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Annual Report 1998 Unidanmark Unibank Contents Summary . 6 Financial review . 8 The Danish economy . 14 Business description . 15 Retail Banking . 15 Corporate Banking . 21 Markets . 23 Investment Banking . 25 Risk management . 26 Capital resources . 33 Employees . 35 Management and organisation . 37 Accounts Accounting policies . 42 The Unidanmark Group . 44 Unidanmark A/S . 50 Unibank A/S . 55 Notes . 59 Unidanmark’s Local Boards of Shareholders . 84 Unibank’s Business Forum . 85 Branches in Denmark . 86 International directory . 88 Notice of meeting . 90 Management Supervisory Board of Unidanmark Jørgen Høeg Pedersen (Chairman) Holger Klindt Andersen Laurids Caspersen Boisen Lene Haulrik* Steffen Hvidt* Povl Høier Mogens Hugo Jørgensen Brita Kierrumgaard* Kent Petersen* Mogens Petersen Keld Sengeløv * Appointed by employees Executive Board of Unidanmark Thorleif Krarup Supervisory Board of Unibank Unibank’s Supervisory Board has the same members as the Supervisory Board of Unidanmark. In addition, as required by Danish banking legisla- tion, the Danish Minister of Business and Industry has appointed one mem- ber of the Supervisory Board of Unibank, Mr Kai Kristensen. Executive Board of Unibank Thorleif Krarup (Chairman) Peter Schütze (Deputy Chairman) Christian Clausen Jørn Kristian Jensen Peter Lybecker Henrik Mogensen Vision We are a leading financial services company in Denmark with a prominent position in the Nordic market. We ensure our shareholders a return in line with the return of the best among comparable Nordic financial services companies. Through our customer focus, efficient business processes and technology we create customer satisfaction and attract new customers. This confirms the customers in their choice of bank. Unibank is an attractive workplace where team spirit and customer focus are important criteria for individual success. The corporate culture, the demands and rewards for professionalism, enthusiasm and ability to change attract and develop the best employees. We carry out our business activities with due respect for existing values and norms and with an understanding of the importance a large financial services company has for society. Mission We offer all types of financial services to retail customers in Denmark. Furthermore, we offer a number of products and services to selected retail customers in the Nordic countries. In addition, we provide asset management to retail customers outside the Nordic countries. We offer all types of banking products and services to Danish and selected Nordic companies, institutional investors, public corporations and institutions. We offer major international investors and companies any Nordic currency and securities product, including asset management, as well as selected credit and cash management products. Our product range, services and distribution channels are tailored according to customers’ needs and Unibank’s profitability requirements. Our customers are served in an obliging and informal manner. The employees have the necessary decision-making authority and provide advice on and sell financial products and services where and when this creates value for the customer. UNIDANMARK ANNUAL REPORT 1998 The Unidanmark Group - five-year financial summary (EURm) Profit and loss account (DKKm) 1994 1995 1996 1997 1998 1998 Net interest income 7,904 7,324 7,116 6,717 7,005 939 Dividend income 69 109 145 169 183 25 Net fees and commissions receivable 1,399 1,361 1,670 1,932 2,283 306 Net interest and fees receivable 9,372 8,794 8,931 8,817 9,471 1,270 Securities and foreign exchange result (897) 1,157 954 1,403 1,454 195 Other operating income 375 348 350 414 737 99 Profit before expenses 8,850 10,299 10,234 10,634 11,662 1,563 Expenses and depreciation 6,442 6,980 7,050 6,546 7,062 947 Provisions for bad and doubtful debts (net) 1,652 1,248 963 499 685 92 Profit on shares in associated and group undertakings (155) 113 115 68 107 14 Operating profit before tax 600 2,184 2,337 3,658 4,022 539 Tax 60 68 312 779 1,215 163 Profit for the year 540 2,116 2,025 2,879 2,807 376 (EURbn) Balance sheet at 31 December (DKKbn) 1994 1995 1996 1997 1998 1998 Assets Cash in hand and balances due from credit institutions 44 55 74 80 82 11 Loans and advances 123 132 170 210 233 31 Ordinary loans and advances 104 101 116 133 151 20 Mortgage loans 9 22 37 53 69 9 Reverse repos 9 8 16 24 13 2 Debt securities and shares etc 46 59 74 82 100 13 Other assets 24 25 27 29 33 4 Total assets 236 271 344 401 447 60 Liabilities Balances due to credit institutions 61 73 98 103 117 16 Deposits 121 129 146 160 162 22 Repos 4 7 9 14 7 1 Debt securities in issue 13 26 53 79 99 13 Mortgage bonds 9 23 39 55 74 10 Other liabilities 20 22 29 36 44 6 Capital resources 21 20 19 23 26 3 Shareholders' funds 14 15 16 18 20 3 Total liabilities 236 271 344 401 447 60 Ratios and key figures (DKK except percentages) 1994 1995 1996 1997 1998 Return on average equity (%) 4.2 15.1 13.1 16.9 14.8 Capital adequacy ratio (%) 13.9 12.4 9.9 9.9 9.9 Capital adequacy ratio, core capital (%) 9.9 10.0 8.8 8.0 7.9 Earnings per share 10 40 38 54 53 Dividends per share 4 10 10 15 15 Share price at 31 December 233 276 305 509 578 Net asset value 253 283 308 344 381 Price/net asset value 0.9 1.0 1.0 1.5 1.5 Number of employees (full-time equivalents) at 31 December* 10,886 10,466 9,960 9,703 10,050 Cost-income ratio (%) ** 77 77 71 69 Euro = DKK 7.4594 at year-end 1998. * Exclusive of employees in unconsolidated companies. ** Expenses and depreciation as % of profit before expenses, excluding investment portfolio income and non-recurring income in 1997 and 1998. Investment portfolio income has not been computed for 1994. 5 UNIDANMARK ANNUAL REPORT 1998 Unidanmark posts a profit of Summary profit and loss account (DKKm) 1997 1998 Change DKK 2,807m for 1998 Net interest income, excluding investment portfolio income 6,116 6,660 544 Fees and commissions receivable 1,932 2,283 352 Securities and foreign exchange result, excluding investment portfolio income 806 905 99 uOperating profit increased by 10% to DKK 4,022m Other operating income 371 331 (40) uProfit on core banking activities up 12% to Core earnings 9,225 10,179 954 Expenses and depreciation 6,546 7,062 517 DKK 2,432m Provisions 499 685 186 uNet interest income excluding investment portfolio Profit on core banking activities 2,180 2,432 251 income improved by 9% to DKK 6,660m Investment portfolio income 1,365 1,077 (289) u Associated and group undertakings 68 107 38 Fees and commissions receivable rose by 18% to Non-recurring income 44 406 363 DKK 2,283m Operating profit 3,658 4,022 364 uCore earnings increased by 10% to DKK 10,179m Tax 779 1,215 436 Profit for the year 2,879 2,807 (72) uExpenses and depreciation grew by 7.9% uProvisions for bad and doubtful debts increased to DKK 685m Fees and commissions receivable continue to grow and, uOrdinary loans and advances up 13% and mortgage despite the volatility of the financial markets, Unibank loans up 32% recorded increased trading volumes and earnings. Mortgage refinancing also contributed to the increase in Unibank continued to improve its profit on core banking fee income. activities in 1998 despite a rise in loan loss provisions compared with the very low 1997 level. The Unibank's higher business levels and increased IT improvement is a result of continuous growth in investments led to growth in expenses and depreciation. Unibank's core activities in the Danish banking, mortgage credit and insurance markets and in the Net provisions for bad and doubtful debts rose Nordic markets. Despite the turbulent financial markets compared with the historically low level in 1997. in 1998, investment portfolio income remained high. As Unibank's tax rate has returned to normal, profit for the Profit on core banking activities improved by year after tax is lower than the previous year. DKK 251m to DKK 2,432m. For the purpose of describing the underlying trend in Unibank's investment portfolio generated substantial Unibank's core business, the individual items as shown income in 1998 despite difficult market conditions. The in the summary profit and loss account are commented decline in long-term interest rates led to lower net on, excluding investment portfolio income and non- interest income than previously. recurring items. Non-recurring income was DKK 406m arising from Core earnings were DKK 10,179m, an increase of repayment of VAT from previous years and repayment DKK 954m on 1997. of fees. Net interest income (excluding investment portfolio Profit for the year was DKK 2,807m producing a return income) rose by 9% or DKK 544m. The growth in on equity of 15%. The Supervisory Board will propose lending and the higher short-term Danish interest rates to the Annual General Meeting that a dividend of more than offset the effect of the competitive regime, DKK 15 per share of DKK 100 be paid for 1998. This which in 1998 continued to put pressure on the interest is the same as for the previous year. spread. Unibank expects profit on core banking activities to remain largely unchanged compared with 1998. 6 UNIDANMARK ANNUAL REPORT 1998 Financial review Ordinary deposits increased by 6% to DKK 155bn. Retail customer deposits went up by more than 4%, particularly pension savings and deposits in high-interest accounts grew.

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