http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/RSS.ashxFSP PagesWed, 20 May 2009 13:23:18 +0200http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=1http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=12009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=2http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=2Finanssektorens Pensionskasse 2 Disclaimer This is a translation of the Danish original document. In the event of inconsistency, the Danish version shall apply. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=3http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=3Finanssektorens Pensionskasse 3 GENERAL DETAILS Name Finanssektorens Pensionskasse Amaliegade 27 1256 Copenhagen K Central Business Registration number 49 40 42 12 Registered in: Copenhagen Supervisory Board (Board of Trustees) Claus E. Petersen, Chairman Michael Budolfsen, Vice-Chairman Birgitte Hagen Børge Hansen René Holm Jan Steen Jensen Pia Lærke Ane Marie Holm Nielsen Knud Pedersen Hans Erik Rasmussen Tina Rønfeldt Executive Board Steen Jørgensen Appointed actuary Karin Elbæk Nielsen Company auditors Deloitte Statsautoriseret Revisionsaktieselskab Consulting doctor Niels Horwitz, Consultant Physician at Bispebjerg Hospital in Copenhagen Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=4http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=4Finanssektorens Pensionskasse 4 CONTENTS Page GENERAL DETAILS 5-YEAR REVIEW MAIN EVENTS IN 2008 Unusually bad investment year Agreement about financial stability FSP receives international recognition Continued top-line growth and addition of customers Customers more satisfied with FSP Outsourcing to Forca strengthens FSP Pension New potential in FSP WebLink FSP introduces temporary disability pension Custody interest rate for 2008 of 3.0% Risk management, hedge transaction and exchange rate protection FSP still at green risk level Financial performance and capital base MANAGEMENT AND EMPLOYEES OF THE PENSION FUND Supervisory and Executive Boards Annual General Meeting 2008 Good corporate governance of FSP Pension FSP’s organisation Focus on good workplace CUSTOMER SERVICE Top line growth and new customers Focus on good information to the customers Satisfaction survey among the customers Quick service process FSP Sundhedssikring gathered at FSP THE ACTUARIAL DEPARTMENT From market rate to account rate Development tasks in 2008 FSP BonusKapital Payment for guarantees Activation of exchange rate protection and use of bonus potential on premium-free policies PAL compensation 3 6 8 8 9 9 9 10 10 12 12 12 13 13 14 15 15 15 16 16 16 17 17 17 18 18 18 19 19 19 20 20 21 21 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=5http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=5Finanssektorens Pensionskasse 5 INVESTMENTS Negative return on investments in 2008 Return in FSP WebLink Property investments Dan-Ejendomme new manager of the FSP properties Ethics in investments and policies for civic responsibility Publishing of ownership shares Investment strategy 2009 RISK MANAGEMENT AND COMPLIANCE Risks Insurance risks Financial risks Operational risks FINANCIAL STATEMENTS Unsatisfactory consolidated financial performance FSP has become a group Consolidated balance sheet of DKK 20.7 billion Income and expenses Profit distribution Analysis of earnings generation Expectations of 2009 SIGNATURES OF THE EXECUTIVE AND SUPERVISORY BOARDS THE INDEPENDENT AUDITOR’S REPORT ACCOUNTING POLICIES BALANCE SHEET INCOME STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES 22 22 22 23 24 24 25 25 26 26 26 27 30 31 31 31 32 32 33 34 35 36 37 38 42 44 45 46 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=6http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=6Finanssektorens Pensionskasse 6 5-YEAR REVIEW Pension activities 2008 Financial figures (DKK million) Membership contribution on own account Pension benefits on own account Return on investments Operating expenses in terms of pension Profit/loss from reassurance Technical profit/loss Technical profit/loss health and accident insurance Profit/loss for the year Pension provisions Provisions for unit-linked contracts Equity Capital base Total assets - Group Total assets - Parent 628.5 -555.9 -2,400.9 -39.8 14.6 -1,134.2 -2.0 -1,391.2 17,418.3 144.5 1,692.5 1,873.8 20,737.7 20,697.4 2008 Return ratios Return before pension return tax (%) Return after pension return tax (%) Cost and profit/loss ratios Cost rate of premiums (%) Cost rate of provisions (%) Costs per member (DKK) Cost profit/loss (%) Risk profit/loss (%) Consolidation ratios Owner capital ratio (%) Excess solvency ratio (%) Solvency ratio (%) Solvensgrad (%) Return ratios Return on equity before tax Return on equity after tax Return on pension provisions before tax -11.1 -9.6 6.3 0.2 2,389 -0.06 0.10 1.1 9.2 6.8 293 -60.0 -58.3 -5.2 3.3 2.9 5.7 0.2 1,961 -0.03 -0.04 1.3 17.3 14.6 462 -6.0 -6.7 4.8 5.6 4.9 3.5 0.2 1,985 -0.02 0.00 0.5 19.0 15.6 490 13.5 12.3 3.7 13.5 12.0 5.1 0.2 1,729 0.00 0.62 17.4 13.4 437 46.4 44.8 10.5 7.6 6.6 5.5 0.2 1,660 0.00 0.09 11.6 7.7 292 19.1 17.8 6.2 579.0 -529.7 684.3 -33.1 10.6 -348.0 -2.1 -213.2 17,944.6 109.8 3,083.7 3,295.5 23,060.4 22,975.7 2007 905.8 -501.1 1,090.4 -31.7 10.0 177.1 -1.8 415.8 17,311.3 77.3 3,296.3 3,368.6 21,621.7 2006 523.8 -393.1 2,391.5 -26.9 11.6 807.5 -2.6 1,084.1 16,536.9 50.7 2,880.5 2,864.5 20,419.3 2005 457.7 -363.2 1,200.8 -25.2 14.6 162.8 -0.9 313.0 15,450.3 9.2 1,796.4 1,788.4 17,345.9 2004 2007 2006 2005 2004 Figures for 2004 have been restated in accordance with the change in accounting policies in 2005. If nothing else is stated, the above ratios are identical for Group and Parent. The cost profit/loss includes costs related to the PAL compensation. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=7http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=7Finanssektorens Pensionskasse 7 5-YEAR REVIEW, CONTINUED Health and accident insurance activities 2008 Financial figures (DKK million) Gross premium income Gross claims expenses Total operating expenses in terms of insurance Return on investment after insurance technical interest rate Profit/loss for the year Run-off profit/loss Total insurance provisions Equity Capital base Ratios Gross claims rate (%) Gross cost rate (%) Combined ratio Operating ratio Relative run-off profit/loss Return on equity (%) Solvency coverage (%) 104.4 8.6 113.0 113.0 -4.2 -3.2 20.5 111.6 6.4 118.1 118.1 -15.2 -3.2 18.9 113.9 6.5 120.4 120.4 0.9 -2.9 16.1 126.1 6.7 132.8 132.8 -18.7 -5.4 13.7 115.2 6.9 122.1 122.1 3.4 -2.8 23.0 13.2 -14.7 -1.1 -0.3 -2.0 -0.6 2.6 16.0 16.0 11.7 -12.7 -0.8 0.1 -2.1 -1.8 3.6 16.0 16.0 9.6 -10.4 -0.6 0.1 -1.8 0.1 3.1 16.0 16.0 8.6 -9.7 -0.6 0.2 -2.6 -1.6 2.6 16.0 16.0 7.6 -8.7 -0.5 0.1 -0.9 0.3 1.4 8.0 8.0 2007 2006 2005 2004 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=8http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=8Finanssektorens Pensionskasse 8 MAIN EVENTS IN 2008 • Unusually bad investment year • Agreement about financial stability • FSP receives international recognition • Continued top-line growth and addition of customers • Customers increase their satisfaction with FSP • Outsourcing to Forca strengthens FSP Pension • New potential in FSP WebLink • FSP introduces temporary disability pension • Custody interest rate for 2008 of 3.0% • Risk management, hedging transaction and exchange protection • FSP still at green risk level • Financial performance and capital base Steen CEO Jørgensen, Claus E. Petersen, Chairman Unusually bad investment year As a consequence of the global financial crisis, 2008 became one of the worst investment years in history, and similar to other pension investors, FSP Pension was hit hard by the notable price drops, especially in the second half. The pension fund achieved a total return on investments of negative 11.1%. Thereby, FSP earned a loss of almost DKK 1.4 billion, which is very unsatisfactory. For periods in 2008, investors earned losses on more or less all types of assets, and the effect of good risk diversification was invalidated. FSP Pension’s hedging of the pension guarantees against interest drop earned a gain of 6.9%, which is to be set off against the investment profit. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=9http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=9Finanssektorens Pensionskasse 9 Agreement about financial stability Our industry association, Forsikring & Pension, in October entered into an agreement with the Ministry of Economic and Business Affairs about financial stability which imposes on the pension institutions to focus on strengthening the capital so that they do not increase their liabilities beyond the pension guarantees already agreed. In 2008 and 2009, the agreement means that life insurance companies and pension funds are to limit the accruing of bonus to the customers, and that the pension funds are to exercise prudence when they invest, and they shall only assume additional investment risks if they have the reserves necessary to resist potential losses. For the full year 2008, FSP has been at the green risk level of the Danish Financial Supervisory Authority, and FSP has decided to maintain investments in shares in the expectation of future good price increases when the markets re-emerge. FSP is still placed in the green traffic light of the Danish Financial Supervisory Authority. FSP receives international recognition In 2008, despite the financial crisis, FSP Pension achieved a number of positive results. In May 2008, FSP received one of the highest rewards of the pension business – an IPE Gold Award for the best mediumsized institutional property investor in Europe. The prize is awarded by Europe’s leading magazine for the pension business: ”Investment & Pensions Europe” (IPE). The award committee consists of a number of international investment experts from universities, auditors and advisors. FSP was awarded the prize with, among others, the following reasons: • • • A ten-year strategy with an average return of 13.5% through the past five years. Long-term returns that contribute to FSP’s total investment strategy. Direct investments in properties in Denmark and indirect investments through funds abroad. FSP views properties as good investments that contribute to good risk diversification and simultaneously are a good defence against inflation. Continued top-line growth and addition of customers In 2008, FSP Pension reached the target for top line growth, and FSP Pension had a number of new customers. The pension contribution payments increased in 2008 by 8.5% to a total of DKK 632 million (gross). This is good news as FSP experiences increased competition in the pension business, and as FSP’s membership enterprises are also affected by the financial crisis. FSP Pension’s ability to deliver good and competitive products that attract new customers meant that five new enterprises entered into agreement about pension scheme, eight existing corporate customers extended the pension agreement with FSP, nine new enterprises entered into agreement about FSP Sundhedssikring, and three enterprises took out FSP Gruppeliv. Unfortunately, one enterprise decided to discontinue registering new employees to FSP Pension from the end of 2008. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=10http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=10Finanssektorens Pensionskasse 10 The gross addition in 2008 was 651 customers while the total number of customers, net, increased by 407 to a total of 17,100 customers by the end of the year. The number of customers incl. FSP Sundhedssikring grew to a total of 22,955 by the end of 2008. Customers more satisfied with FSP More than 1,000 FSP customers responded to a survey in the autumn of 2008 about their satisfaction with FSP, and overall, the customers are more satisfied with FSP Pension than in the most recent survey in the autumn of 2007. On a scale of 1 to 7, where 7 is best, the customers give FSP 6.0 against 5.9 in last year’s survey. ”I am overall happy being a customer of FSP Pension” 4 3 2 5 6 Scale 1. Highly disagree 2. Disagree 3. Predominantly disagree 4. Neither agree nor disagree 5. Predominantly agree 6. Agree 7. Highly agree 1 Highly disagree 7 2008 (6.0) 2007 (5.9) Highly agree The customer survey confirms that FSP still complies with the promise to the customers about making people’s lives better. The customers’ satisfaction is strengthened in areas such as personal advice, quick response, information on the website, advisors’ competences and the general satisfaction with FSP’s service. The customer survey also points towards areas in which FSP is able to do even better. This, among other things, applies to the knowledge of FSP and the pension fund’s products. The customers’ experience of FSP’s advice and service are important to satisfaction, and accordingly, the pension fund will continue to increase the efforts in those areas. The survey has been conducted by the research agency Enalyzer in September 2008. According to the research agency, the high response rate gives a very safe measurement. The survey has been described on FSP’s website: www.fsp.dk. Outsourcing to Forca strengthens FSP Pension Also in 2008, FSP Pension had to spend considerable resources on assignments as a result of a number of new legislative and supervisory initiatives within the financial area. The many tightened requirements for financial enterprises and the extraordinary administrative assignments as a result of, among other things, the financial crises lead to increased expenses in a number of areas. The increasing requirements from authorities and the surrounding world, among other things, about openness and written guidelines furthermore entail that small and medium-sized pension funds such as FSP Pension are facing high requirements within the current development of IT systems, and concurrently, it results in great dependence upon individuals in highly specialised areas. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=11http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=11Finanssektorens Pensionskasse 11 Accordingly, to achieve economies of scope, in June, FSP Pension entered into agreement about outsourcing the very resource intensive administrative assignments which are common for pension funds to the service company, Forca, specialising in administrative assignments for pension funds and which has already created economies of scope for 450,000 members of PKA, PBU and Lærernes Pension. Prior to the agreement, six months of thorough pre-analysis was performed to gain perspective of schemes, processes and service levels and thereby the possibilities of achieving economies of scope. The agreement entails that, as of 2010, Forca will take over administration of the pension schemes for FSP Pension’s well above 17,000 customers. Already from 2009, Forca will handle salary and pension benefits as well as the majority of the accounting assignments for FSP Pension. As a part of the agreement, a part of FSP Pension’s employees will be employed with Forca. The outsourcing also means that, in future, FSP Pension is able to focus increasingly on the core areas where the pension fund makes a difference to the customers. The FSP of the future will therefore increasingly focus on rendering excellent customer service in a modern pension scheme with freedom of choice and on conducting an investment strategy that offers the customers a longterm and competitive return on investment – so that FSP Pension does ”make people’s lives better”. In January 2010, FSP’s secretariat will be moving to new facilities in Tuborg Syd in Hellerup close to Forca. This move is done together with Lærernes Pension, which is also a customer of Forca. The moving in together is made to create a larger professional sphere in the daily work of the secretariats and to utilise the scope economies in terms of offices, but both pension funds will in all other respects continue unchanged. The ambition is that FSP Pension will also in future be able to match the competition in the pension business and be a strong alternative to the commercial pension funds. The conveyance will be connected to a comprehensive improvement in 2009 and will lead to considerable increase in costs in the years 2008-2010 primarily in connection with the transition to the new membership system at Forca and with the implementation of the entire change project. The ambition is that, when the new cooperation is fully in place, the outsourcing is to reduce the average administrative expenses by approx. DKK 7-800 per year. Over a savings period of 40 years, it amounts to a total of approx. DKK 50,000 in present value to the pension savings. Many of FSP Pension’s administrative assignments within IT and property administration have been outsourced for a number of years, and in 2007, the Fund’s administrative routines were outsourced to Nykredit Portefølje Administration in connection with the establishment of the professional association, FSP Invest. As a part of the outsourcing to Forca, by the end of 2008, FSP Pension established the fully owned subsidiary, FSP It ApS. The company is consolidated in FSP’s group structure and is to handle the development of FSP’s new IT systems. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=12http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=12Finanssektorens Pensionskasse 12 New potential in FSP WebLink FSP WebLink is currently developed so that the scheme is still a modern and up-to-date offer of savings in a unit-linked system. In February 2008, the customers had new possibilities of guidance about investments. Concurrently, the design of FSP WebLink was updated to match the remaining FSP website. In this connection, FSP became part of a cooperation with Morningstar, which is an independent and web-based supplier of information and analyses about investments. Among other things, the cooperation ensures that return and development in FSP’s WebLink funds are comparable to corresponding funds. Through the cooperation with Morningstar, FSP also offers an investment school which provides a number of basic descriptions of investments, risks and risk diversification. This adds to making investments in securities simpler and more easily accessible to more customers. As a part of the updating of FSP WebLink, in 2008, the customers had improved possibilities of choosing how to invest the savings. After this, the customers are able to place a part of the savings in the three FSP Vælger funds by which FSP composes the investments and concurrently invests in the remaining funds which more selectively invest in shares, bonds and other assets. FSP makes sure to offer the customers a selection of funds based on investment associations with good results and low expenses. In March 2008, the selection of investment possibilities was expanded with two new funds. FSP introduces temporary disability pension The General Meeting in 2008 adopted to offer the customers of the department, FSP Pension, temporary disability pension. Thereby, the customers are ensured financial security during long-term serious illness. The introduction of temporary disability pension fulfils a request from many employers and a number of customers. Furthermore, the possibility of temporary disability pension makes the pension scheme with FSP more competitive as it gives the customers an even better safety net. The scheme covers if you temporarily lose 2/3 of your ability to work. Furthermore, any public payments are set off against the temporary disability pension. Custody interest rate for 2008 of 3.0% In December 2008, FSP’s Supervisory Board determined the custody interest rate for 2008 at 3.0% after tax for all customers with a conventional pension scheme with guaranteed benefit and average interest rate. Custody interest rates through 10 years Deposit interest rates for the last 10 years % p.a. FSP Pension AP Pension Nordea Pension SEB Pension (Codan Pension) Topdanmark PFA Pension Danica Pension 1999 2000 2001 2002 2003 2004 2005 2006 2007 6.00 8.00 9.00 4.50 4.50 4.50 5.50 5.50 6.00 4.50 6.00 10.50 5.00 4.50 4.50 4.50 5.00 5.80 5.00 6.33 9.50 5.00 4.50 4.50 4.50 4.58 5.50 4.50 5.25 8.50 5.00 4.50 4.50 5.00* 5.00* 5.50* 4.50 4.50 8.50 5.00 4.50 4.50 4.80* 5.00* 5.50* 4.50 6.00 8.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 8.50 5.00 4.50 4.50 4.50 4.50 4.50 2008 DKK 100 has become 3.00 173.04 6.00 172.70 6.00 171.32 5.75* 168.31 5.00* 165.61 5.33 164.86 5.50 163.56 2009 ** 4.00 1.72 2.00 2.00 3.00 1.50 * The return on old schemes with a guarantee may vary. ** Deposit interest rate is fixed yearly arrear. The custody rate for 2008 was determined on the basis of the financial crisis and on the basis of the agreement entered into about financial stability in the pension area between the Ministry of Economic and Business Affairs and our industry organisation, Forsikring & Pension. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=13http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=13Finanssektorens Pensionskasse 13 According to the agreement, the pension funds must focus on consolidation and shall not increase liabilities. This limits the accruing of bonus. FSP’s custody rate for 2008 was therefore determined so as for the majority of the pension benefits not to be adjusted by the turn of the year. Risk management, hedge transaction and exchange rate protection FSP’s customers with traditional savings with average interest rate have security in their pension benefits. Accordingly, in the long-term investment strategy, FSP greatly focuses on security so that the pension fund is able to meet its promise to the customers. In 2008, FSP Pension increased the payment for security provided by the guarantee for future pension benefits. The payment is to outbalance the increased provisions necessary to meet the customers’ guarantees and the financial instruments acquired to hedge the guarantees. As a consequence of the financial crisis, in the autumn of 2008, FSP activated the so-called exchange rate protection which is to protect the capital of the Pension Fund from being eroded if customers decide to leave FSP Pension. The exchange rate protection means that customers will see a deduction of a percentage of the savings if they repurchase the pension scheme to move savings to another pension fund or to receive payment of it. In December 2008, the exchange protection was calculated at 8%. The rate is currently adjusted in relation to the financial development. The exchange protection has no significance to all customers remaining in FSP Pension, but it provides greater space partly to maintain the long-term investment policy of the Pension Fund partly in relation to the current calculations of the Registered Assets. In connection with the strengthening of the risk management, FSP decided to increase the hedging of the risk of interest rate drop in the autumn 2008 to comprise 100% of the interest rate sensitivity of FSP’s pension provisions by the end of the year against the previous 70%. Such ’hedge transaction’ is performed by use of interest swaps and swaptions in EUR. In the spring of 2008, FSP Pension had ordinary inspection by the Danish Financial Supervisory Authority. This dialogue also contributed to our current work with Compliance and risk management. FSP still at green risk level The close risk management has resulted in FSP throughout 2008 having been in the green risk scenario of the Danish Financial Supervisory Authority, and by the end of 2008, FSP had a safety margin of almost DKK 0.9 billion to the red risk scenario of the Danish Financial Supervisory Authority. On the basis of the financial crisis, the Danish Financial Supervisory Authority tightened the supervision of the pension business and in the second half of 2008 demanded several extraordinary reportings from the business. In connection with the agreement about financial stability and the introduction of new requirements of quarterly financial statements and individual solvency, the former yellow risk area was discontinued. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=14http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=14Finanssektorens Pensionskasse 14 Financial performance and capital base The negative investment return for the year as well as the accrual of a custody rate of 3.0% contributed to FSP Pension earning a total loss of almost DKK 1.4 billion after tax in 2008, after a part of the loss for the year on investments having been covered by the customers by use of the bonus potential of the premium-free policies according to the technical basis (see the rules of the Executive Order on the Contribution Principle). The loss for the year (net financial performance) is covered by the equity of the Pension Fund. FSP’s total capital base consists of equity as well as FSP’s BonusKapital. FSP will distribute BonusKapital to the customers when the investment return again allows for it. No BonusKapital will be distributed for 2008. After this, FSP’s capital base by the end of 2008 represents almost DKK 1.9 billion against DKK 3.3 billion at the beginning of the year. FSP’s Capital Base and Capital Requirements DKK million Equity Capital requirements FSP BonusKapital 3,500 3,000 2,500 2,075 2,881 3,296 3,084 2,000 1,500 1,147 1,012 568 588 615 1,482 1,796 1,692 1,000 518 614 659 691 718 645 228 197 500 88 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 FSP’s balance sheet amounted to DKK 20.7 billion by the end of 2008, which is a drop during the year of DKK 2.4 billion. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=15http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=15Finanssektorens Pensionskasse 15 MANAGEMENT AND EMPLOYEES OF THE PENSION FUND Supervisory and Executive Boards In 2008, the Supervisory Board of FSP has held eight Board meetings and one Board seminar in October. This is in accordance with the recommendations about good corporate government. Supervisory Board member Steen Pommeritz, Danske Bank, resigned from the Board by the end of first half 2008 in connection with his retirement. René Holm, Danske Kreds, 49 years, elected as alternate for Steen Pommeritz, joined at 1 July 2008 as a new Board member for the remaining election period until the Annual General Meeting in 2010. The remaining Board is unchanged in relation to the General Meeting in 2007. The Executive Board of the Pension Fund consists of Steen Jørgensen, who has been CEO since the turn of the year 1992/1993. Annual General Meeting 2008 At FSP’s Annual General Meeting on 24 April 2008, three Supervisory Board members were up for election: Tina Rønfeldt, Nordea, Ane Marie Holm Nielsen, Spar Nord Bank, and Knud Pedersen, Løkken Sparekasse. Furthermore, shop steward Ib Voss from Danske Bank on Funen was nominated. The vote gave reelection for a 3-year period to the three existing Supervisory Board members. At the General Meeting, Jan Andersen, Sparekassen Midtfjord, was newly elected alternate for Knud Pedersen, while the alternates, Jens Peter Christensen, Spar Nord Bank (for Ane Marie Holm Nielsen) and Bente Nannestad, Nordea Bank (for Tina Rønfeldt) were reelected. Deloitte was reappointed auditor by State Authorised Public Accountant Søren Dinesen as auditor and State Authorised Public Accountant Kasper Bruhn Udam as substitute auditor. At the subsequent first meeting, Director Claus E. Petersen was reelected Chairman of the Supervisory Board of FSP, and Vice-Chairman of the Financial Services Union, Michael Budolfsen, was reelected Vice-Chairman of FSP’s Supervisory Board. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=16http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=16Finanssektorens Pensionskasse 16 Good corporate governance in FSP Pension The Supervisory Board is currently working with the recommendations of Pensionsmarkedsrådets (the Danish Pension Market Council) in the report about good and efficient corporate governance. It is the Supervisory Board’s task to approve the overall strategies of FSP Pension and to determine the segregation of duties among the Supervisory and Executive Boards including that the necessary written guidelines have been prepared. Furthermore, the Supervisory Board is to consider the risk management, the control procedures and the current reporting that match the size and complexity of the enterprise. FSP’s Supervisory Board emphasises a broad and open dialogue with all stakeholder groups. FSP’s organisation By the end of 2008, FSP had 49 employees (full-time and part-time employees). In average there were 44 full-time positions in 2008, which is six positions more than in 2007 (measured by ATP contribution). The increase partly reflects an increased activity level, partly that more positions for periods of 2007 have been vacant as a result of the insufficiency of labour. The average age of the employees was 40 years by the end of 2008. Organisational chart for FSP Focus on a good workplace It is FSP’s objective to maintain a good workplace for the employees of the Pension Fund as well as to offer them good development possibilities and post-education. Accordingly, in the HR strategy, FSP has identified a number of focus areas and initiatives to support FSP's business objectives as well as to ensure continued high customer and employee satisfaction. Concurrently, the initiatives contribute to FSP still attracting and retaining skilled and competent managers and employees. FSP’s introduction course for new employees ensures that they feel welcome and quickly gain perspective of new work assignments as well as of FSP’s values and corporate culture. In November 2008, for the second year in a row, FSP carried through an employee survey which again showed high satisfaction, welfare and loyalty among the employees. The result of the survey was better than the year before in several areas. In 2009, FSP will continue to focus on the HR strategy and make the Pension Fund visible as a good place to work. Furthermore, FSP will be focusing on the changes which are to improve the transition of a number of administrative assignments to the service company, Forca, as well as to ensure a good process with transfer and integration of the affected FSP employees in Forca. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=17http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=17Finanssektorens Pensionskasse 17 CUSTOMER SERVICE Top line growth and new customers FSP’s profile as a modern and competitive pension fund also in 2008 resulted in a nice addition of new member enterprises and customers, which continue the development for the past four years. The new corporate customers select FSP on the basis of the high service level of the Pension Fund, the independence of large financial enterprises, closeness to the customers and the quick case processing. In 2008, FSP Pension entered into new agreements about pension schemes with five enterprises, and FSP also saw growth for FSP Gruppeliv as well as FSP Sundhedssikring. In 2008, a total of nine new enterprises took out FSP Sundhedssikring. The great interest in FSP’s Sundhedssikring was, among other things, reasoned by a competitive price and high customer service. FSP’s customers acknowledge great satisfaction within the scheme by which 98% of cases have been processed within three workdays. As a new thing, children under the age of 21 living at home are co-insured free of charge if both parents have taken out health insurance from FSP. Even enterprises outside the financial sector show interest, though we cannot offer the insurance to such enterprises. In 2008, FSP Pension saw addition of 651 new customers (gross), while the net addition was 407 so that FSP Pension by the end of 2008 had a total of 17,100 customers. Customer development 1990-2008 – incl. FSP Sundhedssikring In 2008, 183 customers decided to retire, which is an increase of 8% in relation to 2007. FSP Pension had 2,413 retirees by the end of 2008. Focus on good information to the customers FSP highly prioritises good information to customers and will in future base an increasing part of the information on the electronic newsletter of the Pension Fund. This is to ensure quick and flexible communication of news. In 2008, FSP expanded the information on the relaunched website so as for it to be simple and easy for the customers to find the right information about FSP, the pension scheme and the investments. In 2008, FSP Kundeservice visited a number of member firms at which the customer advisors also conducted individual consultancy sessions. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=18http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=18Finanssektorens Pensionskasse 18 Satisfaction survey among the customers According to the most recent customer survey from the autumn of 2008, the customers of the Pension Fund are very satisfied with the service level at FSP. This from the initial contact to the subsequent competent advice. Since the customer survey in 2007, FSP has performed targeted efforts in these areas, and the result is increased satisfaction among the customers. The result of the most recent customer survey is available from the website of the Pension Fund www.fsp.dk. Quick service process In 2008, FSP Pension maintained the quick service process. The customers’ approaches especially concern adaptation of the pension scheme to changed needs and FSP Sundhedssikring. By far most of the cases can be processed by FSP’s Customer Service from day to day. In 2008, FSP processed 8,716 cases of which 91% of the cases were processed in 14 days or less. Statistics Customer service 2009 – 01.01. to 31.12. Processing times 5% 9% 9% Less than or equal to 1 day Between 1 and 7 days (including 7) Between 7 and 14 days (including 14) 77% During this period 8,716 cases were processed, of which 91 % were processed in less than 14 days. More than 14 days FSP Sundhedssikring gathered at FSP FSP offers several schemes that insure the customers and their relatives on illness and death. Coverage by Critical Illness pays out a tax-free compensation in connection with certain critical illnesses. By the turn of the year 2008/2009, the coverage amount was increased from DKK 140,000 to DKK 150,000. FSP Gruppeliv provides a financial safety network to the close relatives on death. Employees of the financial sector are good lives with fewer deaths than the average of the population. This results in fewer payments, and accordingly, FSP Pension is able to maintain FSP Gruppeliv at an attractive price. FSP Sundhedssikring gives quick access to treatment at private hospital and private clinic. Mid-2008, FSP Pension made some adaptations of FSP Sundhedssikring, so that we can still offer the customers a very competitive scheme. Concurrently, FSP has gathered the administration of the scheme under our own auspices to ensure a high and uniform service level to all customers. The change means that FSP Pension is in charge of the case processing of all claims. Formerly, the claims processing for spouses, co-habitants and children was outsourced. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=19http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=19Finanssektorens Pensionskasse 19 THE ACTUARIAL DEPARTMENT From market rate to account rate FSP follows the initiatives of the industry association, Forsikring & Pension, to create increased openness and transparency in the insurance and pension business. For FSP, the connection between market return on investments and the distributed custody rate to the customers is as follows: From market rate to account rate 2008 Market return for the year, gross 1) Investment expenses -10.8% 0.3% 2007 3.5% 0.2% 2006 2005 Explanation 1. Market return for the year achieved on the financial markets (shares, bonds, properties, etc.). 2. Pension return tax for the year which the State imposes on the pension savings. 3. The risk return shows the payments which equity and other subordinated capital are to have. 5.8% 13.7% 0.2% 0.2% Market return for the year, net -11.1% 3.3% 5.6% 13.5% Pension return tax 2) 1.8% -0.4% -0.8% -1.5% Risk profit/loss 0,1% 0.0% 0.0% 0.6% Cost profit/loss -0.1% 0.0% 0.0% 0.0% Risk return, after tax 3) 6.2% 1.9% -1.6% -5.3% Change in market value adjustment 5.6% 1.0% 2.0% -2.1% Change in collective bonus potential 0.0% 0.0% 0.0% 0.0% Profit from health and accident insurance 0.0% 0.0% 0.0% 0.0% Guarantee payment 0.4% 0.2% 0.3% 0.3% Account rate 3.0% 6.0% 5.5% 5.5% Thereby the customer gains insight as to why a performance of negative 11.1% in 2008 gives a 3.0% interest rate to the customer. At the same time, the illustration shows how the customer in 2005 "merely" earns 5.5% of interest even though the market return net for the year was of 13.5%. Development tasks in 2008 In 2008, the Actuarial Department performed a number of development tasks for the purpose of improving the customers’ possibilities at FSP’s website, including development of a new user interface to FSP WebPension. The introduction of temporary disability pension in 2008 has also occupied the Department’s resources for adaptation of the IT systems. The Actuarial Department has furthermore consumed many resources for preparing extra calculations for the Danish Financial Supervisory Authority in connection with the Authority’s close follow-up on the pension business in light of the financial crisis. Furthermore, the Actuarial Department has contributed to the project by updating the Articles of Association of the Pension Fund and the Pension Regulations as a part of the transfer of a number of administrative tasks to the service company, Forca, and the related activities to achieve administrative simplification. The Actuarial Department has furthermore been working on developing the technique which is to enable the offer to the customers of transition from the conventional schemes in FSP with average rate and performance guarantee to FSP WebLink with market interest rate as well as in all other respects participating in the preparations for performing the transition in relation to the member system being moved to Forca in the beginning of 2010. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=20http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=20Finanssektorens Pensionskasse 20 FSP BonusKapital Effective as from 2006, FSP introduced FSP BonusKapital to illustrate the customers’ ownership of the Pension Fund. Thereby, the portion of the custody rate exceeding 4.5% is accrued as so-called ’special bonus provisions’ – or FSP BonusKapital, as we have decided to refer to it. This part of the customers’ saving is not guaranteed, but it carries interest in line with equity by the market return for the year plus the so-called ’risk return’. Historically, equity has achieved better return that the annual custody rate, and this of course benefits the customers. In practice, FSP BonusKapital is paid in the form of increased pension benefits when the individual customer retires and initiates his or her pension benefits. The custody rate for 2008 has been determined at 3.0% after tax which means that no BonusKapital will accrue for 2008. The capital base is of a total of approx. DKK 1.9 billion, and by the end of 2008, FSP’s customers combined directly own DKK 197 million of the capital base of the Pension Fund. In the coming years, FSP Pension will continue the accruing of FSP BonusKapital. FSP BonusKapital is not to be included in the guarantee pension provisions. Thereby, FSP has more freedom to invest actively and achieve an improved long-term return. Payment for guarantees Since 2005, customers with performance guarantee related to the pension scheme have paid for the security of such guarantee to their future pension benefits. The payment is to outbalance the increased provisions necessary to meet the customers’ guarantees and the financial instruments acquired to hedge the guarantees. Payment for guarantees only applies to customers of FSP’s conventional schemes with average rates. All new customers from 1 January 2007 are recorded in FSP’s market rate scheme, FSP WebLink, where there are no performance guarantees and accordingly no payment for guarantees. The payment for guarantees is allocated on the basis of the size of the base interest rate. The expenses are therefore higher for the high guarantees because they require higher provisions and a higher degree of financial instruments for interest hedging. Furthermore, the financial crisis has made it more expensive to insure the investments against fluctuations in exchange and interest rates. Accordingly, FSP is forced to increase the customers’ payment for the performance guarantees. The guarantee payment is deducted before the custody rate accrues to each customer’s account. For 2008, FSP’s Supervisory Board has determined the following rates: • • • Base interest rate of 1.75% - 0.15% of savings. Base interest rate of 2.75% - 0.45% of savings. Base interest rate of 4.50% - 0.90% of savings. Payment for guarantees for FSP Traditional (2008) 1.0% 0.8% 0.90% 0,90% Many customers have several base interest rates on their pension scheme, and this entails that FSP deducts an average of the above payments from the custody rate of 3.00% in 2008. • All customers recorded after 1 July 1999 have a base interest rate of 1.75% and will receive a return of 2.85% in 2008. Customers of Department B2 will receive return on their investment by between 2.10% and 2.85% in 2008. 0.6% 0.45% 0,45% 0.4% 0.2% 0,15% 0.15% • 0.0% Customers accepted after 1 July 1999 Other customers Customers of Dep. B2 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=21http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=21Finanssektorens Pensionskasse 21 • Customers of other departments will receive return on their investment by between 2.55% and 2.85% in 2008. The Supervisory Board will determine the guarantee payment as well as the custody rate for the year 2009 finally by the end of the year. FSP expects the guarantee payment for 2009 to increase by reason of the continued instability on the financial markets. Activation of exchange rate protection and use of bonus potential of premiumfree policies In the autumn of 2008, to maintain the room to manoeuvre in investments, FSP decided to activate the possibility under the rules of the Executive Order on the Contribution Principle and FSP’s technical basis of utilising bonus potential of premium-free policies for partial coverage of the losses on investments as a consequence of the financial crisis which resulted in the customers’ share of the realised results in 2008 being negative. The use of bonus potential of premium-free policies in practice means that by way of the provisions for future bonus accruals for policies with average interest rates, the customers contribute to cover losses in combination with equity. When FSP again sees positive financial performance in future, the profit will initially be applied for reconstruction of the bonus potential of free-premium policies under section 7 of the Executive Order on Contribution Principle. In connection with the use of bonus potentials of the premium-free policies, FSP has activated a socalled exchange rate protection. For customers remaining in FSP Pension, the exchange rate protection has no significance, while customers leaving FSP will see a reduction of a portion of the savings. No exchange rate protection has been introduced for savings in FSP WebLink, as such savings earn market interest rate and not average rates. PAL compensation Effective as from 2008, the Danish parliament, Folketinget, introduced a pension return tax of 15% for index-linked bonds and property investments. Thereby, return on any pension investment is taxed by 15%. In connection with the tax change, the possibility of applying for one-off compensation for the future pension tax on index-linked bonds and property investments was opened. FSP applied for such compensation for all customers with a possibility of taking part in it. The compensation is to be considered a temporary loan from the Danish tax authorities, SKAT, as SKAT in the future year will gradually charge the compensation when you pay full pension tax of 15% of the return on index-linked bonds and properties. In the second half of 2008, FSP allocated the compensation amount of approx. DKK 167 million among the customers. The main part of the customers decided to have the PAL compensation paid to the existing pension scheme. Retirees received direct payment of the PAL compensation net of income tax. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=22http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=22Finanssektorens Pensionskasse 22 INVESTMENTS Negative return on investments in 2008 The return on investments for the year was very unsatisfactory with a return of negative 18.0%. The negative return on investments is due to the heavy effect of the global financial crisis on the stock exchanges all over the world and the following dampened growth all over the world. The financial crisis was strongly increased during the autumn of 2008, where the trust in the financial circles decreased notably. Investors earned losses on more or less all types of assets, and risk diversification accordingly was also invalidated. FSP’s hedging of the risk of dropping interest rates resulted in a gain of 6.9% so that the net investment return can be calculated at negative 11.1 %. FSP especially earned losses on the Danish and foreign shares, raw materials and credit bonds. Investments in properties and hedge funds also earned losses, whereas investments in Danish and European bonds earned positive yields. FSP’s return in 2008 allocated into asset categories Return on individual assets 2008 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% -55% -60% -56.1% -45.0% -41.4% -27.2% -29.0% -13.9% -15.7% -13.2% -5.5% 6.3% -13.5% -18.0% FSP’s focus on safety in the investment policy has shown its strength during the financial crisis and contributed to ensuring a positive and competitive long-term return as illustrated by the below figure. Return in FSP WebLink The venture investors of FSP WebLink in 2008 earned huge losses on their investments as a result of the financial crisis and the unusually adverse market conditions. Especially share investments were hit, but investments in bonds and properties also earned negative return. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=23http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=23Finanssektorens Pensionskasse 23 Despite the notable losses in 2008, the three FSP Vælger funds, in which FSP composes the investments, have still earned positive return in average of 2.6-3.6% per year over the past 5-year period 2004-2008. Most customers of FSP WebLink have selected FSP Vælger, between risks. The return in this fund is at the level of the long-term return on FSP’s conventional savings at average rate which in the past five years earned an average annual return of 3.4%. The advantage to the customers of FSP WebLink is partly that no payment is to be deducted for performance guarantee, partly that the customers benefit from the entire gain when the financial crisis is over and the rates again increase. 5 years returns on FSP Traditional and FSP WebLink 40% 30% 20% 10% 0% -10% -20% -30% -40% 2004 FSP Traditional -10.2% -11.1% -17.8% -33.3% 11.0% 7.6% 8.0% 10.7% 17.5% 10.6% 13.5% 28.0% 5.6% 5.5%8.3%13.4% 3.0% 6.1% 3.3% 2.9% 3.4% 3.6% 3.1% 2.6% 2005 2006 2007 FSP WebLink - Medium Risk 2008 5-year average FSP WebLink - Low risk FSP WebLink - High Risk The return on the individual funds in FSP WebLink is visible from FSP’s website, www.fsp.dk. Property investments 15% of FSP’s investments are placed in properties in Denmark and abroad. The allocation into mandates is illustrated in the below figure. Investments in Danish directly owned properties viewed in isolation earned a return of negative 3.6% in 2008. Allocation of real estate investments by FSP app. 14% of the total balance J.P. Morgan Europe 5% J.P. Morgan USA 6% PanEuropean Property 7% Dansk Ejendomsfond I A/S 9% Foreningen Fast Ejendom 2% ei invest nordisk retail 2% Directly owned 63% Britannia Invest 6% Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=24http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=24Finanssektorens Pensionskasse 24 In June 2008, FSP made an investment in 33 newly built terraced houses in Vallensbæk, Solsikkehusene. The well-furnished terraced houses of two storeys are drawn by architects, Vandkunsten, who are known for good style and good selection of materials. Solsikkehusene were fully let out in merely two months. FSP’s new residential construction, Klosterbakken, which is located centrally in Odense, was ready for moving in in the autumn of 2008. In October 2008, the municipality of Hørsholm awarded FSP’s construction work, Slotshusene, most beautiful of the year and best construction work of the municipality. All housing units are let out. FSP’s construction work, Klosterbakken, in the centre of Odense. The construction work, Slotshusene, in the municipality of Hørsholm. Dan-Ejendomme new manager of the FSP properties In April 2008, Dan-Ejendomme took over the administration of FSP Pension’s more than 20 residential properties and more than 1,100 tenancies in Denmark. The change to Dan-Ejendomme results in even better service for the residents and a more efficient administration for FSP Pension. The conversion to Dan-Ejendomme’s IT system has gone well without significant inconvenience to the residents who have gained access to an intranet with useful information about the individual properties. Concurrently in 2008, FSP entered into cooperation with Cura Management about strategic advice about the properties of the Pension Fund. Ethics in investments and policies for civic responsibility According to section 98 of ”Executive Order on Financial reports from Insurance Companies and Non-Occupational Pension Funds”, FSP is to state whether the investment policy of the Pension Fund takes ethical and social matters into consideration. As stated in the Danish Financial Business Act, FSP invests for the primary purpose of ensuring the members the best possible return in consideration of the risk profile selected. On determination of investments, FSP takes into consideration – as a part of the general analysis of the financial situation of the enterprise – whether the enterprises show openness about their positions, including about the ethical responsibility. FSP has decided to join "Netværk for god virksomhedsetik og ikke-finansiel rapportering" (NVIR) (Network for Good Corporate Ethics and Non-Financial Reporting) and accordingly observes NVIR's recommendations. Therefore, FSP has decided to enclose separately worded policies of social Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=25http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=25Finanssektorens Pensionskasse 25 responsibility according to section 132 of the Danish Executive Order on the Preparation of Financial Statements. NVIR comprises a gross list of recommendations about ethical matters within these six subjects: Market conditions, environment, employees, human rights, social responsibility and governance. FSP applies the NVIR principles in the dialogue with the managers handling investments for FSP. Furthermore, FSP’s property manager, Dan-Ejendomme, has introduced ethical guidelines which the janitor of each property is to observe. Publishing of ownership shares According to the same section 98 of the above Executive Order, FSP is also to indicate whether there is public access to details about the Pension Fund’s investments in enterprises. For administrative and other regards, FSP does not publish a list of all enterprises in which the Pension Fund has investments, nor the size of the investment. Investment strategy 2009 For 2009, FSP budgets a rate of return on investments of 6.0% before tax based on the allocation of assets as shown below and the return assumptions applied by the pension business. The financial crisis has given rise to reducing the risk in the investment strategy so as to stay at the level of 2006. The investment strategy for 2009 accordingly suggests a total investment in Danish, foreign and unlisted shares of about 21% of the capital against 25% by the entry to 2008. Investments in properties are still expected to represent approx. 15% of the capital. FSP expects to see good investment possibilities in future when the market conditions are again beneficial. Historical data shows that crises in average last 14 months. The most recent crisis in 2001 lasted 2½ years and by the entry to 2009, the present crisis had lasted 1½ years. Accordingly, FSP will continue to assess the market possibilities and potential categories of assets with good investment potential. Besides the shown categories of assets, FSP invests in raw materials via financial instruments. 2009 Investment strategy balance sheet Other assets 6% Real estate 15% Danish bonds 34% Hedge f onds 3% International equities 10% Danish equities 5% Private equities High Yield + 6% structural bonds 8% Foreign Bonds 8% Emerging market bonds 5% Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=26http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=26Finanssektorens Pensionskasse 26 RISK MANAGEMENT AND COMPLIANCE Risks In the Executive Order on Financial Reports for Insurance Companies and Pension Funds, the Danish Financial Supervisory Authority has determined requirements of the rules on risk management. On this basis, FSP has decided to gather all material details about risks in this section in which we describe the types of risks FSP assumes as well as which management models and management tools we have selected. FSP’s risks primarily relate to the pension commitments made to the customers and the financial risks on the investments. FSP greatly emphasises supervising and managing these risks and the interplay between them based on the risk tolerance determined by the Supervisory Board. FSP is to report risk scenarios to the Danish Financial Supervisory Authority – the traffic lights – and the individual solvency requirements and also calculating the effect of the most significant risk factors to the Pension Fund. The risks have been illustrated in a special table for sensitivity details calculated according to the guidelines of the Danish Financial Supervisory Authority and as illustrated below. FSP has established a Compliance function the assignment of which is to control and supervise the operation of the business of the Pension Fund, including the compliance with the rules of the section 71 guidelines of the Danish Financial Supervisory Authority. List of FSP’s risks External risks Control risks Legal risks Insurance risks The company's overall risk profile Financial risks Strategic and organisational Operational risks Insurance risks Pension provisions The statement of the pension provisions at market value is to take into consideration the risks in the insurance area. Partly the current interest level and the investments of the Pension Fund in relation to the applied base rate, partly the development in the so-called death and disability intensities among the customers. The pension provisions amount to DKK 17,416 million and have been specified in note 12 to the financial statements. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=27http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=27Finanssektorens Pensionskasse 27 Beneficial risk process for people in active employment Employees in the financial sector represent a beneficial risk group, and accordingly, in 2008, FSP has been able to accrue DKK 68.8 million of risk bonus which corresponds to 0.39% of the customers’ accounts. In 2008, there was a risk profit of DKK 19.9 million after accruing of risk bonus of DKK 68.8 million. The result helps underlining that this is a beneficial risk group. The risk profit can be allocated into a profit from disability coverage of DKK 26.1 million and a loss from death coverage of DKK 6.2 million. Reassurance FSP introduced a programme for reassurance in 2006 and has renewed the programme annually. The programme is a part of an active risk management plan and the programme is to insure FSP's equity against large claims on the disability insurance and the death insurance, respectively. FSP's equity and beneficial risk group are of such size and strength that it is unnecessary to cover a larger part of the claims expenses by reassurance. Disputes in 2008 FSP emphasises a competent and customer-friendly case processing, and this, among other things, shows by very few disputes with customers. In 2008, FSP was brought before the Insurance Appeals Board in two cases. In both cases, the Appeals Board fully agreed with FSP. At the time of publishing the financial statements, there were no pending appeals board cases. Financial risks Risk analysis for investments Please refer to the description of risk analysis for the investments in the annual report 2007. On the basis of the continued uncertainty on the financial markets, FSP has downwards adjusted the risk tolerance for 2009. For 2009, FSP budgets a total return of 6.0% before tax based on the general industry assumptions for return on the individual asset categories. These assumptions have also been included in the calculation for 2005-2008 for the purpose of comparison. Efficient rand and Risk profile 2009 (by use of return requirements for 2009) Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=28http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=28Finanssektorens Pensionskasse 28 Risk scenarios of the Danish Financial Supervisory Authority As a part of the risk management in the Danish Financial Supervisory Authority’s risk scenarios, FSP is to calculate and currently report the effect of such significant financial risk factors: Interest risks, share price risks, exchange risks and raw materials risks as well as counterpart/credit risks. The table below shows FSP’s sensitivity in these areas: Table for sensitivity details for enterprises operating pension business Event Minimum influence on capital base Maximum Maximum influence of influence on bonus potential on collective bonus premium-free policy potential payments before change in applied bonus potential on premium-free policy payments 0 0 0 0 0 0 0 0 0 -36 55 -25 723 to 1,122 -171 to -198 Maximum influence on applied bonus potential for premium-free policy payments Interest increase of 0.7 – 1.0 percentage points Interest decrease of 0.7 – 1.0 percentage points Decrease in share price 12 pct. Decrease in property of 8 pct. Change in exchange rates by 0.5 pct. Probability of 10 days Loss on counterparts 8 pct. Decrease in mortality intensity of 10 pct. Increase in the mortality intensity of 10 pct. Increase in the disability intensity of 10 pct. -161 to -215 52 to -31 -237 -27 -3 -76 -269 0 0 -304 to -487 -45 to -22 -195 -174 -20 -195 -164 359 -29 We refer to an elaborate review of the risk scenarios of the Danish Financial Supervisory Authority in the annual report for 2007. Please note, however, that in connection with the agreement about financial stability, the Danish Financial Supervisory Authority abolished the yellow risk scenario. FSP’s position in the green risk scenario by the end of 2008 appears from the figure on page 13. Financial instruments FSP applies a number of financial instruments. In 2008, interest swaps and interest swaptions in EUR have been applied to hedge interest sensitivity on the pension provisions. This portfolio has a forward start, dated in the end of 2010. For adjustment of the Pension Fund’s maturity of bonds, liquid bond futures with typically three months’ maturity have been applied in 2008, and repo transactions in bonds have been applied in the liquidity management. In the adjustment of the share risk of the Pension Fund, in 2008, liquid futures have been applied to share index with typically three months’ maturity. The Pension Fund hedges exchange risks related to USD, GBP and JPY. This is performed with three months’ forward exchange agreements which continue and are settled quarterly. Through total return swap, the Pension Fund has exposure to raw materials (energy and metals), with quarterly settlement of losses and gains. The above financial instruments lead to a counterpart risk of the related contract counterparts depending on market custom – and such risk is managed within determined limits. In light of the financial crisis and several bankruptcies – including Lehman Brothers’ bankruptcy – FSP has tightened compliance towards FSP’s external fund managers and performed annual follow-up on handling of counterpart risks on the trading partners used on behalf of FSP. The financial crisis has Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=29http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=29Finanssektorens Pensionskasse 29 also resulted in considerable tightening of procedures and rules for approval of counterparts at FSP’s fund managers during 2008. Asset Liability Management FSP has divided the investment activities into a hedging portfolio and an investment portfolio. The division ensures that the hedging is as precise as possible and is done independently of the placement of investments in all other respects. The hedging portfolio is accordingly to hedge FSP’s interest sensitivity on the Pension Funds’ pension liabilities and create security of FSP meeting the pension commitments made. The hedging is made with interest swaps and swaptions in EUR and aims at neutralising the fluctuations in interest level which affect the pension commitments, viewed in isolation. The risk management (Asset Liability Management) also comprises follow-up on the value of interest swaps and swaptions being calculated in EUR whereas the value of FSP’s pension commitments is calculated on the basis of DKK interest (the discount rate). This does not entail an actual exchange risk, but there is a risk of the swap rates in EUR developing differently than the DKK rates. The risk relates to the present positive interest difference between DKK and EUR rates being narrowed or being negative. Discount interest rate 2008 4,7% 4,5% 4,3% 4,1% 3,9% 3,7% 3,5% Statement of individual solvency requirements In 2008, the Danish Financial Supervisory Authority increased its focus on the pension institutions’ calculation of individual solvency requirements. For the individual solvency requirement, FSP is to identify and assess the enterprise's individual risks or groups of risks to itself, and the sum of the individual groups of risks accordingly represents FSP’s individual solvency requirements. The individual solvency requirement is highly based on the risk scenarios of the Danish Financial Supervisory Authority – the traffic lights. According to the agreement about financial stability, the Danish Financial Supervisory Authority introduced quarterly reporting of the individual solvency requirement against formerly every quarter as well as the Danish Financial Supervisory Authority in the autumn 2008 as a consequence of the financial crisis requesting the pension business for extraordinary reporting. The independent audit firm, PriceWaterhouseCoopers, performs an annual assessment of whether FSP meets the requirements of the individual solvency requirement. Please refer to the annual report for 2007, which includes a detailed description of FSP’s calculation of the individual solvency requirement. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=30http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=30Finanssektorens Pensionskasse 30 Valuation of assets It has always been subject to a certain degree of uncertainty to measure assets. This has been stated in FSP's accounting policies in the previous years. This aspect came into focus in 2008 by reason of the financial instability which suspended a number of market mechanisms fully or partially. Accordingly, for long periods of time, there were markets without normal pricing, and for some assets you could even say that the market disappeared in 2008. It was especially a matter of insufficient liquidity as there were no buyers. With insufficient liquidity in the market – to read the value of assets – models may accordingly to a higher extent form part of the valuation. For unlisted share investments, FSP and our cooperating partners apply several models and comparative bases to find a fair value to be applied in the financial statements. The below figure illustrates this for a company where comparison is made with similar companies and where payment flows are measured for the Company’s own ratios. Example of pricing of an unlisted share Fair value Value at the time of acquisition Latest transaction in industri Model of payment flows Pricing in relation to other companies Market price/net asset value in relation to other companies Operational risks Business Compliance Please refer to the elaborate description of Business Compliance in the annual report for 2007. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=31http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=31Finanssektorens Pensionskasse 31 FINANCIAL STATEMENTS Unsatisfactory consolidated financial performance The financial performance of FSP Group for 2008 amounted to a loss of DKK 1,391 million. The primary reason for the loss for the year is a huge negative investment return and that FSP maintains many years’ policy of giving the customers a stable custody rate. In recent years, FSP has developed solid reserves which are applicable as buffer in years of negative return on investments. Concurrently, FSP’s prudent calculation principles mean that almost DKK 1.2 billion of the bonus potential has been applicable for premium-free policy payments for partial coverage of the negative investment result, but the net performance for the year is covered by the capital base. Main accounting Figures DKK millions Net profit or loss Total assets Owners' equity Pension provisions Customers 2008 -1,391 20,738 1,692 17,418 17,100 2007 -213 23,060 3,084 17,945 16,693 2006 416 21,622 3,296 17,311 16,410 2005 1,084 20,419 2,881 16,537 15,911 2004 313 17,346 1,796 15,450 15,617 FSP has become a group FSP Pension constantly focuses on achieving economies of scope in administration as well as on reducing dependency upon individuals in a number of strongly specialised assignments which have increased notably in recent years as the public regulation of the pension business has become increasingly stricter. Accordingly, as mentioned in the annual report for 2007, FSP has established FSP Invest F.M.B.A. and also outsourced the majority of the fund administrative assignments in FSP Pension to Nykredit Portefølje Administration A/S. Thereby, FSP gains access to expertise within a number of areas where FSP itself is not able to develop the same competences or to achieve economies of scope. The new structure also gives FSP’s finance department better time to focus on the overall investment strategy and risk management with an aim to create higher returns for the benefit of all customers. Consolidated finansial statements Enterprise Parent Finanssektorens Pensionskasse (FSP) Significant activities - membership administration - health department - investment activities Subsidiary FSP It ApS - IT investments, etc. Subsidiary FSP Invest F.M.B.A. - investment activities Associate Britannia Invest A/S - property investments in the UK Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=32http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=32Finanssektorens Pensionskasse 32 FSP’s group structure has in 2008 been expanded with the establishment of FSP It ApS in connection with the outsourcing of FSP’s member system to Forca. Consolidated balance sheet of DKK 20.7 billion FSP’s total balance sheet amounted to DKK 20.7 billion by the end of 2008 against DKK 23.1 billion by the end of 2007. From the total balance sheet, investment assets amounted to DKK 19.4 billion. In terms of equity and liabilities, the total provisions amounted to DKK 17.6 billion – both calculated without the unit-linked scheme, FSP WebLink. FSP’s balance sheet 1990-2008 DKK million 25,000 20,000 15,000 10,000 5,000 0 Income and expenses The total membership contribution represented gross DKK 632 million in 2008. This is an increase of 8.5% or DKK 50 million in relation to 2007. The profit/loss on investment activities dropped from DKK 684 million in 2007 to negative DKK 2,401 million in 2008. The number of retirees still increases, and thereby, the pension benefits increased to DKK 556 million in 2008 against DKK 530 million in 2007. Before set-off of applied potential for premium-free policy payments, FSP in 2008 increased provisions for future pensions by DKK 504 million against DKK 236 million in 2007. The higher rate of increase of pension provisions is primarily caused by the interest level dropping through 2008, as it shows from the figure on page 29. A declining interest level leads to strengthening of provisions for market value. In 2008, in accordance with the agreement about Financial Stability in the pension business, bonus has only to a very modest extent accrued to the customers. The amount represented DKK 49 million. In 2007, bonus to the customers before accruing of special bonus provisions amounted to DKK 410 million. The operating expenses of the Pension Fund in 2008 amounted to DKK 39.8 million against DKK 33.1 million in 2007. The increase among other things owes to the continued modernisation of FSP’s pension schemes, including preparations for transferring a considerable part of the administration to the service company, Forca, as well as the continued tight legal requirements as well as increase in Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=33http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=33Finanssektorens Pensionskasse 33 salaries as a result of certain positions, which in 2007 were vacant by reason of the insufficiency of labour, being repossessed in 2008. The growth in costs was expected and is an investment in future reductions of costs. The health and accident profit/loss in 2008 showed a loss of DKK 2.0 million against a loss in 2007 of DKK 2.1 million. The loss is primarily due to the fact that a higher average age of FSP’s customers gave a higher increase in the health and accident business than as expected. Profit distribution According to guidelines from the Danish Financial Supervisory Authority, FSP is to indicate that the interest bonus rates also for 2008 are still in arrears for the year, and that by determination, an easy and stable development has been intended which is in accordance with sections 20 and 21 of the Danish Financial Business Act. Based on the rules of the Danish Financial Supervisory Authority (the Executive Order on Pension Contributions), the actuary has calculated that the realised performance for the year is negative DKK 2,907 million. The loss for the year results in the shadow account for equity in 2008 accruing DKK 1,134 million as stated in note 11 to the financial statements. As is furthermore stated in note 11, the loss for the year of DKK 1,391 million has been transferred to equity. According to Executive Order on Pension Contributions, FSP has reported to the Danish Financial Supervisory Authority that equity carries interest of return ratio 1 (return before pension return tax) plus a so-called risk transaction which in FSP has been determined at 1.5 percentage points for 2008. As a result of the financial crisis, the risk transaction for 2009 has been increased to 3.0 percentage points. Furthermore, the loss on the health and accident activities has been taken to equity as well as establishment of new customers having been covered by equity. The return on FSP’s equity (incl. the shadow account of equity) for 2008 may in accordance with the contribution principles be calculated at negative DKK 258 million less an additional DKK 30 million as appears from note 11 to the financial statements. Accordingly, after transfer to the shadow account, equity by the end of 2008 is in arrears by a total of DKK 1,461 million in relation to the insurance volume. This appears from the shadow account where equity, apart from the above said allocation of contribution, covers previous years’ lacking return when the realised profit so allows. Shadow account for equity (DKK mill.) Shadow account at the beginning of the year + Taken from/to equity + Return on shadow account Shadow account at year-end 2008 356.4 1,133.7 -29.5 1,460.7 2007 8.5 347.5 0.4 356.4 2006 171.3 -177.1 14.3 8.5 2005 847.1 -807.4 131.6 171.3 2004 924.2 -171.3 94.2 847.1 Capital Base The capital base of the Pension Fund which consists of equity and FSP BonusKapital amounts to DKK 1,890 million and corresponds to 10.6% of the provisions of pension agreements, etc. of DKK 17,760 million. This has been illustrated in the figure on page 14. According to the capital requirements of non-occupational pension funds, the solvency margin by the end of 2008 is to represent DKK 645 million corresponding to 3.6% of the pension provisions. FSP’s capital base accordingly covers the solvency requirements 2.9 times. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=34http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=34Finanssektorens Pensionskasse 34 Analysis of earnings generation The earnings generation in a pension fund can be allocated into four main areas: 1. The difference between the insurance technical interest rate (the base rate plus interest bonus) which has accrued to the customers' accounts and the actual return on investment after pension return and investment costs – named the interest performance. 2. The risk performance of the Pension Fund calculated by the Pension Fund actuary according to the technical basis as the difference between the risk premiums included in member contributions and the actual risk expenses plus distributed risk bonus. 3. The difference between the cost contributions included in member contribution and the actual administrative expenses – named the administrative profit/loss. 4. Other items such as change in special bonus provision, change in valuation to market value, technical profit/loss on health and accident insurance and profit/loss on reassurance Earning generation DKK million Return on investment, net Base interest rate Interest bonus Profit/loss from interest Risk premiums Risk expenses Risk bonus Profit/loss on risk Cost addition Cost bonus Administrative expenses Profit/loss on administration Subtotal Provided for special bonus provisions Strengthening to market value Applied bonus potential for premium-free policy pa Other (SAP) Profit/loss on reassurance Acquired/released underlying schemes Adjustment of domicile property Profit/loss on health and accident insurance Total profit/loss for the year 2008 -2,064.2 -501.4 86.3 -2,479.2 51.0 37.7 -68.8 19.9 24.6 5.9 -39.8 -9.3 -2,468.6 30.7 -164.5 1,198.5 0.0 14.6 0.0 0.0 -2.0 -1,391.2 2007 590.7 -510.6 -324.5 -244.4 36.1 8.5 -51.8 -7.2 21.5 6.1 -33.1 -5.5 -257.1 -139.6 171.6 0.0 -0.2 10.6 0.0 3.4 -2.1 -213.2 The interest profit/loss The interest profit/loss shows a loss of DKK 2,479 million. The reason is the negative return on investment as well as that the custody rate was thereby higher than the return on investment. The return on capital in 2008 was negative 11.1% and negative 9.6%, respectively, before and after pension return tax whereas the custody rate was 3.0% before tax and 3.0% after tax, respectively. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=35http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=35Finanssektorens Pensionskasse 35 The risk profit/loss The risk profit/loss shows a profit of DKK 19.9 million after accruing of risk bonus. The risk profit/loss in ratio to the pension provisions represented 0.12% in 2008 against negative 0.04% in 2007. The administrative profit/loss The administrative profit/loss shows a loss of DKK 9.3 million. The administrative profit/loss in ratio to the pension provisions represented negative 0.05% in 2008 against negative 0.03% in 2007. The cost rate of premiums has been calculated at 6.3%, whereas cost rate of provisions amounted to 0.2%, which is the rate of the total return on capital for the year which is applied to cover the operating expenses of the Pension Fund. The profit/loss on health and accident insurance The insurance technical profit/loss on health and accident insurance (critical illness) in 2008 represented a loss of DKK 2.0 million. Profit/loss on reassurance Profit/loss from reassurance amounts to DKK 14.6 million compared to DKK 10.6 million in 2007. The item relates to the profit/loss after adjustment of the value of the underlying policies in other insurance companies. Expectations of 2009 In 2009, FSP will continue the activities for making the customer service even better and strengthen FSP’s position in the financial sector. FSP will also continue the business cooperation with FSP’s member enterprises which takes place at normal market terms. In 2009, FSP will also be consuming considerable resources on ensuring good and successful outsourcing of a number of administrative assignments to the service company, Forca. The Pension Fund budgets a profit of approx. DKK 13 million in 2009, which is based on the determined investment strategy and competitive custody rate. This also includes repayment of DKK 391 million for bonus potential on premium-free policy payments. FSP budgets a return on investments of 6.0% before tax. The expectation is based on the social assumptions distributed from Forsikring & Pension as well as the macroeconomic assessments which the Financial Department has obtained from economic observers and advisors. The financial crisis is expected to lead to a reduction in the number of employees in FSP’s member enterprises in the future years as well as having meant that some of FSP’s member enterprises have merged or seek help from authorities through the company ’Finansiel stabilitet’ (Financial stability). In 2009, FSP Pension will maintain the strategy with focus on achieving top-line growth, among other things, through growth in the number of customers even though the market conditions have become more difficult. FSP will focus on existing customers as well as attempting to attract new customers. The purpose is to create further potential for economies of scope. In the valuation of FSP’s assets invested in FSP’s member enterprises, the difficult situation has been considered, including that the value of Amalie 1 Ltd. has been written down even further after the publishing in February 2009 of Fionia Bank’s agreement with the state company ’Finansiel Stabilitet’. FSP will generally be focusing on limiting the increase in costs expected to follow from the increasing requirements from the Danish Financial Supervisory Authority, continued development of the pension scheme and a strengthening of FSP’s customer service. After the balance sheet date, no events have occurred which would materially affect the evaluation of FSP, and which have not been expressed in the review or in a note to this annual report. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=36http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=36Finanssektorens Pensionskasse 36 SIGNATURES OF THE EXECUTIVE AND SUPERVISORY BOARDS The Supervisory and Executive Boards have today discussed and approved the annual report for 2008 for Finanssektorens Pensionskasse. The annual report has been prepared in accordance with law governing insurance companies, including the executive orders of the Danish Financial Supervisory Authority. We consider the applied accounting policies appropriate for the annual report to provide a true and fair view of the Group’s and the Parent’s financial position at 31 December 2008 as well as of their financial performance and the consolidated cash flows for the financial year 1 January – 31 December 2008. Furthermore, we believe that the Management's review gives a true and fair review of the development in the Group's and the Parent's activities and finances as well as a description of the most significant risks and uncertainties influencing the Group and the Parent. We recommend the annual report for adoption at the Annual General Meeting. Copenhagen, 17 March 2009 Executive Board Steen Jørgensen Supervisory Board Claus E. Petersen Chairman Michael Budolfsen Vice-Chairman Birgitte Hagen Børge Hansen René Holm Jan Steen Jensen Pia Lærke Ane Marie Holm Nielsen Knud Pedersen Hans Erik Rasmussen Tina Rønfeldt Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=37http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=37Finanssektorens Pensionskasse 37 Auditors selected by the Annual General Meeting. THE INDEPENDENT AUDITOR'S REPORT To the customers of Finanssektorens Pensionskasse We have audited the annual report of Finanssektorens Pensionskasse for the financial year 1 January to 31 December 2008, which comprises the statement by Management on the annual report, Management's review, accounting policies, income statement, balance sheet, statement of changes in equity and the notes for the Group as well as the Parent and the consolidated cash flow statement. The annual report has been prepared in accordance with the Danish Financial Business Act. Management's responsibility for the annual report Management is responsible for the preparation and fair presentation of an annual report in accordance with the Danish Business Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility and basis of opinion Our responsibility is to express an opinion on this annual report based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of an annual report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the annual report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the annual report gives a true and fair view of the Group’s and the Parent’s financial position at 31 December 2008, and of their financial performance and the consolidated cash flows for the financial year 1 January to 31 December 2008 in accordance with the Danish Financial Statements Act. Copenhagen, 17 March 2009 DELOITTE Statsautoriseret Revisionsaktieselskab Søren Dinesen chartered accountant Kasper Bruhn Udam chartered accountant Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=38http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=38Finanssektorens Pensionskasse 38 ACCOUNTING POLICIES In general The annual report has been prepared in accordance with the rules of the Danish Financial Business Act and the related the Danish Executive Order on the Preparation of Financial Statements. Amounts in income statement, balance sheet and notes are presented in DKK million unless otherwise specifically stated. Each figure is rounded individually, and accordingly, deviations may occur between the stated totals and the sum of the underlying figures. Changes in accounting policies No changes have been made to accounting policies in 2008, apart from editorial adaptations. Changes in accounting estimates As a result of the agreement about financial stability between Forsikring & Pension and the Ministry of Economic and Business Affairs, adaptation has been made of the term-depending discount rate which is applied on calculation of pension provisions. The effect on income statement and balance sheet appears from the table below. In connection with the transition to new property manager in April 2008, FSP has transitioned to measuring investment and headquarter properties according to the DCF method. The statement method is based on a significantly more detailed basis that the thus far applied return method and is therefore considered more precise. It is not possible to calculate a precise effect of the change in the accounting estimate by reason of the considerable differences in models. Management believes that the effect of the change was insignificant. DKK million Adjusted discount rate -499 -499 1,693 16,017 223 1,175 19,108 1,890 Term-depending discount rate -640 -640 1,552 16,237 181 1,138 19,108 1,749 Difference 141 141 141 -220 42 37 141 Income statement Change in pension provisions Balance Sheet Equity Guaranteed contributions Bonus potential of premium-free policie Bonus potential of future premiums Capital base Accounting estimates, in general Measurement of the carrying amount of certain assets and liabilities is subject to estimates of how future events affect such estimates. The assessments performed are based on assumptions which Management considers reasonable but which are naturally subject to risk and uncertainty. The actual results may accordingly differ from the estimates performed. Estimates are to a particular degree related to calculation of pension commitments, properties and unlisted securities. Such estimates have been described in further detail below in relation to each financial statement item. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=39http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=39Finanssektorens Pensionskasse 39 Consolidation The consolidated financial statements comprise the Parent FSP, FSP IT ApS (wholly-owned) and FSP Invest F.M.B.A. (80% owned). The consolidated financial statements are prepared by combining financial statement items of a uniform nature. Intra-group transactions and balances are eliminated. Intra-group transactions Transactions between enterprises in the Group are performed at market terms or on a cost recovery basis and according to contractual agreement among the enterprises unless the transactions are insignificant. THE BALANCE SHEET Property, plant and equipment comprise purchase of minor furniture, office equipment and IT hardware and are expensed in the year of acquisition under administrative expenses. The operating equipment is measured at cost and depreciated on a straight-line basis over five years except for IT hardware, which is depreciated over three years. Investment properties are measured at fair value calculated by the DCF method. The expected generation of cash flows from the operation of properties and the determined return requirement significantly influences the valuation. The development in the general interest rate level as such does not signify the estimates performed in connection with the determination of return requirements. Furthermore, external appraisers have contributed to the calculation which has been finally determined by the Management of FSP. This is periodical contribution which will be repeated as necessary. Construction work in progress is measured at cost. The headquarter property of the Pension Fund, Amaliegade 27, is measured at reassessed value. In 2008, DKK 80k has been depreciated on the headquarter property. The depreciation period is 50 years. Investments in group enterprises and associates are measured at net asset value and recognised by FSP’s pro rata ownership share. Listed investments are measured at fair value according to the official rates by the end of the year. Official closing rates are applied from OMX Exchanges, Copenhagen for Danish equity investments. Unlisted investments are measured at fair value on the basis of recognised methods, including EVCA standards, and are affected by estimates to a much higher degree than listed securities. Details about prices, etc. that appear after the closing of accounts will only be included if they are material to the assessment of the annual report. Units of investment association are measured at fair value according to the official closing prices from OMX Exchanges, Copenhagen as well as relevant foreign stock exchanges by the end of the year. Danish as well as foreign bonds are measured at fair value according to the official closing prices from OMX Exchanges, Copenhagen as well as relevant foreign stock exchanges by the end of the year. Derivative financial instruments comprise unsettled forward exchange agreements, futures, swaps and swaptions. Derivative financial instruments are recognised on the trading date and are subsequently measured at fair value. All value adjustments are adjusted over the income statement. Investment assets related to unit-linked insurance are the assets that cancel out insurance where the insured person decides his or her own investment composition and thereby bears the full investment risk. The assets are measured at fair value according to the official closing prices from OMX Exchanges, Copenhagen by the end of the year. All financial investment assets are recognised in the balance sheet at the trading date. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=40http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=40Finanssektorens Pensionskasse 40 Assets and liabilities in foreign currencies are recorded at the official exchange rates at the balance sheet date. Deferred tax assets are measured at the value at which the asset is expected to be realised either by set-off against future earnings or by set-off against deferred tax liabilities. Pension provisions are calculated by the appointed actuary of the Pension Fund on the basis of the technical base reported by the Danish Financial Supervisory Authority and consist of guaranteed payments, bonus potential of future contributions and bonus potential of premium-free policy payments. Guaranteed payments represent the present value of the payments guaranteed to the customer as well as the present value of expected future expenses of administration of the insurance less the present value of the agreed, future contributions paid by the customers. Guaranteed payments include an estimated amount for coverage of future payments that stem from insurance events occurring in the financial year, but which had not been reported by the end of the financial year. Bonus potential of future contributions includes the present value of obligations to grant bonus relating to agreed contributions which are not yet due. Bonus potential for premium-free policy payments includes the present value of obligations to grant bonus relating to the already paid contributions, etc. Bonus potential for premium-free policy payments is applied for partial coverage of losses in the event of negative realised performance. The bonus potential is reestablished with future profits before equity is added share of profit. The Pension Fund calculates provisions for fair value on the basis of the term-depending adjusted discount rate of the Danish Financial Supervisory Authority less 5%. This risk addition is primarily to cover uncertainties/estimates in the risk process of the Pension Fund, including especially the expected life of retirees. The calculation is also based on assumptions about the risk and cost matters of the Pension Fund. In relation to the customers’ accounts (the retrospective provision), the lifetime has increased by three years. This entails that a strengthening is calculated for some retirees. Correspondingly, a strengthening is calculated for the customers of department B.2, who have a calculation rate of 4.5%. For the vast majority of pension schemes, the fair value of the pension benefit is lower than the custody account. Thereby, bonus potential occurs on future contributions and bonus potential of premium-free policy payments. By use of bonus potential for premium-free policy payments, the strengthening is lowered whereby the total provision is lowered. On calculation of the size of the provisions, it has been assumed that the administrative expenses of managing the member population of the Pension Fund is covered by the cost deductions burdening the policies. Claims provisions comprise overdue payments from insurance events occurring in the financial year, but which had not been paid or reported by the end of the financial year. Provisions for unit-linked contracts are basically calculated as the individual insurance policy’s share of fair value of the related investment assets. Income statement Membership contributions comprise current contributions (including contributions for unit-linked insurance and transfer from Special Pension Savings) paid by financial institutions as a part of an employment, one-off contribution and contribution from own payments. Social security contributions have been deducted in the financial statement item membership contributions. Business ceded comprises membership contributions ceded to other companies and reassurance companies’ share of pension benefits. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=41http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=41Finanssektorens Pensionskasse 41 Income from investment properties comprise the operating profits or losses of the properties excluding value adjustments taken to designated items. In the operating profit or loss, rental income from headquarter property is not included. Positive value adjustments of headquarter property are adjusted directly in equity and the members' share is transferred directly from equity to the pension provisions. Negative value adjustment is recognised in the income statement. Interest and dividends, etc. comprise the due and earned interest as well as share dividends in the financial year. Exchange and price adjustments comprise value adjustments, sales gains and losses on investment assets, including financial instruments. Realised and unrealised security and exchange gains and losses on value adjustment of investment assets are included in the income statement and calculated as the difference between the value of the assets at the beginning of the financial year plus the weighted average cost of the assets acquired in the financial year and the fair value by the end of the year. Pension return tax comprises tax on the calculation of taxable basis for the financial year as well as changes in provision for deferred pension return tax and deferred tax assets. Pension benefits on own account comprise non-recurrent payments on death and age retirement, current pension benefits as well as exit payments on own account less the pension benefits refunded by the reassurance. Change in pension provisions comprise changes for the year in pension provisions gross less the share of reassurance as well as the consumption for the year of bonus potential of premium-free policy payments. Total bonus comprises accrued bonus for the year as well as changes in special bonus provisions for the year. Operating expenses in terms of pension comprise the administrative expenses attributable to the financial year, including taxes for public authorities and the book depreciation of furniture, etc. The administrative expenses are allocated into pension activities, investment activities and non-life insurance activities. The allocation has been made on the basis of the actual resource consumption. Transferred return on investment includes the portion of investment return which relates to the return on equity and the portion relating to health and accident insurance activities. Ratios are prepared according to the rules of the Executive Order on financial reports of life insurance companies and non-occupational pension funds. The calculation of the return ratios is made according to a money weighted method while return per asset type in the return table is calculated for investment assets according to a time weighted method. Hedging of currency risks is allocated into the individual investment categories in the return table. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=42http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=42Finanssektorens Pensionskasse 42 Balance sheet Assets Group 2008 2007 DKK mill. DKK mill. Property, plant and equipment Operating equipment Headquarter property 1 Total property, plant and equipment Investment assets Investment properties Investments in subsidiaries Investments in associates Other financial investment assets Investments Units of investment associations Bonds Mortgaged lending Deposits in credit institutions Other Other financial investment assets Total investment assets Investment assets related to unitlinked contracts Receivables Reassurance shares of pension provisions Receivables from members Receivables Other assets Current tax assets Deferred tax assets Cash Other assets Total other assets Prepayments Receivable interest Other prepayments Total prepayments TOTAL ASSETS Parent 2008 2007 DKK mill. DKK mill. Note 0.5 40.2 40.7 0.8 40.3 41.1 0.5 40.2 40.7 0.8 40.3 41.1 2 3 3 4 5 6 7 8 1,830.6 174.8 3,948.7 4,128.5 7,252.1 0.2 735.9 1,280.6 17,346.0 19,351.4 1,814.3 384.7 6,802.7 4,286.9 7,886.3 0.6 916.5 49.6 19,942.6 22,141.6 1,830.6 9,169.7 174.8 2,062.0 4,114.4 918.7 0.2 174.9 1,219.3 8,489.6 19,664.7 1,814.3 11,721.7 384.7 2,755.8 4,260.0 667.6 0.6 692.6 33.3 8,409.9 22,330.6 9 144.5 109.8 0.0 0.0 319.2 12.0 331.2 323.8 0.0 323.8 319.2 12.0 331.2 323.8 0.0 323.8 10 0.0 335.2 357.4 73.0 765.6 10.7 0.0 294.8 47.6 353.1 0.0 335.2 242.0 48.3 625.4 10.7 0.0 205.5 32.9 249.1 80.0 24.3 104.3 20,737.7 68.6 22.4 91.0 23,060.4 11.1 24.3 35.4 20,697.4 8.7 22.4 31.1 22,975.7 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=43http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=43Finanssektorens Pensionskasse 43 Balance sheet Equity and liabilities Group 2008 2007 DKK mill. DKK mill. Equity Revaluation reserves Retained earnings 11 Total equity Pension provisions Guaranteed payments Bonus potential of future contributions Bonus potential of premium-free policy payments 12 Total pension provisions Claims provisions Claims provisions relating to health and accident insurance Claims provisions on own account Total claims provisions 14 15 Special bonus provisions Provision for unit-linked contracts Total provisions for pension schemes and investment contracts Debt Debt in connection with pension schemes, etc. Payable to credit institutions Other payables Total debt TOTAL EQUITY AND LIABILITIES Parent 2008 2007 DKK mill. DKK mill. Note 1.8 1,690.7 1,692.5 1.8 3,081.9 3,083.7 1.8 1,690.7 1,692.5 1.8 3,081.9 3,083.7 16,017.4 1,175.4 222.7 17,415.5 13,349.2 1,638.0 2,953.8 17,941.0 16,017.4 1,175.4 222.7 17,415.5 13,349.2 1,638.0 2,953.8 17,941.0 13 2.6 0.3 2.8 197.3 144.5 3.6 0.0 3.6 227.9 109.8 2.6 0.3 2.8 197.3 144.5 3.6 0.0 3.6 227.9 109.8 17,760.1 18,282.3 17,760.1 18,282.3 16 12.9 1,163.4 108.9 1,285.2 20,737.7 13.4 904.1 776.9 1,694.4 23,060.4 12.9 1,163.4 68.6 1,244.9 20,697.4 13.4 904.1 692.2 1,609.7 22,975.7 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=44http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=44Finanssektorens Pensionskasse 44 Income statement Group 2008 2007 DKK mill. DKK mill. Membership contributions Reassurance contributions made Total membership contributions on own account Income from group enterprises Income from associates Income from investment properties Interest income and dividends, etc. Value adjustments Interest expenses Administrative expenses in connection with investment activities Total return on investment Pension tax return Return on investment after pension return tax 21 Pension benefits paid Reassurance coverage received Change in claims provisions Total pension benefits on own account Change in pension provisions Use of bonus potential for premium-free policy payments Change in reassurance part Total change in pension provisions on own account Accrued bonus for the year Change in special bonus provisions Total bonus Change in provisions for unit-linked contracts Total operating expenses in terms of pension on own account Retained return on investment TECHNICAL PROFIT/LOSS Technical profit/loss on health and accident insurance Investment return on equity PROFIT/LOSS BEFORE TAX Pension return tax for equity LOSS FOR THE YEAR 631.7 -3.2 628.5 -209.9 66.8 726.0 -2,881.3 -48.6 -53.8 -2,400.9 336.7 582.1 -3.1 579.0 -20.0 58.8 820.8 -91.2 -39.0 -45.1 684.3 -93.6 Parent 2008 2007 DKK mill. DKK mill. 631.7 -3.2 628.5 -2,202.4 -209.9 66.8 220.8 -185.9 -48.6 -41.7 -2,400.9 336.7 582.1 -3.1 579.0 -6.4 -20.0 58.8 437.4 287.4 -39.0 -34.0 684.3 -93.6 Note 17 18 19 20 -2,064.2 -578.0 22.4 -0.3 -555.9 -499.2 1,198.5 -4.6 694.7 -48.8 30.6 -18.2 -34.7 -39.8 255.3 -1,134.2 -2.0 -296.6 -1,432.8 41.6 -1,391.2 590.7 -548.2 18.3 0.2 -529.7 -231.2 0.0 -4.5 -235.7 -410.2 -139.6 -549.8 -32.5 -33.1 -136.9 -348.0 -2.1 158.5 -191.5 -21.6 -213.2 -2,064.2 -578.0 22.4 -0.3 -555.9 -499.2 1,198.5 -4.6 694.7 -48.8 30.6 -18.2 -34.7 -39.8 255.3 -1,134.2 -2.0 -296.6 -1,432.8 41.6 -1,391.2 590.7 -548.2 18.3 0.2 -529.7 -231.2 0.0 -4.5 -235.7 -410.2 -139.6 -549.8 -32.5 -33.1 -136.9 -348.0 -2.1 158.5 -191.6 -21.6 -213.2 12 12 15 22 23 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=45http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=45Finanssektorens Pensionskasse 45 Statement of changes in equity Group 2008 2007 DKK mill. DKK mill. Changes in equity Equity at the beginning of the year Profit or loss for the year taken from the income statement Income and expenses recognised directly in equity Pension return tax thereof Of this, transferred to the members Net effect of items taken directly to equity Total income for the year Equity at the end of the year Parent 2008 DKK mill. 2007 DKK mill. 3,083.7 3,296.3 3,083.7 3,296.3 -1,391.2 -213.2 -1,391.2 -213.2 0.0 0.0 0.0 0.0 -1,391.2 1,692.5 4.8 -0.7 -3.4 0.6 -212.6 3,083.7 0.0 0.0 0.0 0.0 -1,391.2 1,692.5 4.8 -0.7 -3.4 0.6 -212.6 3,083.7 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=46http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=46Finanssektorens Pensionskasse 46 Notes Group 2008 2007 DKK mill. DKK mill. 1. Property, plant and equipment Operating equipment Operating equipment at cost at the beginning of the year Additions for the year Operating equipment at cost at the end of the year Depreciation of operating equipment at the beginning of the year Depreciation during the year Depreciation of operating equipment at the end of the year Operating equipment, carrying amount at the end of the year Headquarter property Revalued amount at the beginning of the year Value adjustment recognised in equity Amortisation for the year Revalued amount at the end of the year Total property, plant and equipment 2. Investment properties Fair value at the beginning of the year Additions for the year Disposals for the year Value adjustments for the year at fair value Fair value at the end of the year Return rates Lowest Average Highest Return rate on domicile property Weighted average of return rates, business Weighted average of return rates, residential Weighted average of return rates, mixed residential Parent 2008 2007 DKK mill. DKK mill. 3.0 0.0 3.0 2.8 0.2 3.0 3.0 0.0 3.0 2.8 0.2 3.0 -2.2 -0.3 -2.5 -1.7 -0.5 -2.2 -2.2 -0.3 -2.5 -1.7 -0.5 -2.2 0.5 0.8 0.5 0.8 40.3 0.0 -0.1 40.2 40.7 35.6 4.8 -0.1 40.3 41.1 40.3 0.0 -0.1 40.2 40.7 35.6 4.8 -0.1 40.3 41.1 1,814.3 160.2 -8.4 -135.6 1,830.6 1,698.7 168.2 -5.5 -47.1 1,814.3 1,814.3 160.2 -8.4 -135.6 1,830.6 1,698.7 168.2 -5.5 -47.1 1,814.3 4.0 % 4.7 % 8.0 % 5.0 % 5.2 % 4.6 % 4.9 % 3.0 % 4.1 % 6.5 % 4.8 % 5.0 % 4.1 % 3.8 % 4.0 % 4.7 % 8.0 % 5.0 % 5.2 % 4.6 % 4.9 % 3.0 % 4.1 % 6.5 % 4.8 % 5.0 % 4.1 % 3.8 % External appraisers have contributed to measurement of investment and headquarter properties. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=47http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=47Finanssektorens Pensionskasse 47 Notes Group 2008 2007 DKK mill. DKK mill. 3. Investments in group enterprises and associates Group enterprises Carrying amount by the end of the year Finanssektorens Pensionskasse has controlling influence (ownership share represents 79.55%) on FSP Invest F.M.B.A. that operates within investment association activities. At 31 December 2008, the enterprise had equity of DKK 11,523.8 million and during 2008 earned a loss of DKK 2,104.9 million. Registered office of the enterprise is in Copenhagen. Associates Carrying amount by the end of the year Finanssektorens Pensionskasse owns 32% of Britannia Invest A/S that invests in British investment properties. At 31 December 2008, the company had equity of DKK 541 million and in 2008 earned a loss of DKK 663 million. Registered office of the company is in Copenhagen. 4. Investments Listed Danish shares Listed foreign shares Unlisted shares Total investments 784.8 1,022.3 2,141.6 3,948.7 1,793.7 2,408.2 2,600.8 6,802.7 259.7 184.5 1,617.9 2,062.0 767.1 146.4 1,842.3 2,755.8 174.8 384.7 174.8 384.7 9,169.7 11,721.7 Parent 2008 2007 DKK mill. DKK mill. According to section 98 of the Danish Executive Order on the Preparation of Financial Statements, reference is made to the section on "Publishing of ownership shares" of the Management's review. 5. Units of investment associations 6. Bonds Nominal bonds Bonds in foreign currencies Total bonds The option-adjusted term of the bond portfolio represents 4.2 years 7. Deposits in credit institutions Deposits in connection with fund management agreements Margin accounts, futures Other deposits in banks Total deposits in credit institutions From deposits in credit institutions, the following fall due more than one year after the balance sheet date 4,891.8 2,360.3 7,252.1 4,757.7 3,128.6 7,886.3 918.7 0.0 918.7 667.6 0.0 667.6 4,128.5 4,286.9 4,114.4 4,260.0 0.0 0.1 735.8 735.9 0.2 0.0 916.3 916.5 0.0 0.1 174.8 174.9 0.2 0.0 692.4 692.6 0.0 75.0 0.0 75.0 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=48http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=48Finanssektorens Pensionskasse 48 Notes Group 2008 2007 DKK mill. DKK mill. 8. Other Interest swaps and swaptions Financial contracts for raw materials Forward contracts Total other Information according to section 92 of the Danish Executive Order on the Preparation of Financial Statements is stated in the section about "Risk management and compliance" of the Management's review 9. Investment assets related to unitlinked contracts Units of investment associations Total investment assets related to unitlinked contracts 10. Other assets Property assets, etc. Other receivables Total other assets 11. Equity Equity according to statement Revaluation reserve at the beginning of the year Adjustment for the year Pension return tax thereof Of this, transferred to the members Revaluation reserve at the end of the year Capital base Capital base, health and accident insurance Capital base, unit-linked contracts Total capital base Capital base in % of provisions Calculated capital requirement, life insurance Calculated capital requirement, health and accident insurance Total calculated capital requirement Shadow account (return on equity) Balance, at the beginning of the year Return for the year Applied/transferred Balance at the end of the year Calculated return on equity Applied/transferred Loss for the year Realised profit/loss for the year 1,072.9 0.0 207.7 1,280.6 14.2 7.5 27.9 49.6 Parent 2008 2007 DKK mill. DKK mill. 1,072.9 0.0 146.4 1,219.3 14.2 7.5 11.6 33.3 144.5 144.5 41.3 31.7 73.0 1,692.5 1.8 0.0 0.0 0.0 1.8 1,859.8 16.0 14.0 1,889.8 10.6 641.2 3.3 644.5 356.4 -29.5 1,133.7 1,460.7 -257.5 -1,133.7 -1,391.2 -2,906.6 109.8 109.8 25.5 22.1 47.6 3,083.7 1.1 4.8 -0.7 -3.4 1.8 3,281.5 16.0 14.0 3,311.5 18.1 714.5 3.0 717.5 8.5 0.4 347.5 356.4 134.3 -347.5 -213.2 433.7 0.0 0.0 41.3 7.0 48.3 1,692.5 1.8 0.0 0.0 0.0 1.8 1,859.8 16.0 14.0 1,889.8 10.6 641.2 3.3 644.5 356.4 -29.5 1,133.7 1,460.7 -257.5 -1,133.7 -1,391.2 -1,708.0 0.0 0.0 25.5 7.4 32.9 3,083.7 1.1 4.8 -0.7 -3.4 1.8 3,281.5 16.0 14.0 3,311.5 18.1 714.5 3.0 717.5 8.5 0.4 347.5 356.4 134.3 -347.5 -213.2 433.7 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=49http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=49Finanssektorens Pensionskasse 49 Notes Group 2008 2007 DKK mill. DKK mill. 12. Pension provisions Pension provisions Balance at the beginning of the year Change in provision for the year Transferred to health and accident insurance Balance at the end of the year 0.00% other 1.75% base rate 2.75 % base rate 4.50 % base rate Balance at the end of the year Allocation into base rates 2008 Guaranteed payments Bonus potential of future contributions Bonus potential of premium-free policy payments Total allocation into base rates Specification of change for the year Provision at the beginning of the year Accumulate value adjustment at the beginning of the year Value of retrospective provisions at the beginning of the year Membership contributions PAL compensation accrued to members*) Costs of PAL compensation Interest accrual Pension benefits Cost addition after accruing of cost bonus Risk gain after accruing of risk bonus Premium to health and accident insurance Transfer to unit-linked contracts Transferred to BonusKapital Other Value of retrospective provisions at the end of the year Accumulate value adjustment at the end of the year Use of bonus potential for premium-free policy payments Pension provision at the end of the year Other 0.5 1.75% -256.3 618.7 125.2 0.5 487.6 17,941.0 -146.1 17,794.9 561.1 138.2 0.0 438.7 -576.4 -28.7 -18.9 -13.2 -2.3 10.1 0.0 18,303.4 310.6 -1,198.5 17,415.5 Parent 2008 2007 DKK mill. DKK mill. 17,941.0 -512.4 17,428.6 -13.2 17,415.5 0.5 487.6 15,820.9 1,106.6 17,415.5 17,307.9 644.8 17,952.7 -11.7 17,941.0 0.0 449.7 16,509.0 982.3 17,941.0 17,941.0 -512.4 17,428.6 -13.2 17,415.5 0.5 487.6 15,820.9 1,106.6 17,415.5 17,307.9 644.8 17,952.7 -11.7 17,941.0 0.0 449.7 16,509.0 982.3 17,941.0 Total 16,017.4 1,175.4 222.7 17,415.5 17,307.9 -317.7 16,990.2 550.7 0.0 0.0 973.2 -547.3 -28.5 7.5 -11.7 -2.2 -137.2 0.2 17,794.9 146.1 17,941.0 Group and Parent 2.75% 4.50% 15,168.6 1,104.7 554.8 1.8 97.5 15,820.9 17,307.9 -317.7 16,990.2 550.7 0.0 0.0 973.2 -547.3 -28.5 7.5 -11.7 -2.2 -137.2 0.2 17,794.9 146.1 17,941.0 0.0 1,106.6 17,941.0 -146.1 17,794.9 561.1 138.2 0.0 438.7 -576.4 -28.7 -18.9 -13.2 -2.3 10.1 0.0 18,303.4 310.6 -1,198.5 17,415.5 *) FSP received a total of DKK 167 million of PAL compensation. DKK 0.4 million has been incurred for handling of PAL compensation, comprising costs of salaries, system adaptations as well as distribution. The handling costs are covered by equity. Payment of PAL compensations is added FSP's standard exit fee, however, maximum 10% of the relevant PAL compensation amount. The total charged fee represents DKK 0.1 million. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=50http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=50Finanssektorens Pensionskasse 50 Notes Group 2008 2007 DKK mill. DKK mill. 12. Pension provisions (continued) Change for the year in pension provisions Accrued bonus for the year Change for the year in provisions Use of bonus potential for premium-free policy payments Change for the year recognised in income statement PAL compensation Change for the year in equity Change for the year in pension provisions Guaranteed payments Bonus potential of future contributions Bonus potential of premium-free policy payments Total pension provisions Increase of bonus potential for future contributions Increase of bonus potential for premiumfree policy payments Retrospective provision 13. Claims provisions relating to health and accident insurance on own account Balance at the beginning of the year Change in claims provisions Balance at the end of the year 14. Special bonus provisions Balance, at the beginning of the year Interest accrual Transferred to special bonus capital Share of loss for the year Shadow account (special bonus provisions) Balance, at the beginning of the year Return for the year Applied/transferred Balance at the end of the year 15. Provisions for unit-linked contracts Balance at the beginning of the year Membership contributions Interest accrual Pension benefits Cost addition after accruing of cost bonus Risk gain after accruing of risk bonus Transferred to BonusKapital Transferred from pension provisions Provisions for unit-linked contracts at the end of the year Parent 2008 2007 DKK mill. DKK mill. 48.8 499.2 -1,198.5 -650.5 138.2 0.0 -512.4 16,017.4 1,175.4 222.7 17,415.5 -4.9 892.8 18,303.4 410.2 231.2 0.0 641.4 0.0 3.4 644.8 13,349.2 1,638.0 2,953.8 17,941.0 -0.6 -145.5 17,794.9 48.8 499.2 -1,198.5 -650.5 138.2 0.0 -512.4 16,017.4 1,175.4 222.7 17,415.5 -4.9 892.8 18,303.4 410.2 231.2 0.0 641.4 0.0 3.4 644.8 13,349.2 1,638.0 2,953.8 17,941.0 -0.6 -145.5 17,794.9 3.6 -1.0 2.6 3.2 0.4 3.6 3.6 -1.0 2.6 3.2 0.4 3.6 227.9 1.9 -10.0 -22.4 197.3 0.0 0.0 3.4 3.4 109.8 70.6 -33.5 -1.9 -1.8 -1.1 0.0 2.3 144.5 88.3 2.4 137.2 0.0 227.9 0.0 0.0 0.0 0.0 77.3 31.4 -1.0 -0.6 0.9 -0.4 0.0 2.2 109.8 227.9 1.9 -10.0 -22.4 197.3 0.0 0.0 3.4 3.4 109.8 70.6 -33.5 -1.9 -1.8 -1.1 0.0 2.3 144.5 88.3 2.4 137.2 0.0 227.9 0.0 0.0 0.0 0.0 77.3 31.4 -1.0 -0.6 0.9 -0.4 0.0 2.2 109.8 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=51http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=51Finanssektorens Pensionskasse 51 Notes Group 2008 2007 DKK mill. DKK mill. 16. Other payables Holiday pay commitment Property creditors Derivative financial instruments Taxes and duties payable Costs payable Other payables All debt items fall due in less than five years. 17. Membership contributions Current membership contribution, member institutions Current membership contribution, selfpaying Deposits from Special Pension Fund Deposit from the Danish Employees Capital Pension Fund One-off contribution and instalment schemes Labour market contributions Total membership contributions Insurance with bonus scheme Unit-linked contracts Group life premium 5.5 38.3 56.1 2.2 6.7 108.9 3.5 43.5 716.9 1.8 11.2 776.9 Parent 2008 2007 DKK mill. DKK mill. 5.5 38.3 18.4 2.2 4.2 68.6 3.5 43.5 635.4 1.8 8.0 692.2 593.2 24.4 0.6 0.2 62.1 -48.8 631.7 560.6 70.6 0.5 631.7 548.3 24.0 0.8 0.2 54.0 -45.2 582.1 550.6 31.3 0.2 582.1 593.2 24.4 0.6 0.2 62.1 -48.8 631.7 560.6 70.6 0.5 631.7 548.3 24.0 0.8 0.2 54.0 -45.2 582.1 550.6 31.3 0.2 582.1 All contracts are pension agreements taken out as a part of employment. All membership contributions come from Denmark, the Faroe Islands and Greenland. Membership allocation Officials members* Retirees Disability pensioners Spouse pensioners Child pensioners Total members * Of this, dormant members 14,687 1,505 283 472 153 17,100 5,314 14,463 1,355 272 451 152 16,693 5,169 14,687 1,505 283 472 153 17,100 5,314 14,463 1,355 272 451 152 16,693 5,169 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=52http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=52Finanssektorens Pensionskasse 52 Notes Group 2008 2007 DKK mill. DKK mill. 18. Interest and dividends, etc. Return on securities, etc. Indexation of index-linked bonds Dividends from investments Total interest and dividends, etc. 355.7 0.0 370.3 726.0 279.7 5.0 536.1 820.8 Parent 2008 2007 DKK mill. DKK mill. 55.7 0.0 165.1 220.8 66.4 5.0 366.0 437.4 19. Exchange adjustments Investment properties Headquarter property Investments Units of investment associations Bonds Mortgaged lending Other value adjustments Total value adjustments -133.7 0.0 -3,072.1 -312.3 -433.5 0.0 1,070.3 -2,881.3 -50.0 4.8 -30.9 45.1 -318.1 0.0 257.9 -91.2 -133.7 0.0 -971.8 -312.3 47.2 0.0 1,184.8 -185.9 -50.0 4.8 165.0 45.1 17.7 0.0 104.9 287.4 20. Pension return tax Pension return tax Adjustment, previous years Pension return tax on return recognised in profit and loss Pension return tax recognised in equity Total pension return tax Tax-exempt reserves, see section 7 of the Act on Taxation of Pension Returns, share of total reserves Share of investment assets, of which return is included in the pension tax basis -335.2 -1.5 -336.7 0.0 -336.7 94.1 0.2 94.3 -0.7 93.6 -335.2 -1.5 -336.7 0.0 -336.7 94.1 0.2 94.3 -0.7 93.6 6.3 % 5.7 % 6.3 % 5.7 % 99.3 % 97.4 % 99.3 % 97.4 % 21. Pension benefits paid One-off benefits on death One-off benefits on retirement Retirements Disability pensions Spouse pensions Child pensions Exit repayments Payment from SP Payment from LD Singles' benefit Funeral aid Total unpaid pension benefits 8.0 87.1 268.4 53.7 92.6 3.0 64.6 0.4 0.0 0.1 0.2 578.0 6.3 75.5 242.2 49.2 87.1 3.0 82.4 0.5 0.1 1.8 0.1 548.2 8.0 87.1 268.4 53.7 92.6 3.0 64.6 0.4 0.0 0.1 0.2 578.0 6.3 75.5 242.2 49.2 87.1 3.0 82.4 0.5 0.1 1.8 0.1 548.2 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=53http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=53Finanssektorens Pensionskasse 53 Notes Group 2008 2007 DKK mill. DKK mill. 22. Operating expenses in terms of pension Fees and salaries Meeting expenses Other administrative expenses Taxes and duties Administrative charges Total operating expenses in terms of pension 33.0 0.4 5.3 1.5 40.1 -0.3 39.8 26.4 0.6 5.2 1.2 33.4 -0.3 33.1 Parent 2008 2007 DKK mill. DKK mill. 33.0 0.4 5.3 1.5 40.1 -0.3 39.8 26.4 0.6 5.2 1.2 33.4 -0.3 33.1 Further specification of the above expenses Staff costs Payroll costs Pension expenses Other social security costs Payroll tax 26.6 3.6 0.1 2.9 33.1 23.2 3.0 0.1 2.4 28.7 26.6 3.6 0.1 2.9 33.1 23.2 3.0 0.1 2.4 28.7 Average number of employees in the financial year The total expenses of Executive Board, Supervisory Board, auditors and consultants Salaries, pension contributions, cars, holiday pay, etc. for the Executive Board Supervisory Board fees and subsistence allowance External consultants (FDC, IT, temps, attorney, doctor, etc.) Audit fees - Statutory audit, Deloitte - Consultancy, Deloitte 44 38 44 38 2.5 0.7 15.2 2.6 0.6 15.8 2.5 0.6 15.2 2.6 0.6 15.8 0.7 3.8 0.8 0.1 0.5 3.8 0.5 0.1 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=54http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=54Finanssektorens Pensionskasse 54 Notes Group 2008 2007 DKK mill. DKK mill. 23. Technical profit/loss on health and accident insurance Total membership contributions on own account Insurance technical interest Claims expenses on critical illness Change in claims provisions Total claims expenses Total operating expenses on own account Return on investment Return on insurance provisions Total technical profit/loss on health and accident insurance Number of claims Average claim for damages in DKK '000 Claims frequency Run-off loss on third-party account (DKK million) 24. Contingent liabilities and provision of security Registered assets by the end of 2008 represent DKK 18,637 million. The pension fund is not party to legal disputes that are deemed to shift the financial position. By the end of the year, FSP Pension has agreed to acquire unlisted investments of DKK 1,107 million. A mortgage loan has been taken out with 30-year maturity mortgaged in properties. By the end of 2008, the residual maturity represents 26½ years. By the end of 2008, the market price of these loans represents DKK 919 million. Of residual debt of DKK 919 million, DKK 705 million matures in more than five years. Bank loans have been taken out with one month's maturity secured in foreign property foundation. By the end of 2008, the market price of this foreign property foundation amounts to DKK 218 million. Gross positions of derivative financial instruments by the end of the year represent DKK 27,872 million. Parent 2008 2007 DKK mill. DKK mill. 13.2 0.1 -14.7 1.0 -13.7 -1.1 -0.3 -0.1 -2.0 123 140 0.8 % -0.6 11.7 0.1 -12.7 -0.4 -13.1 -0.8 0.1 -0.1 -2.1 118 138 0.8 % -1.8 13.2 0.1 -14.7 1.0 -13.7 -1.1 -0.3 -0.1 -2.0 123 140 0.8 % -0.6 11.7 0.1 -12.7 -0.4 -13.1 -0.8 0.1 -0.1 -2.1 118 138 0.8 % -1.8 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=55http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=55Finanssektorens Pensionskasse 55 Notes 25. Cash flow statement 2008 DKK mill. Paid-in membership contributions Paid-in reassurance premiums Paid-in pension contributions Paid-in operating expenses Acquisition and sale of furniture, IT equipment, cars, etc. Cash flows from pension activities Paid-in from operation of real estate Interest and dividends, etc. Net investment, financial contracts Costs paid Cash flows from investment activities Social security costs paid PAL compensation received Pension return tax paid Cash flows from taxes and duties Cash flows from total activities Net investment, land and buildings Net investment, equity investment Net investment, units of investment associations Net investment, bonds Net investment, mortgage lending Cash flows from net investments Net proceeds, mortgage loans Cash flows from financing activities Change in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Cash and cash equivalents at the end of the year are specified as follows: Deposits in credit institutions Cash and cash equivalents 667.1 -2.3 -601.7 -49.6 0.0 13.5 45.8 662.9 -789.2 -53.8 -134.3 -48.3 167.4 -9.1 110.0 -10.9 -149.9 -193.5 -188.6 200.7 0.3 -331.0 224.0 224.0 -118.1 1,211.4 1,093.3 2007 DKK mill. 631.2 -2.6 -542.8 -51.1 -0.2 34.5 57.2 851.2 1,161.9 -45.0 2,025.3 -44.3 -144.5 -188.8 1,870.9 -164.9 -2,218.3 870.5 529.4 0.4 -982.9 196.7 196.7 1,084.7 126.7 1,211.4 735.9 357.4 1,093.3 916.5 294.8 1,211.4 Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=56http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=56Finanssektorens Pensionskasse 56 Notes 26. Management of the Pension Fund Supervisory Board Claus E. Petersen Chairman of the Board. CEO, Den Jyske Sparekasse Supervisory Board Chairman of DJS Erhvervsinvest A/S) and DJS Leasing A/S. Vice-Chairman of Spar Pantebrevsinvest A/S. Supervisory Board Chairman of ID Sparinvest A/S, Sparinvest Fondsmæglerselskab A/S, Amanah Kredit A/S and Lokale Pengeinstitutter. Elected Chairman of the Board in 2004, 47 years. Special competences: Managerial experience from a number of financial enterprises. Sector political experience from the Supervisory Board of Lokale Pengeinstitutter. Board experience within bank, finance and investment as well as in management and financial affairs. Michael Budolfsen Vice-Chairman of the Supervisory Board. Vice-Chairman of The Danish Financial Services Union. Vice-Chairman of Kobæk Strand Konferencecenter A/S. Member of the Board since 2006, 45 years. Special competences: Experience in board work from Spar Nord Bank, Kobæk Strand Konferencecenter and various commercial foundations and associations. Sector political experience from membership of Central Board of the Danish Financial Services Union. Strategic and political managerial experience as Vice-Chairman of the Danish Financial Services Union. Negotiating experience as central negotiator on collective bargaining in the financial sector. Banking experience as retail customer advisor. Birgitte Hagen Development Director, Fionia Bank A/S Member of the Board since 2003, 59 years. Special competences: Managerial experience from public and private enterprises a well as master degree in management development. Sector political experience through negotiating and work groups under Finanssektorens Arbejdsgiverforening and The Danish Bankers' Association. Experience within banking and financing as inspector in the Danish Financial Supervisory Authority, advisor and staff manager in bank, respectively. Experience from board work. Børge Hansen Bank mediator. Chairman of the Boards of Skandinavisk Brandteknik A/S, Baltic Towing Svendborg ApS and Amico A/S, respectively. Member of the Board since 1977 and Vice-Chairman from 2001 to 2006, 65 years. Special competences: Experience from board work in a number of Danish enterprises. Experience and significant knowledge of the financial sector. Jan Steen Jensen Wealth advisor, Spar Nord Bank A/S. Member of the Board since 2002, 50 years. Special competences: Experience in insurance and pension advice in the financial sector for 25 years of which eight years as responsible for insurance and pensions in Spar Nord. Education at levels 4 and 5 of the Forsikringsakademiet (Insurance Academy) and as investment advisor. Wealth advisor specialising in investment, tax and pension. Shop steward in Spar Nord. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=57http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=57Finanssektorens Pensionskasse 57 Notes 26. Management of the Pension Fund Ane Marie Holm Nielsen Director or department, Spar Nord Bankaktieselskab. Member of the Board since 1981, 59 years. Special competences: Experience from board work and industrial work as former Vice-Chairman of DSfL and Board member of Nordisk Bankmanna Union. Many years of experience in management and within banking as Director of department in Spar Nord. Knud Pedersen Market manager, Løkken Sparekasse. Member of the Board since 2000, 59 years. Special competences: Experience in management and financials from a number of banks. Savings bank education extended with business diplomas, basic law studies at university as well as courses within the sector. Experience in industrial work and pension politics via former positions as branch president and General Council member of Danske Sparekassefunktionærers Landsforening. Pia Lærke HR consultant, Fionia Bank A/S Supervisory Board member of Fionia Bank A/S. Member of the Board since 2003, 42 years. Special competences: Experience in board work form Fionia Bank. Sector political experience from former membership of the Central Board of the Danish Financial Services Union. Experience within negotiation and conflict handling as former shop steward, consultation committee member and branch board member. Experience within banking and financials as former retail and business advisor. René Holm Branch board member Danske Kreds, Danske Bank. Member of the Board since 2008, 49 years. Special competences: Experience in board work and industrial work from branch board of among others Danske Kreds and Sydbank. Supervisory Board member of FTF Region Sjælland. Former member of the Supervisory Board of Danske Bank. Member of the consultation committee of Danske Bank as well as the European works council (EWC). Negotiating experience as well as banking experience. Hans Erik Rasmussen Branch board member Danske Kreds, Danske Bank. Member of the Board since 2001, 57 years. Special competences: Member of the branch board of Danske Kreds. HD of accounting. Experience in organisational assignments. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=58http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=58Finanssektorens Pensionskasse 58 Notes 26. Management of the Pension Fund Tina Rønfeldt Branch board member Kreds Nordea, Nordea Bank. Member of the Board since 2002, 46 years. Special competences: Experience in board work from the branch board of Nordea as well as Board member of FTF Region Sjælland. Sector political experience from the pension and insurance committee of the Danish Financial Services Union. For many years, a member of Nordea’s consultation and safety committee. Knowledge of international work via participation in Nordea Bank’s Consultative Committee for Savings & Life products. Managerial and advisory experience from the work in Nordea. Besides, Finansskolen (School of Finance) 2, 3 and 4 was well as education within investment, pension and insurance. Executive Board Steen Jørgensen Director of Finanssektorens Pensionskasse since 1993 and wholly-owned subsidiaries, 51 years. Supervisory Board member of Britannia Invest A/S, ei invest european retail (and subsidiaries), Ejendomsinteressentskabet Vestervang III and Eqvitec Technology Fund III General Partner A/S. Member of the committees of representatives for Lån & Spar Bank A/S and Fionia Bank A/S. Delegate for General Meeting in Spar Nord Bank A/S. Delegate for Købstædernes Forsikring G/S as well as Ejendomsforeningen Danmark. According to section 80 of the Danish Financial Business Act, the Supervisory Board has approved the above managerial positions of the CEO. Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=59http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=59Finanssektorens Pensionskasse 59 Notes Specifikation of assets and their return at market value (DKK mill.) Market value At the At the beginning end of of the year the year Total land and buildings 1.1 Land and buildings that are directly owned 1.2 Property companies 2 Other subsidiaries 3 Total other investments 3.1 Listed Danish shares 3.2 Unlisted Danish investments 3.3 Listed foreign investments 3.4 Unlisted foreign investments 4 Total bonds 4.1 Government bonds (zone A) 4.2 Mortgage bonds 4.3 Index-linked bonds 4.4 Credit bonds Investment grade Credit bonds Non-Investment grade 4.5 as well as emerging markets 4.6 Other bonds 5 Mortgaged lending 6 Other financial investment assets Derivative financial instruments for hedging of net change in assets and 7 liabilities 7,178 1,688 324 4,275 891 10,819 687 5,470 390 1,160 1,550 1,562 1 924 4,345 858 377 2,528 582 10,548 894 6,001 582 100 859 2,114 0 567 -473 -70 48 -603 152 53 26 0 200 29 -415 213 0 329 -37.3% -47.1% -12.8% -31.0% -13.4% -4.2% 3.7% 6.8% -0.5% -19.6% -19.6% -20.5% -5.2% 5.4% 3,319 1,855 1,464 2,951 1,871 1,080 Net investments 156 152 4 Return in % -12.8% -3.7% -28.5% 14 1,066 42 1999.6% Annual report 20082009-05-20T13:23:18+02:00http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=60http://innovisio.ipaper-cms.dk/fsp/aarsrapporter/annualreport2008/?Page=60Finanssektorens Pensionskasse 60 Notes Share and unit portfolios, percentage distribution into businesses and regions Other Far Other East countries Unallocated 0.0% 0.2% 0.4% 0.0% 0.6% 0.1% 0.7% 0.1% 0.2% 0.0% 0.0% 2.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 26.3% 26.3% Other North South Denmark Europe America America Japan Energy 0.5% 0.7% 1.0% 0.0% 0.0% Materials 0.1% 0.8% 0.2% 0.0% 0.0% Industry 7.8% 5.6% 1.5% 0.0% 0.0% Consumer goods 0.1% 0.8% 0.6% 0.0% 0.0% Consumer products 0.8% 1.5% 0.9% 0.0% 0.0% Health care 3.1% 0.6% 2.5% 0.0% 0.0% Finance 7.4% 5.7% 1.0% 0.0% 0.0% IT 0.4% 0.5% 1.1% 0.0% 0.0% Tele communication 0.0% 0.4% 0.3% 0.0% 0.0% Utilities 0.0% 0.4% 0.3% 0.0% 0.0% Unallocated 5.4% 11.8% 3.6% 0.0% 3.9% Total 25.6% 28.8% 13.0% 0.0% 3.9% Total 2.1% 1.3% 15.3% 1.4% 3.7% 6.4% 14.8% 2.1% 0.9% 0.7% 51.1% 100.0% Annual report 20082009-05-20T13:23:18+02:00