Investment Parameters for Liquidity

Investment parameters for liquidity apporved May 2018.

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1) Maximum is calculated as a percentage of the minimum liquidity (15% of GDP).

2) Securities are grouped into categories pursuant to directives issued by the Financial Supervisory Authority.

3) Investment could be made in a combination of assets if permission is granted to place an investment in the underlying assets, for example, placement with investment companies such as SPV, CMO or ETF.

4) If investments are placed with investment companies holding investment grade bonds, at least 85% of the bonds shall hold an investment-grade rating.

For Asset Class 3: Corporate entities or investment companies holding corporate shares. For shares (Group 3) the limit is 2% for each counterparty. This limitation is only applicable for direct investment in corporate shares and not for investments placed with investment companies.

For Asset Class 4.1 and 4.2: Investments in government bonds, Danish mortgage-backed bonds, and similar real property (covered) bonds in European countries; investment made in EUR or DKK, otherwise it is necessary to hedge against currency fluctuations.

For Asset Class 4.3: Index bonds. In EUR or DKK, otherwise it is necessary to hedge against currency fluctuations.

For Asset Class 4.5: High-yield corporate bonds, and emerging-market bonds are included in this category.

For Asset Class 4.6: Other bonds include bonds that could not be grouped into categories 4.1 – 5.5.

For Asset Class 6: Financial Institutions. The maximum is set so high because this category encompasses the deposit accounts of the investment companies/managers who over time shift from one security to another. This category also includes alternative investments that could not be grouped into other categories. The mandate for alternative investments is 15%, however, if it goes beyond 10%, it has to be put forward to the Board of Directors. The category “Hedge funds, infrastructure, and other alternative investment” could encompass financial products that are wholly or partially derivatives.

For Asset Class 7: Derivatives could be used in categories 3 and 4, if the derivatives are based on corporate share equity or bonds and carry the same or similar risk assessments or characteristics as the underlying securities. In category 4, investment can be placed in active index bonds. Moreover, investment could be placed in financial products that are either wholly or partially derivatives within the parameters set forth in category 6, “Hedge funds, infrastructure, and other alternative investments”. If another type of derivative is to be purchased, said purchase must be submitted to the Board of Directors prior to purchase for review.