Contents The Oslo Børs VPS Business Areas Board of Directors of Oslo Børs VPS Holding Board of Directors Annual Report 2017

Transcription

1 Annual report 2017

2 Contents 03 - The Oslo Børs VPS Business Areas 03 - Oslo Børs 05 - Verdipapirsentralen (VPS) 09 - Oslo Market Solutions 49 - Note 14 Intangible assets - including assets developed in-house 51 - Note 15 Goodwill 52 - Note 16 Financial instruments 54 - Note 17 Accounts receivable/losses on receivables 10 - Board of Directors of Oslo Børs VPS Holding 55 - Note 18 Share capital and shareholder information 57 - Note 19 Related parties 12 - Board of Directors Annual Report Note 20 Contingent liabilities 57 - Note 21 Other liability 23 - Group Annual Accounts 23 - Statement of comprehensive income 24 - Statement of financial position 26 - Statement of changes in equity 27 - Cash flow statement 28 - Notes to the group accounts 28 - Accounting principles 34 - Note 1 Business combinations 34 - Note 2 Segment information 36 - Note 3 Investments in joint ventures, shares etc Note 4 Specification of profit and loss items 37 - Note 5 Pension costs and pension liabilities 42 - Note 6 Remuneration of officers, executive personnel, the auditor etc Note 7 Number of employees 44 - Note 8 Leasing contracts 45 - Note 9 Taxation 46 - Note 10 Earnings per share, diluted earnings per share 46 - Note 11 Uncertainty associated with estimates used 47 - Note 12 Specification of balance sheet items 58 - Annual Accounts Oslo Børs VPS Holding ASA 58 - Profit and loss account 59 - Balance sheet 61 - Cash flow analysis 62 - Notes to annual accounts 62 - Note 1 Principles applied for the parent company accounts 63 - Note 2 Shares in subsidiary companies 63 - Note 3 Investment in shares 63 - Note 4 Tax expense/deferred tax assets 64 - Note 5 Receivables and payables between companies in the same group 65 - Note 6 Equity 65 - Note 7 Share capital and shareholder information 68 - Note 8 Financial expense 68 - Note 9 Remuneration of executive personnel 68 - Note 10 Pension cost and pension liabilities 68 - Note 11 Auditor 68 - Note 12 Events after the balance sheet date 48 - Note 13 Fixed assets 69 - Auditor s Report Front page photo: Svein Nordrum / NTB scanpix 2

3 The Oslo Børs VPS Group The Oslo Børs VPS Group operates and develops co-ordinated and attractive marketplaces for the listing and trading of securities, together with securities registration and settlement services for securities in Norway, financial market data and internet solutions. Oslo Børs VPS Holding ASA owns 100% of the share capital of Oslo Børs ASA, Verdipapirsentralen ASA (VPS) and Oslo Market Solutions AS. Oslo Børs ASA owns 100% of the share capital of NOTC AS and 97% of the share capital of Fish Pool ASA, and VPS owns 100% of the share capital of Centevo AB. Business areas Through its business areas, the Oslo Børs VPS Group operates marketplaces for trading in financial instruments, together with settlement, securities registration and information services, in order to give customers access to an efficient and effective capital market. Oslo Børs The Oslo Børs business area comprises the wholly-owned subsidiary Oslo Børs ASA, which is authorised to operate stock exchange activities. The main objective of Oslo Børs is to be the central marketplace for the listing and trading of financial instruments in the Norwegian market. The role of Oslo Børs is to make it possible for purchasers and sellers of securities to carry out their transactions in a rapid, efficient and secure manner. Oslo Børs organises listing and trading of equities, equity certificates, ETPs, fixed income products and derivatives products. Bente A. Landsnes is the Chief Executive Officer of Oslo Børs. The other members of the executive management team are Tom Kristoffersen (secondary market), Øyvind Skar (market data), Kjetil Nysæther (IT), Øivind Amundsen (legal affairs and primary market), Thomas Borchgrevink (surveillance and operations) and Per Eikrem (corporate communications/ marketing and staff). Oslo Børs (including Fish Pool) had 89 employees at the close of Oslo Børs uses the Millennium Exchange trading system for trading in equities and fixed income instruments. Millennium Exchange is owned and operated by the London Stock Exchange Group. Oslo Børs uses the SOLA system for trading in standardised derivatives. This system is licensed from the Montreal Exchange. For trading in non-standardised derivatives (OTC derivatives) Oslo Børs uses the EDGE trading system, which was developed by Baymarkets AB was characterised by consistently high levels of activity in both the primary and secondary markets. 34 companies were admitted to listing, trading or registration on Oslo Børs, Oslo Axess, Merkur Market and NOTC in 2017 (including transfers between marketplaces). There was again a good increase in the number of fixed-income issues listed and registered in Nearly all Norwegian companies regard Oslo Børs as the most attractive stock exchange and marketplace. Oslo Børs also has a strong position internationally in the energy/offshore, seafood and shipping sectors with regard to the listing of both fixed income issues and equities. Segmental information for the Oslo Børs business area over the last two years is as follows (Figures in NOK 1,000): Operating revenue - external Operating revenue - internal Depreciation Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period Revenue was NOK 60 million higher in 2017 than in

4 Ordinary revenue from the equity markets area was NOK 57 million higher, while ordinary revenue from the derivatives area was NOK 8 million lower. Ordinary revenue from the fixedincome area was NOK 7 million higher. The market data area reported an increase in revenue of NOK 4 million. In 2017 other operating costs were NOK 13 million higher than in The increase was to a large extent due to the financial sector tax and higher cost-increasing non-recurring items related to trading systems projects. Equity Markets The Equity Markets area accounted for approximately 52% of total operating revenue for Oslo Børs in traded funds (ETFs) listed on Oslo Børs, the same number as at the end of At the end of 2017 there were 16 companies admitted to trading on Merkur Market, which was set up in January 2016, while there were 44 companies registered on the NOTC list. Of the companies listed on Oslo Børs and Oslo Axess, admitted to trading on Merkur Market and registered on the NOTC list, 46 were from countries other than Norway. The market value of shares and equity certificates listed or admitted to trading on the Oslo Børs marketplaces at 31 December 2017 was NOK 2,535 billion, an increase of 18% from the close of At the close of 2017 Oslo Børs had 50 member firms, of which 18 were local firms and 32 were remote members. Operating revenue - Equity Markets (Figures in NOK 1,000) Fixed fees - issuers Trading and technical fees - members Document, registration and new listing fees Total operating revenue Key figures - Equity Markets OSEBX at No. of listed shares at Market capitalisation of listed companies at (NOK billion) No. of shares listed on Merkur Market No. of member firms - equity markets No. of trades (1,000) Omsatt volum i verdi (NOK mrd.) The Oslo Børs Benchmark Index closed 2017 at , having risen by 19% over the course of the year. The value of shares and equity certificates traded totalled NOK 1,098 billion for the year, which was 5% higher than in The total number of transactions carried out through the exchange s trading system was 24.9 million in 2017, which was approximately 7% more than in Share issues carried out by listed companies raised NOK 62 billion in 2017, up from NOK 35 billion in With eleven companies admitted to listing on the Oslo Børs marketplace in the year, four companies transferring to it, and eleven companies removed from listing, the number of companies listed on Oslo Børs increased to 191 at the close of The number of companies listed on the regulated marketplace Oslo Axess fell to 23 after two companies were admitted to listing and two companies were removed from listing, and there was a net reduction of one company as the result of transfers between marketplaces. At the close of 2017 there were four exchange The revenue generated from fixed fees paid by issuers (annual listing fees) is dependent on the number of companies and their market capitalisation. Revenue from fixed fees paid by members depends on the number of active member firms and the pricing tariffs they select. Revenue from variable trading fees is affected by order fees and the value of transactions carried out. Fixed Income Markets The Fixed Income Markets area accounted for approximately 12% of total operating revenue for Oslo Børs in Operating revenue - Fixed Income Markets (Figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Document, registration and new listing fees Other revenue Total operating revenue Key figures - Fixed Income Markets No. of listed issues at (Oslo Børs) No. of listed issues at (Nordic ABM) Market value of listed issues at (NOK billion) Value of trades exc. repos (NOK billion) Figures for market value and trading value include fixed income instruments listed on both the Oslo Børs and Nordic ABM marketplaces. The revenue Oslo Børs derives from the fixed income market is principally determined by the number of loans listed. 2,064 loans were listed at the end of 2017, representing an increase of 189 loans since the start of the year. Of the loans, 1,274 were listed on Nordic ABM (Alternative Bond Market) and 790 4

5 on Oslo Børs. New debt issued in respect of new and existing loans amounted to NOK 350 billion (excluding government bonds) in 2017, which was NOK 38 billion higher than in Derivatives Market The Derivatives Market area accounted for approximately 7% of total operating revenue for Oslo Børs in Trading fees account for around 98% of the area s revenue. The revenue from trading fees is dependent on the number of contracts traded and the premiums paid. The premium paid on a derivatives contract is determined principally by the price of the underlying instrument, the period to maturity and, in the case of options, the price volatility of the underlying instrument. The number of derivatives contracts traded on Oslo Børs was 15% lower in 2017 than in Aggregate premium turnover for all derivatives products was, however, in line with Contract turnover at Fish Pool was 15% lower at 67,500 tonnes for 2017 as a whole. Operating revenue - Derivatives Markets (Figures in NOK 1,000) Trading fees Other revenue Total operating revenue Key figures - Derivatives Markets Equity options, No. of contracts traded (1,000) Equity options, turnover (NOK million) Index options, No. of contracts traded (1,000) Index options, turnover (NOK billion) Equity forwards, No. of contracts traded (1,000) Equity forwards, turnover (NOK million) Index forwards, No. of contracts traded (1,000) Index forwards, turnover (NOK million) Total No. of contracts (1,000) Total value of turnover - options (NOK million) Total value of turnover - forwards (NOK million) Average premium equity options (NOK) Average premium index options (NOK) Average premium equity forwards (NOK) Average premium index forwards (NOK) Tonnes traded on Fish Pool (full year) Market data Revenue from sales of financial market data accounted for approximately 27% of total operating revenue for Oslo Børs in Sales of financial market data are principally measured by the number of end users that have access to market data from Oslo Børs. Customers of information distributors such as Thomas Reuters, Bloomberg etc. subscribe to price and market index information from a range of different marketplaces. The number of end-users with access to data from Oslo Børs increased by around 8% in 2017 to approximately 49,700. There was a decrease in the number of professional users, while the number of private users increased. Other revenue is generated from selling a range of products such as index information, information on mutual funds, statistics and news services. Operating revenue - Market Data (Figures in NOK 1,000) Financial market data Other revenue Total operating revenue Verdipapirsentralen (VPS) The business area comprises the wholly-owned subsidiary Verdipapirsentralen ASA, which is a Norwegian public limited company authorised to register rights to financial instruments pursuant to the Securities Register Act. VPS develops and markets products and services for banks, investment firms, investment management companies and other financial institutions. These in turn deliver the products and services to issuers and investors. The services offered by VPS make it easier and more efficient for issuers to raise capital and manage their securities registers, and give investors the reassurance that they will be able to exercise their rights as owners of securities. Registering the ownership of securities with a central securities depository such as VPS provides legal protection and procedures for the priority of interests, which are important practical features for confidence in the capital markets. VPS helps to improve the efficiency of securities trading through its participation in payment clearing and settlement systems. Audun Bø is the Chief Executive Officer of VPS. The other members of the executive management team are Sveinung Dyrdal (Clients, Sales and Business Development), Aleksander Nervik (Products), Helen Midtskau (IT), Jorunn Blindheim 5

6 Øystese (Legal Affairs and Compliance), Jorunn Rummelhoff (HR), Trond Pettersen (Quality and Security Management), and Geir Heggem (Finance). Leif Arnold Thomas is the CEO of the wholly-owned subsidiary Centevo AB. VPS (including Centevo) had 119 employees at the close of In 2017 VPS processed 14.0 million settlement instructions for securities transactions, which represents an increase of 15% from It also processed 2.8 million transactions in mutual fund units, a decrease of 16% from At the end of 2017 there were 1.7 million holdings in financial instruments registered with VPS across 1.4 million VPS accounts. The number of VPS accounts increased by 0.2 million over 2017, principally due to new accounts opened following the introduction of share savings accounts. The number of VPSregistered mutual funds increased by 510 in 2017 to 1,764. At the end of 2017, a total of 1,005 limited companies and 49 equity certificates were registered with VPS, a net increase of 11 relative to the end of At the end of 2017 there were 3,172 fixed income instruments registered with VPS, an increase of 239 from the end of The number of other equity instruments registered with VPS increased in 2017 by 217 to 1,260. The total market value of VPS-registered financial instruments was NOK 5,602 billion at the end of 2017, which is 12% higher than at the end of Segmental information for the VPS business area over the last two years is as follows (Figures in NOK 1,000): Operating revenue - external Operating revenue - internal The revenue generated by VPS was NOK 35 million higher in 2017 than in Revenue from registration activities was NOK 27 million higher in 2017, while revenue from settlement activities was NOK 5 million higher and revenue from mutual funds activities was NOK 3 million higher. Operating costs, excluding depreciation, amortisation and write-downs, were NOK 28 million higher in 2017 than in The increase was largely due to the financial sector tax, higher variable salary costs, the appointment of a new CEO, annual salary increases, and greater use of hired-in personnel in connection with development projects. Issuer Products The Issuer Products area accounted for 30% of total VPS revenues in The Issuer Products area offers products and services that rationalise and improve the efficiency of tasks carried out by account operators and issuers, while at the same time ensuring that investors, companies and other users receive accurate information. The services are delivered through reliable and secure applications. Most services are available over the internet. The Issuer Products area offers its services through the following products: VPS Corporate is a web-based work platform for account operators that operate share and equity certificate VPS accounts for issuers, providing services for registering and monitoring the companies they have registered in VPS. VPS Corporate is also used by investment firms to register subscriptions for new issues/distribution sales and for registering bid acceptances. Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period VPS Company Services is a web-based solution that allows VPS-registered issuers to make more efficient use of the information registered about the securities they issue. The application is a subscription-based additional service for companies registered in VPS. VPS Fixed Income is a web-based work platform for account operators that operate fixed income VPS accounts for issuers. The system was launched in 2008, and is used by account operators and VPS to register fixed income instruments and carry out actions relating to these instruments. The revenue generated by the Issuer Products area in respect of limited companies is affected by the value of the share capital of the companies registered for the services and the 6

7 number of shareholders. In respect of fixed income instruments, revenue is affected by the volume of debt issued and the number of bondholders. In addition, revenue is affected by the number of corporate actions relating to securities that are carried out, and the complexity of these actions. At the close of the year, a total of 1,054 (1,043) share issues/ equity certificate issues and 3,174 (2,935) bond/certificate issues were registered in VPS. Operating revenue - Issuer Products (Figures in NOK 1,000) Total operating revenue Key figures - Issuer Products No. of AS/ASA companies registrered in VPS No. of equity certificate issues registered in VPS No. of bond issues registered in VPS No. of short-term fixed income issues registered in VPS Investor Products The Investor Products area accounted for approximately 29% of total VPS revenues in The Investor Products area provides registration of rights to securities for investors through products and services that allow them to own, transfer and manage their holdings of securities securely and efficiently. The core element of this offer is the VPS account, which is offered to investors through a network of account operators. Investors use their VPS accounts to record all types of registered securities that they own, whether these are shares, warrants, ETNs, units in mutual funds, equity certificates or fixed income instruments. The Investor Products area delivers its services through the following products: VPS Investor Services (VPS IS) is a web-based work platform used by account operators for operating investor accounts. The platform allows account operators to set up and manage investors and their rights on the VPS system. VPS Investor Services is used by banks and savings banks as well as investment firms and investment managers. 150 institutions have entered into agreements for VPS Investor Services, and the platform has 8,500 users. VPS Investor Services is recognised as the core VPS system. VPS Client Services is a web-based interface used by endinvestors that is delivered either through internet banking services or from the web pages of investment managers. VPS Client Services gives investors access to complete information on their holdings of VPS registered securities, even if they use more than one account operator, as well as details of account information and personal information and reports on their holdings and transactions. In addition, investors can use VPS Client Services to subscribe for and sell fund units and to participate in corporate actions such as share issues, annual general meetings etc. Revenue from the Investor Products area is largely dependent on the number of VPS accounts and the market value of the securities registered in VPS at the start of the year. The number of income-earning VPS accounts increased by approximately 15% between 2016 and 2017, while the total market value of the securities registered increased by approximately 12%. The increase in the number of accounts relates in part to the introduction of share savings accounts. Revenue from the Investor Products area is also affected by the use that account operators or investors make of the additional services that are available. Operating revenue - Investor Products (Figures in NOK 1,000) Total operating revenue Key figures - Investor Products No. of accounts (1,000) Market value (NOK million) Settlement Products The Settlement Products area accounted for approximately 22% of total VPS revenues in Settlement Products provides clearing and settlement services for trading in securities. VPS Settlement contributes to the effective operation of the capital market in Norway through efficient and secure transfers of securities on the one hand and monetary settlement from buyer to seller on the other hand. The clearing and settlement system supports straight through processing (STP) for the entire value chain. VPS attaches great importance to developing the system in response to changing customer requirements, and VPS closely follows market developments and trends both in Norway and internationally. In addition, VPS pays particular attention to complying with international recommendations and standards for clearing and settlement. Oslo Børs has chosen LCH.Clearnet to operate as a central clearing counterparty (CCP) in the Norwegian market in addition to SIX Securities Services (formerly Oslo Clearing). 7

8 The clearing and settlement services provided by VPS are based on generally recognized principles such as delivery against payment (DvP) and multilateral netting between settlement participants. Clearing of payments takes place through the central bank of Norway, Norges Bank. The settlement ratio achieved by VPS has risen significantly over the years, from 80% at the end of the 1990s to over 96% at the close of 2016, when measured in terms of the number of transactions. The efficiency of the settlement process is supported by an automated securities borrowing and lending arrangement based on a lending pool that is used in the settlement process. Trades that cannot be settled on the agreed settlement day are resubmitted for settlement until they are settled or cancelled. The settlement cycle is run twice a day. Transfers of securities holdings take place in real time, and the system can handle settlement on the same day that a trade takes place (S = T + 0). Settlement participants communicate with the system using an international open-standard interface (ISO 15022). VPS started implementation of ISO communication in 2000, and usage has grown very strongly. At the end of 2017, VPS had 63 settlement participants (i.e. entities that have entered into a settlement agreement with VPS). Of these, 36 are direct participants in VPO, and 27 use a settlement agent to settle their trades through VPO. The revenue generated by the Settlement Products area is dependent on the number of securities transactions carried out in the market, but following the introduction of CCPs the number of financial instruments listed and the number of firms with membership of Oslo Børs have become more important as factors that determine the volume of settlement transactions carried out by VPS. A further important factor is the number of transactions carried out between investment firms and their end-customers. VPS processed 12.9 million settlement transactions for trades in securities in This represents an increase of 6% from Operating revenue - Settlement Products (Figures in NOK 1,000) Total operating revenue Key figures - Settement Products Settlement ratio 96.70% 96.40% No. of trades settled (1,000) Fund Services The Fund Services area accounted for approximately 18% of total VPS revenues in Fund Services offers a broad range of services for investment managers and other distributors of mutual fund products to assist with the management of their funds and the unit holder registers for individual funds. The VPS account system provides the basis for the Fund Services products, and investors holdings of fund units are registered on a VPS account in the same way as for other securities. The Fund Services area comprises two main areas, complemented by additional services: Fund Services and Fund Distribution Services. In both these areas, VPS is responsible for operations, maintenance and ongoing development of the systems, which allows customers to focus on their core activities. The Fund Services area covers all aspects of the value chain, from establishing and registering a mutual fund through to distribution and customer service. Fund Services also includes integrated payment functionality that supports purchases and sales of fund units with full delivery against payment for investors. It is not compulsory to register holdings of fund units with a central securities depository. Accordingly, the Fund Services area markets its registration services to securities custodians and distributors of both Norwegian and international fund management products in competition with other service providers and the customers own systems. At the close of 2017, approximately 50% of the market value of Norwegian mutual funds was registered with VPS. In addition, various foreign mutual funds and nominee-registered funds are registered with VPS. The total market value of the mutual funds registered with VPS was NOK 598 billion at the close of 2017, representing an increase of 19% from the end of The number of investor holdings in mutual funds registered in VPS decreased by 23% in 2017, and the number of transactions in mutual funds was 16% lower in 2017 than in The revenue generated by the Fund Services area is principally dependent on the number of transactions, the value of assets registered and the number of holdings. 8

9 Operating revenue - Fund Services (Figures in NOK 1,000) Total operating revenue Key figures - Fund Services: No. of mutual funds registrered in VPS Market value of mutual funds registrered in VPS (NOK billion) No. of investor holdings in mutual funds (1,000) No. of mutual fund transactions (1,000) Centevo contributed revenue of approximately NOK 23 million in both 2016 and Oslo Market Solutions The business area comprises the wholly-owned subsidiary Oslo Market Solutions AS. Oslo Market Solutions has specialist expertise in capturing, processing, distributing and presenting financial market data. Sales of information relating to Norwegian securities forms a central part of the business area s activities. A second major aspect is sales of specialised web and internet solutions for trading in securities and the real-time presentation of market data. The business area offers both standard products and customised solutions for issuers, investment firms, leading media players and other parties involved with the financial markets. Segment information for the Oslo Market Solutions business area over the last two years is as follows (Figures in NOK 1,000): Operating revenue - external Operating revenue - internal Depreciation Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expenses Investment in joint ventures Other assets Liabilities Investment in the period Operating revenue was 12% higher in 2017 than in The business area s operating revenues vary with the state of completion of customer projects and the timing of annual system licence payments. Personnel expenses and other operating expenses were 11% higher in 2017 than in Tine Charlotte Holm is the Chief Executive Officer of Oslo Market Solutions AS. The business area had 12 employees at the close of

10 Board of Directors of Oslo Børs VPS Holding ASA Catharina E. Hellerud (born 1968) - Chair Catharina E. Hellerud was elected to the Board of Directors of Oslo Børs VPS Holding in She is Executive Vice President for Analytics, Product and Price at Gjensidige, where her previous roles include CFO as well as Executive Vice President for Strategy, Purchasing and Transactions. Catharina joined Gjensidige as Executive Vice President for IR in 2007, prior to which she had worked at Oslo Børs and as an auditor at Ernst and Young. She qualified as a state-authorised public accountant at the Norwegian School of Economics (NHH) and holds an MSc in Business Economics from the BI Norwegian Business School. Ottar Ertzeid (born 1965) Ottar Ertzeid has been a member of the Board of Directors of Oslo Børs VPS Holding since He was a member of the boards of Oslo Børs and Oslo Børs Holding between 2002 and 2007, and was a member of the Oslo Børs VPS Holding ASA Nomination Committee between 2007 and Ottar Ertzeid is Group Executive Vice President for DNB Markets and holds an MSc in Business Economics from the BI Norwegian Business School. His previous roles include Head and Deputy Head of DNB Markets as well as various positions in the FX and capital markets areas at DNB. He has also previously been the CFO of DNB Boligkreditt and the Head of Finance at Realkreditt. Roy Myklebust (born 1969) Roy Myklebust has been a member of the Board of Directors of Oslo Børs VPS Holding since October He is an investor and an independent advisor. Until 2015 he was a corporate finance partner at ABG Sundal Collier. Roy joined ABG Sundal Collier in He holds an MSc in Business Economics from the Norwegian School of Economics (NHH) in Bergen. Øyvind G. Schanke (born 1968) Øyvind G. Schanke has been a member of the Board of Directors of Oslo Børs VPS Holding since May Øyvind G. Schanke is the CEO of SKAGEN Funds and has an MBA in Finance from the Norwegian School of Economics (NHH). Øyvind joined SKAGEN in February 2017, prior to which he worked at Norges Bank Investment Management (NBIM) for over 15 years, where he most recently was Chief Investment Officer for Market Exposure, based in London. Before this role, he was Global Head of Equity Trading at NBIM. Øyvind was a member of the Board of Directors of Oslo Børs between 2013 and He is also a member of the Board of Directors of the Norwegian Fund and Asset Management Association (VFF). Silvija Seres (born 1970) Silvija Seres was elected to the Board of Directors of Oslo Børs VPS Holding in Silvija is a researcher and mathematician interested in entrepreneurship and innovation in business and society. She has previously held senior management positions at Microsoft and at Fast Search & Transfer, and now works as an active investor in several tech companies. She is a member of the boards of a number of companies, including Nordea and NRK, and is also the President of the Norwegian Polytechnic Society. Education: MSc in Computer Science (Oslo), MBA (INSEAD), and a PhD in Mathematical Sciences (University of Oxford). Thomas B. Skjønhaug (born 1972), Oslo Børs employee representative Thomas B. Skjønhaug was elected to the Board of Directors of Oslo Børs VPS Holding as an employee representative in He joined Oslo Børs in 2011 since which time he has worked as the head of the Operations Centre in the IT section. Prior to joining Oslo Børs, Thomas worked for 12 years in a comparable role at StockPoint Nordic, where he was responsible for the company s IT infrastructure. StockPoint Nordic delivers share portals to many of Norway s leading banks and broking firms. Sissel Bakker (born 1963), VPS employee representative Sissel Bakker was elected to the Board of Directors of VPS as an employee representative in She is responsible for project management at VPS where she has worked since Sissel is PMP-certified and trained in project management at BI Norwegian Business School. She has extensive experience as a project manager and advisor on IT system implementation across various industries. 10

11 Deputy employee representatives Morten Nordby (born 1959), VPS employee representative Morten Nordby is Senior Development Manager at VPS in the clearing and settlement area. He has been with VPS since 1985, and was responsible for developing the VPS settlement environment and its ISO interface. Morten Nordby was on the board of VPS Holding ASA as an employee representative from 2005 to Ingvild Resaland (born 1979), Oslo Børs employee representative Ingvild Resaland was elected to the Board of Directors of Oslo Børs VPS Holding as a deputy employee representative in She is VP Secondary Market at Oslo Børs and is in charge of client relationship management for members and investors. Having spent 14 years in various roles in the market data, listing and trading departments, Ingvild has wide-ranging experience of Oslo Børs business areas. She studied economics at the BI Norwegian Business School. 11

12 Board of Directors`Annual Report for 2017 The Oslo Børs VPS group looks back on 2017 as a year in which there were high levels of activity in both the primary and secondary markets. Oslo Børs VPS reports a consolidated profit of NOK 357 million for 2017 as compared to a profit of NOK 269 million in The group s earnings benefited from the good level of growth in the Norwegian economy, and were also supported by the Group s marketplaces, registration offering and other services functioning well and meeting a broad range of business and industry needs. The year saw greater demand for the group s services from Norwegian and international companies, not least from bond issuers. The group s efforts to increase the visibility of its range of services and to market them more actively have been effective in this regard. The information required pursuant to Sections 3-3b and 3-3c of the Norwegian Accounting Act is provided in the Board s report on Corporate Governance and in the company s report on Corporate Social Responsibility, which are available on the company s website The report on Corporate Social Responsibility covers all the companies in the group. Strategy The Oslo Børs VPS group comprises Oslo Børs VPS Holding ASA, Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS. Oslo Børs ASA owns 100% of the share capital of NOTC AS and 97% of the share capital of Fish Pool ASA. Verdipapirsentralen ASA owns 100% of the share capital of Centevo AB. Oslo Børs VPS Holding ASA operates from Tollbugata 2, Oslo. Unless otherwise stated, this commentary applies to the Oslo Børs VPS group. Through the marketplaces operated by Oslo Børs ASA, NOTC AS and Fish Pool ASA, the central securities depository and settlement activities operated by Verdipapirsentralen and the service range offered by Oslo Market Solutions and Centevo, the group aims to offer attractive marketplaces, settlement and registration of securities and information services for financial instruments, in order to give its customers access to an efficient capital market. The group has formulated its overall strategy for the imminent strategy period with the objective of meeting the increasing competition faced by its core businesses, as well as of generating increasing revenue from value-adding services. The strategy attaches importance to ensuring that the group continues to operate a state-of-the-art and competitive infrastructure. In addition to this, the group aims to create additional sources of revenue by attracting new customers and building value-adding products and services that complement its core activities. The Oslo Børs VPS group enjoys a high degree of strategic and financial flexibility, and the Board accordingly has a very positive view of the opportunities that the continuing development of its activities will offer. The group s main challenges over the next few years will be changes in regulation as well as the competitive environment in Europe and the effect these factors will have on the entire Norwegian securities chain, including listing, registration, trading and settlement. At an overall level, the group intends to achieve the following goals: 1. We will operate a profitable and attractive financial infrastructure 2. We will develop and market profitable value-adding services that meet the market s requirements 3. We will be the preferred securities chain for domestic companies, investors and investment firms 4. We will develop greater international interest in the group The leading marketplace for selected sectors Broadly based and robust distribution network 5. We will be an attractive workplace 6. We aim to have satisfied shareholders The group aims to preserve and develop its position in the listing and registration markets in Norway and to strengthen its position as the principal marketplace on which to trade listed securities. The group will also aim to strengthen its position internationally, both in relation to the listing of companies within the group s sectors of particular strength and as a supplier of information and related services. For the group to increase its earnings in the time ahead it needs to generate continued revenue growth from all the areas in which it operates. While market conditions and the amount of revenue reported by the group will vary over time, the group s aim is to create the basis for underlying growth, regardless of varying market conditions. The environment in which the group operates is seeing extensive changes of a technological, competitive and regulatory nature. The securities market is seeing increasing levels of interest and use. This is particularly the case in relation to the savings and pension markets. On the basis of the current picture, the Board has decided on a strategy of organic growth for Oslo Børs, with a target of achieving growth in both the Norwegian and international markets. Oslo Børs will progress its strategy 12

13 by concentrating on important sectors in the Norwegian securities market as well as by developing and selling valueadding services. Oslo Børs is well-positioned to compete in this market. In 2018 the Board will particularly focus on its strategy for VPS. This will include considering how best to position this company for further growth in light of the changes in the regulatory framework caused by the introduction of the Central Securities Depositories Regulation (CSDR). The Board has also considered the group s capital structure. During the first six months of 2018 the Board will increase the amount of interest-bearing debt held by Oslo Børs VPS Holding ASA by around NOK 450 million (i.e. by an amount approximately equivalent to the group s average annual EBITDA over the last three years), with a payment then subsequently made to shareholders. The greatest threats faced by the group in the time ahead consist of not being able to maintain Oslo Børs s position as the principal marketplace on which to trade listed Norwegian securities and of not being able to position VPS for the increasing level of competition for central securities depository business. Competition for listing and trading securities is international and has been accelerating for the last decade. The level of competition faced by the group s settlement and registration activities is expected to increase as the European Central Bank s settlement platform Target2Securities (T2S) and the EU s Regulation on Securities Settlement and on Central Securities Depositories (CSDR) are implemented in Europe. The new Directive on Markets in Financial Instruments (MiFID II), which came into force on 3 January 2018, will lead to the launch of new trading platforms also offering trading in Norwegian securities. Increased regulation and greater complexity may cause trading and settlement activity to be concentrated to an increasing extent at a small number of member firms. Current and future newly-created central securities depositories (CSDs) in Europe will over time seek to acquire customers across international borders. Structural changes may create new, larger depositories that operate across international borders, but large European players have found this to be challenging. Due to differences between the various markets, pan-european CSDs will not be able to take full advantage of their economies of scale in the Nordic market. For example, the implementation of two separate systems is planned for Sweden and Finland despite the CSDs in the two countries having the same owner. VPS currently has a strong market position and satisfied customers. In a market more exposed to competition, however, it may be challenging for VPS to maintain its current market share. VPS offers a broad range of services that meet the requirements of all customer groups. However, VPS operates with lower business volumes than potential Nordic competitor CSDs, which means that costeffective operations and a high level of quality are essential if any future pressure on prices is to be counteracted. The group s strategy for strong sectors has contributed to VPS already having attracted more international issuers than is the case for CSDs with which VPS might naturally be compared. Furthering this strategy and ensuring that VPS successfully implements IT solutions that enable it to attract further international customers are important to ensuring that business volumes are maintained and increased at VPS. In 2017 VPS continued to modernise those of its products and services that are of greatest significance to its customers in their day-to-day activities. This work will continue in VPS will prioritise modernising and developing its end-user solutions, while also continuing to standardise notifications and functionality, which is important to reducing costs for customers. VPS will in parallel simplify its core system so that a future modernisation project will be smaller in scope and involve less risk. Technical requirements arising from new European regulations are being developed as part of the existing system. VPS will also work on the roadmap for its new core system. Following a delay announced by Finland, the earliest that T2S will be fully implemented in Europe for the euro markets is T2S will lead to new competition for post-trade activities in the markets connected to the settlement system. The experience from markets and CSDs that have connected to T2S so far seems to suggest that the quality is better than anticipated, but that the costs are higher as well. This may result in the downward pressure on service providers margins potentially not being as great as previously anticipated. The impact of T2S will depend on how many countries and CSDs outside the euro zone decide to participate. This is currently uncertain. VPS announced in 2012 that it would hold back from joining T2S and address the issue again at a later date. As part of this approach, the Norwegian National User Group (NUG) resumed its work in November 2015 at the request of VPS. So far, the Norwegian market has shown little interest in the issue. Reports from Sweden suggest the situation is the same there. VPS is at the same time working on further developing its services using its roadmap to ensure that they are harmonised with the rest of Europe, and are competitive and attractive. 13

14 With the exception of Euronext s acquisition of the Irish Stock Exchange, Europe s financial infrastructure has not seen much consolidation. Globally, attempts at consolidation have in recent years been stopped by shareholders or national authorities. Changes to European regulation Future changes in the regulatory framework will have an impact on the Oslo Børs VPS Holding group. Over recent years, the EU has intensified its work on regulating the infrastructure for financial instruments. EU initiatives in this area will affect Oslo Børs VPS Holding ASA to varying degrees. As part of their program to create a transparent, stable and more coordinated financial system, the European Parliament and the European Council have approved revisions to various pieces of legislation in the securities area. As far as Oslo Børs is concerned, it is the new Directive on Markets in Financial Instruments (MiFID II) and the associated regulations that are particularly relevant. MiFID II replaced MiFID I (from 2007). MiFID II principally applies to investment firms and trading venues. MiFID II has introduced a new type of trading venue for fixed income issues and other types of non-equity-related financial instruments known as Organised Trading Facilities (OTFs). Requirements have also been introduced whereby trading in certain types of standardised cleared OTC derivatives has to take place on regulated trading venues. MiFID II has also brought in restrictions on the trading of listed shares in trading venues where orders are not made public (known as dark pools). Limits have been introduced on the volume of trading that can take place in any single share in dark pools over a given period. Such limits are determined by the European Securities and Markets Authority (ESMA) and apply to total trading volumes across the EEA area. MiFID II has also widened the scope of the regulation to which multilateral trading facilities are subject. Oslo Børs operates two MTFs, namely Oslo Connect (for non-standardised derivative contracts) and Merkur Market (for equity capital instruments). MiFID II has also introduced a new type of MTF for SMB companies. MiFID II has also brought in detailed regulation for algorithmbased trading, including requirements for marketplaces rules and control over such trading. MiFID II represents greater transparency (disclosure of information about orders and trades) for trading in shares, the consolidation of market information and a greater focus on investor protection. With regard to fixed income securities, MiFID II has introduced both pre-trade and post-trade transparency rules, an area that was not regulated in MiFID. However, a range of exceptions apply that mean that there is still not the same degree of harmonisation between fixed income marketplaces as there is for equities. Oslo Børs has adapted its systems, rules, authorisations and organisational structure to meet the new requirements introduced by MiFID II. Changes have also been approved to the Transparency Directive (periodic financial reporting and disclosure of large shareholdings). With regard to new legislation, Norway is behind compared to the EU where the directive was implemented from November New Norwegian legislation implementing the Transparency Directive has been proposed in NOU 2016:2, but the new legislation has on the whole not yet been adopted. However, the requirement for quarterly financial statements was rescinded with effect from 1 January In connection with this, Oslo Børs has incorporated into its Code of Conduct for IR a recommendation that companies publish quarterly reports for the first and third quarters in addition to the half-yearly and annual reports that are required by law. The changes to the Transparency Directive will also broaden the rules on the disclosure of large shareholdings to include financial derivatives and will make the rules on the disclosure of large shareholdings more harmonised between EEA states. A central access point for each EEA state s officially appointed storage mechanism (OAM) will be introduced at ESMA, with reporting formats also standardised. Oslo Børs operates the OAM for Norway. This will lead to the need for common technical solutions to be developed in the EEA and will therefore involve development costs for the area s OAMs. The EU has also approved a new Market Abuse Directive (MAD II) and regulation (MAR). It is only the MAR that is directly relevant to Norway as an EEA state, as MAD II regards the criminal sanctions for market abuse. MAR is intended to harmonise and increase the efficiency of the rules on market abuse (publication of inside information, prohibitions against insider trading and market manipulation) in the EEA area. Oslo Børs is the supervisory authority for listed companies in relation to their duty to publish inside information. It is expected that Oslo Børs will be able to continue to fulfil this function after MAR is transposed into Norwegian law. With regard to new legislation, Norway is behind relative to the rest of the EU, where the regulation was implemented in July New legislation transposing MAR into Norwegian law has been proposed in NOU 2017:4, but the legislation has not yet been adopted. 14

15 A new regulation (the Central Securities Depositories Regulation, CSDR) that regulates the activities of central securities depositories and the settlement system and sets new rules for the settlement of transactions in financial instruments was approved in 2014 and has entered into force in the EU. The regulation is intended to maintain financial stability and also to improve the efficiency of cross-border activities and increase competition between CSDs across international borders. A number of additional Commission Regulations have already been approved, and the final regulations are expected to be approved in the first six months of These regulations set comprehensive requirements for European CSDs in relation to the design of the technical solutions employed, their management structures and their transparency in relation to customers, the authorities and the public. Existing CSDs will have to apply for new authorisation under CSDR. European CSDs submitted their applications in September 2017, and a small number have received authorisation under CSDR. With regard to VPS, the application deadline will depend on when CSDR is transposed into Norwegian law. CSDR is one of several EU legal acts whose transposition into Norwegian law has been delayed due to constitutional issues. CSDR is expected to be incorporated into the EEA Agreement during The Norwegian Ministry of Finance has carried out a consultation exercise regarding a proposed new Securities Register Act that transposes CSDR into Norwegian law, and is currently working on a draft bill for consideration by the Norwegian parliament. VPS expects a legislative decision to be taken on the matter in the second quarter of Both CSDR and T2S are expected to result in new competition in the post-trade area in Europe. However, the effects of both so far seem to have been limited. It is expected that the new competition will initially relate to the fixed income market, and there are already some signs of competition developing in this area. VPS has been encountering competition particularly in relation to EUR-denominated bonds for a number of years. The new competition is expected to relate to NOK-denominated bonds. With regard to equity capital instruments, for the moment there are such significant differences across the EEA countries in terms of company law, taxation law and market practice in relation to corporate events that extensive competition for issuers is only expected to develop somewhat further into the future. The European authorities have launched a number of initiatives to achieve greater harmonisation, including revising the Shareholders Rights Directive. It is, however, not clear when we will see the effects of what has been set in motion or when the initiatives that have been announced will be implemented. In 2017 the Norwegian savings market saw sizeable change in the form of new regulations introducing share savings accounts and individual pension savings accounts. The proposed changes to the Defined Contribution Pensions Act, which will make it possible for employees to combine their pension savings into a single pension account (an individual pension account), represent a new initiative by the authorities that is intended to encourage more saving. The proposed changes were circulated for consultation with a response deadline in February These new initiatives are resulting in more competition in the savings market, and the digital solutions that different companies operate for distributing and displaying customers overall holdings are central elements in their efforts to win customers. This is also of significance to VPS. In addition, the Revised Payment Services Directive will be transposed into Norwegian law. This directive does not regulate securities accounts, but is nonetheless expected to be of significance to VPS customers in a way that means it may also be of significance to VPS. The transposition of MiFID II/MIFIR into Norwegian law has primarily affected VPS customers. They have, however, requested solutions from VPS to help make it easier for them to fulfil their obligations pursuant to the new rules. On 22 December 2015 the Ministry of Trade, Industry and Fisheries in collaboration with the Ministry of Finance consulted on a number of possible options for increasing transparency regarding the information currently contained in companies shareholder registers and the Norwegian Tax Administration s Shareholder Register. The proposals include options that involve setting up a public register with information on the ownership of limited companies. Some of the proposed solutions would require information to be provided from securities registers. The Ministry is continuing to look into the issue. The regulatory changes discussed above have already caused a number of companies to make changes to their strategies and business models. These changes are expected to continue in the time ahead. Market activity in 2017 The Oslo Børs Benchmark Index closed 2017 at , having risen by 19% over the course of the year. The value of shares and equity certificates traded totalled NOK 1,098 billion for the year, which was 5% higher than in The total number of transactions carried out through the exchange s trading system was 24.9 million in 2017, which was approximately 7% more than in

16 VPS processed 14.0 million settlement transactions for trades in securities in This represents an increase of 15% from In addition, VPS processed 2.8 million transactions for purchases and sales of units in mutual funds, a decrease of 16% from New share issues carried out in 2017 raised NOK 62 billion, an increase from NOK 35 billion in With eleven companies admitted to listing on Oslo Børs in the year, four companies transferring to it, and eleven companies removed from listing, the number of companies listed on Oslo Børs increased to 191 at the close of The number of companies listed on the regulated marketplace Oslo Axess fell to 23 after two companies were admitted to listing, three companies were removed from listing, and there was a net reduction of one company as the result of transfers between marketplaces. At the close of 2017 there were four exchange traded funds (ETFs) listed on Oslo Børs, the same number as at the end of At the end of 2017 there were 15 companies admitted to trading on Merkur Market, which was set up in January 2016, while there were 44 companies registered on the NOTC list. Of the companies listed on Oslo Børs and Oslo Axess and those admitted to trading on Merkur Market, 45 were from countries other than Norway. The market value of the companies listed or admitted to trading on the Oslo Børs marketplaces at 31 December 2017 was NOK 2,535 billion, an increase of 18% from the close of At the close of 2017, 1.7 million holdings of financial instruments were registered with VPS, held on 1.4 million VPS accounts. The number of VPS accounts increased by 0.2 million in 2017, principally due to the introduction of share savings accounts. The number of mutual funds registered in VPS increased by 510 in 2017 to 1,764 funds. In total, 1,005 limited companies and 49 equity certificates were registered in VPS, a net increase of 11 from the end of The number of fixed income issues registered in VPS at the end of 2017 was 3,172, an increase of 239 from the end of The number of other equity capital instruments registered in VPS increased by 217 in 2017 to 1,260. The market value of all the financial instruments registered at the end of 2017 was NOK 5,602 billion, which is 12% higher than at the end of At the close of 2017 Oslo Børs had 50 member firms, of which 18 were local firms and 32 were remote members. At the close of 2017 VPS had 63 settlement participants (i.e. entities that have entered into a settlement agreement with VPS). Of these 36 are direct participants in VPO, and 27 use a settlement agent to settle their trades through VPO. Sales of financial market data are principally measured in terms of the number of end-users with access to market data from Oslo Børs. Customers of information distributors such as Thomson Reuters, Bloomberg, etc. subscribe for access to price and index information from a variety of different marketplaces. The number of end-users subscribing for access to data from Oslo Børs increased by around 8% in 2017, bringing the total to approximately 49,700 end-users. There was a decrease in the number of professional users, but an increase in the number of private users. Revenue from the fixed income market is principally determined by the number of issues listed. In all, 2,085 loans were listed at the end of 2017, representing an increase of 210 loans since the start of the year. Of the loans, 1,274 were listed on Nordic ABM (Alternative Bond Market) and 811 on Oslo Børs. New debt issued in respect of new and existing loans amounted to NOK 350 billion (excluding government bonds) in 2017, which was NOK 38 billion higher than in The number of derivatives contracts traded on Oslo Børs was 15% lower in 2017 than in Aggregate premium turnover for all derivatives products was, however, in line with Contract turnover at Fish Pool was 15% lower at 67,500 tonnes for 2017 as a whole. Oslo Market Solutions is one of the leading Nordic suppliers of internet-based solutions for the securities market. The company is also a significant vendor of information on Norwegian securities. The company reported an increase in revenue of 12% in Financial results The unconsolidated annual accounts of the holding company Oslo Børs VPS Holding ASA have been prepared in accordance with generally accepted accounting practice in Norway. The consolidated annual accounts of Oslo Børs VPS have been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by the EU. The group s operating revenue for 2017 was NOK 995 million, up NOK 94 million from Revenue from trading and settlement was NOK 4 million higher in 2017, while revenue in connection with the registration and listing of securities was NOK 82 million higher. Revenue from sales of financial market data was NOK 4 million higher. Revenue from fund services was NOK 3 million higher. 16

17 MNOK OPERATING REVENUES excess value related to the purchase of Centevo (formerly Evolution) totalled NOK 4 million in both 2016 and EBITDA AND OPERATING PROFIT (EBIT) 800 MNOK Total operating costs in 2017 amounted to NOK 547 million, down from NOK 552 million in EBITDA EBIT MNOK OPERATING COSTS 81 Operating costs before capitalisation of internal resources, depreciation, amortisation and write-downs Capitalisation of internal resources, depreciation, amortisation and write-downs Salaries and personnel costs, before capitalisation of internal resources, totalled NOK 305 million in 2017, an increase of 10% or NOK 27 million from The increase is to a large extent due to the financial sector tax, higher variable salary payments, and the change of CEO at VPS. Other operating costs increased in 2017 by NOK 15 million from NOK 193 million in 2016 to NOK 208 million. The increase is primarily due to projects at Oslo Børs and VPS as well as to higher activity-dependent costs in Ordinary depreciation totalled NOK 31 million in 2017, a decrease of NOK 12 million relative to Amortisation of EBITDA and EBIT for 2017 were NOK 482 million and NOK 448 million respectively. Net financial items totalled NOK 23 million in 2017, up NOK 13 million from The group s acquisition of the remaining 50% of NOTC AS and its change to a wholly owned subsidiary company from a joint venture meant that under IFRS the group s previous equity stake in NOTC had to be re-measured. This led to income of NOK 14 million being recognised. The result for the year for 2017 was a profit of NOK 357 million, as compared to a profit of NOK 269 million in MNOK PROFIT FOR THE YEAR 269 Goodwill totalling NOK 1,931 million was capitalised on the balance sheet as a result of the merger in 2007 between Oslo Børs Holding ASA and VPS Holding ASA. Goodwill related to VPS decreased to NOK 464 million following write-downs of

18 NOK 363 million and NOK 1,102 million carried out in 2008 and 2009 respectively. The acquisition of Fish Pool in 2013 resulted in the capitalisation of goodwill and of Fish Pool s licence to operate as an exchange totalling NOK 15 million, while the acquisition of Centevo (formerly Evolution) in 2013 resulted in the capitalisation of goodwill of NOK 27 million and NOK 15 million for Evolution s systems. The acquisition of the remaining 50% of NOTC AS in 2017 resulted in the capitalisation of goodwill of NOK 43 million. The book value of the goodwill and licence associated with Fish Pool was written down to zero in Pension liabilities decreased by NOK 1 million from the end of 2016 to NOK 163 million. Actuarial differences that arose in 2017 amounted to NOK 0.1 million (before tax) and were recognised in other comprehensive income. Reported pension liabilities therefore represent gross pension liabilities less the calculated value of pension assets. An increase in liabilities as a result of the introduction of the financial sector tax is included in the figure for actuarial differences. Further information is provided in Note 5 to the consolidated accounts. The equity of Oslo Børs VPS Holding was NOK 1,010 million at the end of 2017, representing a consolidated equity capital ratio of 72%. The holding company, which produces its accounts in accordance with Norwegian generally accepted accounting practice, reported equity of NOK 897 million and an equity capital ratio of 66%. The holding company s equity includes undistributable reserves of NOK 86 million. The group held cash and cash equivalents of NOK 629 million at the end of The group generated positive cash flow from operational activities of NOK 397 million in Cash flow from investment activities represented an outflow of NOK 31 million. Following an outflow of NOK 341 million from financing activities (payment of a dividend totalling NOK 340 million), net cash flow for the year was an inflow of NOK 25 million. The boards of directors of the subsidiary companies Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS have proposed dividend and/or group contribution payments to the parent company Oslo Børs VPS Holding ASA of NOK 57 million, NOK 139 million and NOK 1 million respectively, generating a total for 2017 of NOK 197 million. Oslo Børs ASA also paid a dividend of NOK 180 million in December Following these transfers, the unconsolidated accounts of Oslo Børs VPS Holding ASA show an accounting profit for the year in 2017 of NOK 359 million. Oslo Børs VPS Holding ASA distributed a dividend of NOK 4.00 per share in December 2017, equivalent to NOK 172 million in total. The Board of Directors is committed to ensuring that the group and the individual companies have satisfactory liquidity and capital adequacy. Following an evaluation on this basis, the Board of Oslo Børs VPS Holding ASA intends, as part of its approval of the Annual Reports and Accounts, to propose to the Annual General Meeting that an ordinary dividend of NOK 4.20 per share, equivalent to NOK 181 million, be approved. Together with the dividend of NOK 4.00 per share paid in December 2017, this is equivalent to NOK 8.20 per share for 2017, which represents 98% of earnings per share before amortisation. The Board of Oslo Børs VPS Holding ASA considers it to be in general appropriate that the major part of the group s annual profit should be distributed as dividend. However, decisions on dividend payments must also take into account the need to maintain satisfactory levels of liquidity and capital adequacy, including the effect of planned and possible investment on liquidity and capital adequacy. Payments of dividend by Oslo Børs VPS Holding are the result of dividends received from its subsidiaries. The dividends proposed by subsidiaries take into account their liquidity and capital adequacy requirements, as well as the regulatory requirements that apply to the subsidiary in question. IFRS accounting does not recognise a proposed dividend as a liability until the annual general meeting has passed a resolution to approve payment of the dividend. Norwegian generally accepted accounting practice recognises a proposed dividend as a liability from the time it is proposed. The proposed dividend is therefore included as a liability in the unconsolidated accounts of Oslo Børs VPS Holding ASA, but is not included as a liability in the consolidated accounts. It is proposed that the profit for the year of the holding company, Oslo Børs VPS Holding ASA, of NOK 358,602,019 should be allocated as follows: Provision for dividend: NOK 4.20 per share NOK 180,616,800 Dividend distributed in December 2017 NOK 171,999,788 Transferred from retained earnings NOK 5,985,431 Total allocations NOK 358,602,019 Shareholder information Oslo Børs VPS Holding ASA has only one class of shares, and its shares are freely negotiable, subject to limitations imposed by legislation. Each share carries one vote at general meetings of the company, subject to limitations imposed by legislation. The company is not aware of any agreements between shareholders that impose restrictions on trading in the company s shares or on the exercise of voting rights. 18

19 The Composition of the Board and its work The Board of Directors held nine meetings in 2017, including two group strategy meetings. The Board has focused in particular on the group s strategy and finances, the competitive situation, improving efficiency, risk management and major projects. At 31 December 2017, two of the five members of the Board of Directors elected by shareholders were female. Reference is also made to the information on the Board s composition and independence, and the work of the Board, which is provided in the Board s report on Corporate Governance. Personnel and organisational issues The Oslo Børs VPS group had 244 employees at 31 December Six employees were on fixed term contracts and the equivalent of 1.5 full-time employees were absent on unpaid leave. Female staff accounted for 32% of employees at the close of Female staff held 12 of the senior management positions in the group. Salary statistics do not show any differential caused by gender. In its recruitment processes, Oslo Børs VPS places emphasis on the expertise required for the position in question and language skills in Norwegian and English, regardless of a candidate s ethnic background, age and gender. At the end of 2017, the group had six employees with a non-scandinavian background. The average age of the group s employees is 46. For the group in 2017, parental leave of absence totalled the equivalent of three full-time appointments. Oslo Børs VPS provides appropriate arrangements for parents to be able to combine a demanding job with their family responsibilities. Leave of absence and flexible working play important roles in this respect. The group strives, wherever working conditions permit, to make arrangements for employees with partial disability in order that they are able to continue with their role in the group. In 2017, 27 new employees were recruited on permanent terms, while 23 permanent employees resigned. This represents staff turnover of 7%. In overall terms, the group s employees have extensive experience. 81% of employees have been with the group for five years or more, and 59% have been with the group for ten years or more. 42 employees have been recruited over the last two years, representing approximately 18% of the workforce. This has helped to ensure a definite mix of new expertise and employees with long-standing experience. Results from employee satisfaction surveys carried out in 2017 that focused on employee commitment and motivation showed overall stable and good results for the group as a whole. The group takes a pro-active approach to preventative medical measures, particularly in respect of the problems that may be caused by working with personal computers. Statistics show that absence due to sickness for the group in 2017 was 3.9%. There were no incidents of personal injury or reportable accidents involving employees of the group in Statement on the remuneration of senior employees Oslo Børs VPS has unified guidelines for the remuneration of senior employees throughout all companies in the group. The objective of the guidelines is to offer a total compensation package that is competitive in order to attract high-quality managers, but without offering market-leading terms. The Board s guidelines for the remuneration of the chief executive officer and other senior employees are for remuneration to be determined on an individual basis, taking into account the individual s area of responsibility, results achieved, expertise and background. The Board of Oslo Børs VPS Holding ASA has appointed a Remuneration Committee, and the chair of the board of VPS also participates in meetings of this committee. The Remuneration Committee makes preparation for the Board s decision on the remuneration of the Group Chief Executive Officer, prepares the group s guidelines on the remuneration of senior employees, as well as the principles for variable salary payments to other employees of the group, and provides advice to the Group Chief Executive Officer on the remuneration of other senior employees. The remuneration of senior employees comprises normal salary together with employment benefits including company car, telephone and newspapers, in addition to any variable salary payment, and senior employees also participate in the group pension arrangements and early retirement arrangement in the same way as other employees. The general mandatory retirement age for employees of the group is 70. The Board allocates a budget at each year-end for variable salary payments to employees and managers at Oslo Børs, VPS and Oslo Market Solutions and makes its decision on an overall evaluation of performance relative to predefined objectives for financial earnings, the successful implementation of action plans, attainment targets, operational reliability, quality standards and customer satisfaction. For managers, 19

20 employee satisfaction is also a criterion. Fish Pool ASA has its own variable salary arrangement based on the volume of product traded and profit. Variable salary payments to senior employees are evaluated individually by the Group Chief Executive Officer in relation to predetermined objectives and, with the exception of Fish Pool, such payments cannot exceed 25% of the fixed annual salary. In the case of Fish Pool, variable salary payment cannot exceed an employee s fixed annual salary. This structure relates to the total remuneration package offered by Fish Pool. Variable salary payments to the Group Chief Executive Officer are determined by the Board on the basis of the same criteria as for other senior employees. Senior employees shall be entitled to the same rights as other employees in respect of pension benefits and employee insurance arrangements. The remuneration of the Group Chief Executive Officer is determined by a meeting of the Board. The Group CEO is responsible for deciding the salary increases awarded to other members of senior management, after consultation with the Remuneration Committee. Oslo Børs VPS Holding ASA does not provide any remuneration linked to shares or to the performance of the company s share price or the share price of any of the companies in the same group. Managers are required to use part of any bonus entitlement to purchase shares in Oslo Børs VPS Holding ASA. Reporting for 2017 The companies in the group carry out annual salary adjustments through a combined process with increases coming into effect on 1 July. The annual increase in 2017 in fixed salaries for senior employees other than the Group CEO, with effect from 1 July 2017, was on average 1.8%, which was equivalent to the increase for other employees. Senior employees (members of the Group Senior Management) other than the Group CEO received bonus payments for 2017 that averaged 20% of fixed salary at the end of The equivalent payments to other employees represented approximately 10.3% of fixed salary. The annual increase in 2017 in fixed salary for the Group CEO, with effect from 1 July 2017, was 1.8%. The Group CEO received a bonus payment for 2017 equivalent to 21.4% of fixed salary. The guidelines were applied to the recruitment of senior employees in No changes were made to existing employment contracts entered into prior to 2017, and no material changes were made to the guidelines for the remuneration of senior employees. Further information on the salary and other remuneration of senior employees for 2017 can be found in Note 6 to the annual accounts. Environmental report The activities carried out by Oslo Børs VPS do not have any material adverse effect on the external environment. The group s business activities are not subject to any environmental licences or restrictions. Research and development Oslo Børs VPS does not carry out any research or development activity. However, the group does develop some of its own IT systems. Risk factors and uncertainty Structural changes in the international capital market cause continuous changes in the competitive outlook. Failure to adapt to changes may have adverse consequences for the group s domestic and international position. On a medium-term perspective, it is uncertain how cross-border settlement of securities transactions in Europe will be carried out. The EU authorities have launched a number of initiatives to encourage greater harmonisation and competition, and central banks have taken the initiative to plan the establishment of centralised pan-european settlement arrangements. There is also a trend for the authorities to impose stricter requirements on businesses in the financial sector, including providers of financial infrastructure. This may affect the capital adequacy requirements that apply to the activities carried out by the group, and may also have an adverse effect in the future on the level of activity in the market in general. Future changes in EU regulation may affect the group s future revenues. Oslo Børs, VPS and Fish Pool have implemented and carry out risk management and internal control in accordance with the Regulations on Risk Management and Internal Control issued by Finanstilsynet. Work on risk management and internal control is a continuous process of implementing measures to improve identified areas and monitoring their effectiveness. No material risks that might threaten the operations of Oslo Børs VPS have been identified. Standby and disaster recovery procedures are in place and are tested routinely, including remote secondary operating locations for critical systems. Reference is also made to the description of risk management and internal control provided in the Board s statement on corporate governance. Finanstilsynet carried out an on-site IT inspection at Oslo Børs in November 2016, which principally 20

21 focused on Oslo Børs s management and control of how it delivers its trading systems and its preparedness in relation to hostile electronic attacks. In its post-inspection report, Finanstilsynet only had a number of minor comments. This was also the case following the IT inspection carried out at Fish Pool in Exposure to financial risk arises in respect of liquidity, foreign currency, credit risk, market risk and interest rate risk. These areas are monitored continuously. The Board is of the opinion that the regular cash flow from operations, combined with the scale of liquid assets held, ensures that exposure to liquidity risk is at a low level. Foreign currency exposure is reduced since the large majority of contracts entered into stipulate payment in Norwegian kroner. Net pension liabilities are exposed to interest rate risk in that their value can be affected by changes in interest rates. The key systems operated by Oslo Børs maintained a generally high level of availability in Availability for Millennium Exchange, the trading system for equities and fixed income instruments, as well as for SOLA, the trading system for derivatives, was 100%. Overall availability for the key products and services operated by VPS was on average 99.99% in The Board of Directors is not aware of any particularly significant risk factors in relation to the operations of Oslo Børs VPS other than as mentioned above. The Board recognizes the importance of continuing to develop services in close collaboration with customers in order to ensure that the risk of losing business volume is minimised. The Board of Directors would like to emphasise that it is normal for there to be significant uncertainty associated with assessing future conditions. Prospects for 2017 The group s revenue fluctuates in line with the level of activity in the securities market. Oslo Børs VPS strives to offer a range of products with a pricing structure that is competitive and that promotes active use of the services the group offers. The group expects competition from other venues for trading in listed securities to continue to be intense, and it also expects increasing competition for the group s post-trade activities. Operating expenses for 2018 before capitalisation of internal resources, depreciation and amortisation are expected to be in excess of NOK 500 million. Included in this figure is an increase in costs at Centevo in relation to planned development activities at the company. Oslo Børs VPS has the market position, capital adequacy and liquidity needed to take an aggressive approach to carrying out the projects it plans and meeting the challenges it faces in The Annual Accounts have been prepared on the going concern assumption, and the Board confirms that this assumption is appropriate. No events have occurred between the date of the accounts and the signing of this report of material significance for the accounts reported for Oslo, 21 March 2018 Catharina E. Hellerud Ottar Ertzeid Øyvind G. Schanke Silvija Seres Chair Board member Board member Board member Roy Myklebust Sissel Bakker Thomas B. Skjønhaug Bente A. Landsnes Board member Board member Board member Group CEO 21

22 Statement pursuant to Section 5-5 of the Securities Trading Act The Board of Directors confirm that to the best of their knowledge, the annual accounts for the period 1 January 2016 to 31 December 2016 have been prepared in accordance with the current accounting standards and that the information in the accounts gives a true and fair view of the group s assets, liabilities, financial condition and earnings as a whole, and that the Directors annual report gives a true and fair view of the performance, results and commercial position of the company and of the group as a whole, as well as providing a true and fair view of the most relevant risk factors and uncertainties that the company and group face. Oslo, 21 March 2018 Catharina E. Hellerud Ottar Ertzeid Øyvind G. Schanke Silvija Seres Chair Board member Board member Board member Roy Myklebust Sissel Bakker Thomas B. Skjønhaug Bente A. Landsnes Board member Board member Board member Group CEO 22

23 Oslo Børs VPS Holding ASA - GROUP Statement of comprehensive income (Figures in NOK 1,000) Note OPERATING REVENUES Operating revenues TOTAL OPERATING REVENUES OPERATING COSTS Salaries and related costs 4,5, Depreciation 13, Amortisation of excess value Write-downs of excess value Other operating costs TOTAL OPERATING COSTS OPERATING PROFIT Income from investments in joint ventures 3, Financial income Financial expense NET FINANCIAL ITEMS RESULTAT FØR SKATT Tax expense Profit/Loss for the year Items that will not be classified to profit and loss Actuarial gains/losses on defined benefit pension scheme Tax effect COMPREHENSIVE INCOME Earnings per share Diluted earnings per share

24 Oslo Børs VPS Holding ASA - GROUP Statement of financial position at 31 Dec (Figures in NOK 1,000) Note FIXED ASSETS Intangible assets IT systems 11, Licences Goodwill 14, Total intangible assets Deferred tax assets Tangible fixed assets Property Fittings, IT equipment, vehicles etc Total tangible fixed assets Financial fixed assets Investment in joint ventures Investment in shares Other long-term receivables Total financial fixed assets Total fixed assets CURRENT ASSETS Receivables Accounts receivable Other receivables Total receivables Bank deposits Total current assets TOTAL ASSETS

25 Oslo Børs VPS Holding ASA - GROUP Statement of financial position at 31 Dec (Figures in NOK 1,000) Note Equity Paid-in equity Share capital Own shares Other paid-in equity Retained earnings Total paid-in equity Non-controlling interests Total equity LIABILITIES Long-term liabilities Pension liabilities 5, Deferred tax liabilities Total long-term liabilities Current liabilities Trade creditors Tax payable Payroll tax and other deductions Other current liabilities Total current liabilities Total liabilities TOTAL LIABILITIES AND EQUITY Oslo, 21 March 2018 Catharina E. Hellerud Ottar Ertzeid Øyvind G. Schanke Silvija Seres Chair Board member Board member Board member Roy Myklebust Sissel Bakker Thomas B. Skjønhaug Bente A. Landsnes Board member Board member Board member Group CEO 25

26 Oslo Børs VPS Holding ASA - GROUP Statement of changes in equity Other Non- Share Own paid-in Retained controlling Total (Figures in NOK 1,000) capital shares equity earnings interest equity Equity capital at 31 December Consolidated profit at December Actuarial gains/losses applied directly to equity after tax Comprehensive income Transactions with owners Buy-back of own shares Dividend for Interim dividend Translation effects Total transactions with owners Equity capital at 31 December Consolidated profit at December Actuarial gains/losses applied directly to equity after tax Comprehensive income Transactions with owners Buy-back of own shares Dividend for Interim dividend Translation effects Total transactions with owners Equity capital at 31 December

27 Oslo Børs VPS Holding ASA - GROUP Cash flow statement (Figures in NOK 1,000) Note Cash flow from operational activities Ordinary pre-tax profit Tax paid in the period Depreciation of tangible fixed assets Amortisation and write-downs of excess value 14, Net financial items Change in accounts receivable Change in trade creditors Change in pension liabilities Change in other accruals Net cash flow from operational activities Cash flow from investment activities Interest income Dividends received Receipts from sale of tangible fixed assets Payments for purchases of shares Payments for purchases of tangible fixed assets Net cash flow from investment activities Cash flow from financing activities Payment for purchases of own shares Interest expense Dividend paid Net cash flow from financing activities Net change in cash and liquid assets Cash and liquid assets at start of the period Cash and liquid assets at end of the period The cash flow analysis has been prepared in accordance with the indirect method. Cash and liquid assets comprise cash and bank deposits. Cash and liquid assets include blocked deposits amounting to NOK 54,947k (NOK 47,773k) in NOK k of this amount represents guarantees in respect of future pension payments (NOK 34,459k in 2016). 27

28 Oslo Børs VPS Holding ASA Notes - GROUP Accounting principles The consolidated accounts of Oslo Børs VPS Holding for 2017 were approved by the Board of Directors on 21 March Oslo Børs VPS Holding ASA is a public limited liability company registered in Norway. The company s registered office is Tollbugata 2, 0152 Oslo, Norway. The group s business activities are the operation of marketplaces for listing and trading in securities and other stock exchange listed financial instruments, registration of rights over and settlement of trading in financial instruments, and sales of financial market data and related systems. The group prepares its accounts in Norwegian kroner (NOK), which is the functional currency for all companies in the group with the exception of Centevo AB (formerly Evolution Software Sweden AB), the functional currency for which is the Swedish krona (SEK). The accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by the EU. Oslo Børs VPS Holding ASA has not been admitted to stock exchange listing, and the preparation of consolidated accounts in accordance with IFRS is therefore on a voluntary basis. The consolidated accounts are based on historic cost, save for financial assets available for sale and financial assets and liabilities, which are valued at fair value through profit and loss. Comparable figures Comparable figures are provided for profit and loss and balance sheet items for the last two years. Consolidation principles The group comprises Oslo Børs VPS Holding ASA and the subsidiary companies Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS. Oslo Børs VPS Holding ASA owns 100% of the share capital of these companies. Oslo Børs ASA owns 100% of the share capital of NOTC AS following its acquisition in 2017 of the 50% of the share capital that it did not previously own. Oslo Børs ASA also owns 97% of the share capital of Fish Pool ASA. Verdipapirsentralen ASA owns 100% of the share capital of Centevo AB (formerly Evolution Software Sweden AB). Oslo Børs VPS Holding ASA and Oslo Børs ASA operate from offices at Tollbugata 2, 0152 Oslo, Norway. Verdipapirsentralen ASA and Oslo Market Solutions AS operate from offices at Fred Olsens gate 1, 0152 Oslo, Norway. Non-controlling interests are included in the company s equity. The consolidated accounts show the financial condition of the group when the companies making up the group are consolidated as a single commercial entity. The subsidiaries are consolidated in accordance with the purchase value method. This means that the historical purchase price of shares in the subsidiary is replaced by the actual value of assets and liabilities in the subsidiary at the time of purchase. Companies that are purchased or sold during the course of the year are included in the consolidated accounts from the time that the group takes over control and until such time as the group ceases to exercise control. Control over a company exists when the group has exposure or rights to variable returns from its involvement with the company, and has the ability to use power over the company to affect the amount of returns. Changes in ownership interests in subsidiaries that do not cause loss of controlling influence are accounted for as equity transactions. The consideration is recognised at fair value, and the difference between the consideration and the book value of the ownership interest is applied directly to the controlling interest s equity. All internal transactions, including internal services and unrealised gains and losses as well as receivables and liabilities between the parent company and subsidiaries, are eliminated on consolidation. In the event of a change in ownership interest in a subsidiary that causes loss of control, the consideration is measured at fair value. The book value of assets and liabilities in the subsidiary and noncontrolling interests are derecognised from the time of loss of control. The difference between the consideration and the book value of the assets is recognised to profit or loss as a gain or loss. Any remaining investment is measured at fair value, and any gain or loss is recognised to profit or loss as part of gains/losses on sale of subsidiaries. Any amounts recognised in other comprehensive income are reclassified to profit or loss, except where such amounts are applied directly to equity as a result of other IFRS standards. Investments in joint ventures are accounted for in accordance with IFRS 11. A joint venture is a business over which the group has shared control through a contractual agreement between the parties. Such an investment is recognised in accordance with the equity method. Associated companies are undertakings where the group has significant influence, but not control, over financial and operational management (normally involving an ownership interest of between 20% and 50%). The consolidated accounts include the group s share of the profit or loss from associated companies recognised in accordance 28

29 Notes - GROUP with the equity method from such time as the group first exercises significant influence until such time as this influence ceases. When the group s share of losses in an associated company exceeds the value of its investment, the group s capitalised value is reduced to zero and any further losses are not recognised to profit and loss unless the group has a liability to meet such losses. Business combinations and goodwill Business combinations are recognised in accordance with the acquisition method. Transaction costs are recognised to profit and loss as they are incurred. The consideration for the acquisition of a business is recorded at fair value at the date of acquisition and can include cash, shares issued and conditional consideration. Conditional consideration is classified as a liability in accordance with IAS 39 and is recognised at fair value in subsequent periods with changes in value applied through profit and loss. Upon the acquisition of the business, all assets and liabilities are reviewed for classification and allocation in accordance with the contractual terms and conditions, commercial circumstances and other relevant matters at the time of acquisition. Assets and liabilities acquired are recognised at fair value in the opening balance sheet. The difference between the consideration paid for acquisition and the fair value of net identifiable assets at the time of acquisition is classified as goodwill. In the case of investments in joint ventures, goodwill is included in the balance sheet value of the investment. Goodwill is recognised in the balance sheet at acquisition cost, less any accumulated write-downs. Goodwill is not amortised, but is tested at least annually for impairment. If the impairment test shows that book value is in excess of the recoverable amount, goodwill is written down to the recoverable amount. Assets and liabilities acquired as a result of a business combination are capitalised at fair value in the opening consolidated balance sheet. In the case of each acquisition, a decision is made on whether to recognise non-controlling interests at fair value, or on the basis of the non-controlling interests share of the identified asset and liability items. In connection with the annual testing of goodwill for impairment, recoverable amounts are determined by estimating the present value of future cash flows for cash generating units. Management took the view when deciding what constituted the group s cash generating units that these were equivalent to the groups subsidiary companies. As part of goodwill testing, goodwill is allocated to cash generating units or groups of cash generating units, i.e. subsidiary companies, that are expected to benefit from the synergy effects of the business combination. If the fair value of equity acquired through a business combination exceeds its acquisition cost, the excess value is recognised to profit immediately at the time of acquisition. Investments where the group does not have a controlling interest are accounted for in accordance with IFRS 3. Goodwill in such cases is recognised only for the controlling interest s share. Goodwill is calculated as the difference between the acquisition cost and the controlling interest s share of the fair value of identifiable net assets measured at the time of acquisition. In the case of step acquisition, assets and liabilities are measured at fair value at the time they are acquired. Changes in the value of the earlier ownership interest are recognised to profit and loss. Cash and cash equivalents Cash includes cash held in the tills and bank deposits. Cash equivalents are short-term liquid investments with a maximum term of three months that can readily be converted to a certain cash amount. Liquid assets held as deposits with a fixed term in excess of three months but not exceeding 12 months are not classified as cash and cash equivalents in the cash flow analysis. Accounts receivable Accounts receivable are recorded at their nominal value less provisions for expected losses. Financial instruments In accordance with IAS 39 Financial Instruments: Recognition and Measurement, financial instruments that fall within the scope of IAS 39 are classified into the following categories: at fair value through profit or loss (held for trading purposes), hold to maturity, loans and receivables, available for sale and other commitments. In 2016 and 2017 the group held instruments in the financial instruments at fair value through profit or loss and loans and receivables categories. Loans and receivables are valued at amortised cost. Tangible operational fixed assets and intangible assets Tangible operational fixed assets are valued at acquisition cost less accumulated depreciation and any write-downs. Expenses incurred after an operational fixed asset comes into use, such as routine maintenance, are charged to profit and loss, while costs of improvements that are expected to produce future economic benefits are capitalised. 29

30 Notes - GROUP Intangible assets are recognised in the balance sheet if it is likely that the expected future economic benefits arising from the asset will be received by the company, and the acquisition cost of the asset can be reliably measured. Acquisition cost includes the cost of internal and/or external development resources, as well as the purchase of off-the-shelf software. Costs are capitalised from the time of the decision to implement the project. Costs of preparatory work for a project, marketing and training are not capitalised. Intangible assets with defined economic life are valued at acquisition cost less accumulated amortisation and writedowns. Amortisation starts when the project is complete, or when a clearly defined subsystem goes into production. Tangible operational fixed assets and intangible assets are subject to linear depreciation using the following periods for expected economic life: IT systems etc. Real estate Vehicles, fixtures and fittings etc years 8-50 years 3-10 years The depreciation period for real estate reflects different depreciation periods for the different technical installations and building elements included in this balance sheet item. The depreciation method and the periods used are evaluated annually. This also applies to the remaining value. In the event of a change in the estimated remaining economic life of an asset, the book value at the start of the accounting period is depreciated over the new remaining economic life. Provisions A provision is recognised in the accounts when the group has a liability (contractual or self-imposed) as a result of previous events and it is likely (more likely than not) that a financial settlement will arise as a result of the liability and the amount of the liability can be measured reliably. If the effect is significant, the provision is calculated by discounting expected future cash flows using a pre-tax discount rate that reflects the market valuation of the time value of money and, where appropriate, specific risks associated with the liability in question. Equity Financial instruments are classified as liabilities or equity on the basis of the underlying financial reality. Distributions made to holders of financial instruments that are classified as equity are charged directly to equity. If the company buys back own shares, the purchase price including directly attributable costs is charged directly to equity. Holdings of own shares are reported as a reduction in equity. Losses or gains on transactions in own shares are not recognised to profit and loss. Transaction costs directly attributable to equity transactions are charged directly to equity after making a deduction for tax. Revenue Fees charged for services provided on a daily basis and fixed annual and monthly fees represent the group s principal source of revenue. Annual fixed fees are invoiced in advance at the start of the year, and are recognised to income over the course of the year (deferred income recognition). Other trading fees are mainly invoiced in arrears, and are recognised to income in the month to which they apply (income recognition in advance). Certain types of revenue, for example the monthly terminal fees charged for access to financial market data from Oslo Børs, are invoiced in arrears on the basis of the reported number of users and are recognised to income in the month to which the fees apply (income recognition in advance). If information on the number of users is not received prior to the end of an invoicing period, the income recognised is based on a best estimate of the number of users. Where invoices are issued at a later date as a result of errors in the information provided for monthly invoicing, payments received are recognised as revenue in the period they are received. Monetary items denominated in foreign currency Transactions denominated in foreign currency are translated to NOK at the exchange rate on the transaction date. Monetary items denominated in foreign currency are translated at the exchange rate on the balance sheet date. Nonmonetary items measured at historic prices denominated in foreign currency are translated to Norwegian kroner by using the exchange rate on the transaction date. Currency valuation differences are recognised to profit and loss as they occur in the accounting period. Employee benefits The companies in the group operate a number of defined benefit and defined contribution pension schemes for their employees. The group s pension arrangements comprise compensation schemes, a defined benefit scheme, and a defined contribution scheme. The net pension liability for the defined benefit scheme is calculated on the basis of the current value on the balance sheet date of the future pension benefits to which employees are entitled, less the fair value of pension fund assets. The calculations are based on the linear model for the accrual of pension benefits. Actuarial gains and losses are recognised 30

31 Notes - GROUP in other comprehensive income. For the defined contribution scheme, payments into the scheme are recognised as a cost as they are incurred. The group has no further obligations in respect of the defined contribution scheme. Taxation Tax expense is made up of tax payable, changes in deferred tax assets and changes in deferred tax. Deferred tax assets and deferred tax in the balance sheet are calculated on all differences between accounting and taxation values of assets and liabilities, with the exception of timing differences that relate to investments in subsidiaries or joint ventures where the group controls when the timing difference will be reversed and this is not expected to take place in the foreseeable future. Provision is made for deferred tax assets in respect of goodwill items for which goodwill amortisation is tax deductible. Deferred tax assets are capitalised in the balance sheet to the extent that it is likely that the group will have sufficient taxable surpluses in subsequent periods to make use of the tax asset. Similarly, the group will reduce a capitalised deferred tax asset to the extent that the group can no longer assume that it is likely to make use of the deferred tax asset. Deferred tax assets are measured on the basis of the future tax rate payable by the companies in the group in which the differences have arisen. Deferred tax and deferred tax assets are recognised at nominal value, and are classified in the balance sheet as financial fixed assets and long-term liabilities respectively. Tax related to items that are recognised in other comprehensive income or that are applied directly to equity (equity transactions) is recognised to other comprehensive income or directly to equity accordingly. Write-down of financial assets Financial assets valued at amortised cost are written down by the difference between the book value of the asset and the present value of the estimated future cash flows, discounted by the original effective interest rate of the financial asset, if there is objective evidence that it is likely that the instrument s cash flow has been impaired by one or more events that occurred after the initial recognition of the asset. The amount of the writedown is the difference between the book value of the asset and the present value of the estimated future cash flows, discounted by the original effective interest rate of the financial asset. The amount of the write-down is charged to profit and loss. If, in a subsequent period, the reason for the impairment ceases, and this change can objectively be related to an event occurring after the impairment was originally recognised, the previously recognised write-down is reversed. The amount of the reversal must not cause the book value of the financial asset to exceed the amortised cost that would have applied at the time of the reversal if the impairment had not been recognised. Reversals of earlier writedowns are reported as part of net financial items. Segmental information The Oslo Børs VPS Holding ASA group has three segments: Oslo Børs, VPS and Oslo Market Solutions. Segment information has been prepared in accordance with IFRS 8. Contingent liabilities and assets Contingent liabilities and assets are not recognised because their existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the company s control. Existing obligations that do not satisfy the criteria for recognition pursuant to IAS 37 are also deemed to be contingent liabilities. Information on contingent liabilities is provided in the accounts, unless it is very improbable that the liability will be confirmed. Information is provided in the notes on contingent assets when it is probably that there will be a flow of economic benefits to the company. Events after the date of the balance sheet The annual accounts include information on any new information that has arisen since the date of the balance sheet in respect of the company s financial condition on the balance sheet date. Events after the date of the balance sheet that do not affect the company s financial condition on the balance sheet date, but that would affect the company s future financial condition, are disclosed to the extent they are material. Use of estimates in preparing the annual accounts Management has used estimates and made assumptions that have affected assets, liabilities, income, costs and information on potential liabilities. This is particularly the case for estimates made in connection with acquisitions, estimates in respect of depreciation of tangible fixed assets and amortisation of intangible assets, estimates of the value of goodwill, evaluating whether development costs should be capitalised or not, and the calculation of pension liabilities. Future events may cause changes in estimates. Estimates and underlying assumptions are kept under continuous review. Changes in accounting estimates are recognised in the accounts in the period the change occurs. If the changes also affect future periods, the effect is allocated over the current and future periods. See note

32 Notes - GROUP Financial items Financial items are recognised as financial income or financial expense. New standards and interpretations that have not yet been implemented A number of new standards and interpretations have been issued that enter into force for accounting years commencing after 1 January 2017, with companies able to adopt these standards and interpretations early if they so choose. The group has not adopted any standards or interpretations early in connection with the preparation of its annual accounts. IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have to be implemented with effect from 1 January The group has analysed the implications of these new standards and the effects they will have on its accounts. The effect that implementing these new standards is expected to have on the group s equity as at 1 January 2018 is set out below. The actual effect of implementing the new standards at 1 January 2018 may be different due to the following: - The group has not yet finished updating its processes and internal control; and - The new accounting principles may change before the group releases its first accounts covering the date when the new standards are implemented. IFRS 9 Financial instruments (in force with effect from 1 January 2018) IFRS 9 Financial Instruments was issued in July The standard addresses the classification, measurement and recognition of financial assets and liabilities as well as general hedge accounting. The standard will replace IAS 39 in these areas. Classification financial assets and liabilities IFRS 9 stipulates that financial assets must be classified into three categories: fair value through profit or loss, amortised cost and fair value through other comprehensive income. The classification is dependent on the business model used for managing financial instruments as well as on the characteristics of the cash flows related to the individual instruments. Equity instruments are as a rule to be measured at fair value through profit or loss. It is possible for value changes to be presented in other comprehensive income, but the choice is binding, and gains/losses cannot instead be recognised to profit or loss when sold at a future date. On the basis of its analysis, the group expects that the financial instruments it owns at 31 December 2017 will be reclassified under IFRS 9 as set out in the table below. The group does not expect the new classification rules to have a significant impact on its consolidated accounts as at 1 January With regard to financial liabilities, the new standard largely contains the same requirements as IAS 39, with one significant exception. This is that where the fair value option is used for financial liabilities, changes in fair value attributable to a change in the entity s credit risk are to be recognised in other comprehensive income. The group has not used the fair value option under IAS 39 and it therefore does not expect IFRS 9 to have a significant impact on its classification of financial assets as at 1 January Hedging IFRS 9 simplifies the requirements for general hedge accounting by ensuring hedge effectiveness is linked more closely to the company s risk management and gives greater room for the use of judgment. Hedging documentation continues to be required, but the tests relating to hedging relationships have been simplified. The group does not hold any material hedging instruments and does not use hedge accounting under IAS 39, and it does not plan on doing so in 2018 either. The group therefore does not expect the new requirements for hedge accounting in IFRS 9 to have a material effect on its accounts as at 1 January Impairment Financial assets IFRS 9 contains a new model for calculating impairment on financial assets. The incurred loss model in IAS 39 will be replaced by a more forwardlooking expected loss model in IFRS 9. The new impairment model will affect all financial assets that are measured at amortised cost or FVOCI with the exception of equity capital instruments. Classification under IAS 39 Under IFRS 9 Classification Measured at Classification Loans and receivables Amortised cost Amortised cost FVTPL FVTPL FVTPL Under IFRS 9, provisions for losses on financial instruments will be calculated either on the basis of twelve-month expected losses or lifetime expected losses. If the credit risk associated with an instrument has not increased significantly since its initial recognition, impairment will be based on twelvemonth expected losses. If the credit risk associated with an instrument has increased significantly since its initial recognition, impairment will be based on lifetime expected losses. 32

33 Notes - GROUP The group s assessment is that it will not have to recognise significant changes to its loss provisions as a result of IFRS 9. The group does not expect implementing the new loss model in IFRS 9 to have a material effect on its accounts as at 1 January The transition to IFRS 9 will be implemented retrospectively, with the following exceptions: The group will use the exemption that permits an entity not to change the comparison information it provides from previous years in relation to classification and measurement, including the measurement of impairment. Any effects of implementing IFRS 9 will be recognised as adjustments to the opening balance of equity as at 1 January IFRS 9 will not be used for financial assets and liabilities that are derecognised before the standard is implemented on 1 January IFRS 15 Revenue from Contracts with Customers (in force with effect from 1 January 2018) IFRS 15 Revenue from Contracts with Customers was issued in May The standard concerns revenue recognition and will replace IAS 11 Construction Contracts and IAS 18 Revenue and the related interpretations. IFRS 15 introduces a new five-step model that is to be used to recognise all revenue from contracts with customers. The standard requires individual customer contracts to be divided into the performance obligations associated with them. A performance obligation can be a good or a service. Revenue is recognised when control over a good or service passes over to the customer, and it can therefore direct the use of and obtain the benefits of the good or service. The standard enters into force for the 2018 accounting year. The group s revenue principally consists of sales of services that can be divided into the following categories: Periodic fees The group has revenue from periodic fees, for example annual fees at Oslo Børs and monthly subscription fees at VPS. The group has assessed whether these revenue streams should be recognised over time or at a point in time. The group has concluded that under IFRS 15 they have to be recognised over time, with the passage of time used as the data for measuring progress. The contract length will be judged to be one month or the current calendar year depending on each contract s specific terms. IFRS 15 is not expected to lead to a significant change in recognition, as under IAS 18 the revenue from periodic fees is recognised linearly over the period the fee was agreed to cover. Admission fees The group has revenue from admission fees at Oslo Børs and it has analysed this revenue in relation to whether it should be recognised over time or at a point in time. Based on the analysis work it has carried out, the group s assessment is that admission fees do not represent a separate performance obligation, but have to be seen in the context of the service that is provided in connection with annual listing fees. The group thus expects that it will have to make changes to how it recognises admission fees in that under IFRS 15 they will have to be recognised over time, while under IAS 18 they are recognised once the admissions checks have been completed. The contract length for admission fees will be judged to be the current calendar year until 31 December in that accounting year. The passage of time will be used as the method of measuring progress. Recognising admission fees over time will therefore cause admission fees to be accrued over the year of admission. The group does not expect this change to have a significant effect on the group s equity as at 1 January Transaction fees The group has revenue from transactions, including registration fees, trading fees and 33 other transaction fees. The group has assessed whether under IFRS 15 this revenue will have to be recognised over time or at a point in time. Based on its analysis of the implications of the new standard, the group s conclusion is that this revenue will have to be recognised at a point in time. The point in time at which the revenue is recognised will be the same point in time as that at which the transaction is carried out. The group does not expect implementing IFRS 15 to significantly change how it recognises transaction fees relative to its practice under IAS 18. IFRS 15 will be implemented using the cumulative effect method. Any effects arising as a consequence of implementing IFRS 15 will be recognised as adjustments to the group s equity as at 1 January Comparison figures for prior years will not be restated. IFRS 16 Leases (in force with effect from 1 January 2019) IFRS 16 Leases was issued in January The standard will lead to a significant shift in the accounting for leases. The underlying principle of the new standard is that leases should be recognised as assets (right-of-use) and liabilities. The standard enters into force for the 2019 financial year. The group is currently in the process of finalising its analysis of the implications of the new standard. Based on its preliminary work, the group does not expect IFRS 16 to be significant to the group s accounting treatment of the leasing agreements for its premises. The group is planning to implement IFRS 16 on 1 January 2019 using the modified retrospective approach. This approach means that the effects of implementing IFRS 16 will be recognised as an adjustment in the opening balance of equity as at 1 January 2018.

34 Notes - GROUP Note 1 Business combinations and information on discontinued operations On 19 April 2017 Oslo Børs purchased the remaining 50% of the share capital of NOTC AS for NOK 23 million. Until this point NOTC was recognised in the accounts as a joint venture. The book value of Oslo Børs interest in the joint venture at the end of April 2017 was NOK 8,635k. Balance sheet value at Balance sheet value at Share of profit for the year Dividend received Balance sheet value at The acquisition was completed following agreement on the terms of the contract with the former owners of the other 50% of the share capital. NOTC was consolidated into the group with effect from 1 May The group s acquisition of the remaining 50% of NOTC AS and its change to a wholly owned subsidiary company from a joint venture meant that under IFRS the group s previous equity stake in NOTC had to be measured at fair value (NOK 23 million). This led to income of NOK 14.6 million being recognised, which was recognised as financial income. An excess value analysis has been carried out. The goodwill that arose from the acquisition relates inter alia to NOTC s workforce, expected future earnings and synergy effects. The goodwill is not tax deductible. The table below provides an overall picture of the acquisition analysis: Fair value after Balance sheet at time Allocation of allocating of acquisition excess value excess value Goodwill Cash and bank deposits Other current assets Total assets Equity Current liabilities Total liabilities and equity Ordinary operating revenue from NOTC of NOK 5 million is included in the consolidated accounts for 2017, and ordinary operating expenses of NOK 1 million are also included. If the acquisition had taken place on 1 January 2017, ordinary operating revenue of NOK 8 million would have been included in the consolidated accounts, along with ordinary operating expenses totalling NOK 2 million. Apart from NOTC, no business combinations were carried out in No business combinations were carried out in Note 2 Segment information Oslo Børs VPS Holding had three segments at 31 December 2017: Oslo Børs, VPS and Oslo Market Solutions. The business activity of Oslo Børs is to operate marketplaces for listing and trading in securities and other listed financial instruments. The business activity of VPS is the registration of rights over financial instruments and settlement of trading in financial instruments. The business activity of Oslo Market Solutions is the development and sale of solutions for internet-based share trading and presentation of market data. Fish Pool and Centevo (formerly Evolution) are included in the Oslo Børs and VPS segments respectively. The identification of segments is based on the organisational structure of the group and its management reporting. The segments are based on the subsidiary companies Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS. Oslo Børs VPS Holding ASA is included in the segment Other. 34

35 Notes - GROUP Segment information is based on the unconsolidated accounts of Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS, with the addition of each company s share of excess value, and on the current agreements between the companies on charges for products and services. Internal transactions are priced on an arm s length basis. Oslo Børs VPS Holding operates in Norway and Sweden. The group has customers in a number of geographic areas, but it does not consider that the geographic location of customers gives rise to any material differences in risk and return. The group s largest customer accounts for 13% of total revenue. (Figures in NOK 1,000) Oslo Market Other/ 2017 Oslo Børs VPS Solutions netting Total Operating revenue - external Operating revenue - internal Depreciation Amortisation of excess value Write-down of excess value 0 Other operating costs Total operating costs Operating profit Income from joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period (Figures in NOK 1,000) Oslo Market Other/ 2016 Oslo Børs VPS Solutions netting Total Operating revenue - external Operating revenue - internal Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating profit Income from joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period The entries for netting in respect of other assets include netting of shareholdings in subsidiaries and intercompany payables and receivables between subsidiaries. 35

36 Notes - GROUP Note 3 Investments in joint ventures, shares etc. NOTC AS: Oslo Børs purchased 50% of the share capital of NOTC AS on 15 August In April 2017 Oslo Børs purchased the remaining 50% of the share capital. Based on the shareholder agreement between the Norwegian Securities Dealers Association and Oslo Børs, the company was judged to be a joint venture until Oslo Børs acquisition of the remaining 50% of the share capital. The ownership interest in this company was recognised in the consolidated accounts using the equity method. The proportion of profit recognised, less dividend, was transferred to the reserve for valuation differences to the extent that fair value exceeded acquisition cost. Further information on the company, the book value of the ownership interest and the calculation of the share of profit at the point of Oslo Børs acquisition of the remaining 50% of the share capital is as follows (Figures in NOK 1,000): Date of Registered Ownership Proportion of Company acquisition office interest voting shares held NOTC AS 2006 Oslo 50 % 50 % Oslo Børs purchased the remaining 50% of the share capital of NOTC AS in April 2017, whereupon the company became a wholly-owned subsidiary and was fully consolidated. The profit and balance sheet value of Oslo Børs interest in NOTC at the date of acquisition was as follows: Balance sheet value at Balance sheet value at Share of profit for the year Dividend received Balance sheet value at FinansNett Norge AS: FinansNett Norge AS was incorporated in 2004 by VPS and the Norwegian Securities Dealers Association. The company has been in operation since the fourth quarter of The company offers data communications through a metropolitan area network (MAN) in Oslo. This network provides communication services with the appropriate speed and interface for use by backup and disaster recovery solutions as used by brokers and other participants in the financial sector. Further information on the company, the book value of the ownership interest and the calculation of the share of profit is as follows (Figures in NOK 1,000): Date of Registered Ownership Proportion of Company acquisition office interest voting shares held FinansNett Norge AS 2007 Oslo 50 % 50 % Calculation of balance sheet value at Share of profit for the year 636 Dividend received Balance sheet value at Share of balance sheet and profit and loss items at : Current assets Long-term assets 746 Equity Current liabilities 431 Revenue Costs

37 Notes - GROUP Note 4 Specification of profit and loss items (Figures in NOK 1,000) Salaries and related costs Salaries Pension costs Employer s social security contributions and financial sector tax Other benefits Total salaries and related costs Other operating costs Use of external contractors IT equipment/maintenance Marketing and communications Training and personnel benefits Office expenses and rental Travel and entertainment Other costs Other operating costs Financial items Share of profit in joint ventures Step acquisition gains Interest income Other financial income including currency gains Interest expense Other financial expense including currency losses Net Financial items Note 5 Pension costs and pension liabilities Insured schemes In connection with the termination of the defined benefit scheme on 31 December 2013, a compensation scheme has been established which, subject to certain conditions, gives employees compensation for the change in their pension arrangements. The provision for compensation at 31 December 2017 totals NOK 49,036k, including employer s social security contributions and financial sector tax. The liabilities in respect of the defined contribution pension schemes are limited to the payment of contributions and paying the associated costs. The schemes involve a contribution equivalent to 5% of salary between 0 and 7.1 times the National Insurance base amount (G) and 8% of salary between 7.1G and 12G. Risk insurance is equivalent to that offered by the closed defined benefit scheme, except that the closed defined benefit scheme also provided for a surviving partner s pension. The collective pension schemes and the defined contribution scheme now provided by the group satisfy the requirements of the Mandatory Occupational Pensions Act. Uninsured schemes This is a voluntary early retirement scheme established by Oslo Børs ASA in 1997, which offered retirement at 64 years for all employees. The scheme offered a pension equivalent to 60% of gross salary. This scheme was closed to new members in For one manager, the scheme offers retirement at age 60 based on seniority and the management position in question. Further 37

38 Notes - GROUP details of the pension liabilities involved are provided in the table at the end of this note. The expected cost for 2018, including employer s social security contributions and financial sector tax, is NOK 1,412k. Bente A. Landsnes took up her appointment as President and CEO of Oslo Børs on 2 January Her employment contract gives her the right to a lifetime pension of 70% of salary at retirement age (62 years of age) or on any earlier retirement due to disability, reduced by an amount corresponding to the benefits received from the National Insurance Fund and the benefits received from previous employers. Under the terms of her employment contract, her pension entitlement also includes the right to a spouse s pension of 55% of retirement salary. The CEO is contractually entitled to a full pension contribution period at Oslo Børs and full pension from Oslo Børs at retirement age (62 years). She is therefore deemed to have 16 out of 30 years of contribution upon joining Oslo Børs. Under the terms of an agreement entered into in 2012, the basis for pension with effect from 1 January 2012 will be the employee s salary at 1 January 2011, i.e. NOK 3,225k. The basis for pension will be increased in accordance with the agreement when she leaves her employment or upon reaching 62 years of age. The agreement with the Group CEO/President and CEO of Oslo Børs includes partial compensation for the change in her pension agreement, which is paid as cash compensation together with salary. A liability of NOK 43,696k including employer s social security contributions and financial sector tax was recognised in the balance sheet at 31 December The cost recognised in the accounts for 2017, including employer s social security contributions and the financial sector tax, was NOK 2,381k. Actuarial losses of NOK 412k that arose in connection with changes to the assumptions used for calculating this pension liability have been recognised in other comprehensive income. The expected cost for 2018 is NOK 2,564k including employer s social security contributions and financial sector tax. Audun Bø was appointed as CEO of Verdipapirsentralen ASA in October His agreed retirement age is 63 years of age. He is a member of the collective defined-contribution pension scheme. His contributions in 2017 totalled NOK 11k. Former CEOs of Oslo Børs and of VPS have the benefit of agreements for future pension payments. These agreements give the individuals in question the right to a pension from the date of leaving service, reduced by an amount corresponding to the benefits received from the National Insurance Fund and any pension benefits received from other employers. In addition, the pension entitlements include the right to a spouse s pension. The total cost in 2017 in respect of the current CEO of VPS and former CEOs was NOK 2,190k, and the total provision at 31 December 2017 was NOK 43,755k including employer s social security contributions and financial sector tax. The expected cost for 2018 including employer s social security contributions and financial sector tax is NOK 1,006k. Actuarial losses of NOK 55k that arose in connection with changes to the assumptions used for calculating this pension liability have been recognised in other comprehensive income. Pension cost and pension liabilities The net pension cost for the period is included in salaries and other personnel expenses, and for defined benefit schemes consists of the net discounted present value of pension rights accrued for the year, the interest accrued on pension liability, the expected return on pension fund assets, and the accrued liability for employer s social security contributions and financial sector tax. The expected cost in 2018 for the discontinued defined benefit schemes is NOK 563k including employer s social security contributions and financial sector tax. Pension cost for defined contribution plans comprises the cost of contributions for the period and related costs. Contributions made for 2017 totalled NOK 13,460k excluding employer s social security contributions and financial sector tax. Employer s social security contributions and financial sector tax in respect of payments to the collective pension scheme are capitalised to the extent that the payments increase pension assets. The provisions made for uninsured pension liabilities include employer s social security contributions and financial sector tax. Actuarial gains or losses are recognised in other comprehensive income. Actuarial differences that arose in 2017 in respect of both insured and uninsured pension schemes totalled NOK -123k. This caused an increase in equity of NOK 95k and deferred tax assets decreased by NOK 31k. Total pension liabilities increased in 2016 by NOK 7,665k, while equity decreased by NOK 5,749k as a result of changes to actuarial estimates. 38

39 Notes - GROUP The following assumptions are applied in calculating pension liability: Expected return on pension funds 2.30 % 2.10 % Discount rate 2.30 % 2.10 % Expected annual rate of increase in salaries 2.50 % 2.25 % Expected annual rate of increase in the National Insurance base amount (G) 2.25 % 2.00 % Expected annual rate of increase in pension benefits - G increase 2.00 % 2.00 % Expected annual rate of increase in pensions - minimum increase 0.0%-2.00% 0.0%-2.00% Average rate for employer s social security contributions (incl. financial sector tax) % % Mortality table used (+/- 1 year of life) K2013FT K2013FT The discount rate is determined on the basis of observed yields on Norwegian corporate bonds of sufficiently high quality. The corporate bonds used are covered bonds with maturities of up to 15 years. The average maturity of pension liabilities is calculated to be 30 years. The expected rates of increase in salaries, pensions and benefits and the National Insurance base amount (G) are based on historic observations for the company, assuming expected long-term inflation of 2.0%. Actuarial assumptions are based on risk tables. The mortality table K2013FT was used in A summary of the tables used is shown below. The table shows life expectancy and the likelihood of disability and death respectively over the next 12 months for different age groups. Life expectancy At age Men Women Men Women Mortality rates At age Men Women Men Women % 0.01 % 0.02 % 0.01 % % 0.03 % 0.06 % 0.03 % % 0.28 % 0.42 % 0.29 % % 2.94 % 4.36 % 2.99 % Likelyhood of disability At age Men Women Men Women % 0.16 % 0.13 % 0.16 % % 0.35 % 0.21 % 0.35 % % 1.94 % 1.48 % 1.94 % 80 NA NA NA NA Sensitivity analysis The table below shows the effects on pension liabilities of changes in the assumptions applied. Liability Increase Decrease Discount rate (1% change) Future salary growth (1% change) Future pension growth (1% change) Future mortality (+/- 1 year of life)

40 Notes - GROUP Summary of all pension liabilities: (Figures in NOK 1,000) 2017 Insured scheme Uninsured scheme Uninsured Group CEO Current/former Compensation for salaries under for salaries over early retirement Oslo Børs OB and VPS for closed 12 G 12 G scheme management management DB scheme Total Liability at 1 Jan Charged to profit and loss in Payments Actuarial gains/losses Liability at 31 Dec Assets at 31 Dec. 0 0 Insured defined benefit scheme for salaries up to 12 times the National Insurance base amount (Figures in NOK 1,000) No. of members at 31 Dec. 2 2 Pension costs and pension liabilities of the group are as follows: Net pension costs: Present value of pension rights accrued for the year Interest on pension liabilities Expected return on pension fund assets Net pension costs excluding employer s social security contributions and financial sector tax Accrued employer s social security contributions and financial sector tax Net pension costs including employer s social security contributions and financial sector tax Financial condition of the pension scheme: Calculated gross pension liability at 1 Jan Cost of pension rights accrued for the year Interest cost Actuarial gains and losses Calculated gross pension liability at 31 Dec Pension fund assets at 1 Jan Expected return on pension fund assets Actuarial gains and losses Pension fund assets at 31 Dec Net pension assets before employer s social security contributions Accrued employer s social security contributions and financial sector tax Net pension liabilities Changes in the insured scheme liabilities: Net capitalised liability at 1 Jan Pension cost charged to profit and loss Actuarial gains/losses Net capitalised liability(-)/assets(+) 31 Dec

41 Notes - GROUP Uninsured defined benefit scheme The summary includes the Oslo Børs and VPS uninsured defined benefit schemes for salaries over 12 times the National Insurance base amount (G), and the Oslo Børs early retirement pension scheme Number of active members in the scheme for salaries over 12 G included at 31 Dec Number of active members in the Oslo Børs early retirement scheme at 31 Dec Additional assumptions for the early retirement scheme: Expected drawings under the scheme - employees under 40 years 25 % 25 % Expected drawings under the scheme - employees years 50 % 50 % Expected drawings under the scheme - employees over 50 years 100 % 100 % Pension costs and pension liabilities for the group are as follows: Net pension costs: Present value of pension rights accrued for the year Interest on pension liabilities Net pension costs before employer s social security contributions and tax Accrued employer s social security contributions and financial sector tax Net pension costs including employer s social security contributions and tax Financial condition of the pension scheme: Calculated pension liability at 1 Jan Cost of pension rights accrued for the year Interest cost Actuarial gains and losses Pensions paid/paid-up policies Calculated pension liability at 31 Dec Accrued employer s social security contributions and financial sector tax Net pension liabilities Changes in the uninsured scheme liabilities: Net capitalised liability at 1 Jan Pension cost charged to profit and loss Pension payments Actuarial gains/losses Net capitalised liability at 31 Dec

42 Notes - GROUP Note 6 Remuneration of officers, executive personnel, the auditor etc Variable Pension Pension Total Pension (Figures in NOK 1,000) Salary Fees salary Benefits cost liability remuneration liability Chair, Oslo Børs VPS Holding, Oslo Børs and VPS - from May 2017 Catharina E. Hellerud Chair, Oslo Børs VPS Holding and Oslo Børs; Board member, VPS - until May 2017 Benedicte Schilbred Fasmer Board member, Oslo Børs VPS Holding; deputy chair, Board of Oslo Børs - until August 2016 Harald Espedal 214 Board member, Oslo Børs VPS Holding and Oslo Børs Ottar Ertzeid Board member, Oslo Børs VPS Holding and Oslo Børs - until May 2017 Widar Salbuvik Board member, Oslo Børs Dag Erik Rasmussen Board member, Oslo Børs VPS Holding and Oslo Børs - from May 2017 Øyvind G. Schanke 174 Board member, Oslo Børs VPS Holding and Oslo Børs - from May 2017 Silvija Seres 179 Board member, Oslo Børs VPS Holding Roy Myklebust Chair, VPS - from May 2017 Anne Lise Kristiansen Chair, VPS - until May 2017 Audun Bø Chair, VPS - until May 2016 Kim Dobrownen 92 Board member, VPS Knut Erik Robertsen Board member, VPS Mette Kamsvåg Board member, VPS Åsmund Skår Board member, VPS - from May 2017 Ivar Qvist 93 Employee representative, VPS and Oslo Børs VPS Holding Sissel Bakker Employee representative, VPS; deputy employee representative, Oslo Børs VPS Holding Morten Nordby Employee representative, Oslo Børs and Oslo Børs VPS Holding Thomas Skjønhaug Employee representative, Oslo Børs; deputy employee representative, Oslo Børs VPS Holding Ingvild Resaland Chair, Oslo Børs VPS Holding Nomination Committee Bjørn Erik Næss Member, Oslo Børs VPS Holding Nomination Committee Ola Wessel-Aas 34 Member, Oslo Børs VPS Holding Nomination Committee Ida Louise Skaurum Mo Chair, VPS Control Committee - from May 2015 Harald Jægtnes Member, VPS Control Committee Jan Henriksen Member, VPS Control Committee Kristin Farstad Deputy member, VPS Control Committee - from May 2016 Ida Espolin Johson Group CEO Bente A. Landsnes Executive Vice President - September 2017 John-Arne Haugerud Executive Vice President - from October 2017 Audun Bø Executive Vice President Geir Heggem

43 Notes - GROUP The above remuneration amounts are entered as expenses in the accounts for 2017 of the companies that make up the group. Salaries include a provision for the holiday allowance to be disbursed in 2018 relative to the holiday allowance disbursed in Bonuses consist of a variable salary portion for 2017, which is provided for in the annual accounts for 2017 for disbursement in February Benefits in kind comprise established benefits such as a company car, free telephone etc. The amounts are exclusive of employer s social security contributions and financial sector tax. Pension costs and pension liabilities are calculated based on the assumptions specified in Note 5. Pension cost and pension liability include both the insured and uninsured schemes, and the figures are reported inclusive of employer s social security contributions and financial sector tax. The employment contract of Group CEO and Oslo Børs CEO Bente A. Landsnes provides for an annual salary of NOK 3,785k plus a fixed company car benefit as well as free telephone and newspapers. She is entitled to a lifetime pension from 62 years of age, or on any earlier retirement due to disability, of 70% of salary at retirement, reduced by an amount corresponding to the benefits received from the National Insurance Fund and the benefits received from previous employers. Under the terms of her employment contract, her pension entitlement also includes the right to a spouse s pension of 55% of retirement salary. Changes were made to the pension entitlement in 2012, see Note 5 for further information. In the event that employment is terminated by either party, she is entitled, subject to certain conditions, to full salary and other benefits for 24 months. Such payments will be reduced by 50% of any amounts received from other employment during this period. Audun Bø, CEO of VPS, took up his appointment on 1 October He is entitled to six months notice of termination of employment and twelve months salary upon termination of employment by his employer. His agreed retirement age as CEO is 63 years, see Note 5 for further information. Other than the benefits described above and the general scheme for early retirement described in Note 5, there are no other agreements for payment upon termination or change to employment or board appointments. No company in the group has entered into any personal contracts with any member of its board of directors, managing director or any other employees on bonuses, profit sharing, share options or similar. However, all companies in the group operate an incentive scheme for all employees. The Board of Oslo Børs considers whether to award a bonus to the Group CEO annually. The company operates a share purchase program for employees. Shares are sold at fair value (at the volume-weighted average of trades in the share for the five working days prior to the date each month on which the price is set), but with a discount of 20% on purchases up to NOK 15,000. Where employees purchase shares in an amount greater than NOK 15,000, they are given one bonus share for every fourth share purchased subject to the shares purchased still being in the employee s ownership as at 1 July in the year following the year of purchase. Loans to employees totalled NOK 472k at year-end. Interest is charged on loans totalling NOK 139k at normal rates of interest. The repayment period for these loans is one year. No interest is charged on the remaining balance of loans. There were no loans to members of the board or the Group CEO. Auditor Expensed auditor s fees, excluding value added tax, break down as follows: (Figures in NOK 1,000) Ordinary audit Advice on taxes and duties Attestation Other assistance 4 2 Total EY delivered internal audit services to Oslo Børs and VPS. In 2017 fees totalling NOK 508K paid to EY for internal audit services carried out in 2017 were expensed. All figures exclude value added tax. 43

44 Notes - GROUP Note 7 Number of employees Number of full-time equivalent employees at 31 Dec Note 8 Leasing contracts Annual lease rental of operational assets not capitalised on the balance sheet: (Figures in NOK 1,000) Remaining lease period Annual lease payment Operational asset Rental of premises Up to 16 years In April 2009, Oslo Børs entered into an agreement with the London Stock Exchange Group (LSEG) for the rental of a trading system for derivatives, equities, and fixed income instruments. The agreement was extended in April 2016 and now runs until April The fee payable for use of the system is linked to revenue, but is subject to a minimum fee. Oslo Børs rents premises under the terms of a lease contract that expires in March 2032, but the contract can be terminated at any time by giving 12 months notice. Fish Pool rents premises in Bergen. The lease contract terminates in Centevo AB rents premises in Stockholm. In January 2018, the company entered into a new lease contract which runs to January VPS rents premises at three locations in Oslo. One lease contract expires in September 2021, with an option to extend for a further two years. The second lease contract runs from April 2012 to March 2032, with the right to terminate the lease on the 5th, 10th or 15th anniversary of the start of the lease. The third lease contract runs from April 2013 to March The rental payable under all these contracts is adjusted annually in accordance with the consumer price index published by Statistics Norway. VPS has sub-let space in these premises to three tenants. These sub-leases are renewed on an annual basis. All three sub-leases are linked to the consumer price index published by Statistics Norway. The group incurred costs in relation to these lease agreements totalling NOK 31,809k in The minimum future lease rental payments are as follows (NOK 1,000): Up to 1 year to 5 years Over 5 years Minimum future lease rental payments

45 Notes - GROUP Note 9 Taxation (Figures in NOK 1,000) Pre-tax profit Non-tax-deductible costs/non-taxable income Income from joint ventures Change in temporary differences Pensions applied to comprehensive income Tax base for the year Tax charge Tax payable at 22%-25% Change in deferred tax assets Change in deferred tax liabilities Effect of changed tax rate 2 3 Other Tax charge for the year Reconciliation of tax charge: Total tax charge for the year % % Nominal tax rate % % Difference caused by non-tax-deductible costs etc % % Change in temporary differences not giving rise to deferred tax asset % % Changed tax rate 0.00 % 0.00 % Other % 0.00 % The following table provides an analysis of deferred tax assets and deferred tax liabilities and the asset or liability with which they are associated (Figures in NOK 1,000). Profit and loss effect Comprehensive income Goodwill Tangible fixed assets Pension liabilities Other Total deferred tax asset Tangible fixed assets IT systems Customer relationships Licences Deferred tax liabilities (Figures in NOK 1,000) Gross Tax effect Net Actuarial gains or losses on pensions

46 Notes - GROUP Deferred tax liabilities in respect of excess value arising from the business combination with VPS Holding in 2007 and the acquisition of Evolution Software Sweden in 2013 are not netted in the balance sheet against deferred tax assets associated with other assets. The amount in question at 31 December 2017 was NOK 2,377k. The tax positions that were recognised in other comprehensive income for 2017 are shown in the table above. The investments in joint ventures do not give rise to any temporary differences. Note 10 Earnings and dividend per share, diluted earnings per share Earnings per share is calculated as follows (Figures in NOK 1,000): Profit after tax Average number of shares Earnings per share (NOK) Diluted earnings per share (NOK) Dividend: Dividend proposed Dividend distributed Number of shares (1000) Proposed dividend per share (NOK) Dividend distributed per share (NOK) The dividend shown as paid in 2016 was distributed in The distribution of dividends to the parent company s shareholders does not affect the company s tax payable or deferred tax. Note 11 Uncertainty associated with estimates used The most significant accounting estimates used by the company relate to the following items: - Fair value of assets and liabilities acquired by acquisition, including amortisation and impairment of goodwill and other intangible assets. Book value at 31 December 2017 was NOK 541 million (licences and goodwill). - Evaluating whether to capitalise costs incurred in the development of IT systems. The book value of IT systems at 31 December 2017 was NOK 25 million. - Net pension liabilities, with book value at 31 December 2017 of NOK 163 million. Estimating values requires management to make significant judgements in selecting the method used, making estimates and deciding on assumptions. The material categories of intangible assets capitalised to the balance sheet are customer relationships, software and licences. The assumptions used in valuing intangible assets include, inter alia, the estimated useful life of customer relationships based on the rate of customer turnover, and the remaining period of licences and the replacement cost, adjusted for the technology aspects of software and for technological and market developments in general. The assumptions used for valuing tangible assets include, inter alia, the replacement cost of tangible assets. Management s estimates of fair value are based on assumptions that are believed to be reasonable, but these assumptions of necessity involve uncertainty, and it is accordingly the case that the actual values in the future may differ from the estimated values. The company s capitalised goodwill, IT systems and the value of licences are tested annually for impairment, and also for any need to reverse any earlier write-downs in respect of the 46

47 Notes - GROUP value of licences. The company s business activities are affected by economic conditions, and this causes fluctuations in revenue and earnings, which in turn cause fluctuations in the value of its businesses. The annual evaluation is based on assumptions that are believed to be reasonable, but these assumptions of necessity involve uncertainty, and it is accordingly the case that the actual values in the future may differ from the estimated values. See Notes 14 and 15 for further information. Costs incurred in the development of IT systems are capitalised in the balance sheet if it is likely that the expected future economic benefits arising from the asset will be received by the company, and the acquisition cost of the asset can be reliably measured. The company s business activities are affected by economic conditions, and this causes fluctuations in revenue and earnings, which in turn cause fluctuation in the value of its IT systems. The company is also affected by technological and commercial changes. Projects not yet in production are tested for loss in value. The valuation is based on assumptions that are believed to be reasonable, but these assumptions of necessity involve uncertainty. The valuation of net pension liabilities is based on a number of economic and actuarial assumptions, including the discount rate used, future salary growth, life expectancy of employees, annual pension increases and the future return on pension fund assets. Changes to these assumptions can have a significant effect on net liability and cost. The company has to a large extent followed the guidance on pension assumptions issued by the Norwegian Accounting Standards Board. Note 12 Specification of balance sheet items (Figures in NOK 1,000) Other long-term receivables Other long-term receivables Other long-term receivables Other current receivables Loans to employees Pre-paid costs and income earned but not yet invoiced Other receivables Other current receivables Other current liabilities Salaries due, holiday pay etc Accrued costs Prepaid income Other current liabilities Other current liabilities The terms for trade creditors and other current liabilities are as follows: - Trade creditors are not normally interest bearing, and normally fall due for payment within 30 days from receipt of the invoice. - Salaries due, holiday pay etc. are not interest bearing and normally fall due for payment within six months. - Accrued costs/prepaid income are normally not interest bearing. Accrued costs normally fall due for payment within 30 days from receipt of the invoice. Prepaid income normally becomes earned income within 12 months of the balance sheet date. 47

48 Notes - GROUP Note 13 Fixed assets Fixtures, Non-depreciable IT equipment, operating (Figures in NOK 1,000) Property vehicles etc. assets Total 2017 Acquisition cost 1 Jan Additions during the year Disposals during the year Acquisition cost Acc. ordinary depreciation Ordinary depreciation for the year Write-downs for the year 0 Accumulated ordinary depreciation for assets sold Accumulated ordinary depreciation Book value Expected economic life (years) I/A Depreciation plan Linear Linear I/A Property includes the book value of the stock exchange building (Børsbygget). The building, which is slightly over 3,000 m² in size, was formally opened in 1829 and was designed by the architect Christian Heinrich Grosch in the Empire style. The building was extended in 1910 to a design by the architect Carl Michalsen in the Neoclassical style. The stock exchange building was one of the first monumental buildings in Christiania (the former name for Oslo). The building was protected as a national monument in 1927, and is now on the Yellow list issued by the Cultural Heritage Management Office of the City of Oslo. The group had no commitments to purchase fixed assets at 31 December Fixtures, Non-depreciable IT equipment, operating (Figures in NOK 1,000) Property vehicles etc. assets Total 2016 Acquisition cost Additions during the year Disposals during the year Acquisition cost Acc. ordinary depreciation Ordinary depreciation for the year Write-downs for the year 0 Accumulated ordinary depreciation for assets sold Accumulated ordinary depreciation Book value Expected economic life (years) I/A Depreciation plan Linear Linear I/A 48

49 Notes - GROUP Note 14 Intangible assets including assets developed in-house Of which not Customer (Figures in NOK 1,000) IT systems completed relationships Goodwill Licences Total 2017 Acquisition cost Completed in Additions during the year - including in-house development Disposals during the year Acquisition cost Accumulated ordinary depreciation/write-downs Ordinary depreciation for the year Amortisation for the year Write-downs for the year Accumulated ordinary depreciation/ write downs for assets sold Accumulated ordinary depreciation/write-downs Book value Expected economic life (years) 3-10 I/A I/A I/A Depreciation plan Linear I/A I/A I/A Of which not Customer (Figures in NOK 1,000) IT systems completed relationships Goodwill Licences Total 2016 Acquisition cost Completed in Additions during the year - including in-house developments Disposals during the year Acquisition cost Accumulated ordinary depreciation Ordinary depreciation for the year Amortisation for the year Write-down for the year Accumulated ordinary depreciation/write downs for assets sold Accumulated ordinary depreciation Book value Expected economic life (years) I/A I/A Depreciation plan Linear Linear I/A I/A Licences comprise the authorisations held by Verdipapirsentralen ASA and Fish Pool ASA to carry on business as a securities register and an exchange respectively. The licences have no definite time limit, and are therefore not amortised. IT systems include both development of in-house systems and in-house work on customising systems supplied by or rented from third parties. Of the total balance outstanding for IT systems, NOK 1 million relates to systems at Oslo Børs. Oslo Børs implemented the Millennium Exchange trading system in November The migration to the Millennium trading system has not caused any 49

50 Notes - GROUP material changes to the existing agreement between Oslo Børs and the London Stock Exchange Group (LSEG). There were no additions in VPS capitalises costs involved in developing in-house systems where the system in question has an identifiable economic benefit. Project costs are disaggregated in terms of the expected commercial life, and capitalised system costs are reviewed regularly. Capitalised costs include both development of in-house systems and/or in-house work on customising commercial systems, infrastructure systems and administration systems. Individual projects for systems developed in-house that have a cost price of less than NOK 2.5 million are charged directly to profit and loss. Of the total balance outstanding for IT systems, NOK 20 million relates to VPS. There were no additions in Neither Oslo Market Solutions, Fish Pool, NOTC nor Centevo made any material investments in IT systems in In connection with the purchase of Evolution Software Sweden AB in July 2013, NOK 19 million of the purchase price was allocated to the company s IT system Cairo. The book value of the system in the consolidated balance sheet at 31 December 2017 was NOK 4 million. At the end of 2014 VPS initiated a project to modernise its IT and service platform. With this project VPS intended to modernise its IT infrastructure and a range of applications that are used to deliver services that are additional to the functionality offered by the core system itself. The Board of Directors of VPS decided in April 2016 to end the agreement with the supplier. VPS made a write-down of approximately NOK 34 million in 2016 as a consequence of ending the agreement. The remaining book value related to the project is NOK 9 million, which relates to the parts of the modernisation project that were continued and are expected to lead to new revenue or lower recurring software costs in the years ahead. Information on remaining amortisation periods and on fully amortised systems still in use: Oslo Børs amortises assets associated with the rental of the Millennium Exchange and Sola trading systems from the London Stock Exchange Group (LSEG) over the remaining life of the contract for these systems. The contract was extended in April 2016 and runs until April VPS has developed a system known as VPS Investor Services that supports account operators in managing and advising their customers. This system was fully amortised by the close of The system used by the Issuers business area, which is used by managers, account operators, issuers and Norsk Tillitsmann AS to manage fixed income instruments in VPS, was fully amortised in The central securities settlement system (VPO) is also fully amortised. VPS has carried out a number of projects since 2010 intended to modernise the company s IT platform, including applications used in the Funds area, comprising three subprojects that were fully amortised in 2016 and The new mutual funds solution, which came into production in part in 2012 and in part in 2013, will be fully amortised by the end of In connection with the merger in 2007, excess value was allocated in relation to the VPS systems and the Oslo Market Solutions systems. Excess value relating to these systems was fully amortised in

51 Notes - GROUP Note 15 Goodwill Capitalised goodwill in the consolidated accounts totalled NOK 534 million at 31 December Goodwill in relation to VPS arose as a result of the merger between Oslo Børs Holding and VPS Holding in The subsidiary companies Verdipapirsentralen ASA and Oslo Market Solutions AS are deemed to be cash generating units in the group, and the goodwill allocated to these units was NOK 1,818 million and NOK 33 million respectively. Goodwill in relation to Centevo arose as the result of the acquisition of Centevo (formerly Evolution Software Sweden AB) in The company is owned by VPS, but is treated as a separate cash generating unit. Goodwill in relation to NOTC AS arose as the result of the acquisition of the remaining 50% of the share capital in the company in April The company is owned by Oslo Børs, but is treated as a separate cash generating unit. Summary of the book value of goodwill at 31 December 2017 (Figures in NOK million) Verdipapirsentralen Centevo NOTC Total Book goodwill Additions Write-downs Book goodwill Goodwill was tested for impairment in The interest rate applied to discount cash flows was 9.2% (8.9% at 31 December 2016). This is based on a risk-free return of 1.6% (1.3%), and an equity risk premium of 8.3% (8.3%). The required return on equity is determined post-tax. Applying this together with an equity ratio of 90% and assuming the post-tax cost of capital at 2.7% (2.0%) gives a weighted average cost of capital of 9.2% (8.9%). The forecast period is from 2018 to The terminal value is calculated by projecting forward cash flow from the last year of the forecast period using an average cost of capital adjusted for inflation (2.4%). The assumptions made for the individual cash generating units are as follows: The impairment test for VPS assumed annual increases in revenue and costs for each year of the forecast period. In an alternative scenario with no growth in revenue and a 2 percentage point increase in the discount rate, there would still be no need for a writedown. The impairment test for Centevo assumed an average annual increase in revenue of 8% and an average annual increase in costs of 3% for each year up to and including If the growth in revenue for Evolution is reduced to 6%, accompanied by a 1 percentage point increase in the discount rate, there would still be no need for a write-down. 51

52 Notes - GROUP Note 16 Financial instruments The group has exposure to financial instruments such as loans, accounts receivable and accounts payable. In connection with these items, the group is exposed to credit risk, interest rate risk, liquidity risk, currency risk and market risk. Credit risk The group s largest single customer accounted for approximately 13% of total revenues in 2017, which is approximately in line with 2016, and 8% of accounts receivable and other receivables in the balance sheet as at 31 December Losses on receivables have historically been at a low level. The group has guidelines in place to avoid making sales to customers who have had significant problems in making payments in the past. The maximum credit risk is equivalent to the book value of receivables, which totalled NOK 106 million at 31 December Liquidity risk - general The group s strategy is to maintain cash sufficient for at least six months operating costs at any time. The minimum requirement for VPS will be higher because of its primary capital requirements. Surplus liquidity is placed in deposits with a number of banks. VPS is permitted to place surplus liquidity in interest-bearing instruments issued by the Norwegian state, and in certain specified circumstances surplus liquidity can be placed in money market funds with low risk. The table on page 53 shows the group s financial liabilities and their maturity structure. These represent unconditional claims on the group. Market risk The group s assets and liabilities are only exposed to market risk to a very limited extent. The value of shares and investments in joint ventures is exposed to market risk. The group is exposed to currency risk since certain costs are payable in foreign currencies. It is group policy that the consideration for significant purchases must be denominated and paid in Norwegian kroner. If agreement is reached to make payment in another currency, consideration is given to acquiring the currency in question in order to meet future contractual payments. Accordingly, exposure to currency risk and the consequences for earnings and equity of changes in exchange rates are not material. The group placed part of its surplus liquidity in 2017 in fixed-rate term deposits for periods of up to three, six or 12 months. Other bank deposits are on floating rate terms. A change of one percentage point in the level of interest rates would have affected earnings and equity by approximately NOK 7 million. Financial strategy Oslo Børs VPS Holding ASA will strive to maintain a level of equity appropriate to its strategy and risk profile. In parallel with this, the group will seek to limit the level of capital it needs. If the group has liquidity in excess of the level needed taking into account the amount of capital it needs for its current operations, acquisitions, or investments, or the requirements for satisfactory liquidity and solidity, including the level of capital needed to satisfy the requirements imposed by the authorities, it will seek to distribute the surplus to its shareholders. 52

53 Notes - GROUP Norwegian legislation stipulates requirements for Oslo Børs and VPS to maintain a prudent level of primary capital. In this context, primary capital comprises equity after deducting items including intangible assets such as system development costs and deferred tax assets. In the case of VPS, Finanstilsynet has ruled that VPS must maintain primary capital equivalent to at least nine months operating costs plus a prudent buffer amount. Dividend payments by VPS require approval by the Ministry of Finance. Primary capital must be available to a large extent as holdings of liquid assets. The group satisfies all external requirements for capital adequacy. The group had equity of NOK 1,009 million at the end of The group did not have any interest-bearing borrowings at 31 December Maturity structure of financial instruments (Figures in NOK 1,000): 2017 On demand < 3 months 3-12 months 1-5 years >5 years Total Items other than derivatives Trade creditors Total items other than derivatives On demand < 3 months 3-12 months 1-5 years >5 years Total Items other than derivatives Trade creditors Total items other than derivatives Liabilities in respect of items other than derivatives are expected to be settled from existing liquid assets. Available Carried at Other fin. Overview Note for sale fair value Recievables liabilities Total Level 1 Level 2 Financial assets measured at fair value Total financial assets measured at fair value Financial assets not measured at fair value Accounts receivable and other receivables 17, Bank deposits Total financial assets not measured at fair value Financial liabilities measured at fair value Contingent liabilities Total financial liabilities measured at fair value Financial liabilities not measured at fair value Trade creditors Total financial liabilities not measured at fair value

54 Notes - GROUP Available Carried at Other fin. Overview Note for sale fair value Recievables liabilities Total Level 1 Level 2 Financial assets measured at fair value Total financial assets measured at fair value Financial assets not measured at fair value Accounts receivable and other receivables 17, Bank deposits Total financial assets not measured at fair value Financial liabilities measured at fair value Contingent liabilities Total financial liabilities measured at fair value Financial liabilities not measured at fair value Trade creditors Total financial liabilities not measured at fair value Note 17 Accounts receivable/losses on accounts receivable Accounts receivable are recorded at their nominal value less provisions for expected losses. Provisions are made on the basis of a case-by-case evaluation of the amounts due. Losses on accounts receivable are recognised as other operating costs. Provisions for losses changed over the course of the year as follows: Figures in NOK 1,000 Specific General provision provision Total Provision made in the year 0 Provision applied in the year 0 Provision written back Provision made in the year Provision applied in the year 0 Provision written back Ageing of customer receivables is as follows: Totalt 2017 Not yet due < 30 days days days >90 days Totalt 2016 Not yet due < 30 days days days >90 days

55 Notes - GROUP Note 18 Share capital and shareholder information The share capital of Oslo Børs VPS Holding at 31 December 2017 was as follows: No. of shares Par value (NOK) Own shares Total Shares NOK Total NOK All shares have the same rights in respect of voting and dividends. Sales and purchases of shares in 2017 were as follows: Bought Sold Number Average price Number Average price In the Notice of the Annual General Meeting to be held on 15 May 2018, the Board has proposed that the company should pay a dividend of NOK 4.20 per share for the 2017 financial year. This is in addition to the dividend of NOK 4.00 per share paid in December Shares held by Board Members, senior employees and related parties: Shares held Shares by related Name Office owned parties Catharina E. Hellerud Chair, Oslo Børs VPS Holding ASA, Chair, Oslo Børs ASA Board member, Verdipapirsentralen ASA Ottar Ertzeid Board member, Oslo Børs VPS Holding, Board member, Oslo Børs ASA Silvija Seres Board member, Oslo Børs VPS Holding ASA, Board member, Oslo Børs ASA Dag Erik Rasmussen Board member, Oslo Børs ASA Øyvind G. Schanke Board member, Oslo Børs ASA, Board member, Oslo Børs VPS Holding ASA 5 000* Roy Myklebust Board member, Oslo Børs VPS Holding ASA * Anne-Lise Kristiansen Chair, Verdipapirsentralen ASA Ivar Qvist Board member, Verdipapirsentralen ASA Knut Erik Robertsen Board member, Verdipapirsentralen ASA Mette Kamsvåg Board member, Verdipapirsentralen ASA Åsmund Skår Board member, Verdipapirsentralen ASA Sissel Bakker Employee representative, Verdipapirsentraslen ASA 676 Employee representative, Oslo Børs VPS Holding ASA Morten Nordby Employee representative, Verdipapirsentraslen ASA Employee representative, Oslo Børs VPS Holding ASA Thomas Skjønhaug Employee representative, Oslo Børs ASA 703 Employee representative, Oslo Børs VPS Holding ASA Ingvild Resaland Employee representative, Oslo Børs ASA Deputy employee representative, Oslo Børs VPS Holding ASA Kari Ann Egeland Deputy employee representative, Verdipapirsentraslen ASA Pål Thomas Lysaker Deputy employee representative, Verdipapirsentraslen ASA Line Mauseth Deputy employee representative, Oslo Børs ASA 241 Torbjørn Vik Deputy employee representative, Oslo Børs ASA 550 *Catalina Invest 1 AS, shareholder and the CEO of which is Roy Myklebust, owns 100,000 shares in Oslo Børs VPS Holding ASA. *Schanke Holding AS, owned by Øyvind G. Schanke, owns shares in Oslo Børs VPS Holding ASA. 55

56 Notes - GROUP Shares held by Board Members, senior employees and related parties: Shares held Shares by related Name Position owned parties Bente A. Landsnes Group CEO of Oslo Børs VPS, President and CEO of Oslo Børs Board member, Verdipapirsentralen ASA Øivind Amundsen EVP Primary Market and Legal Affairs, Oslo Børs Per Eikrem EVP Corporate Communications and Staff, Oslo Børs Thomas Borchgrevink EVP Surveillance and Operations, Oslo Børs Kjetil Nysæther EVP IT, Oslo Børs Øyvind Skar EVP Information Services, Oslo Børs Tom Kristoffersen EVP Secondary Market, Oslo Børs Audun Bø CEO of VPS Jorunn Blindheim Øystese EVP Legal and Compliance, VPS Jorunn Rummelhoff VP, Head of HR VPS 254 Aleksander Nervik EVP Products, VPS Helene Midtskau Acting CTO, VPS 290 Geir Heggem SVP Oslo Børs VPS/CFO VPS ** Sveinung Dyrdal EVP Clients, Sales and Business Development, VPS Leif Arnold Thomas EVP Fund Services, VPS Trond Pettersen EVP Quality and Security, VPS Anne Kristin Hildrum Board secretary, Oslo Børs VPS Holding ASA Heidi Magnussen Brandt Board secretary, VPS 51 Harald Jægtnes VPS Control Committee (Chair) Jan Henriksen VPS Control Committee Kristin Farstad VPS Control Committee Ida Espolin Johnson VPS Control Committee (Deputy) Lars Inge Pettersen Auditor (KPMG) ** Inclusive shares held by close associate. The 20 largest shareholders at 3 January 2018: Nationality no. of shares Percentage DNB LIVSFORSIKRING ASA NOR % KOMMUNAL LANDSPENSJONSKASSE NOR % PARETO AS NOR % ARENDALS FOSSEKOMPANI ASA NOR % MORGAN STANLEY & CO INT. PLC (NOM) GBR % STATE STREET BANK AND TRUST COMP (NOM) CAN % UBS AG London (NOM) GBR % ARMOR QUALIFIED, LP USA % THE NORTHERN TRUST CO. (NOM) GBR % JP MORGAN SECURITIES LLC (NOM) USA % FRANKLIN MUTUAL FIN SERV FUND USA % ARMOR CAPITAL OFFSHORE MASTER, LTD CYM % MUST INVEST AS NOR % SPAREBANKEN VEST NOR % ARMOR CAPITAL PARTNERS, LP USA % GOTHIC CORPORATION USA % BNP PARIBAS SECURITIES (NOM) LUX % MP PENSJON PK NOR % NORDEA NORDIC SMALL FIN % JP MORGAN BANK LUXEMBOURG S.A. (NOM) LUX % Total % 56

57 Notes - GROUP Note 19 Related parties Oslo Børs VPS Holding ASA is a holding company and the parent company in the Oslo Børs VPS group. At the end of 2017, the group consists of the subsidiary companies detailed in the table below, which highlights which companies are owned directly by Oslo Børs VPS Holding. Booked value Consolidated Ownership Number of shares (figures in NOK 1,000) with effect from Owned by parent company: Oslo Børs ASA 100 % May 2001 Verdipapirsentralen ASA 100 % November 2007 Oslo Market Solutions AS 100 % November 2007 Owned by subsidiaries: Fish Pool ASA 97 % February 2013 Centevo AB 100 % July 2013 NOTC AS 100 % May 2017 In addition, Verdipapirsentralen owns 50% of FinansNett Norge. The following table shows the totals for transactions with these companies, which are defined as related parties (Figures in NOK 1,000): Sales of Purchases of 2017 services services Receivables Liabilities Joint ventures - FinansNett Norge Sales of Purchases of 2016 services services Receivables Liabilities Joint ventures - NOTC FinansNett Norge The group owns 50% of the shares in the joint venture. Transactions with related parties are carried out on normal commercial terms. Note 20 Other liability Under the terms of Section 9-1 the Securities Register Act of 5 July 2002, VPS is liable for losses that other parties may incur as a result of errors that occur in connection with registration activities where the company is not able to demonstrate that the error was outside the securities register s control. The statutory liability only applies to direct losses and is limited to NOK 500 million per claim. For losses that are due to circumstances unrelated to registration activities, and in the absence of any agreement to the contrary, VPS is liable for losses that are the result of negligence by VPS or by a party for which VPS is responsible. The Securities Register Act stipulates that VPS s potential liability pursuant to Section 9-1 of the Act must be covered through insurance, or by some other form of guarantee subject to approval by Finanstilsynet. Oslo Børs VPS Holding ASA has taken out errors and omissions insurance for the parent company and its subsidiaries, with an annual limit of NOK 1 billion and a deductible of NOK 10 million per claim. VPS shares this insurance with the other companies in the group up to a limit of NOK 300 million, and is the sole insured party for the balance of NOK 700 million. The insurance is subject to a limit of NOK 500 million for any one claim. No compensation was paid in Note 21 Events after the balance sheet date There have been no events after the balance sheet date that could have affected the company s profit. 57

58 Oslo Børs VPS Holding ASA Profit and loss account (Figures in NOK 1,000) Note OPERATING REVENUES Operating revenues 0 0 TOTAL OPERATING REVENUES 0 0 OPERATING COSTS Salaries and related costs 9, Other operating costs 5, TOTAL OPERATING COSTS OPERATING PROFIT Income from investment in subsidiaries 2, Financial income Financial expense from subsidiaries Financial expense NET FINANCIAL ITEMS ORDINARY PRE-TAX PROFIT Tax expense PROFIT FOR THE YEAR Earnings per share Diluted earnings per share ALLOCATIONS Ordinary dividend Additional dividend Transfer from/to other equity TOTAL ALLOCATIONS

59 Oslo Børs VPS Holding ASA Balance sheet, at 31 Dec (Figures in NOK 1,000) Note FIXED ASSETS Intangible assets Total intangible asset 0 0 Financial fixed assets Investment in subsidiaries Investment in shares Total financial fixed assets Total fixed assets CURRENT ASSETS Receivables Dividends and group contributions receivable Other intragroup receivables Other receivables Total receivables Bank deposits Total current assets TOTAL ASSETS

60 Oslo Børs VPS Holding ASA Balance sheet, at 31 Dec (Figures in NOK 1,000) Note EQUITY Paid-in equity Share capital Own shares Other paid-in equity Total paid-in equity Other equity Other equity Total other equity Total equity LIABILITIES Long-term liabilities Intragroup liabilities Total long-term liabilities Current liabilities Trade creditors Tax payable Public duties payable Provision for dividend Intragroup liabilities Other current liabilities Total current liabilities Total liabilities TOTAL LIABILITIES AND EQUITY Oslo, 21 March 2018 Catharina E. Hellerud Ottar Ertzeid Øyvind G. Schanke Silvija Seres Chair Board member Board member Board member Roy Myklebust Sissel Bakker Thomas B. Skjønhaug Bente A. Landsnes Board member Board member Board member GROUP CEO 60