11. ASSIGNMENT OF RIGHTS AND OBLIGATIONS 12

12. GOVERNING LAW AND JURISDICTION 14

Appendices

Appendix 1: Loan Notes Agreement

Appendix 2: Calculation of financial ratios

Spar Nord Bank – Prospectus Appendix 1 163 AGREEMENT ON STATE-FUNDED CAPITAL INJECTION “Group Entity” shall mean an entity which is part of the same Group as Spar Nord Bank. This Agreement on State-Funded Capital Injection, including appendices, (the “Agreement”) was made on 29 June 2009 between “Hybrid Tier 1 Capital” shall mean loan capital that meets the requirements set out in section 132 of the Financial Business (1) Spar Nord Bank A/S, Central Business Register (CVR) no. Act. 13737584, Skelagervej 15, DK-9000 Aalborg (“Spar Nord Bank”), as borrower, and “Issue Date” shall have the meaning ascribed to it in Clause 4.1. (2) The Danish State represented by the Ministry of Economic and Business Affairs, Slotsholmsgade 10-12, DK-1216 Co- “Loan” shall have the meaning ascribed to it in Clause 3.1. penhagen K (the “Danish State”), as lender. “Loan Notes Agreement” shall mean the Terms and Condi- 1. bacKGROUND AND PURPOSE tions of the Notes as specified in Appendix 1 or as subse- 1.1 Application. Spar Nord Bank has on 19 May 2009 filed an quently amended in accordance with this Agreement or the application, including appendices, (the “Application”) under Loan Notes Agreement. the Act on State-Funded Capital Injections (as defined below) for the Danish State’s injection of Hybrid Tier 1 Capital (as “Notes” shall have the meaning assigned to them in Clause defined below) into Spar Nord Bank, and the Danish State has 3.1. on the date of this Agreement accepted to inject such Hybrid Tier 1 Capital on the terms specified in this Agreement and “Party” shall mean Spar Nord Bank or the Danish State. the Loan Notes Agreement (as defined below). “Parties” shall mean Spar Nord Bank and the Danish State. 1.2 Objective. The purpose of the injection of Hybrid Tier 1 Capital into Spar Nord Bank is to stimulate Spar Nord Bank’s supply “Private Placement” shall mean the Danish State’s sale, of credit to healthy undertakings and households by increas- transfer or assignment of any or all of the Notes by a private ing its capital and the solvency and thus enhancing Spar Nord placement to one or more investors. Bank’s possibility to offer finance to the real economy according to the Act on State-Funded Capital Injections. “Solvency Need” shall mean the individual solvency need as assessed by Spar Nord Bank’s Board of Directors and Execu- 2. DEFINITIONS tive Board in accordance with section 124(4) of the Financial 2.1 For the purpose of this Agreement, the terms below shall be Business Act. defined as follows: “Solvency Requirement” shall mean the higher of (i) the “Act on State-Funded Capital Injections” (lov om statsligt solvency requirement, see section 124(2) of the Financial kapitalindskud) shall mean Act No. 67 of 3 February 2009 and Business Act and (ii) an individual solvency requirement de- any executive order issued there under, all as amended from termined by the Danish Financial Supervisory Authority, see time to time. section 124 (5) of the Financial Business Act.

“Application” shall have the meaning ascribed to it in Clause “Stock Exchange Listing” shall mean the Danish State’s sale, 1.1. transfer or assignment of any or all of the Notes or any other exit in connection with admittance of all or part of the Notes “Banking Day” shall mean a weekday when banks are gener- for trading on a regulated market or another market in the ally open for business in Denmark. European Union, the European Economic Area or in an OECD member country. “DKK” shall mean Danish kroner. “Subsidiary” shall have the meaning ascribed to it in section “Executive Board” shall mean the executive board of Spar 5(1)(8) of the Financial Business Act. Nord Bank from time to time as registered with the Danish Commerce and Companies Agency (Erhvervs- og Selskab- “Term of Agreement” shall mean the period from the date sstyrelsen). of this Agreement until the earlier of the time when (i) all amounts payable under the Loan, including interest and “Exit Strategies” shall mean the Danish State’s sale, transfer costs, have been repaid in full, cancelled or converted into of all rights and obligations or sale, transfer or assignment of equity under this Agreement and the Loan Notes Agreement, all or part of the Notes, including by a Private Placement or or (ii) the Danish State has transferred all Notes and has thus in connection with a Stock Exchange Listing and/or any other ceased to be creditor of all or part of the Loan. form of exit strategy including securitisations initiated by the Danish State of the Danish State’s interest in the Notes. “Tier 1 Capital” shall mean tier 1 capital (kernekapital) as defined in section 5(7)(4), of the Financial Business Act. “Financial Business Act” (lov om finansiel virksomhed) shall mean Consolidated Act No. 897 of 4 September 2008 and any “Tier 1 Capital Ratio” shall mean Tier 1 Capital as a percent- executive order issued there under, all as amended from time age of risk-weighted assets calculated according to the prin- to time. ciples specified in the Danish Financial Supervisory Author- ity’s reporting form for assessment of capital adequacy, CS01, “Group” shall mean Spar Nord Bank and its Subsidiaries in item 4 (Kernekapital (inkl. hybrid kernekapital) efter fradrag i accordance with section 5(1)(9) of the Financial Business Act. procent af vægtede poster).

“VP” shall mean VP Securities A/S, CVR no. 21599336.

164 Appendix 1 Prospectus – Spar Nord Bank 2.2 For the purpose of this Agreement, all terms defined in the (e) provide a comprehensive report dated as at the Issue Date singular shall have the same meaning in the plural and on Spar Nord Bank from the Commerce and Companies vice-versa. All indefinite nouns shall have the same meaning Agency; in the definite form, and all references to paragraphs and appendices shall be references to paragraphs and appendices (f) provide a legal opinion dated as at the Issue Date in a form of this Agreement. acceptable to the Danish State;

3. loan IN THE FORM OF HYBRID TIER 1 CAPITAL (g) make members of the Executive Board available for an- 3.1 The Loan. Subject to compliance with Clause 5 hereof, the swering confirmatory questions to the satisfaction of the Danish State subscribes for 126,500,000,000 notes (kapital- Danish State; and beviser) (the “Notes”) of DKK 0.01 each issued by Spar Nord Bank, corresponding to a total loan of DKK 1,265,000,000 (say (h) take such further actions and/or deliver such additional Danish kroner one billion two hundred and sixty five million) statements, documents, etc. as are deemed necessary or (collectively the “Loan”) on the terms specified in this Agree- appropriate by the Danish State. ment and in the Loan Notes Agreement. 5. condITIONS PRECEDENT 3.2 The Act on State-Funded Capital Injections. The Notes 5.1 The Danish State’s conditions precedent. On the part of the constitute Hybrid Tier 1 Capital and are subscribed for by the Danish State, the Agreement and the subscription of the Danish State under the authority of the Act on State-Funded Notes are subject to the following conditions precedent: Capital Injections. (a) Spar Nord Bank complies with the Solvency Requirement 4. sUBSCRIPTION OF NOTES AND PAYMENT OF THE LOAN and the Solvency Need as at the Issue Date; 4.1 Time of payment of the Loan. Subject to compliance with Clause 5 hereof, the proceeds of the Loan shall be credited (b) Spar Nord Bank’s Tier 1 Capital Ratio is at least 12 per by the Danish State to Spar Nord Bank’s account no. 1745-9 cent after payment of the Loan on the Issue Date, with the Danish Central Bank (Danmarks Nationalbank) on 30 June 2009 or on such other Banking Day as agreed in writing (c) Spar Nord Bank’s Tier 1 Capital Ratio is above 9 per cent between the Danish State and Spar Nord Bank (the “Issue prior to the Issue Date, and the Loan itself will not result Date”). in an increase of Spar Nord Bank’s Tier 1 Capital Ratio corresponding to more than 3 percentage points com- 4.2 Spar Nord Bank’s obligations prior to the Issue Date. Spar pared to the numbers last reported in Spar Nord Bank’s Nord Bank shall no later than 2 p.m. on the first Banking Day quarterly report for Q1 2009 ended 31 March 2009; prior to the Issue Date issue the Notes in VP and transfer them to the Danish State’s deposit no. (CD-ident 08240): (d) performance of Spar Nord Bank’s obligations as set out in 082400000126726 with the Danish Central Bank (Danmarks Clause 4.2 and 4.3 to the satisfaction of the Danish State; Nationalbank) and conclude the necessary and custom- and ary agreements with VP and Spar Nord Bank as registrar (“kontoførende institut”). (e) Spar Nord Bank’s representations and warranties as set out in Clause 6 are true, accurate and correct as at the 4.3 Spar Nord Bank’s obligations on the Issue Date. Spar Nord date of this Agreement and as at the Issue Date. Bank shall on the Issue Date: 5.2 Waiver of conditions precedent and termination of the Agree- (a) provide a statement, which is acceptable to the Danish ment. The Danish State has the right (but not the obligation) State in terms of form and content, made by Spar Nord to waive or modify its conditions precedent in whole or in part Bank’s Board of Directors to the effect (i) that the Danish for the purpose of paying out the Loan. The Agreement shall State’s conditions precedent as set out in Clause 5.1 are be terminated if the Danish State’s conditions precedent have met as at the Issue Date, (ii) that the representations and not been met or waived no later than on the Issue Date, which warranties made by Spar Nord Bank as set out in Clause 6 may, in any event, occur no later than 31 December 2009. are true, accurate and correct as at the Issue Date, and (iii) The Parties shall not make any claim against each other as a that no material adverse changes have occurred in Spar result of termination of this Agreement, unless such termina- Nord Bank’s operations, assets and liabilities and financial tion is attributable to a Party’s breach of this Agreement. If position since the filing of the Application other than as the Agreement is terminated, the Parties’ obligations under disclosed to the Danish State in writing prior to the date of Clauses 10.3 and 12 shall continue in full force and effect. this Agreement; 6. representatIONS AND WARRANTIES (b) provide a certified copy of the resolution by the general 6.1 Spar Nord Bank’s warranties. Spar Nord Bank represents meeting of Spar Nord Bank, authorising the Board of Di- and warrants to the Danish State as at the date of this Agree- rectors to raise Hybrid Tier 1 Capital with variable dividend ment and the Issue Date as follows: coupon charge as provided for in the Act on State-Funded Capital Injections; 6.1.1 Legislation. The Group complies with applicable law, including the Act on State-Funded Capital Injections and the Finan- (c) provide a certified copy of the resolution by its Board of cial Business Act. Directors approving this Agreement and the Loan Notes Agreement and authorising the Executive Board to execute 6.1.2 Correct information. All information, presentations, reports, this Agreement and the Loan Notes Agreement; projections, forecasts, etc. which the Danish State has received from Spar Nord Bank in connection with the Ap- (d) provide a certified copy of Spar Nord Bank’s articles of plication and the processing thereof, are correct and contain association as at the Issue Date; no material errors or omissions and accurately and fully

Spar Nord Bank – Prospectus Appendix 1 165 disclose the financial position of Spar Nord Bank and the in default under any loan agreement or other agreement or Group at the time of the Application or at the time they were instrument to which Spar Nord Bank or any of its Subsidiaries made or updated, whichever is later, and no material adverse is a party except for violations and defaults which, individu- changes have occurred in Spar Nord Bank’s and the Group’s ally or in the aggregate, could not reasonably be expected to operations, assets and liabilities and financial position taken result in a material adverse effect. as a whole since the filing of the Application other than as disclosed to the Danish State in writing prior to the date of 6.1.9 Approvals. Spar Nord Bank and its Subsidiaries possess all this Agreement. All the financial ratio calculations as set out licenses, approvals, and other authorizations necessary to in Appendix 2 are true and accurate. conduct their respective businesses, subject, in each case, to such exceptions as would not have a material adverse effect, 6.1.3 No conflict. The conclusion and performance of this Agree- and neither Spar Nord Bank nor any of its Subsidiaries has ment and the Loan Notes Agreement is not contrary to (i) received any written order or notice of proceedings relating any law, public rule, court decision or any kind of public to any such license, approval, or other authorization which regulation, (ii) Spar Nord Bank’s articles of association and would have a material adverse effect. corporate resolutions of Spar Nord Bank or (iii) any material agreement or document to which Spar Nord Bank or its 7. OBLIGATIONS Subsidiaries is a party or which is binding on Spar Nord Bank 7.1 Obligations of Spar Nord Bank. Spar Nord Bank undertakes or its Subsidiaries. at the time of the conclusion of this Agreement and during the entire Term of Agreement to fulfil the obligations 6.1.4 Material adverse events. Other than as disclosed to the stipulated in this Clause 7.1 provided that clauses 7.1.1, 7.1.5, Danish State in writing prior to the date of this Agreement, 7.1.7, 7.1.8 and 7.1.9 shall continue to apply until the Danish no material adverse event or material adverse change has State has disposed of any and all shares in Spar Nord Bank occurred in Spar Nord Bank’s and the Group’s operations, received through conversion of the Notes to share capital in assets and liabilities and financial position taken as a whole Spar Nord Bank in accordance with the Loan Notes Agree- since the date of its most recent annual and quarterly report. ment.

6.1.5 Fulfilment of conditions precedent. Spar Nord Bank meets 7.1.1 Legislation, etc. Spar Nord Bank undertakes to observe ap- all requirements that must be met under the Act on State- plicable law, including the Act on State-Funded Capital Injec- Funded Capital Injections in order to obtain a loan in the form tions and the Financial Business Act as well as all the terms of Hybrid Tier 1 Capital on the terms specified in this Agree- and conditions stipulated in this Agreement. ment and in the Loan Notes Agreement. The Danish State’s conditions precedent as specified in Clause 5.1 will be met as 7.1.2 Capital reduction and own shares. Spar Nord Bank shall not at the Issue Date. (i) effect any capital reductions except to cover losses or to write down share capital in accordance with the Loan Notes 6.1.6 Annual and Quarterly reports. The consolidated financial Agreement or (ii) purchase own shares, including initiating statements included in Spar Nord Bank’s annual report for new share buy back programs, if such purchase will con- the financial year ended 31 December 2008 and quarterly stitute a violation of the Act on State-funded Capital Injec- report for Q1 2009 ended 31 March 2009, give a true and fair tions. Spar Nord Bank may not sell own shares on terms and view of Spar Nord Bank’s and the Group’s assets, liabilities, conditions that are more burdensome for Spar Nord Bank equity and financial position at 31 December 2008 and 31 than market terms unless it is necessary to do so in order to March 2009 (respectively), and of the results of Spar Nord honour Spar Nord Bank’s employee stock option programs. Bank’s and the Group’s operations and the consolidated cash flows for the financial year starting on 1 January 2008 7.1.3 Dividends. Spar Nord Bank shall not distribute dividends and ending on 31 December 2008 and the financial quarter prior to 1 October 2010. After 1 October 2010, dividends may starting on 1 January 2009 and ending on 31 March 2009. only be distributed to the extent that the dividends can be The consolidated financial statements have been prepared financed by Spar Nord Bank’s net profits after taxes, which in accordance with the International Financial Reporting may be added to the distributable reserves, as generated in Standards (IFRS) as adopted by the European Union applied the period following 1 October 2010. on a consistent basis (except as stated in such financial statements), and the financial statements of the Spar Nord Bank’s 7.1.4 Funding of Group Entities. Spar Nord Bank may not use funds have been prepared in accordance with the Financial Busi- to capitalise businesses in violation of the Act on State- ness Act. Furthermore, the annual report has been prepared Funded Capital Injections. Spar Nord Bank may not make in accordance with additional Danish disclosure requirements acquisition of shares that would constitute a violation of the for annual reports of listed financial institutions. Act on State-Funded Capital Injections. All agreements and transactions with Group Entities shall be concluded on arm’s 6.1.7 No Proceedings. Other than as disclosed to the Danish State length terms. in writing prior to the date of this Agreement and the Issue Date, as applicable, there are no legal or governmental, 7.1.5 Restrictions on ownership, voting and negotiability etc. administrative or other proceedings pending or, to the best of Spar Nord Bank’s knowledge, threatened to which Spar Nord a) Spar Nord Bank shall not later than on its first ordinary Bank or any of its Subsidiaries is a party which would have a general meeting after the date of this Agreement pass material adverse effect on Spar Nord Bank’s and the Group’s such resolutions as are required to comply with Section operations, assets and liabilities and financial position taken 8(7) of the Act on State-Funded Capital Injections. as a whole. b) Spar Nord Bank may not in its articles of association intro- 6.1.8 No default. Neither Spar Nord Bank nor any of its Subsidiar- duce restrictions on ownership, voting rights, negotiability, ies is, or with the giving of notice or lapse of time or both nor may Spar Nord Bank introduce share classes. would be, (i) in violation of its articles of association or (ii)

166 Appendix 1 Prospectus – Spar Nord Bank 7.1.6 Remuneration of the Executive Board. Spar Nord Bank may 8. breach OF AGREEMENT not (i) initiate new share option programmes or other similar 8.1 Breach of Agreement and remedies. In case of Spar Nord plans for the Executive Board or prolong or renew existing Bank’s breach or anticipatory breach (anteciperet mislighold- programmes; (ii) remunerate the members of the Executive else) of its obligations under this Agreement, and if such Board by variable pay elements, see section 77a(2) of the breach is not remedied on or before the tenth (10th) day Financial Business Act, to an extent exceeding 20% of the after notice of such breach is given by the Danish State to total basic salary including pension; (iii) issue bonus shares Spar Nord Bank, the Danish State is entitled to exercise any at a favourable price or use similar beneficial schemes for remedies in accordance with Danish law, including to institute the Executive Board; or (iv) make tax deductions of more than legal proceedings to enforce its rights. half the Executive Board’s salaries, to the extent that such action would constitute a violation of Act on State-funded 8.2 Cure. Spar Nord Bank shall be obliged to enter into discus- Capital Injections. Spar Nord Bank shall state the amount at sions with the Danish State regarding possible amendments which tax deductions have been made in a note to the annual to the Loan Notes Agreement which may cure any breach report. or prevent any breach from occurring under the Loan Notes Agreement. 7.1.7 Notice of a breach of agreement. Spar Nord Bank shall give written notice to the Danish State as soon as Spar Nord Bank 8.3 No cancellation. For the avoidance of doubt, the Danish becomes aware (i) that a breach of this Agreement or an State’s remedies as mentioned in Clause 8.1, may not result anticipatory breach will occur or (ii) that a payment under the in Spar Nord Bank having to pay any amount under the Loan Loan Notes Agreement will not be made. Notes Agreement at an earlier time than when the amount would otherwise have been due and payable under the Loan 7.1.8 Statement on lending activities. No later than on 31 March Notes Agreement. and 30 September of each year, Spar Nord Bank shall present a statement on its lending activities in the immediately 9. NOTICES preceding period from 1 July to 31 December and 1 January 9.1 Notices. Any notice to be given under this Agreement and to 30 June respectively to the Danish State in accordance with under the Loan Notes Agreement shall be given by post, the Act on State-Funded Capital Injections. The statement on fax or e-mail (except that a notice or other communication lending activities shall be published as provided by the Act on under Section 8 of this Agreement may not be given by fax or State-Funded Capital Injections. e-mail) to the following addressees or to any other addressee (including e-mail addresses) designated by either Party to the 7.1.9 Conversion of the Loan. If all or part of the Loan is converted other Party: into share capital in Spar Nord Bank in accordance with the Loan Notes Agreement, Spar Nord Bank shall cooperate a. to Spar Nord Bank: with and assist the Danish State if the Danish State wishes to dispose of the shares received in one or more rounds. Clause Spar Nord Bank A/S 11.2 shall apply mutatis mutandis to the Danish State’s full or Attn: Head of Funding Jan Frølund Poulsen partial disposal of shares in Spar Nord Bank received by way Skelagervej 15 of a conversion in accordance with the Loan Notes Agree- DK-9000 Aalborg ment. Tel: +45 96 34 42 09 Fax: +45 96 34 45 76 7.1.10 Announcements and Press Releases. Spar Nord Bank shall E-mail: [email protected] deliver to the Danish State a draft of any company announcement or press release relating to this Agreement, the Loan b. to the Danish State: Notes Agreement or the Notes as soon as possible prior to the disclosure of such press release or announcement. The Danish State represented by the Ministry of Economic Furthermore, if Spar Nord Bank intends or has taken a deci- and Business Affairs sion to convert any Notes or interest into shares as set out in Attn: Deputy Permanent Secretary Jens Lundager the Loan Notes Agreement, Spar Nord Bank shall, until such Slotsholmsgade 10-12 conversion has been given up or completed, as applicable, DK-1216 Copenhagen K deliver to the Danish State a draft of any company announce- Tel: +45 33 92 33 50 ments or press release as soon as possible prior to the Fax: +45 33 12 37 78 disclosure of such press release or announcement. E-mail: [email protected]

7.1.11 Corporate Authorisation. Spar Nord Bank shall hold an 10. amendments, COSTS AND PRECEDENCE extraordinary general meeting not later than 12 August 2009 10.1 The Danish Financial Supervisory Authority. Any modifica- in order to obtain the necessary corporate authorisations tion or amendment to the Loan Notes Agreement, as agreed required to give full effect to this Agreement and the Loan between the Parties, which entails that the Notes do not Notes Agreement. The proposal to obtain the necessary constitute Hybrid Tier 1 Capital shall be subject to the prior corporate authorisations shall be recommended by Spar written approval of the Danish Financial Supervisory Author- Nord Bank’s Board of Directors. If the necessary corporate ity. authorisations are not adopted by the extraordinary general meeting, the Parties shall renegotiate the relevant provisions 10.2 Consent. Notwithstanding the provisions of this Agreement of this Agreement and the Loan Notes Agreement affected by and the Loan Notes Agreement, the consent of the Danish the failure to obtain such corporate authorisations. Financial Supervisory Authority shall not be required under this Agreement and the Loan Notes Agreement, and the Dan- 7.2 Withholding Tax in the Loan Notes Agreement. As long as the ish Financial Supervisory Authority has no powers vis-à-vis Danish State is the sole noteholder of the Notes, paragraph Spar Nord Bank, if Spar Nord Bank is no longer subject to 9.5 of the Loan Notes Agreement shall not apply.

Spar Nord Bank – Prospectus Appendix 1 167 supervision from the Danish Financial Supervisory Authority shall take the following action in accordance with the Danish in accordance with the Financial Business Act. State’s directions:

10.3 Costs. Spar Nord Bank shall pay: a) prepare and approve and provide assistance in connection with preparation of prospectus(es) in Danish and/or Eng- (a) an issue fee in the amount of DKK 3,582,000 shall be lish, with a base prospectus and final terms, if relevant, in credited by Spar Nord Bank to the Danish State’s account accordance with the applicable rules; no. 0216-4069055494 with Danske Bank A/S in accordance with the Act on State-Funded Capital Injections; b) prepare and approve and provide assistance in connection with preparation of an information memorandum in Dan- (b) all costs and other expenses incurred by the Danish State ish and/or English, describing Spar Nord Bank, the Group in connection with Spar Nord Bank’s breach of this Agree- and the Notes in such detail as the Danish State may ment or the Loan Notes Agreement; reasonably request;

(c) all costs and other expenses incurred in connection with c) apply for approval of prospectus(es) by competent authori- a conversion of all or part of the Loan into share capital in ties and answer any comments and use best efforts to accordance with the Loan Notes Agreement, excluding the seek to accommodate any requests made by such compe- Danish State’s financial, legal and other advisers; tent authorities;

(d) all costs incurred in connection with amendments to this d) comply with all market disclosure requirements and simi- Agreement and the Loan Notes Agreement initiated by lar requirements in force from time to time at the relevant Spar Nord Bank; Stock Exchange, if any;

(e) all costs relating to the establishment of a Stock Exchange e) enter into any agreements that may be necessary or Listing as well as all costs and expenses incidental to a appropriate in connection with an Exit Strategy, includ- continued Stock Exchange Listing, including listing fee ing dealer agreements (programme agreements), agency and fees to agents, agencies etc., provided that the Danish agreements (issue and paying agency agreements), deeds State shall pay its own costs relating to a Stock Exchange of covenants, trust deeds, special issuer agreements and Listing, including costs to financial, legal and other advis- other usual agreements with dealers, operators of the ers, and, subject to prior approval, all Spar Nord Bank’s relevant market or markets, clearing centres, and others; documented, external initial expenses incidental to an establishment of a Stock Exchange Listing, including the f) accept any modifications and amendments to this Agree- costs and expenses of market places, dealers, clearing ment and the Loan Notes Agreement affecting the Notes centres, lawyers, auditors, financial and other advisers; or any part thereof that may, in the Danish State’s opinion, and be necessary or appropriate for the purpose of an Exit Strategy, including the making of necessary adjustments (f) all Spar Nord Bank’s costs incurred in connection with Exit (including, where necessary, the deletion of the relevant Strategies, except as set out in paragraph (e) in relation to provisions) should noteholder(s) be required to subscribe a Stock Exchange Listing. for shares in exchange for coupon and should such subscription requirement be impracticable in light of the 10.4 Precedence. In case of any conflicting term between this preferred Exit Strategy of the Danish State as well as a Agreement and the Loan Notes Agreement on the one hand change of the governing law of the Loan Notes Agreement and the Act on State-Funded Capital Injections or the Finan- to English law; provided that (i) provisions needed in order cial Business Act on the other hand, the Act on State-Funded to qualify the Loan and the Notes as Hybrid Tier 1 Capital Capital Injections and the Financial Business Act, respec- and regarding the registration of the Notes in VP shall tively, shall prevail. With regard to the Loan Notes Agreement, always be governed by Danish law and (ii) such modifica- the preceding sentence shall, however, only apply as long as tions and amendments to this Agreement and the Loan the Danish State owns all the Notes. In case of any conflicting Notes Agreement affecting the Notes or any part thereof term between the Loan Notes Agreement on the one hand shall be agreed with Spar Nord Bank until the Issuer’s and this Agreement (without the Loan Notes Agreement), this Conversion Option Period (as defined in the Loan Notes Agreement shall prevail between the Danish State and Spar Agreement) has lapsed; Nord Bank. g) make the senior management of Spar Nord Bank available 11. assIGNMENT OF RIGHTS AND OBLIGATIONS for investor presentations and investor meetings; 11.1 Assignment by Spar Nord Bank. Spar Nord Bank may not assign any of its rights and/or obligations under this Agree- h) to the extent possible facilitate that Spar Nord Bank has a ment. credit rating from no less than two of the rating agencies Fitch, Moody’s and Standard & Poor’s or another recog- 11.2 Assignment by the Danish State. The Danish State may, nised rating agency approved by the Danish State and as- without the consent of Spar Nord Bank, assign all or any part sist in connection with obtaining ratings of the Notes or of of its rights and obligations (combined or individually) under any securities issued by another entity in connection with this Agreement and may sell, transfer and assign any or all an Exit Strategy, however, to the extent ratings are applied of the Notes in one or more rounds, including by way of Exit for by another entity than Spar Nord Bank such applica- Strategies. Spar Nord Bank shall cooperate with and assist tion will be the overall responsibility of the management the Danish State if the Danish State wishes to implement Exit of such entity; Strategies. Where the Danish State submits a written request to Spar Nord Bank for an Exit Strategy, Spar Nord Bank i) undertake the same obligations and provide the same warranties to the buyers of Notes as Spar Nord Bank has

168 Appendix 1 Prospectus – Spar Nord Bank given to the Danish State under this Agreement, however, Spar Nord Bank A/S: only to the extent such obligations and warranties would be in conformity with market practice on subscription or purchase of Hybrid Tier 1 Capital; Name: Lasse Nyby Name: John Lundsgaard j) issue such company announcement as may be necessary Title: Chief Executive Officer Title: Executive Officer to clear the Danish State of inside information immediately prior to an exit; and

k) take any other action and/or enter into and execute any The Danish State represented by the Minister of Economic and Busi- other agreements, declarations, documents etc. that the ness Affairs: Danish State may consider necessary or appropriate for the purpose of an Exit Strategy.

11.3 Information and consultation before Exit Strategy. Without Lene Espersen restricting the Danish State’s right to pursue any Exit Strat- egy, cf. Section 11.2, the Danish State will, (i) upon request Countersigned in respect of the Minister of Economic and Business from Spar Nord Bank, in good faith consider possible exit Affairs: strategies presented by Spar Nord Bank and, (ii) inform Spar Nord Bank prior to any decision concerning an Exit Strategy, and, if so requested by Spar Nord Bank, in good faith enter into joint consideration of possible alternative exit strategies, Michael Dithmer provided that any such exit strategies under (i)-(ii) should be Permanent Secretary in accordance with the purpose and intentions of this Agree- ment, and be in the financial interest of the Danish State.

12. governING LAW AND JURISDICTION 12.1 Governing law and jurisdiction. This Agreement shall be governed by Danish law. Any dispute arising out of or in connection with this Agreement shall be brought before the Copenhagen City Court. Each Party is, however, entitled to request that the case be sent for trial in the Danish Eastern High Court.

Spar Nord Bank – Prospectus Appendix 1 169 Appendix 1

Loan Notes Agreement

[Attached as a separate document]

170 Appendix 1 Prospectus – Spar Nord Bank Appendix 2

Calculation of financial ratios

[Attached as a separate document]

Spar Nord Bank – Prospectus Appendix 1 171 Terms and conditions of the notes

SUMMARY OF TERMS:

Issuer: Spar Nord Bank A/S

Total issue: DKK 1,265,000,000

Issue Date: 30 June 2009

Annual Yield: 9.425 per cent p.a.

ACPE Conversion Fee: 0.100 per cent p.a.

Issuer’s Conversion Option Fee: 0.400 per cent p.a.

Conversion: Conversion Option and Obligation

CONTENTS

1. DEFINITIONS 1

2. FORM, DENOMINATION AND TITLE 7

3. STATUS 7

4. INTEREST PROVISIONS 8

5. ALTERNATIVE COUPON PAYMENT 8

6. COUPON CANCELLATION 9

7. REDUCTION OF PRINCIPAL AND UNPAID COUPON 11

8. REDEMPTION OF NOTES 11

9. PAYMENTS 14

10. OBLIGATIONS OF THE ISSUER 14

11. ISSUER’S CONVERSION OPTION AND OBLIGATION 15

12. BREACH OF CONDITIONS 19

13. AMENDMENTS AND NO CONSENT 20

14. GOVERNING LAW AND JURISDICTION 20

Appendices

Appendix 1 List of the Issuer’s Hybrid Tier 1 Capital

Appendix 2 Form of ACPE Notice

Appendix 3 Form of Notice of Conversion

172 Appendix 1 Prospectus – Spar Nord Bank 1. DEFINITIONS “Conversion Announcement Date” shall have the meaning 1.1 For the purpose of these Conditions, the terms below shall be ascribed to it in paragraph 11.12. defined as follows: “Conversion Date” shall mean the date on which Notes are “ACPE Announcement Date” shall have the meaning ascribed converted into New Shares by registration of the resulting to it in paragraph 5.5. capital increase with the Danish Commerce and Companies Agency (Erhvervs- og Selskabsstyrelsen). “ACPE Conversion Date” shall have the meaning ascribed to it in paragraph 5.1. “Corporate Action” shall mean distribution of dividend and any other distribution of cash or assets to shareholders of the “ACPE Conversion Fee” shall mean a fee of 0.100 per cent Issuer, increase or decrease of share capital, issue of war- p.a. rants on the Shares, options on the Shares, convertible bonds or other convertible instruments or other rights to subscribe “ACPE Notice” shall have the meaning ascribed to it in para- or purchase Shares, split or consolidation of Shares, merger, graph 5.5. demerger and any other corporate action involving the capital structure. “ACPE Reference Price” shall have the meaning ascribed to it in paragraph 5.4. “Coupon” shall mean the Fixed Coupon Amount plus the Vari- able Dividend Coupon Charge. “ACPE Shares” shall have the meaning ascribed to it in paragraph 5.1. “Danish Financial Business Act” shall mean Consolidated Act No. 897 of 4 September 2008 and any executive order issued “Actual/Actual (ICMA)” shall mean (a) where the relevant thereunder, all as amended from time to time. period is equal to or shorter than the Interest Period during which it falls, the actual number of days in the period divided “Danish Act on State-Funded Capital Injections” shall mean by the product of (A) the actual number of days in such Inter- Act No. 67 of 3 February 2009 and any executive order issued est Period and (B) the number of Interest Periods in any year; thereunder, all as amended from time to time. and (b) where the period is longer than the Interest Period, the sum of (i) the actual number of days in the period falling “Denomination” shall mean DKK 0.01. in the Interest Period in which it begins divided by the product of (A) the actual number of days in such Interest Period and “Dividend Declared” shall mean the sum of (a) any dividend (B) the number of Interest Periods in any year; and (ii) the declared by the general meeting or the board of directors of actual number of days in the period falling in the next Interest the Issuer and distributed by the Issuer and (b) any dividend Period divided by the product of (A) the actual number of days declared by the general meeting or the board of directors of in such Interest Period and (B) the number of Interest Periods the Issuer but scheduled to be distributed by the Issuer after in any year. the relevant VD Calculation Date, in the 12-month period preceding the relevant VD Calculation Date or, with regard “Alternative Coupon Payment Event” shall have the meaning to the first payment of Variable Dividend Coupon Charge, ascribed to it in paragraph 5.1. since 1 October 2010, in DKK or, if in another currency, the DKK equivalent of such dividend calculated on the date the “Annual Fixed Coupon Amount” shall mean the Fixed Coupon dividend was declared. Amount accrued on the Notes in a period starting on 1 May of any year and ending on 30 April of the following year. “DKK” shall mean Danish kroner.

“Annual Yield” shall mean an effective rate of 9.425 per cent “Early Redemption Amount” shall equal the product of the per annum. following formula:

^(Tr- Tn) “Available Free Reserves” means the amount of free re- Denomination + ∑CFnEx x (1+Effective Annual Yield) serves (consisting of the retained profit brought forward from – ∑CFn x (1+ Effective Annual Yield)^(Tr- Tn) + Accrued Interest prior fiscal years, the retained profit for the most recent fiscal year and other reserves available for distribution of dividends) Where as disclosed in the Issuer’s most recent audited annual financial accounts approved by the general meeting of sharehold- Accrued Interest = Fixed Coupon accrued on a Note from the ers of the Issuer as reduced by any payments on the Notes or latest Fixed Coupon Payment Date until Tr any subordinated loan capital of the Issuer ranking pari passu Tr = the Redemption Date with the Notes made since the date of such accounts by refer- To = the Issue Date n ence to free reserves disclosed therein. T = the date of relevant CFn or CFnEx

“Banking Day” shall mean a weekday when banks are gener- CFnEx = Fixed Coupon Amounts the Noteholder would have ally open for business in Denmark. expected to receive since the Issue Date on a Note assuming all Fixed Coupon Amounts had been paid in full on each Fixed

“Capital Requirement” shall mean the higher of the Solvency Coupon Payment Date with CF1Ex being the first such pay-

Requirement and the minimum capital requirement, see sec- ment, CF2Ex being the second and so forth. tion 127 of the Danish Financial Business Act.

CFn = Actual payments of Coupon which have been received

“Conditions” shall mean these Terms and Conditions of the since the Issue Date on a Note with CF1 being the first such

Notes. payment, CF2 being the second and so forth.

Spar Nord Bank – Prospectus Appendix 1 173 Periods between dates (such as Tr – T0 or Tr – Tn) expressed in “Issuer’s Conversion Option Fee” shall mean a fee of 0.400 the formula above shall be calculated based on Actual/Actual per cent p.a. payable for the duration of the Issuer’s Conver- (ICMA). sion Option Period.

“Effective Annual Yield” means the sum of the Annual Yield, “Issuer’s Conversion Option Period” shall have the meaning ACPE Conversion Fee and Issuer’s Conversion Option Fee (if ascribed to it in paragraph 11.1. applicable). “Loan above Market Capitalisation” shall mean the Outstand- “Fixed Coupon” means a nominal rate corresponding to the ing Principal Amount divided by the Market Capitalisation. Effective Annual Yield when paying the Fixed Coupon Amount in semi-annual instalments. The Fixed Coupon is 9.690248 “Market Capitalisation” shall mean DKK 2,813,159,000 ad- per cent p.a. in the Issuer’s Conversion Option Period and justed for any net cash proceeds from the subscription of new 9.212810 per cent p.a. thereafter. Shares in the Issuer made since the Issue Date.

“Fixed Coupon Amount” shall have the meaning ascribed to it “New Shares” shall have the meaning ascribed to it in para- in paragraph 4.1. graph 11.4.

“Fixed Coupon Payment Date” means 1 May or 1 November “Note” and “Notes” shall have the meaning ascribed to such of any year. terms in paragraph 2.1.

“Group” shall have the meaning ascribed to it in section 5(1) “Noteholder” shall mean any person registered as holder of (9) of the Danish Financial Business Act. Note(s) evidenced as such by book entry in the records of VP.

“Hybrid Tier 1 Capital” shall mean subordinated loan capital “Notice of Conversion” shall have the meaning ascribed to it that meets the requirements in section 132 of the Danish in paragraph 11.12. Financial Business Act. “Number of Notes” shall mean the number of Notes out- “Hybrid Tier 1 Capital Ratio” shall mean the Issuer’s Hybrid standing at any given time. Tier 1 Capital at any time relative to the Issuer’s Tier 1 Capital (as calculated in accordance with Section 129(2) of the Danish “Optional Redemption Date” shall mean 30 May 2014. Financial Business Act) at any time. “Original Number of Notes” means 126,500,000,000 Notes of “Initial Hybrid Tier 1 Capital Ratio” shall mean the Issuer’s DKK 0.01 each. Initial Hybrid Tier 1 Capital relative to the Issuer’s Tier 1 Capital (as calculated in accordance with Section 129(2) of the “Outstanding Principal Amount” shall mean the product of Danish Financial Business Act) at any time. the Number of Notes multiplied by the Denomination.

“Initial Hybrid Tier 1 Capital” shall mean the Issuer’s Hybrid “Price Sensitive Information” shall mean information about Tier 1 Capital on the Issue Date (immediately post issue of the (i) the Issuer, including the Issuer’s and the Issuer’s Group’s Notes) as subsequently redeemed or otherwise decreased business, assets, liabilities, condition (financial or other- unless replaced by new Hybrid Tier 1 Capital; provided, wise), results and operations, (ii) the Shares, or (iii) market however, that the amount of the Issuer’s Hybrid Tier 1 Capital conditions relating to the Shares, which information ((i)-(iii)), for the purpose of calculating the Issuer’s Initial Hybrid Tier 1 alone or in combination with other information, has or would Capital cannot exceed the amount of the Issuer’s Hybrid Tier reasonably be expected to have, alone or in the aggregate, an 1 Capital on the Issue Date using prevailing currency rates influence on the price of the Shares or which a rational inves- (immediately post issue of the Notes). Issuer’s Initial Hybrid tor would reasonably be expected to take into consideration Tier 1 Capital shall for all calculation purposes be deter- when assessing the value of the Shares, provided, however, mined using prevailing currency rates as of the relevant date that information about the mere intention to and the mere for the calculation of the Initial Hybrid Tier 1 Capital. A list of decision to exercise the Issuer’s Conversion Option shall not the Issuer’s Hybrid Tier 1 Capital in place at the Issue Date is constitute Price Sensitive Information for the purposes of attached as Appendix 1. these Conditions, but that, for the avoidance of doubt, any matter (including the incurrence of a loss) giving rise to the “Interest Period” means each period beginning on (and exercise of the Issuer’s Conversion Option may be deemed including) the Issue Date or any Fixed Coupon Payment Date Price Sensitive Information. The Issuer is in possession of and ending on (but excluding) the next Fixed Coupon Payment Price Sensitive Information if any member of the board of Date. directors, any executive officer or any other key employee is in possession of such Price Sensitive Information. “Issue Date” shall mean 30 June 2009. “Redemption Date” means the date on which a Note(s) is/are “Issuer” shall mean Spar Nord Bank A/S, Central Business redeemed in accordance with paragraph 8. Register (CVR) no. 13737584, Skelagervej 15, 9000 Aalborg, Denmark. “Reference Price” shall have the meaning ascribed to it in paragraph 11.6. “Issuer’s Conversion Option” shall have the meaning ascribed to it in paragraph 11.1. “Settlement Date” shall mean the date on which (as the case may be) Notes or Coupon are converted into New Shares or ACPE Shares in the register of VP and New Shares or ACPE Shares (as the case may be) are deposited on VP accounts of

174 Appendix 1 Prospectus – Spar Nord Bank the Noteholder(s) against deletion of the Notes converted or 2. form, DENOMINATION AND TITLE cancelling of Coupon. 2.1 The Notes. The Issuer shall issue 126,500,000,000 notes (kapitalbeviser) (each a “Note” and collectively the “Notes”) of “Shares” shall mean shares issued by the Issuer. nominally DKK 0.01 each, in total DKK 1,265,000,000 under these Conditions. “Solvency Requirement” shall mean the higher of (i) the solvency requirement, see section 124(2) of the Financial 2.2 Registration in VP. The Notes shall be in dematerialised Business Act and (ii) an individual solvency requirement de- form and issued through VP. Title to the Notes will pass by termined by the Danish Financial Supervisory Authority, see registration in the VP register between the direct or indirect section 124(5) of the Danish Financial Business Act. account holders at VP in accordance with the rules and procedures of VP from time to time. The Noteholder will be the “Stock Exchange” shall mean Nasdaq OMX Copenhagen A/S, person evidenced as such by a book entry in the records of Central Business Register (CVR) no. 19042677, or another the VP register. Where a nominee is so evidenced, it shall be regulated market within the European Union or the European treated by the Issuer as the Noteholder of the relevant Note. Economic Area. The person or nominee evidenced as a Noteholder shall be treated as such for the purposes of payment of principal or “Subordinated Loan Capital” shall mean capital that meets Coupon on such Note. the requirements in section 136 of the Danish Financial Busi- ness Act and any other loan capital designated as subordi- 2.3 Negotiability. The Notes shall be freely transferable. nated to all other non-subordinated loan capital. 3. STATUS “Taxes” shall mean all existing and future Danish direct and 3.1 Ranking. The Notes shall constitute Hybrid Tier 1 Capital of indirect taxes, duties, charges, withholdings, etc. and all the Issuer. The Notes shall rank pari passu with any other types of restrictions or conditions resulting in taxes in Den- Hybrid Tier 1 Capital of the Issuer and with any capital instru- mark. ments expressed to rank pari passu with Hybrid Tier 1 Capital of the Issuer. The Notes shall rank senior to the Issuer’s “Term of the Loan” shall mean the period from the Issue share capital and debt expressed to be subordinate to Hybrid Date until the time when all amounts due under the Notes, Tier 1 Capital, including in relation to the right to receive including Coupon and costs, are fully repaid or no longer due. periodic payments and the right to receive dividend in case of the Issuer’s bankruptcy or liquidation. “Tier 1 Capital” shall mean tier 1 capital (kernekapital) as defined in section 5(7)(4) of the Danish Financial Business Act. 3.2 Subordination. The Notes shall be subordinate to all non- subordinated debt of the Issuer and all debt ranking as “Tier 1 Capital Ratio” shall mean Tier 1 Capital as a percent- Subordinated Loan Capital of the Issuer. age of risk-weighted assets calculated according to the principles specified in the Danish Financial Supervisory Author- 4. INTEREST PROVISIONS ity’s reporting form for assessment of capital adequacy, CS01, 4.1 Fixed Coupon Amount. The Issuer shall pay the Fixed Coupon item 4 (Kernekapital (inkl. hybrid kernekapital) efter fradrag i on the Notes (“Fixed Coupon Amount”) semi-annually on procent af vægtede poster). each of the Fixed Coupon Payment Dates, the first time on 1 November 2009. “Trading Day” means a day where the Stock Exchange is open for trading. 4.2 Calculation of Fixed Coupon. The Fixed Coupon Amount shall be calculated based on Actual/Actual (ICMA) by multiplying “Variable Dividend Coupon Charge” shall have the meaning the Fixed Coupon by the Outstanding Principal Amount. ascribed to it in paragraph 4.3. 4.3 Variable Dividend Coupon Charge. In addition to the Fixed “VD Calculation Date” shall have the meaning ascribed to it in Coupon Amount, the Issuer shall pay a variable dividend cou- paragraph 4.4. pon charge on the Notes (“Variable Dividend Coupon Charge”) calculated as the higher of: “Volume Weighted Average Price” shall mean in respect of the Shares the volume-weighed average price published by or (i) DKK 0, and derived from the price displayed under the heading “Bloomb- erg VWAP” on Bloomberg page SPNO DC VAP (or any (ii) (Dividend Declared x 1.25 x Loan above Market Capitalisa- successor page) in respect of the period from 9 a.m. CET on tion) – Annual Fixed Coupon Amount. the first day of the relevant calculation period to 5 p.m. CET on the last day of the relevant calculation period. 4.4 Calculation of the Variable Dividend Coupon Charge. The Variable Dividend Coupon Charge shall be calculated five “VP” shall mean VP Securities A/S, Central Business Register Banking Days prior to 1 May of every year (“VD Calculation (CVR) no. 21599336. Date”). In the event that the Issuer shall declare a dividend at a later date in April of that year such date shall be deemed 1.2 For the purpose of these Conditions, all terms defined in to be the VD Calculation Date. The Variable Dividend Coupon the singular shall have the same meaning in the plural and Charge shall become payable on 1 May of every year, the first vice-versa. All indefinite nouns shall have the same meaning time being 1 May 2012 on the basis of the period starting on 1 in the definite form, and all references to paragraphs and ap- October 2010 and ending on the VD Calculation Date in 2012. pendices shall be references to paragraphs and appendices of these Conditions. 5. alternatIVE COUPON PAYMENT 5.1 Alternative Coupon Payment Event. If, following the making of any Coupon payment or part thereof the Issuer would

Spar Nord Bank – Prospectus Appendix 1 175 have a solvency (solvens) of less than 110% of the Solvency 6. coUPON CANCELLATION Requirement (“Alternative Coupon Payment Event”) on any 6.1 Non-payment of Coupon (cancellation event). In the event Fixed Coupon Payment Date the payment of the relevant that the Issuer on any Fixed Coupon Payment Date: Coupon or part thereof shall be settled by way of issue of new Shares or delivery of existing own Shares (“ACPE Shares”) to (i) Does not have Available Free Reserves; or the Noteholder(s) pro rata with their holding of Notes on the relevant Fixed Coupon Payment Date or such later date as (ii) Does not satisfy the Capital Requirement; may be required in accordance with paragraph 11.6.2 (“ACPE Conversion Date”). The Coupon shall be converted into ACPE the Coupon shall be cancelled and shall not fall due. Shares on the ACPE Conversion Date by registration of the resulting capital increase with the Danish Commerce and The Danish Financial Supervisory Authority may require that Companies Agency (Erhvervs- og Selskabsstyrelsen). a Coupon be cancelled and not fall due, when the Danish Financial Supervisory Authority in its sole discretion assesses 5.2 Pari Passu Shares. The ACPE Shares shall carry the same that the Issuer does not satisfy the Capital Requirement rights as the Issuer’s existing Shares on the ACPE Conversion before or following the payment of such Coupon, or assesses Date and shall be listed on the Stock Exchange. The ACPE that the payment of the Coupon would have an adverse effect Shares shall be negotiable instruments and shall be freely on the Issuer’s financial position which would result in the transferable. The ACPE Shares shall carry dividend as from Issuer being unlikely to meet its Capital Requirement. the time of registration with the Danish Commerce and Com- panies Agency (Erhvervs- og Selskabsstyrelsen) as the Issuer’s 6.2 Non-payment of Coupon (reduction event). Subject to para- Shares on the ACPE Conversion Date. graph 6.1, if the Coupon payable on the Notes on any Fixed Coupon Payment Date either: 5.3 Implementation of issue of ACPE Shares. The issue of ACPE Shares shall be implemented by way of an issue of ACPE (i) Exceeds the amount of Available Free Reserves; or Shares pro rata to the Noteholder(s)’ holding of Notes on all accounts with VP in accordance with the from time to time (ii) The Issuer prior to or following payment of such Coupon standard procedures of VP. In exchange for the valid issue of will not satisfy the Capital Requirement; ACPE Shares the Noteholder(s) will after the ACPE Conver- sion Date cease to have any claim in respect of the Coupon the Coupon on the Notes on the relevant date will be reduced converted into ACPE Shares. The Noteholder(s) shall be to an amount equal to with regard to (i) the Available Free obliged to subscribe for the ACPE Shares if and to the extent Reserves or with regard to (ii) the greatest amount following required under applicable law. the payment of which the Issuer will continue to satisfy the Capital Requirement. 5.4 Number of ACPE Shares. The Coupon to be converted due to an Alternative Coupon Payment Event shall be converted into In the event that less than the full payment of a Coupon is to a number of ACPE Shares in accordance with the following be made, the amount to be paid on any Note shall represent formula: a pro rata share of the full amount available for payment calculated by reference to the Denomination as a propor- ACPE Shares = Coupon (on all of the Notes) to be converted tion of the sum of the Outstanding Principal Amount and the at the ACPE Conversion Date divided by the ACPE Reference total outstanding principal amount of any pari passu ranking Price. capital instruments.

“ACPE Reference Price” is defined as the price calculated in 6.3 Cancellation of non-paid Coupon. Any Coupon payment which accordance with paragraph 11.6.2 and 11.6.3 (if applicable). has not been made (in whole or in part) with reference to Paragraph 11.5, 11.7, 11.9, 11.10, 11.13 and 11.14 shall apply paragraph 6.1 and 6.2 shall be cancelled and no request for mutatis mutandis with regard to an Alternative Coupon Pay- payment may subsequently be made. ment Event and the issue of the ACPE Shares. 6.4 Accrual of Coupon. Accrual of Coupon will cease with effect 5.5 Notice of Alternative Coupon Payment Event. In the event of from in respect of paragraph 6.1(i) or 6.2(i) the date of approv- an Alternative Coupon Payment Event as set out in paragraph al by the general meeting of shareholders of the Issuer of the 5.1 the Issuer shall give a notice (the “ACPE Notice”) to the relevant annual audited accounts disclosing that the Issuer Noteholder(s) and the public to this effect, in accordance does not have sufficient Available Free Reserves or in respect with the rules of VP, the rules of the Stock Exchange and of paragraph 6.1(ii) or 6.2(ii) the date on which the Issuer fails applicable law, no less than 3 Trading Days and no more than to satisfy the Capital Requirement. Where Coupon has ceased 5 Trading Days prior to the ACPE Conversion Date subject to accrue accrual of Coupon will recommence in respect of always to the application of paragraph 11.6.2 (the “ACPE An- paragraph 6.1(i) or 6.2(i) from the date of the general meeting nouncement Date”). The ACPE Notice shall be unconditional of shareholders’ approval of audited annual accounts disclos- and irrevocable and shall be in the form attached as Appendix ing that the Issuer has Available Free Reserves or in respect 2. The ACPE Notice shall be given prior to the opening of the of paragraph 6.1(ii) or 6.2(ii) the date on which the Issuer next Stock Exchange on the ACPE Announcement Date. No later satisfies the Capital Requirement. than on the ACPE Conversion Date and prior to conversion of the Coupon, the Issuer shall give a notice to the Noteholder(s) 6.5 Notice. The Issuer shall give notice to the Noteholder(s) as and the public of the ACPE Reference Price in accordance soon as possible following the occurrence of an event imply- with the rules of VP, the rules of the Stock Exchange and ap- ing that non-payment, in whole or in part, of Coupon under plicable law. this paragraph 6 may arise.

176 Appendix 1 Prospectus – Spar Nord Bank 7. redUCTION OF PRINCIPAL AND UNPAID COUPON (b) The total sum of the Denomination of the Notes to be 7.1 Reduction of Outstanding Principal and Coupon. The Issuer redeemed has been replaced by other Tier 1 Capital of at may in accordance with section 132 of the Danish Financial least the same quality as the Notes. Business Act, by a resolution passed at a general meeting of its shareholders duly convened in accordance with Danish 8.4 Redemption price in the fifth year from the Issue Date. The law and the Issuer’s Articles of Association, resolve to reduce Issuer may redeem all or part of the Notes, with the addition and cancel (in whole or in part) the Notes, any due but unpaid of any accrued and due but unpaid Coupon, on or after the Coupon and any Coupon accrued on the Notes since the last Optional Redemption Date but prior to the first day of the Fixed Coupon Payment Date or VD Calculation Date, on a pro sixth year from the Issue Date, at a price per Note which is rata basis with any pari passu ranking capital instruments the higher of: outstanding, upon the occurrence of all of the following circumstances: (a) The Denomination; or

(a) The equity capital of the Issuer has been lost; (b) The Early Redemption Amount;

(b) A general meeting of the shareholders of the Issuer has plus effectively resolved in accordance with Danish law and the Issuer’s Articles of Association to reduce the share capital (i) In respect of (a) above, Fixed Coupon accrued on the of the Issuer to zero; and Denomination from the latest Fixed Coupon Payment Date until the Redemption Date; plus (c) Following the resolution referred to in (b) above either: (A) sufficient new share and/or other capital of the Issuer is (ii) In respect of both (a) and (b) above, Variable Dividend Cou- subscribed or contributed so as to enable the Issuer, fol- pon Charge accrued from the latest VD Calculation Date lowing any such reduction and cancellation of the Notes, until the Redemption Date. to comply with the Capital Requirement, or (B) the Issuer discontinues its business without a loss to its non-subor- 8.5 Redemption price in the sixth year from the Issue Date. The dinated creditors. Issuer may redeem all or part of the Notes, with the addition of any accrued and due but unpaid Coupon on the Denomina- 7.2 Prior Approvals and Notice. The amount of any reduction, on or after the first day of the sixth year from the Issue tion pursuant to paragraph 7.1 shall be subject to the prior Date but prior to the first day of the seventh year from the approval of the Issuer’s elected external auditors and the Issue Date, at a price per Note of: Danish Financial Supervisory Authority. The Issuer shall give notice to the Noteholder(s) of the reduction and cancella- (a) 105 per cent of the Denomination; plus tion immediately following the passing of the resolution, cf. paragraph 7.1 above. (b) In the event of a cancellation pursuant to paragraph 6.3 has occurred at any time since the Issue Date up and until 7.3 Effect. The Notes to be reduced and cancelled pursuant to the Redemption Date, 5 per cent of the Denomination; paragraph 7.1 shall be selected in accordance with the from plus time to time standard procedures of VP and will take effect on the date specified in the resolution approving any such (c) Fixed Coupon accrued on the Denomination from the reduction and cancellation. The Noteholder(s) will thereafter latest Fixed Coupon Payment Date until the Redemption cease to have any claim in respect of any Notes to be reduced Date; plus and cancelled. To the extent that only part of the Notes has been reduced and cancelled, Coupon will continue to accrue (d) Variable Dividend Coupon Charge accrued on the De- in accordance with the terms hereof on the remaining Notes. nomination from the latest VD Calculation Date until the Redemption Date. 8. redemptION OF NOTES 8.1 No maturity. The Notes are perpetual and shall not fall due, 8.6 Redemption price in or after the seventh year from Issue neither in whole nor in part, at any fixed date. No demand Date. The Issuer may redeem all or part of the Notes, with may be made for redemption, in whole or in part, of the the addition of any accrued and due but unpaid Coupon on Notes, unless expressly specified in these Conditions. the Denomination, on or after the first day of the seventh year from the Issue Date, at a price per Note of: 8.2 Non-redemption. The Notes shall be non-callable until the Optional Redemption Date. (a) 110 per cent of the Denomination; plus

8.3 Redemption at the option of the Issuer. The Issuer may, (b) Fixed Coupon accrued on the Denomination from the subject to the written consent of the Danish Financial Super- latest Fixed Coupon Payment Date until the Redemption visory Authority, redeem all or part of the Notes, with the ad- Date; plus dition of accrued and due but unpaid Coupon, on or after the Optional Redemption Date. If the Notes are redeemed before (c) Variable Dividend Coupon Charge accrued on the De- the first day of the sixth year from the Issue Date, redemption nomination from the latest VD Calculation Date until the shall, however, be subject to the following conditions being Redemption Date. met on the Redemption Date: 8.7 Partial redemption. The Issuer may only redeem the Notes in (a) The Issuer’s Tier 1 Capital Ratio shall be at least 12 per part subject to the following conditions: cent following such redemption; or

Spar Nord Bank – Prospectus Appendix 1 177 (a) The Issuer may redeem the Notes by no more than three a net amount corresponding to the amount they would have redemption calls before the Notes are redeemed in full received had such Taxes not been deducted. (with the addition of accrued and due but unpaid Coupon). 9.6 Expenses. The Issuer shall pay all expenses incurred by the (b) Any partial redemption shall comprise at least 20 per cent Noteholder(s) in connection with any breach of these Condi- of the Original Number of Notes per call. tions.

(c) At least 30 per cent of the Original Number of Notes shall 10. oblIGATIONS OF THE ISSUER remain outstanding following a partial redemption. 10.1 Obligations of the Issuer. The Issuer shall fulfil all obligations stipulated in this paragraph 10 as from the Issue Date (d) The Notes to be redeemed shall be selected in accordance and throughout the Term of the Loan; provided, however, that with the from time to time standard procedures of VP. paragraphs 10.1.2, 10.1.5, 10.1.6 and 10.1.7 shall terminate upon the expiry of the Issuer’s Conversion Option Period. (e) Any redemption shall be subject to the prior written consent of the Danish Financial Supervisory Authority. 10.1.1 Capital reductions and own Shares. The Issuer shall not (i) effect any capital reductions except to cover losses or to carry 8.8 Redemption (capital and tax event). Notwithstanding para- out reductions pursuant to paragraph 7.1, or (ii) purchase graph 8.2 and 8.7, if on or after the first day of the fourth year own Shares, including initiating new share buy back pro- from the Issue Date the Notes (a) due to statutory amend- grams, if such purchase will constitute a violation of the Act ments no longer fully can be included in the Issuer’s Hybrid on State-funded Capital Injections. The Issuer may not sell Tier 1 Capital or (b) if the Issuer no longer will be entitled own Shares on terms and conditions that are more burden- to deduct Coupon (in whole or in part) for tax purposes, the some for the Issuer than market terms unless it is necessary Issuer may, subject to the prior written consent of the Danish to do so in order to honour the Issuer’s employee stock option Financial Supervisory Authority, redeem such part of the programs. Notes, with the addition of any accrued and due but unpaid Coupon, which (as the case may be) fail to qualify as Hybrid 10.1.2 Issue of share options etc. The Issuer may not issue share Tier 1 Capital or for which Coupon no longer can be de- options, warrants, convertible debt instruments or similar ducted for tax purposes. The price payable in respect of such instruments on terms that are less favourable to the Issuer redemption shall be the price determined in accordance with than market terms, unless such issue is part of a general paragraph 8.4 to 8.6, paragraph 8.4 applying as from the first employee scheme. day of the fourth year from the Issue Date. 10.1.3 Dividends and redemption of subordinated debt. The Issuer 8.9 Notice. The Issuer shall give notice to the Noteholder(s) of its may not at any time pay dividend, repay or buy back any debt intent to exercise its rights under this paragraph 8 no later that is subordinated to the Notes or purports to rank pari than 15 days and no more than 60 days before redemption passu with the Notes or other Hybrid Tier 1 Capital where may take place. (i) any Coupon that is past due remains unpaid or (ii), if relevant, Coupon has not been paid in full on two consecu- 9. PAYMENTS tive Fixed Coupon Payment Dates following an Alternative 9.1 Currency. All payments under these Conditions shall be Coupon Payment Event or the date on which a cancellation made in DKK. of Coupon, see paragraph 6, has occurred. Notwithstanding the aforementioned, the Issuer may purchase debt that is 9.2 Time. Payments of the Fixed Coupon shall be made semi- subordinated to the Notes or purports to rank pari passu with annually on each of the Fixed Coupon Payment Dates of each the Notes or other Hybrid Tier 1 Capital to its trading portfolio year. Payments of the Variable Dividend Coupon Charge shall (handelsbeholdning) in order to meet purchase orders from be made annually on 1 May of each year starting on 1 May the Issuer’s customers in respect of the Issuer operating as a 2012. Any payment by the Issuer under these Conditions shall “market maker”. be made not later than on the due date of the relevant payment through VP, and shall be available to the Noteholder(s) 10.1.4 Liquidation. The shareholders of the Issuer may not approve on such date. any resolution to liquidate the Issuer unless where such liquidation is required by law. 9.3 Principal and Coupon. Payments of principal and Coupon in respect of Notes shall be made to the Noteholder(s) shown in 10.1.5 Merger and demerger. The Issuer may not enter into a (i) the relevant records of VP in accordance with and subject to merger agreement (fusionsplan), and the shareholders of the the rules and regulations from time to time governing VP and Issuer may not approve such merger agreement, if the valu- as set out in paragraph 2.2. ers declare pursuant to section 134(c) of the Danish Compa- nies Act (aktieselskabsloven) that the consideration paid for 9.4 Non-Banking Day. If a Fixed Coupon Payment Date falls the Shares is not fair and reasonable, or (ii) demerger agree- on a day which is not a Banking Day, payment of Coupon ment (spaltningsplan) if such agreement may have a material shall be postponed to the following Banking Day without the adverse effect on the Danish State’s interests. Noteholder(s) being entitled to any further interest or other payment in respect of any such delay. 10.1.6 Delisting. The Issuer may not request for a delisting of the Shares from the Stock Exchange. 9.5 No withholding. All the Issuer’s payments under these Conditions shall be made without any right of set-off and 10.1.7 Other. The Issuer may not carry out any transaction or take without any right to deduct Taxes. If the Issuer pays an any other action which would imply that in the event of a con- amount from which Taxes are to be deducted, such amount version of Coupon or Notes pursuant to paragraph 5 or 11 the shall be increased to ensure that the Noteholder(s) receive economic value of the ACPE Shares or the New Shares to be received following the determination of the ACPE Reference

178 Appendix 1 Prospectus – Spar Nord Bank Price or Reference Price is less than the value of such ACPE 11.6.1 No Price Sensitive Information. If the Issuer (i) is not in Shares or New Shares (respectively) had such transaction or possession of Price Sensitive Information on the Conver- action not been executed or carried out. sion Announcement Date, (ii) has not been in possession of Price Sensitive Information within the last 5 consecutive 11. ISSUER’S CONVERSION OPTION AND OBLIGATION Trading Days (and any other day within that period) prior to 11.1 Issuer’s Conversion Option. For a period of up to and not the Conversion Announcement Date, and (iii) do not believe including the first day of the sixth year from the Issue Date or foresee, after having made due enquiry into the business, (the “Issuer’s Conversion Option Period”), the Issuer may at assets, liabilities, condition (financial or otherwise), results, its discretion and at any time require that Notes be converted and operations of the Issuer and the Issuer’s Group, that at the Denomination of the Notes, with the addition of any it will become in possession of Price Sensitive Information accrued and due but unpaid Coupon on the Denomination, within the first 10 consecutive Trading Days (and any other in individual tranches of 20 per cent of the Original Number day within that period) after the Conversion Announcement of Notes into New Shares of the Issuer, if the Issuer’s Hybrid Date, the Reference Price shall be calculated in accordance Tier 1 Capital Ratio exceeds 35 per cent (the “Issuer’s Con- with the following formula: version Option”). The Volume Weighted Average Price of the Shares calculated 11.2 Tranches. The Issuer’s Conversion Option may only be over a period of three (3) consecutive Trading Days before the exercised in individual tranches of 20 per cent of the Original Conversion Announcement Date (excluding the Conversion Number of Notes at a time, unless a conversion of more than Announcement Date) minus 5 per cent. one tranche of 20 per cent is necessary to bring the Issuer’s Hybrid Tier 1 Capital Ratio (including with the effect of the 11.6.2 Price Sensitive Information. If paragraph 11.6.1 does not conversion) to a level at or below 35 per cent, in which case apply, the Reference Price shall be calculated in accordance the Issuer may exercise the Issuer’s Conversion Option in with the following formula (subject to paragraph 11.6.3): two or more tranches of 20 per cent of the Original Number of Notes as is necessary to bring the Issuer’s Hybrid Tier 1 The average of (i) the Volume Weighted Average Price of Capital Ratio (including with the effect of the conversion) to a the Shares calculated over a period of three (3) consecutive level at or below 35 per cent. Trading Days before the Conversion Announcement Date (excluding the Conversion Announcement Date) and (ii) the 11.3 Implementation of Conversion. The Issuer’s Conversion Volume Weighted Average Price of the Shares calculated over Option shall be implemented by way of a proportionate a period starting on and including the Conversion Announce- reduction and cancellation of the holding of Notes on all ment Date and the two (2) consecutive Trading Days after the accounts with VP in accordance with the from time to time Conversion Announcement Date. procedures of VP. In exchange for a valid issue of New Shares, the Noteholder(s) will after the Settlement Date cease to For the avoidance of doubt, in the event that the Issuer is in have any claim in respect of any Notes converted. To the possession of Price Sensitive Information, such Price Sensi- extent only part of the Notes has been converted, Coupon tive Information shall be disclosed to the public in accord- will continue to accrue in accordance with the terms hereof ance with applicable law no later than on the Conversion on the Denomination of the remaining outstanding Notes. Announcement Date. If the Issuer believes or foresees, after The Noteholder(s) shall be obliged to subscribe for the New having made due enquiry into the business, assets, liabilities, Shares in the form and manner and to the extent required condition (financial or otherwise), results, and operations under applicable law. of the Issuer and the Issuer’s Group, that it will become in possession of Price Sensitive Information within the next 10 11.4 Number of New Shares. The Notes to be converted pursuant consecutive Trading Days, the Conversion Announcement to the Issuer’s Conversion Option shall be converted into a shall be made no earlier than on the date of disclosure of number of new Shares (“New Shares”) in accordance with the such Price Sensitive Information. following formula: 11.6.3 Expert. If (i) the Shares are not actually traded on the Stock New Shares = The sum total of the Denomination of all of the Exchange on any Trading Day within the last three (3) con- Notes to be converted with the addition of any accrued and secutive Trading Days prior to the Conversion Announcement due but unpaid Coupon on such Notes divided by the Refer- Date (excluding the Conversion Announcement Date) or, if ence Price. paragraph 11.6.2 applies, the Shares are not actually traded on the Stock Exchange on the Conversion Announcement 11.5 Rounding. If the Denomination of the Notes which are con- Date or on any Trading Day within the first two (2) Trading verted does not correspond to a whole number of New Shares Days after the Conversion Announcement Date or (ii) the in respect of any account with VP, the number of New Shares Danish State requests this in writing no later than 2 Trading shall be rounded downwards to the nearest whole number. Days after the expiry of the relevant period for calculating No fractions of New Shares will be delivered on conversion. the Reference Price as set out in (i) above, the Reference Any balance on the Notes which may thus not be converted Price shall, after consultation with the Issuer and the Danish into New Shares, shall be paid in cash at par value of the State, be fixed by an independent investment bank of repute, Notes in connection with the conversion in accordance with appointed by the Danish State after agreeing with the Issuer, the from time to time standard procedures of VP. whose written opinion shall be conclusive and binding on the Issuer and the Danish State, save to the extent of manifest 11.6 Reference Price. The reference price (“Reference Price”) error. If the Reference Price is to be determined by an invest- expressed in DKK per Share shall be calculated as set out in ment bank, the conversion of the relevant Notes shall not- paragraphs 11.6.1 - 11.6.3: withstanding paragraph 11.12 take place as soon as possible after the investment bank has informed the Issuer and the

Spar Nord Bank – Prospectus Appendix 1 179 Noteholder(s) of the Reference Price. The Issuer shall bear 11.12 Exercise of Issuer’s Conversion Option. If the Issuer wishes all costs to the investment bank. This provision shall cease to or is obliged to exercise the Issuer’s Conversion Option apply as and when the Danish State no longer is a Noteholder. as set out in paragraphs 11.1 and 11.11, respectively, the Issuer shall give a notice (“Notice of Conversion”) to the 11.7 Delivery. The New Shares shall be delivered on the Settle- Noteholder(s) and the public to this effect, in accordance ment Date in dematerialised form through VP to the account with the rules of VP, the rules of the Stock Exchange and of the Noteholder(s) in which the Notes converted were kept applicable law, no less than 3 Trading Days and no more than and otherwise in accordance with the from time to time 5 Trading Days prior to the Conversion Date (“Conversion standard procedures of VP. Announcement Date”). The Notice of Conversion shall be unconditional and irrevocable and shall be in the form at- 11.8 Pari Passu Shares. The New Shares shall carry the same tached as Appendix 3. The Notice of Conversion shall be given rights as the Issuer’s existing Shares on the Conversion Date prior to the opening of the Stock Exchange on the Conversion and shall be listed on the Stock Exchange. The New Shares Announcement Date. No later than on the Conversion Date shall be negotiable instruments and shall be freely transfer- and prior to conversion of the relevant Notes, the Issuer shall able. The New Shares shall carry the same right to dividend give a notice to the Noteholder(s) and the public of the Refer- as from the time of registration with the Danish Commerce ence Price in accordance with the rules of VP, the rules of the and Companies Agency (Erhvervs- og Selskabsstyrelsen) as Stock Exchange and applicable law. the Issuer’s Shares on the Conversion Date. 11.13 Tax. The Issuer shall pay any and all Taxes of the 11.9 Conditions. The Issuer’s Conversion Option can only be ex- Noteholder(s) arising on exercise of the Issuer’s Conversion ercised (including pursuant to paragraph 11.11) and a Notice Option. of Conversion can only be delivered if each and every of the following conditions are met: 11.14 Costs. The Issuer shall bear any and all costs to VP and the Noteholder(s)’ depositaries arising on exercise of the Issuer’s (a) the Issuer has obtained the necessary corporate authori- Conversion Option. sation by a general meeting of the Issuer to issue the New Shares to the Noteholder(s) in exchange for Notes as set 12. breach OF CONDITIONS out in this paragraph 11; 12.1 Breach of Conditions and Remedies. In case of Issuer’s breach or anticipatory breach (anteciperet misligholdelse) (b) the Issuer has on or before the Conversion Date presented of its obligations under these Conditions, each Noteholder a legal opinion from the Issuer’s external legal counsel to is entitled to exercise any remedies in accordance with Dan- the Noteholder(s) in a form and with a content satisfactory ish law, including to institute legal proceedings to enforce to the Danish State confirming that the Issuer has the nec- its rights. For the avoidance of doubt, the remedies of the essary corporate authorisation to issue the New Shares Noteholder(s) may not result in the Issuer having to pay any as set out in this paragraph 11, and that the New Shares amount under these Conditions at an earlier time than when are duly authorised and will be validly issued and, when the amount would otherwise have been due and payable issued, will rank pari passu with the Issuer’s Shares on the hereunder, except as set out in paragraph 12.2. Conversion Date; 12.2 Cessation of Business. It shall (without limitation) be con- (c) the Issuer’s articles of association contain no restrictions sidered a breach of these Conditions if (a) Issuer has entered on negotiability, ownership, voting rights, etc.; into liquidation, (b) a bankruptcy order is issued against the Issuer, or (c) the Issuer’s authorisation as a credit institution (d) the Issuer has not entered into liquidation or suspended is cancelled and the Danish Financial Supervisory Author- payments and no petition for bankruptcy has been filed ity has approved a winding-up of the Issuer through other against the Issuer; and means than liquidation, bankruptcy or merger in accordance with Section 227 of the Financial Business Act. If an event as (e) no Corporate Action which may have an influence on the set out in this paragraph occurs in respect of the Issuer, any price of the Shares is pending or announced within the Noteholder(s) may notify the Issuer that the Notes are due period of 5 consecutive Trading Days before and 10 con- and payable at the amounts set out in paragraphs 8.4 to 8.6 secutive Trading Days after the Conversion Announcement (paragraph 8.4 applying as from the first day of the fourth Date, or, if the Reference Price is determined in accord- year from the Issue Date) or, if the Notes were to become pay- ance with paragraph 11.6.3, within the period relevant for able before the first day of the fourth year, at par value. the investment bank’s determination of the Reference Price. 13. amendments AND NO CONSENT 13.1 Amendments. Any amendment to these Conditions which 11.10 No adjustment. The Reference Price shall not be subject to entails that the Notes do not constitute Hybrid Tier 1 Capital adjustment as a result of the Issuer’s increase or decrease of shall be subject to the prior written approval of the Danish share capital, issuance of warrants on the Shares or convert- Financial Supervisory Authority. ible instruments, merger or demerger. 13.2 No Consent. Notwithstanding the provisions of these Condi- 11.11 Issuer’s conversion obligation. If the Issuer’s Initial Hybrid tions, the consent of the Danish Financial Supervisory Tier 1 Capital Ratio exceeds 50 per cent, the Issuer is obliged Authority shall not be required under these Conditions, and to exercise the Issuer’s Conversion Option in individual the Danish Financial Supervisory Authority has no pow- tranches of 20 per cent of the Original Number of Notes to ers vis-à-vis the Issuer, if the Issuer no longer is subject to the extent (and only to the extent) necessary to bring the supervision from the Danish Financial Supervisory Authority Issuer’s Initial Hybrid Tier 1 Capital Ratio (including with the in accordance with the Danish Financial Business Act. effect of the conversion) to a level at or below 35 per cent.

180 Appendix 1 Prospectus – Spar Nord Bank 14. governING LAW AND JURISDICTION 14.1 Governing law and jurisdiction. These Conditions shall be governed by Danish law. Any dispute arising out of or in connection with these Conditions shall be brought before the Copenhagen City Court. The Issuer or any Noteholder may, however, request that the case be sent for trial in the Danish Eastern High Court.

Date: 29 June 2009

The Issuer, Spar Nord Bank A/S:

Name: Lasse Nyby Name: John Lundsgaard Title: Chief Executive Officer Title: Executive Officer

Spar Nord Bank – Prospectus Appendix 1 181 Appendix 1

[List of the Issuer’s Hybrid Tier 1 Capital]

182 Appendix 1 Prospectus – Spar Nord Bank Appendix 2

To the Noteholders and Nasdaq OMX Copenhagen A/S

[date]

Share settlement of coupon payable on notes under Spar Nord Bank’s DKK 1,265,000,000 notes programme in accordance with the Danish Act on State-Funded Capital Injections (the “Programme”)

We refer to the Programme. Terms used in this notice have the same meaning as used in the Programme.

We hereby give notice in accordance with the Programme of an Alternative Coupon Payment Event in respect of Coupon payable on [date] with a total amount of DKK [amount] which will be converted into shares of Spar Nord Bank A/S (“Spar Nord Bank”).

The Coupon payable will be converted into shares of Spar Nord Bank in accordance with the Programme and based on a conversion price of the average of (i) DKK [amount], corresponding to the volume weighted average price of Spar Nord Bank’s shares calculated over the three trading days prior to today, and (ii) the volume weighted average price of Spar Nord Bank’s shares calculated over the next three trading days (including today). Spar Nord Bank will on [date] announce the final price at which the notes are converted into new shares and the resulting amount of new shares to be issued.

[Description of matters giving rise to settlement in shares.]

[Timetable for issuing, delivering and listing new shares.]

The new shares will in every respect carry the same rights as Spar Nord Bank’s existing shares from the time of registration of the new shares with the Danish Commerce and Companies Agency (Erhvervs- og Selskabsstyrelsen). The new shares will also carry the same right to dividend as the existing shares. The new shares will be negotiable instruments and will be freely transferable.

[Information on Danish State as major shareholder if a relevant limit is exceeded]

Spar Nord Bank A/S

Spar Nord Bank – Prospectus Appendix 1 183 Appendix 3

To the Noteholders and Nasdaq OMX Copenhagen A/S

[date]

Conversion of notes under Spar Nord Bank’s DKK 1,265,000,000 notes programme in accordance with the Danish Act on State-Funded Capital Injections (the “Programme”)

We refer to the Programme. Terms used in this notice have the same meaning as used in the Programme.

We hereby give notice in accordance with the Programme that Spar Nord Bank A/S (“Spar Nord Bank”) [exercises the Issuer’s Conversion Option]/[is obliged to require conversion] on [insert Conversion Date] of notes with a total nominal value of DKK [amount] into shares of Spar Nord Bank under the Programme.

The notes will be converted into shares of Spar Nord Bank in accordance with the Programme and based on a conversion price of [[DKK [amount], corresponding to the volume weighted average price of Spar Nord Bank’s shares calculated over the three trading days prior to this announcement minus 5 per cent. Consequently, Spar Nord Bank will issue [ ] shares of nominal value DKK 10 each to the holders of converted notes (subject to any applicable rounding).] [representing the average of (i) DKK [amount], corresponding to the volume weighted average price of Spar Nord Bank’s shares calculated over the three trading days prior to today, and (ii) the volume weighted average price of Spar Nord Bank’s shares over the next three trading days (including today). Spar Nord Bank will on [date] announce the final price at which the notes are converted into new shares and the resulting amount of new shares to be issued]].

[Description of matters giving rise to conversion and the effect the conversion will have on the Issuer’s Hybrid Tier 1 Capital Ratio and solvency ratio.]

[Timetable for issuing, delivering and listing new shares.]

[Information on Danish State as major shareholder if a relevant limit is exceeded]

Spar Nord Bank A/S

184 Appendix 1 Prospectus – Spar Nord Bank Appendix 2

Part F – Financial information erence to the Bank’s website: http://www.sparnord.dk. Other than the stated information, the contents of the website do not form part Pursuant to item 20.1 of Appendix I to Commission Regulation (EC) of the prospectus. No. 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards informa- The below table of cross references refers to information in the tion contained in prospectuses as well as the format, incorporation Bank’s annual reports for the financial years ended 31 December by reference and publication of such prospectuses and dissemina- 2011, 2010 and 2009 as released through NASDAQ OMX, which are tion of advertisements (the Prospectus Regulation), the Prospectus available at the Bank’s website: www.sparnord.dk. The annual re- shall contain audited historical financial information covering the ports comprise audited consolidated and parent company financial latest three financial years. Pursuant to article 28 of the Prospectus statements for the financial years ended 31 December 2011, 2010 Regulation and section 18(2) of the Danish Prospectus Order, the and 2009. No other information in the Prospectus is audited. following information will be incorporated in the Prospectus by ref-

Table 102 – Table of Cross References

Information Source Management’s statement for 2011 Annual report 2011, p. 45 Reports by the Internal Audit department for 2011 Annual report 2011, p. 46 Reports by the independent auditors for 2011 Annual report 2011, p. 47 Consolidated income statement for 2011 Annual report 2011, p. 50 Consolidated statement of comprehensive income for 2011 Annual report 2011, p. 50 Consolidated balance sheet at 31 December 2011 Annual report 2011, p. 51 Consolidated statement of changes in equity for 2011 Annual report 2011, pp. 52 - 54 Consolidated cash flow statement for 2011 Annual report 2011, p. 55 Notes to the consolidated financial statements for 2011 Annual report 2011, pp. 58 - 124

Management’s statement for 2010 Annual report 2010, p. 49 Report by the Internal Audit department for 2010 Annual report 2010, p. 50 Independent auditors’ report for 2010 Annual report 2010, p. 51 Consolidated income statement for 2010 Annual report 2010, p. 53 Consolidated statement of comprehensive income for 2010 Annual report 2010, p. 53 Consolidated balance sheet at 31 December 2010 Annual report 2010, p. 54 Consolidated statement of changes in equity for 2010 Annual report 2010, pp. 55 - 57 Consolidated cash flow statement for 2010 Annual report 2010, p. 58 Notes to the consolidated financial statements for 2010 Annual report 2010, pp. 59 - 124

Management’s statement for 2009 Annual report 2009, p. 45 Report by the Internal Audit department for 2009 Annual report 2009, p. 46 Independent auditors’ report for 2009 Annual report 2009, p. 47 Consolidated income statement for 2009 Annual report 2009, p. 50 Consolidated statement of comprehensive income for 2009 Annual report 2009, p. 50 Consolidated balance sheet at 31 December 2009 Annual report 2009, p. 51 Consolidated statement of changes in equity for 2009 Annual report 2009, pp. 52 - 54 Consolidated cash flow statement for 2009 Annual report 2009, p. 55 Notes to the consolidated financial statements for 2009 Annual report 2009, pp. 57 - 115

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