56
CONTENTS
Operations
Kommuninvest in brief 2
President’s statement 4
Municipal sector finances 7
Market 9
Funding 12
Lending 14
Finance support 17
Human resources 18
Risk management 20
Corporate governance 24
Annual Report
Administration Report 31Accounting and valuation principles 36Income Statement 38Balance Sheet 39Cash Flow Statement 40Notes 41Other information 46Five-year summary 48Signatures 50Report of the Auditors 51
The Board of Kommuninvest Cooperative Society 52
1CONTENTS
2 KOMMUNINVEST IN BRIEF
VISION
BUSINESS CONCEPT
OBJECTIVESGrowth
Credit ratings
Membership, 1998 – 2005
0
50
100
150
200
20052004200320022001200019991998
The following 5 members joined after the end of the year:
Stability
Customer benefit
At year-end 2005, Kommuninvest had 174 members. The 16 new members that joined in the year were:
3KOMMUNINVEST IN BRIEF
THE YEAR IN BRIEF
• Kommuninvest expanded by 16 new members to 168 municipalities and 6 county councils.
• The balance sheet total grew by 34% to SEK 91.1 billion.
• Net lending grew by SEK 5.6 billion, to SEK 56.7 billion.
• Operating profit was the highest in Kommuninvest’s history at SEK 56.0 million.
• Kommuninvest has retained the market’s highest rating (Aaa)
• Kommuninvest won ‘Most Innovative Product’ for a bond launched on the Danish private client market alongside Danske Bank.
4
Intense competition favours the municipal sector
PRESIDENT’S STATEMENT
5
Successful funding
Continuous quality enhancement
Focusing on our values
PRESIDENT’S STATEMENT
6
New regulations ahead
Continued growth towards realizing our vision
PRESIDENT’S STATEMENT
7
A substantial share of Sweden’s public finances
The best results for a very considerable period
Firm cost control
MUNICIPAL SECTOR FINANCES
8 MUNICIPAL SECTOR FINANCES
More surpluses in the coming years
An improved financial position
Investments increase while borrowing remains relatively unchanged
Pension commitments
Municipalities’ and county councils’ resultsResults before extraordinary items at current prices
-15
-10
-5
0
5
10
15
08070605040302010099989796
Municipalities County councils Total05–08 forecast
SEK bn
Division of municipal sector’s * debt, provisions and pension commitments
Other provisions and short-term liabilities, 19%
Borrowings, 44%
Total pension commitments, 37%
The municipal sector’s * borrowingsBillions of kronor at current prices
300
310
320
330
340
350
360
2005
SEK bn
forecast
200420032002200120001999
9 MARKET
Protecting municipal interests
Grow
th
10
Intense competition over lending
MARKET
A top-rated borrower
Grow
th
11MARKETG
rowth
Sweden’s coat of arms
Credit ratings
12 FUNDING
Stability
13
Diversified funding
FUNDINGStability
New borrowing by geographical market
Europe, 32%
Japan, 29%
Sweden, 22%
Asia, 16%
Middle East, 1%
14
Custom
er benefit
LENDING
15LENDINGLENDINGC
ustomer benefit
A guarantor of competition
A tailored offering
Increased market shares
The role of an interest group
16
The importance of advisory services
Loans from the CEB and EIB
LENDING
Lending as of 31 December each year
0
10
20
30
40
50
60
SEK bn
20052004200320022001200019991998199719961995
Custom
er benefit
17FINANCE SUPPORTFINANCE SUPPORT
18
Challenges for staff
HUMAN RESOURCES
Skills enhancement initiatives
19
A foundation of shared values
Balance and health
Salaries and incentives
HUMAN RESOURCES
HR statistics
20
Market risks
Interest risks limited at portfolio level
%
02468
1012141618
USFra
nce
Germany UK
Japan
Denmark
Netherlands
Switzerla
ndSweden
Australia
Belgium
Geographical division of derivatives contracts 31 Dec. 2005
%
0
10
20
30
40
50
Sweden UKSpain
France
Denmark
Germany
Netherlands
Finland
Belgium
Australia
Norway
Geographical division of investments, 31 Dec. 2005
RISK MANAGEMENT
21
Foreign exchange limits currency risks
Liquidity risks
Credit-related counterparty risksSecure counterparties are a prerequisite for long-term value growth
Invested assets by rating, 31 December 2005
Group AAA, 73%
Group AA, 21%Group A, 6%
Nominal amount on derivatives by rating, 31 December 2005
Group AAA, 19%
Group AA, 72%Group A, 9%
RISK MANAGEMENT
22
Ongoing research and update of counterparties
RISK MANAGEMENT
23
Operational riskInternal controls a priority
Reliable processes for secure risk management
RISK MANAGEMENT
24 CORPORATE GOVERNANCE
Alf Egnerfors Sören Gunnarsson
25CORPORATE GOVERNANCE
The Swedish Corporate Governance Code
Corporate Governance
Articles of Association
Annual General Meeting
Election Committee
26 CORPORATE GOVERNANCE
Election Committee members
Anders Ceder (born in 1951)
Kenneth Carlsson (born in 1952)
Alf Egnerfors (born in 1946)
Margareta Karlsson (born in 1942)
Kerstin Sjöström (born in 1955)
Barbro Tjärnström (born in 1936)
Auditing Committee
Auditing Committee members
Erik Johansson (born in 1933)
Bengt Björnemalm (born in 1935)
Bo Johansson (born in 1944)
Ingemar Andersson (born in 1944)
Committees appointed by the Board
Credit Research Committee
Credit Research Committee members
Chairman Thomas Åkelius
David Nyberg
Tommy Karlsryd
Ingalill Hellberg
Karin Hydén
Nils-Eric Gustavsson
Madeleine Sjöstrand
Gunnar Tidemand
27CORPORATE GOVERNANCE
Financial Committee
Financial Committee Members
Chairman Tomas Werngren
Victoria Galbe
Bo Johansson
Lars Sjökvist
Kerstin Gustavsson
Anders Ottensten
Björn Ryd
Stefan Ekfeldt
Bernt Gran
Corporate management
Executive managers
Thomas Åkelius (born in 1954)
Tomas Werngren (born in 1961)
Harriet Forsell Söderberg (born in 1959)
Malin Gillberg (born in 1971)
Maria Viimne (born in 1970)
Remuneration to the Executive Management
28 CORPORATE GOVERNANCE
The Board of Directors and its Activities
Board Members’ remuneration
Committees
Credit Committee
Kommuninvest’s Board of Directors
29CORPORATE GOVERNANCE
30
Auditors
Audit Report
The Board’s Report on Internal Controls
CORPORATE GOVERNANCE
31ADMINISTRATION REPORT
Operations
Operations that build on member needs
Shareholders and share capital
Joint and several guarantees
The Board
Legal status
0
50
100
150
200
20052004200320022001200019991998
Number of members
Kommuninvest i Sverige AB (publ) Annual Report 2005
32 ADMINISTRATION REPORTADMINISTRATION REPORT
Rating
Financial results
Net interest income
Other operating income
Expenses
Personnel costs
Other expenses
Group contribution to parent society
33ADMINISTRATION REPORT
Increased membership permits new issues
Liquidity reserve
Operations
Risk management
34 ADMINISTRATION REPORTADMINISTRATION REPORT
Human resources
New accounting and capital cover standards
Executive Management Group
Prospects for 2006
35ADMINISTRATION REPORT
Appropriation of surplus
Capital coverage analysis
36
Assets and liabilities in foreign currencies
Lending
Liquid assets
Liabilities
Equipment
Government bonds eligible as collateral, and bonds and other interest-bearing securities
Early redemption of loans
Repurchase agreements
Index-linked notes
Valuing derivatives
Foreign currency translation
ACCOUNTING AND VALUATION PRINCIPLES
37ACCOUNTING AND VALUATION PRINCIPLES
Re-allocation of expenses within the notes section
38 INCOME STATEMENT
39BALANCE SHEET
40 CASH FLOW STATEMENT
41
All amounts in SEK 000 unless otherwise stated.
NOTES
42
Öhrlings PricewaterhouseCoopers AB:
Ernst & Young AB:
KPMG Bohlins AB:
NOTES
43NOTES
44 NOTES
45NOTES
46
Off-Balance Sheet commitments
OTHER INFORMATION
47OTHER INFORMATION
Accrued acquisition value
Credit risk exposure
Maturities
Interest fixing terms, interest exposure
Details of actual value
48 FIVE-YEAR SUMMARY
49FIVE-YEAR SUMMARY
50 SIGNATURES
51REPORT OF THE AUDITORS
52 THE BOARD OF KOMMUNINVEST COOPERATIVE SOCIETY
StabilityWith the majority of Sweden’s municipalities and a number of county councils as members, Kommuninvest operates as a local debt office and interest group offering attractive funding, advisory services and efficient financial management methodologies.
Customer benefitKommuninvest’s mere presence stimulates competition, creating a societal benefit every year by cutting its members’ interest costs by many millions of kronor.
GrowthCollectively, Kommuninvest’s members exert integrated power that can access efficient funding solutions.
A voluntary approach and influence have helped create Sweden’s largest inter-municipal cooperation on finance issues. The decision to join is autonomous and voluntary, as is the decision on if and when to raise funding.
More municipalities and county councils are choosing Kommuninvest: we’ve never been stronger.
Postal address: Box 124 SE-701 42 Örebro, Sweden. Visiting address: Fenix House, Drottninggatan 2, Örebro.Telephone: +46 (0)19-16 78 00. Fax: +46 (0)19-12 11 98. E-mail: [email protected].
Website: www.kommuninvest.org
