Annual Report

Transcription

1 Annual Report

2 Contents 03 - Business Areas in Oslo Børs VPS 03 - Oslo Børs 06 - Verdipapirsentralen (VPS) 09 - Oslo Clearing 10 - Oslo Market Solutions 12 - Board of Directors Oslo Børs VPS Holding 62 Note 15 Leasing contracts 62 Note 16 Uncertainty associates with estimates used 63 Note 17 Contingent liabilities 63 Note 18 Responsibilities 64 Note 19 Related parties 64 Note 20 Outstanding derivatives positions 64 Note 21 Subsequent events 13 - Directors Annual Report 26 - Group Annual Accounts 26 - Profit and loss account 27 - Balance sheet 29 - Changes in equity 30 - Cash flow 31 - Notes to the group accounts 31 Accounting principles 36 Note 1 Segment information 38 Note 2 Business Combinations 39 Note 3 Accounts receivable / Losses on receivables 39 Note 4 Analysis of profit and loss items 40 Note 5 Analysis of balance sheet items 41 Note 6 Taxations 42 Note 7 Pension cost and pension liabilities 48 Note 8 Assets 51 Note 9 Share capital and shareholders 54 Note 10 Earnings per share, dilute earnings per share 54 Note 11 Investments in joint venture, shares etc. 56 Note 12 Financial instruments 59 Note 13 No. of employees - group 60 Note 14 Remuneration of officers, senior management, the auditor etc Annual Accounts Oslo Børs VPS Holding ASA 65 - Profit and loss account 66 - Balance sheet 68 - Cash flow analysis 69 - Notes to annual accounts 69 Accounting principles 70 Note 1 Shares in subsidiary companies 71 Note 2 Tax expense / deferred tax assets 71 Note 3 Receivables and payables between companies in the same group 72 Note 4 Equity 73 Note 5 Share capital and shareholder information 75 Note 6 Financial cost 75 Note 7 Remuneration of officers 75 Note 8 Pension cost and pension liabilities 75 Note 9 Remuneration of auditor 76 - Auditor s Report 78 - Board of directors statement on corporate governance 86 - Shareholder Information 88 - Articles of Association of Oslo Børs VPS Holding ASA 2

3 The Oslo Børs VPS Group The Oslo Børs VPS Group comprises the companies Oslo Børs, VPS, Oslo Clearing and Oslo Market Solutions. The group operates and develops co-ordinated and attractive marketplaces for listing and trading of securities, together with securities registration, clearing and settlement services for securities in Norway, as well as financial market data and internet solutions. Oslo Børs VPS Holding ASA owns 100% of the share capital of Oslo Børs ASA, Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS. Business areas Through its business areas, the Oslo Børs VPS Group operates marketplaces for trading in financial instruments, together with clearing, 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 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. In 2010, Oslo Børs launched a new segment, ETP (Exchange Traded Products). This segment comprises ETFs (Exchange Traded Funds) and ETNs (Exchange Traded Notes). Bente A. Landsnes is the Chief Executive Officer of Oslo Børs. The other members of the executive management team are Anders Brodin (Marketplace), Kjetil Nysæther (IT), Øivind Amundsen (Legal Affairs), Barbro Wiik Pedersen (Finance and Administration) and Per Eikrem (Corporate Communications). Oslo Børs had 105 employees at the close of 2010, as compared to 123 at the close of 2009 and 136 at the close of Oslo Børs uses the TradElect trading system for trading in equities and fixed income instruments. TradElect is owned and operated by the London Stock Exchange Group. Oslo Børs uses the SOLA system for trading in derivatives. This system was developed by the Montreal Exchange. Oslo Børs can look back on 2010 as a year with a good level of market activity. The market capitalisation of listed companies showed a marked increase throughout the year. Market conditions were characterised by increased competition, especially for trading in equities. In the wake of the financial crisis, the market has shown increased demand for new listings of equities and fixed income instruments, while demand for real-time financial market data from professional investors has declined. Trading in the equity market averaged 75,792 transactions daily (62,733 in 2009), representing an average daily value of NOK 7.2 billion (NOK 6.1 billion in 2009). The Oslo Børs Benchmark Index closed 2010 at points having risen by approximately 18% over the course of Segmental information for the Oslo Børs business area over the last three years is as follows (figures in NOK 1,000): Operating revenues - external Operating revenues - internal Depreciation Amortisation of excess value - - Write-down of excess value - - Other operating costs Total operating costs Operating profit Share of income in joint ventures (1 553) (1 824) 649 Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period Operating revenues were NOK 21.0 million higher in 2010 than in Revenue from the Equity Markets area was NOK 7.3 million higher, the Derivatives Markets area reported an increase in revenue of NOK 10.3 million, and the Fixed Income Markets 3

4 area increased revenue by NOK 6.2 million. The Markets Data area reported a reduction in revenue of NOK 5.5 million. Operating costs decreased by NOK 24.6 million between 2009 and After adjusting for restructuring costs and non-recurring costs in respect of the effect of the reorganisation on pension costs, as well as changes to capitalised costs and depreciations, operating costs for the year as a whole were NOK 20.8 million lower than in Equity Markets The Equity Markets area s operating revenue accounted for around 55% of total operating revenue for Oslo Børs in Operating revenue - Equity Markets (figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Prospectus and admission fees Registration fees Financial market data Other revenue Total operating revenues Key figures - Equity Markets No. of listed companies at Benchmark index (OSEBX) at Market capitalisation of listed companies at (NOK billion) No. of member firms - equity markets No. of trades (1,000) Value of trades (NOK billion) Turnover in shares and equity certificates for 2010 as a whole totalled NOK 1,820 billion, an increase of 19% from The year saw 19.2 million transactions carried out, representing an increase of around 21% from New share issues carried out in 2010 raised NOK 62 billion as compared to NOK 52 billion in With 20 new companies admitted to listing and 17 companies removed from listing, the marketplaces saw a net increase of 3 listed companies in In all, 205 companies were listed on the Oslo Børs marketplace at the close of 2010 following 10 new companies being admitted to listing and 13 companies removed from listing. The number of companies listed on the regulated marketplace Oslo Axess increased to 34 after 10 companies were admitted to listing and 4 companies were removed from listing in Six exchange traded funds (ETFs) were listed on Oslo Børs at the close of 2010, a decrease from the 8 ETFs listed at the close of The number of firms with membership for trading in equities on Oslo Børs was 53 at the end of 2010, down from 57 members at the close of Of these, 30 are located outside Norway. The number of firms that have membership of the marketplaces for bonds and derivatives is somewhat smaller. The revenue generated from fixed fees paid by issuers (annual listing fees) is dependent on the number of listed companies and their market capitalisation. Revenue from fixed fees paid by members depends on the number of active member firms. Revenue from trading fees is affected by monthly fees, order fees and the value of transactions carried out. Prospectus, admission and registration fees depend on the number of new companies admitted to listing as well as the number and size of share issues and other equity transactions carried out by listed companies. A change of 10% in the market capitalisation of listed companies at 31 December 2010 would cause a change of approximately 3.5% in annual revenue from listing fees (approximately 3.7% in 2009). The most widely traded equity market security accounted in 2010 for 6.9% of the total number of trades (9% in 2009 and 9% in 2008) and 18.2% of total trading value (20.4% in 2009 and 21% in 2008). Revenue generated from, or in relation to, this company in 2010 accounted for 7.3% of the Equity Markets area s operating revenue (7.5% in 2009 and 10% in 2008) and 4.0% of total operating revenue for Oslo Børs (4.2% in 2009 and 7% in 2008). Fixed Income Markets The Fixed Income Markets area s operating revenue accounted for around 6.6% of total operating revenue for Oslo Børs in Operating revenues - Fixed Income Markets (figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Prospectus and admission fees Financial market data Other revenue Total operating revenues Key figures - Fixed Income Markets No. of listed issues at (Oslo Børs) No. of listed issues at (Oslo ABM) Market value of listed issues at (NOK billion) No. of member firms - fixed income Value of trades exc. repos (NOK billion) Value of repo trading (NOK billion) Both stock exchange listed and Oslo ABM listed issues are included in the figures for marked value and value of trades. 4

5 The revenue Oslo Børs derives from the fixed income market is principally determined by the number of issues listed. In all, 1,154 loans were listed at the end of 2010, made up of 666 loans listed on Oslo ABM (Alternative Bond Market) and 488 loans listed on the stock exchange market, representing an increase of 95 loans since the start of the year. New debt issued in respect of new and existing loans amounted to NOK 754 billion in 2010, which was NOK 10 billion higher than in Operating revenues - Derivatives Markets (figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Prospectus and admission fees Financial market data Other revenue Total operating revenues The revenue generated from fixed fees paid by issuers of fixed income securities (annual listing fees) is dependent on the number of listed bond issues and their nominal value. Revenue from fixed fees paid by members depends on the number of active member firms. Trading fees reflect the number of transactions carried out and their value. Prospectus fees depend on the number of prospectuses submitted for inspection in accordance with the Securities Trading Act and registration documents submitted for inspection in accordance with the Oslo ABM Rules. A repo is a repurchase agreement whereby the parties simultaneously agree the sale and future repurchase of a specified amount of a bond issue. Repo transactions incur trading fees equivalent to 10% of the rate for a normal trade. The borrower with the greatest volume of loans outstanding at the close of 2010 accounted for around 28.3% of total outstanding bonds and 92.6% of total outstanding commercial paper. The figures include loans listed on Oslo Børs and on Oslo ABM. Revenue from this issuer accounted for 1% of the Fixed Income Markets area s operating revenue from the primary market in Derivatives Market The Derivatives Markets area accounted for approximately 6% of total operating revenue for Oslo Børs in Trading fees account for around 96% 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 level of activity in the derivatives market showed some increase in 2010 from the level seen in 2009 in the wake of the financial crisis. The number of active derivatives accounts at the close of 2010 was 1,800, little changed from the end of 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 million) 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) Market Data Oslo Børs generates operating revenue from sales of financial market data (previously carried out by Oslo Børs Informasjon AS, which was merged into Oslo Børs ASA in 2008). 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 Reuters, Bloomberg etc. subscribe to price and market index information from a range of different marketplaces, providing the real-time information that is essential for trading on Oslo Børs. The number of terminals with access to data from Oslo Børs increased by approximately 3% in 2010 to approximately 50,770. 5

6 Three types of subscription to real-time information from Oslo Børs are available: Professional users with full access to real-time information (55%), private individuals with limited access to real-time information (32%) and private individuals with full access to real-time information (14%). These three products accounted for 56%, 29% and 15% respectively of the total number of terminals in use at the end of 2009 (at the end of %, 20% and 11%). The two largest distributors accounted for around 52% of revenue from sales of financial markets data in 2010 (58% in 2009), while the four largest distributors accounted for 60% of operating revenue (65% in 2009). Other revenue is generated by the sale of various products such as share price tables for newspapers, index weighting, SMS services and internet advertising. The two products that produce the largest revenue are fundamental data on issuers and mutual funds information. Operating revenues - Market Data (figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Prospectus and admission fees Registration fees Financial market data Other revenue Total operating revenues Ola Forberg is the acting Chief Executive Officer of VPS. The other members of the executive management team are Leif Arnold Thomas (Customers & Market), Jorunn Blindheim Øystese (Legal), Geir Heggem (Finance and Administration, on contract from Oslo Børs) and Harald Næss (Development and IT). VPS had 128 employees at the close of 2010, as compared to 130 at the close of 2009 and 135 at the close of The level of activity in the securities market was good throughout VPS handled a total of 31.4 million transactions related to trades in securities, a decrease of 27% from This reduction is the result of the introduction of central counterparty clearing for trading in equities, equity certificates and ETFs. In addition, VPS handled 6 million purchases and sales of mutual fund units, an increase of 8% from Segmental information for the VPS business area over the last three years is as follows (figures in NOK 1,000): Operating revenues - external Operating revenues - internal Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs 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, fund 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. 6 Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period Operating revenues decreased by NOK 18.4 million from 2009 to The Settlement Products area reported a drop in operating revenue of NOK 51.8 million due to the introduction of central counterparty clearing for equity capital instruments. The Issuer Products and Investor Products areas reported increases in revenue for 2010 of NOK 10.1 million and NOK 19 million respectively.

7 Operating costs decreased by NOK 1,172.7 million from 2009 to This includes a reduction of NOK 1,154.2 million in amortisation and write-downs of goodwill and systems. Other operating costs reduced by NOK 18.5 million over the same period. Operating costs were affected by restructuring costs and non-recurring costs in respect of the effect of the reorganisation on pension costs, as well as changes to capitalised costs and depreciation. After adjusting for these factors, operating costs showed an increase of NOK 3 million relative to Issuer Products The Issuer Products area s operating revenue accounted for 25.6% 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 three products: VPS Corporate is an internet-based work platform that account operators can use to register and monitor 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. VPS Corporate Services is an internet-based application that allows VPS-registered issuers to make more efficient use of the information registered about their own securities. The application is a subscription-based additional service for companies registered in VPS. VPS Fixed Income is an internet-based application for processing fixed income instruments. The system was launched in 2009, and is used by account operators and VPS to register fixed income instruments and carry out actions relating to them. 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 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 that are carried out and the complexity of these actions. At the close of the year, a total of 1,381 (1,432) limited companies/equity certificate issuers and 2,065 (2,119) bond issues were registered in VPS. Operating revenues - Issuer Products (figures in NOK 1,000) Total operating revenues Key figures - Issuer Products No. of AS/ASA companies registered 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 s operating revenue accounted for 19.3% of total VPS revenues in The Investor Products area offers services for investors to make it easier to own and transfer securities, and to keep track of their personal investments. A VPS account can handle all types of registered securities owned by the individual investor, and represents the core element of the product area s service offer. Investors can confirm their ownership of securities by registering their holdings in the VPS register. In addition, investors can pledge as collateral their entire VPS account or specific securities held on the account. VPS also offers an internet service that gives investors access to their VPS accounts over the internet, and VPS offers a range of additional services linked to this internet service. Revenue from the Investor Products area is to a large extent 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 VPS accounts increased by 2.9% in 2010, and total market value increased by 12%. The number of investors with access to the VPS internet service increased by 6.7% over the course of the year. 7

8 Operating revenues - Investor Products (figures in NOK 1,000) Total operating revenues Key figures - Investor Products No. of accounts Market value (NOK million) No. of unique internet users Settlement Products The Settlement Products area reported operating revenue of NOK 156 million in 2010, which represented 35% of total VPS revenues for the year. Settlement Products provides clearing and settlement services for trading in securities. VPS contributes to the effective operation of the capital market in Norway through efficient and secure transfers of securities on the one hand and 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 was a year of major changes for the securities infrastructure in Norway. Oslo Børs introduced central counterparty (CCP) clearing of all shares, equity certificates and ETFs listed on the Oslo Børs and Oslo Axess marketplaces. VPS carried out changes to the central securities settlement system (VPO) in order to accommodate CCP clearing. Oslo Clearing was selected as the CCP for the Norwegian market and became a VPO participant. As a consequence of these changes, all transactions carried out through Oslo Børs are now netted for settlement through the clearing system operated by Oslo Clearing, and this has affected the number of transactions processed by VPS Settlement Products. The period since the start of full CCP clearing (from and including September 2010) has shown that the total number of transactions presented for settlement has fallen by more than 60%. 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, Norges Bank. The settlement ratio achieved by VPS has risen significantly over the years, from 80% at the end of the 1990s to 97.5% at the close of The efficiency of the settlement process is supported by an automated securities borrowing and lending arrangement based on a lending pool. In addition, trades that cannot be settled on the agreed settlement day are resubmitted for settlement until they are cancelled or settled, and 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 (ISO15022). VPS started implementation of ISO15022 communication in 2002, and usage has grown very strongly. At year-end 2010, VPS had 104 settlement participants (i.e. entities that have entered into a settlement agreement with VPS). Of these, 27 are settlement agents and 76 are brokers. Four new settlement participants joined in Of the 76 brokers that participate in settlement, 38 are remote members of Oslo Børs. Four of the remote members are direct participants in VPO while the remaining 34 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 CCP clearing 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. After the first four months of CCP clearing in 2010, the number of settlement transactions carried out by VPS showed a reduction of 27% relative to the same period in Operating revenues - Settement Products (figures in NOK 1,000) Total operating revenues Key figures - Settement Products Settlement ratio % % % No. of reports (ISO 15022) (mill.) No. of trades settled (mill.) Reports per transaction

9 Fund Services The Fund Services area s operating revenue accounted for 16% of total VPS revenues in Fund Services offers a broad range of services for mutual fund management companies 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 three main areas, complemented by additional services: Fund Basics, Distribution Solutions and Unit Linked Defined Contribution Pensions. In all these areas, VPS is responsible for operations, maintenance and ongoing development of the systems, which allows the customers to focus on their core activities. Fund Services cover all aspects of the value chain, from establishing and registering a mutual fund through to distribution and customer service. Similarly, the services for defined contribution pension products cover the entire range from calculating pension contributions to making pension payments with tax deduction and producing annual statements. 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 2010, 70% of the market value of Norwegian mutual funds was registered in VPS. In addition, various foreign mutual funds and nominee registered funds are registered in VPS. The total market value of VPS registered mutual fund holdings was NOK 395 billion at the close of 2010, representing an increase of 24% from The number of investments in mutual funds registered in VPS increased by 1.6% in 2010, while the number of transactions in mutual funds increased by 7.5% between 2009 and 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. Operating revenues - Fund Services (figures in NOK 1,000) Total operating revenues Key figures - Fund Services No. of mutual funds registered in VPS Market value of mutual funds registered in VPS (NOK billion) No. of investor holdings in mutual funds No. of mutual fund transactions No. of pension accounts in VPS registered schemes (Mandatory Employers Pensions) Oslo Clearing The business area comprises the wholly-owned subsidiary Oslo Clearing ASA. Oslo Clearing is a Norwegian public limited liability company licensed to operate as a clearing house for derivatives and equity instruments, as well as for borrowing and lending of financial instruments. Oslo Clearing was granted an extension to its authorisation in 2010 to include operating as a clearing house for equity instruments. Oslo Clearing is committed to delivering added value for members through the solutions it provides for the securities market. The business area distributes its products and services through banks and investment firms, but certain types of institutional customers can also apply for direct membership of Oslo Clearing. Christian Sjöberg is the Chief Executive Officer of Oslo Clearing. The other members of the executive management team are Kari Geier (Business Development), Håvard Thorstad (Risk Management) and Sara Lillefloth (Clearing Operations). Oslo Clearing ASA had 14 employees at the close of 2010 (11 in 2009 and 2008). All product areas at Oslo Clearing showed an increase in operating revenue in The level of market activity was higher than in 2009 for all areas, and in addition revenue was boosted by higher market values for underlying shares. 9

10 Segment information for the Oslo Clearing area for the last three years is as follows (figures in NOK 1,000): Operating revenues - external Operating revenues - internal 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 Oslo Clearing reported an increase in operating revenue between 2000 and 2010 of NOK 26.7 million. Revenue growth reflects the introduction of central counterparty clearing of equity capital instruments from June 2010, which caused an increase in revenue of NOK 23.7 million. Revenue from the derivatives area was slightly higher than in Reported revenue includes non-recurring intragroup revenue of NOK 2 million. Operating costs reduced by NOK 14.0 million between 2000 and Write-downs of excess value were NOK 29.1 million lower in 2010, while other operating costs increased by NOK 15.0 million. The implementation of central counterparty clearing for equity capital instruments involved additional use of external consultants, and required an increase in headcount at Oslo Clearing, together with additional IT costs, in order to meet the company s additional and revised operational duties and IT operations. The Norwegian market for standardised derivatives saw a 20% increase in the turnover of futures contracts to NOK billion (NOK 227 billion in 2009). Option premium turnover increased by 10% to NOK 1.7 billion in 2010 (NOK 1.6 billion in 2009) while turnover in stock forwards increased by 48% to NOK 10.5 billion (NOK 7.1 billion in 2009). The average number of contracts traded daily was in line with the previous year at 53,811 in 2010 as compared to 53,830 in Business volumes in the securities lending market were at the same level in 2010 as in 2009, but revenue was affected by a reduction in fees in Business volumes for OTC derivatives and standardised stock forwards were approximately 30% higher than in The increase reflects higher prices in the underlying market and a more positive view of future prospects by major investors. At the close of 2010, Oslo Clearing had 29 clearing members for derivatives, of which 4 are solely clearing members while 25 operate as both trading and clearing representatives. There were no new clearing participants in 2010, and one membership was cancelled at the close of the year. There were 20 clearing members for equity capital instruments at the close of 2010, including 9 foreign members. All of these became members during the course of Oslo Clearing Key figures No. of derivatives clearing members at No. of active derivatives acc. at Total no. of cleared TM derivative contracts (1,000) Total no. of cleared lending contracts (1,000) Total no. of cleared equities transactions (CCP for equities) (Started June 2010) No. of equities clearing members at Oslo Market Solutions The business area comprises Oslo Market Solutions AS, which is a wholly-owned subsidiary of the Oslo Børs VPS Group. 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 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. Hugo Sundkjer is the Chief Executive Officer of Oslo Market Solutions. The business area had 13 employees at the close of 10

11 2010, and employee numbers at the close of 2009 and 2008 were 13 and 14 respectively. Segment information for the Oslo Market Solutions business area over the last three years is as follows (figures in NOK 1,000): Operating revenues - external Operating revenues - internal Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating revenues decreased by NOK 1.0 million between 2009 and The business area s operating revenues vary with the state of completion of customer projects and the timing of annual system licence payments. Oslo Market Solutions carried out a sizeable intragroup project in Revenue from external customers was higher in 2010 than in Operating costs increased by NOK 1.5 million in Depreciation increased by NOK 0.8 million as a result of investment spending. Other operating costs increased by NOK 0.7 million, principally in respect of cost recognition of an internal project in Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period

12 Board of Directors of Oslo Børs VPS Holding ASA Leiv Askvig (born 1957), Chairman Leif Askvig has been a member of the board of Oslo Børs VPS since Askvig is the Managing Director of Sundt AS, and is a business economics graduate of the Norwegian School of Management. He was deputy chair of the board of Verdipapirsentralen following its privatisation in 2003 until 2007, and he was on the board of Verdipapirsentralen prior to its privatisation from He was a member of the Nomination Committee of Oslo Børs VPS Holding from 2007 to Leif Askvig has been a member of the board of Imarex ASA since 2004, and was chair of the board from 2006 to He has also been a member of the board of Astrup Fearnley AS, Fjellkraft AS. He is currently a member of a number of boards, including Eiendomsspar/Victoria Eiendom AS, Pandox AB, Skibs AS Tudor / AS Toluma, Verdane Capital IV AS, Alfarveg AS and Agder OPS Vegselskap AS, and he is a member of the Nomination Committee of Orkla ASA. Gisèle Marchand (born 1958), Deputy chair Gisele Marchand is the President and CEO of Eksportfinans ASA and has been a member of the board since Marchand previously held various senior management positions in the DNB Group, and was responsible as a member of the group executive management for the corporate and retail markets in Norway. She has also previously been Managing Director of the Norwegian Public Service Pension Fund and of Batesgruppen AS. She has experience from a number of board appointments, including Hafslund ASA, EDB ASA, Norske Skogindustrier ASA, Scandinavian Property Development ASA, Innovasjon Norge and GIEK. Harald Espedal (born 1972) Harald Espedal has been member of the board of Oslo Børs VPS since Espedal is managing director of Skagen AS, which acts as investment manager for Skagen Funds. He has a Masters degree in business and is a graduate of the higher-level auditing course at the Norwegian School of Economics and Business Administration. Before joining Skagen AS in 2002, Espedal was the manager of Andersen (Ernst & Young) in Stavanger and also worked as Investment Director at Vesta and as European portfolio manager at Skandia (which at that time owned Vesta). Prior to this, he was head of finance and analysis with SpareBank1 SR-Bank. He is also Chairman of the Board of the Norwegian Mutual Fund Association. Benedicte Schilbred Fasmer (born 1965) Benedicte Schilbred Fasmer has been a member of the board of Oslo Børs VPS since 2007 and was a member of the board of Oslo Børs Holding ASA from 2005 to She holds the position of Director Capital Markets Division at Sparebanken Vest. She has a Master of Science from the Norwegian School of Economics and Business Administration. She was previously the Chief Financial Officer and Investor Relations Officer, and more recently Head of Corporate Communications and HR, at Rieber & Søn. Her work experience prior to this included Paal Wilson Management AS, chief of staff and later vice president at Citibank International plc, head of the Norwegian branch of Nautopolis.com, and as an investment banker at Pareto Securities ASA in Bergen. Schilbred Fasmer is a member of the Council of Representatives of Exportfinans ASA. She has also been a board member of Vesta Forsikring and Fana Sparebank, and has been a member of the Control Committee for Storebrand Bank. Svein Støle (born 1963) Svein Støle has been member of the board of Oslo Børs VPS since 2007 and he has been a board member of both Oslo Børs and VPS since their privatisation in 2001 and Støle is Chief Executive and majority owner of Pareto AS. Other appointments outside the Pareto Group include earlier Board duties at Fondsforvaltning ASA. Benedikte Bettina Bjørn (born 1963) Benedikte Bjørn has been member of the board of Oslo Børs VPS since Bjørn is a Danish citizen and is an attorney and Company Secretary at Statoil ASA. She is a law graduate of the University of Copenhagen, and is qualified as an attorney in Denmark and Norway. She previously worked for Norsk Hydro ASA in the legal department and as Company Secretary and Vice President, as well as working for the Danish Ministry of Energy, at the University of Copenhagen and with a Danish law firm. She has been a member of the board of BioMar Holding AS, a company listed on the Copenhagen Stock Exchange. She is a deputy member of the Corporate Assembly of Orkla ASA, represents the Confederation of Norwegian Enterprise on Næringslivets Aksjemarkedsutvalg (the Equity Markets Commission) and is a member of the Council of Representatives and the Nomination Committee of Gjensidige ASA. Observers Ingvild Resaland (born 1979), employee representative Oslo Børs ASA Ingvild Anita Resaland was elected as an employee representative to the Oslo Børs ASA Board in Since 2008 Ingvild has been working as an adviser for Issuers of bonds and commercial papers in the Listing department, where she also is responsible for the secondary market for bonds on Oslo Børs and Oslo ABM, including market model and functionality for trading. She has previously held several positions in Oslo Børs Market Data department (previously Oslo Børs Informasjon AS) between 2001 and 2007 and worked as an adviser in Optimum ASA from She has a Bachelor of Business Administration and Economics from Handelshøyskolen BI. Morten Nordby (born1959), employee representative VPS ASA Mr Nordby is Senior Development Officer, VPS Clearing and Settlement. He has been with VPS since 1985, and was responsible for developing the VPS settlement environment and ISO interface. Employee representative since April Christian F. Falkenberg Kjøde (born 1972), employee representative Oslo Børs ASA Christian F. Falkenberg Kjøde was elected as an employee representative to the Oslo Børs Board in Christain works as Head of Enquiries and Analysis in Market surveillance. He has been a employee at Oslo Børs since 1999 and has held different positions at Market surveillance. He has a Master of Business Administration and Economics from The Norwegian Business School. Christian has been a deputy employee representative of the Oslo Børs board from 2007 to Sissel Bakker (born 1963), employee representative VPS ASA Sissel Bakker was elected as an employee representative to the VPS board in She is responsible for project management in VPS and has been employee at VPS since Sissel is PMP certified and has education in project management from The Norwegian Business School. She has long experience as project manager and adviser from implementation of IT systems in different industries. 12

13 Board of Directors` Annual Report for 2010 The Oslo Børs VPS group comprises Oslo Børs VPS Holding ASA, Oslo Børs ASA, Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS. Oslo Børs VPS Holding ASA operates from Tollbugata 2, Oslo. Unless otherwise stated, this commentary applies to the Oslo Børs VPS group. The Oslo Børs VPS group can look back on 2010 as a year with a relatively good level of market activity. The market values of listed and registered companies increased sharply over the course of the year. Oslo Børs VPS Holding ASA reports a consolidated profit for 2010 of NOK 277 million (loss of NOK 910 million). Strategy The Oslo Børs VPS group comprises the marketplaces operated by Oslo Børs ASA, the central securities depository and settlement activities operated by Verdipapirsentralen ASA and the clearing house business of Oslo Clearing ASA, together with the financial market data and on-line solutions company Oslo Market Solutions AS. Through these companies, the group aims to offer attractive marketplaces, services for clearing, 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 with the objective of meeting the increasing competition faced by its core businesses, as well as generating increasing revenue from value-adding services. The strategy emphasises the need to continue to operate a competitive and state-of-the-art financial infrastructure. In parallel with this, the group aims to create additional revenue by attracting new customers and building value-adding products and services around its core business activities. As an independent company, Oslo Børs VPS Holding ASA enjoys a high degree of commercial flexibility, and the Board has a very positive view of the opportunities that the continuing development of its activities will offer. The group s main challenge over the next few years will be the new competitive environment in Europe and the effect this will have on the entire Norwegian securities chain. One consequence that must be expected is that the group will see a reduction in its market share of trading in securities listed on Oslo Børs. The group intends to prioritise the following goals over the next three years: 1. We will operate an attractive and competitive financial infrastructure 2. We will develop and market 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 International focus on selected value-adding services Broadly based and robust distribution network 5. We will be an attractive workplace 6. We aim to have satisfied shareholders Important areas of focus in 2010, that will continue to be prioritised in 2011, include: Strengthen customer relationships with the most important customers Oslo Børs VPS will strive to strengthen its relationships both with its direct customers as well as with indirect customers in the form of investors and end users of the group s products and services. In the new competitive situation, there is a clear need for better, regular dialogue with customers in order to understand their needs and priorities and the way they are thinking so that we can develop and adapt our products to maintain our competitiveness. Continue the development of the marketplace rules, pricing structure, technology, networks and products Continuing development of our core activities is key to maintaining competitiveness. This applies to the microstructure (pricing structure, trading rules, business terms and conditions for issuers and investors, etc.), to our systems (functionality, speed and cost structure) and to our contact network (issuers/listed products and members). Improve the efficiency of the group s operations in general and core activities in particular As market conditions and competition continue to change, it is essential that the group responds by managing its overall cost base. The future outlook for our core activities makes it absolutely essential that we develop our operations with improved efficiency in order to remain competitive. Continue to provide and develop additional services It is clear that revenue from some aspects of our core products will be on a falling trend. In order for the group to maintain a satisfactory return over time, it is crucial that we put more effort into developing and marketing additional services. The group has identified a range of opportunities, both to improve our core activities and to create additional revenue. 13

14 Increase focus on strong sectors of the Norwegian market The financial markets in Norway have a particularly strong position in the oil/energy, shipping and aquaculture sectors. In these sectors, one finds clusters of expertise, investment analysts who specialise in these sectors, international banks with investment interest and with access to investors looking for investment opportunities. Strengthening our position in these sectors offers considerable potential. The group aims to develop closer collaboration with Norwegian investment firms on the promotion of these sectors to selected geographic markets. Further develop the derivatives area The group continues to see derivatives as an area of great potential, and expects increasing interest from both institutions and intermediaries in the future. The way in which this market operates has improved over recent years, but it takes some considerable time for institutions and intermediaries to respond by changing their trading patterns. Market trends 2010 was a year of increased competition for the Oslo Børs VPS group, in particular for equities trading. 20 new companies were admitted to listing, which represents an average year for new listings. In addition, 2010 saw greater demand for new listings of fixed income instruments, but lower demand from professional investors for real-time financial market data. Listed companies enjoyed good access to capital over the year, and significant amounts were raised in both the equity and fixed income markets. The overwhelming majority of Norwegian companies recognise Oslo Børs as the natural choice of venue for listing. In addition, Oslo Børs has a strong international position in the sectors of energy, aquaculture, offshore and shipping, and further effort was committed during the year to attracting international companies in these niche sectors. In order to expand its offer to these sectors, Oslo Børs entered into collaboration agreements with the Singapore Exchange (SGX) and with the Toronto Stock Exchange/TSX Venture Exchange. An important feature of these agreements is that they make it easier for companies listed on these collaborating exchanges to arrange a secondary listing on Oslo Børs, with settlement and securities registration carried out through VPS. As part of its strategic partnership with the London Stock Exchange, Oslo Børs implemented the SOLA trading system for derivatives on 30 November 2009 in collaboration with EDX. The system is licensed from TMX Group. TradElect was implemented for trading in equities and fixed income instruments on 12 April The TradElect system was developed by the London Stock Exchange. The London Stock Exchange migrated to a new trading system for shares known as Millennium in February Oslo Børs has launched a project to evaluate whether it should adopt the same system. Since MiFID came into effect in November 2007, a number of new players have established marketplaces and trading facilities for trading in European securities. This has included both new types of marketplace in the form of MTFs (multilateral trading facilities) and dark pools, which offer no order book transparency in order to attract investors looking to trade major blocks of shares without affecting the market in the share in question. Some exchanges also offer what are known as unsponsored listings, which means that they offer trading in companies that are listed on competing exchanges. These developments represent a further intensification of competition, and this has been reflected in the fee offers and general level of fees charged by both new and existing marketplaces. In addition, the ability to facilitate high-frequency trading by offering a local presence convenient for customers, together with low latency, continue to be important themes for both exchanges and MTFs. A number of international investment firms have established trading infrastructure using order routers that have links to a number of marketplaces. Smaller investment firms are offered opportunities to connect up to this kind of structure. These developments add to the trend for traditional exchanges to experience greater competition for trading business and downward pressure on trading fees. Investment firms in general welcome alternative marketplaces in order to encourage competition. The implementation of new EU directives over the next few years is expected to cause changes to some aspects of financial markets. One particular change relates to the planned launch of Target2-Securities (T2S) in 2014/2015, which will lead to greater competition for securities settlement and will represent a challenge for some aspects of the core activities currently carried out by Oslo Børs VPS since securities settlement will then be carried out through T2S rather than through national central securities depositories. 29 European central securities depositories, including VPS, have signed a letter of intent with T2S for the use of their systems. The group intends to position itself during the current strategy period so that it is ready to offer a competitive and attractive product when T2S is launched. It is anticipated that the European Market Infrastructure Regulation (EMIR), which includes provisions on the regulation of central counterparties (CCPs), will be implemented in national legislation in EMIR includes new requirements for CCP clearing, and 14

15 imposes more stringent requirements on the clearing of OTC derivatives. In addition, a process is currently underway to revise the Market in Financial Instruments Directive (MiFID), and this is expected to include a separate regulatory framework for regulated markets relative to unregulated trading platforms, provisions for consolidated market data and greater transparency for the fixed income and derivatives markets. The EU is also working on the regulation of central securities depositories (CSDs) and regulations for settlement of transactions in financial instruments. The EU Commission plans to circulate its proposals for regulation in this area in summer The major challenge facing the group in the future will be that of maintaining liquidity in listed securities. The emergence of competing marketplaces makes it unlikely that the group will be able to retain its current market share. However, in terms of the current strategy period it is expected that Oslo Børs will continue to be the main marketplace for Norwegian listed securities, and that securities settlement and registration services will largely take place through VPS. Over the longer term, a decline in market share may be offset by growth in trading volumes in general. The implementation of CCP clearing for equities in June 2010 caused a reduction in revenue from settlement activities. Oslo Clearing has signed a letter of intent with the London Clearing House (LCH) to establish a link between LCH and Oslo Clearing. Work on this link has been held up by delays in decisions by the relevant authorities at the European level on the requirements that should apply to this type of link. Oslo Clearing s formal authorisation for CCP clearing of equities includes a condition that it should establish a link with another CCP. Taken together, these developments will cause a significant reduction in the profitability of trading and settlement services. This places particular demands on improving the efficiency of the group s activities in general, and its core activities in particular. Regulatory framework The EU has recently 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 its program to create a transparent and stable financial system, the EU commission has start work on revising the 2007 Markets in Financial Instrument Directive (MiFID) by circulating a consultation document with general proposals for changes to MiFID. The background for revising this directive includes the experience gained from the financial crisis, the rapid pace of development seen for trading technology and hence trading patterns, and changes in the financial infrastructure whereby a large proportion of trading now takes place away from the regulated markets and trading facilities in a trend that is seen as damaging investor protection and reducing market quality. The issues raised by the EU in the consultation document include the question of introducing a new type of investment service intended to address trading on un-regulated trading platforms, the introduction of a requirement that trading in certain cleared and standardised OTC derivatives should take place through marketplaces that are subject to official supervision, the regulation of highfrequency trading, greater transparency for equities trading and OTC trading, the consolidation of market information and rules for increased investor protection. The EU is expected to announce its proposal for the revised MiFID (MiFID II) in spring On 1 January 2010, the EU introduced a new system for European supervision (ESFS), comprising three European Supervisory Authorities of which the European Securities and Markets Authority (ESMA) will be the European supervisory authority for financial infrastructure, including marketplaces, clearing houses and central securities depositories. It seems likely that the EU will approve regulations in 2011 on clearing of derivatives trading and the operation of clearing houses (European Market Infrastructure Regulations - EMIR). EMIR will introduce mandatory clearing for derivatives, and will authorise ESMA to decide which derivatives will be subject to mandatory clearing. This will give clearing houses greater responsibility for managing financial risk, and EMIR will impose requirements on how clearing houses should operate. The new regulations are expected to be implemented before the end of Under the new regulations, authorisation to operate as a clearing house will apply throughout the EEA area, and existing clearing houses will have to apply for new authorisation pursuant to EMIR. The EU is also working on a Securities Law Directive (SLD). The EU commission intends to circulate its proposal for this directive in the first quarter of 2011, with final approval planned for the first quarter of 2012 followed by implementation in national legislation by the end of The 2001 and 2003 Giovannini Reports highlighted that the legal consequences of securities registration in different countries vary considerably, and are quite often conflicting. This is seen as a significant barrier to the development 15

16 of a common European securities market. The proposed directive in its current form aims to harmonise the legal consequences of registering financial instruments on a securities account in order to make it safer and easier to hold and manage financial instruments registered on such an account. The EU Commission s proposal includes provisions on the legal consequences of registration and on choice of law when registering securities cross-border. In addition, it proposes that the service of providing securities accounts (for example the services offered by central securities depositories and investment managers) should be classified as an investment service and be subject to MiFID. The EU is also working on other regulations for CSDs and for the settlement of transactions in financial instruments. The EU commission intends to circulate its proposals in this area in summer No draft proposals have yet been circulated, but in a consultation document dated 13 January 2011 the EU commission indicated the areas that it intends to regulate and set out various alternatives for such regulation. If it is approved, the proposed regulation in this area will impose terms and conditions for parties offering what are deemed to be CSD functions. CSD functions will be defined as maintaining the central securities register to enable registration and settlement of electronically registered financial instruments, acting as the central account provider for the basic functioning of the entire market and operating a settlement system for financial instruments as defined in the Settlement Finality Directive (which is implemented in Norwegian legislation in the Payment Systems Act). In the case of institutions that operate cross-border, which would include a CSD accepting registration of financial instruments that are issued by a company from a foreign jurisdiction, the EU commission envisages that the authorities in such foreign jurisdictions should be involved in authorising and supervising the CSD. The EU Commission also intends to regulate what it terms the ancillary services that a CSD will be permitted to offer. This envisages that CSDs should adopt a low-risk business model, and that any ancillary services should have a clear connection with the CSD s core services. The Commission proposes that the list of permissible ancillary services should take into account the activities of existing CSDs to the extent that they are compatible with these principles. Measures are also proposed to reduce the level of risk associated with a CSD s settlement function, as well as facilitating a high settlement ratio and reducing the cost of settlement. The EU Commission s January 2011 consultation document also addresses the question of harmonisation of settlement periods with a view to making T+2 the standard settlement period. The EFTA Surveillance Authority (ESA) issued a reasoned opinion in December 2010 to the effect that the Norwegian restrictions on ownership and voting rights in financial services infrastructure institutions are in breach of the EEA Agreement. ESA agrees with the Norwegian Government that restrictions to ensure the good functioning of the financial system may be justified, but it believes that the ownership and voting restrictions in question are unnecessarily restrictive and disproportionate to the aim. The Norwegian Securities Trading Act and the Securities Register Act provide for a general ban of ownership above 20 percent of the shares in stock exchanges and securities depositories, with very limited exemptions. In addition, this legislation restricts voting rights to 20% of the total votes or 30% of the votes represented at a shareholders meeting. In ESA s view, these rules restrict the possibility to invest in these undertakings and to participate effectively in their management. ESA accordingly maintains that the rules are incompatible with the EEA rules on free movement of capital and the freedom of establishment. Legal proceedings and court hearings Oslo Børs ASA received a notice of proceedings dated 9 July 2009 from Periscopus AS which claimed that the Stock Exchange Appeals Committee s resolution 1/2009, which upheld the approval by Oslo Børs of a mandatory offer dated 18 December 2008 by Erik Must AS for the shares in Gyldendal ASA, should be declared void. The issue in dispute is the price of the offer. Periscopus AS maintains that the offer price should have been set with reference to the market price. In addition, the proceedings claim that Oslo Børs ASA and Erik Must AS should be held jointly and severally liable for the amount that Periscopus AS claims to have lost as a result of this offer being accepted, calculated at approximately NOK 37 million plus interest and expenses. The case was put on hold by the Oslo District Court while it awaited a response from the EFTA Court on a question over the interpretation of the EU directive on takeovers. The EFTA Court issued its response on 10 December The EFTA Court found that the rule in Norwegian legislation that adjusts the bid price with reference to the term market price, but without further clarification of that term, does not satisfy the requirements of the directive. 16

17 The parties to the case now await the Oslo District Court s ruling on the matter. DNO International issued civil proceedings against Oslo Børs ASA on 17 March 2010 claiming that the Stock Exchange Appeals Committee s decision of 17 September 2009 upholding the ruling by Oslo Børs that DNO had acted in breach of its duty to disclose information to Oslo Børs was invalid, and that the violation charges imposed on DNO in relation to the Committee s ruling were to be paid back. In addition DNO claimed compensation for its costs of litigating. On 22 December 2010 the Oslo District Court issued its ruling on the claim brought by DNO International. DNO International s claim did not succeed on any of its points, and DNO was ordered to pay the costs of Oslo Børs in the litigation. DNO has appealed against the ruling. Market activity in 2010 The OBX Index closed 2010 at 400.4, having risen by 18% over the course of the year. The value of trading turnover in shares and equity certificates amounted to NOK 1,820 billion in This represented an increase of 19% from The number of transactions carried out through the exchange s trading system totalled 19.2 million for the year as a whole, an increase of around 21% from Oslo Børs launched a new segment on the Oslo Børs marketplace in 2010 for Exchange Traded Products (ETPs). This segment includes Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs). VPS processed 31.4 million transactions relating to securities trading in This represents a decline of 27% from 2009, when 44.9 million transactions were processed. The fall in transactions was a result of the introduction of central counterparty clearing for cash equities in June In addition, VPS handled 6 million transactions for purchases and sales of units in mutual funds, an increase of 10% from New share issues carried out in 2010 raised NOK 62 billion as compared to NOK 52 billion in With 10 new companies admitted to listing and 13 companies removed from listing, the 17

18 number of companies listed on Oslo Børs fell to 205 at the close of The regulated marketplace Oslo Axess saw an increase in the number of listed companies to 34, with 10 companies admitted to listing in the year and 4 companies removed from listing. By the close of 2010 there were 6 exchange traded funds (ETFs) listed on Oslo Børs, a decrease from 8 ETFs at the close of of the companies listed on Oslo Børs and Oslo Axess are from countries other than Norway. At the close of the year, 2.7 million holdings of financial instruments were registered in VPS, held on 1.7 million VPS accounts. The number of mutual funds registered in VPS showed a net decrease of 36 in 2010, with 1,297 mutual funds registered at the end of the year. In total, 1,354 limited companies and 27 equity certificate issuers were registered in VPS at the end of the year, a net reduction of 51 from the end of The number of bond and commercial paper issues listed at the end of the year was 2,420, a reduction of 22 from the end of The number of stock exchange member firms reduced from 57 to 53 in 2010, of which 30 member firms are located outside Norway. At year-end 2010, VPS had 98 settlement participants (i.e. entities that have entered into a settlement agreement with VPS). Of these, 27 are settlement agents and 70 are investment firms. Of the investment firms that participate in settlement, 38 are remote members, i.e. they are located outside Norway. Of the remote members, 4 are direct participants in VPO (the central securities settlement system) while the remaining 34 use a settlement agent to settle their trades through VPO (indirect members). VPS added 4 new settlement participants in 2010, of which one is a new indirect settlement agent and three are new indirect remote members (investment firms). One local member firm and four remote members ceased to be participants in The settlement ratio, i.e. the proportion of trades that settle on the agreed date, fell in from 98.6% in 2009 to 98.3% in 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 Reuters, Bloomberg, etc. subscribe for access to price and index information from a variety of different marketplaces. The number of terminals subscribing for access to data from Oslo Børs increased by just over 3% in 2010, taking the total to just over 50,500. The number of professional users declined, but there was 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, 1,154 loans were listed at the end of 2010, made up of 666 loans listed on Oslo ABM (Alternative Bond Market) and 488 on the stock exchange market, representing an increase of 94 loans since the start of the year. New debt issued in respect of new and existing loans amounted to NOK 754 billion in 2010, which was NOK 10 billion higher than in The number of derivatives contracts traded on Oslo Børs in 2010 increased by around 1% from 2009, while premium turnover for all derivatives products increased by approximately 21%. The number of contracts traded in respect of index futures and index options was lower in 2010, but both stock forwards and stock options showed an increase in the number of contracts traded in the year. Oslo Clearing launched central counterparty clearing in 2010 for cash equities, equity certificates and ETFs traded on Oslo Børs. CCP clearing was introduced in steps, with full implementation from the end of August. The level of activity seen for the equities central counterparty, which reflects the volume of trading on Oslo Børs, increased over the autumn months. The level of activity in the derivative markets was relatively high at the start and end of 2010, but was somewhat lower in the middle of the year. Total volumes for 2010 were somewhat higher than in At the close of 2010, Oslo Clearing had 30 clearing members for derivatives and 20 clearing members for equity instruments. All the equities clearing members were new members in Oslo Clearing received a capital injection of NOK 30 million in In addition, Oslo Clearing has established a default fund for equities clearing of approximately NOK 210 million. The Board is satisfied with Oslo Clearing s capital adequacy at the close of 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 a decline in revenue of approximately 4% in Revenue from external customers was higher in 2010, but revenue from other companies in the group was lower. Financial results The unconsolidated annual accounts of Oslo Børs VPS Holding ASA have been prepared in accordance with Norwegian legislation and 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) approved by the EU. 18

19 Comparison with 2009 shows an increase of NOK 18 million in operating revenues. Revenues from settlement and clearing of equity instruments fell by NOK 28 million in This was offset by higher revenues in most other areas. MNOK OPERATING REVENUES Total operating costs in 2010 before amortisation and write-downs totalled NOK 488 million, a decrease from NOK 520 million in MNOK Operating costs before amortisation and write-downs

20 Personnel-related costs, before capitalisation of internal costs, were reduced by NOK 17 million from NOK 291 million in 2009 to NOK 273 million in The decrease was principally the result of non-recurring items in connection with the effect of restructuring on pension costs. A provision of NOK 23 million was made for restructuring costs (NOK 15 million in 2009). The effects of the restructuring measures initiated in 2009 were seen in Capitalisation of internal resource costs used on projects decreased from NOK 33 million in 2009 to NOK 19 million in Other operating costs reduced by NOK 35 million from NOK 208 million in 2009 to NOK 173 million in A significant part of this reduction was the result of reduced use of external consultants. Costs reported for 2010 were affected by the agreement reached between VPS and Capgemini on the settlement of services and payments following the decision to stop work on the development of the new mutual funds project at the start of The cancellation of the funds project incurred costs of NOK 12 million in Amortisation of the excess values that arose as a result of the merger between Oslo Børs Holding ASA and VPS Holding ASA in November 2007 amounted to NOK 82 million in 2010, a decrease of NOK 12 million from The decrease is due to some elements of excess value being fully amortised in The operating result for 2010 after amortisation and writedowns of excess values was a profit of NOK 371 million. Net financial items decreased from NOK 19 million in 2009 to NOK 16 million in The reduction was due to the writedown of certain holdings of shares in The result for the year was a profit of NOK 277 million as compared to a loss of NOK 910 million in MNOK Profit for the year 277 Ordinary depreciation was NOK 61 million in This represents an increase from 2009 of NOK 6 million. The increase was a consequence of investments carried out in 2009 and Operating profit before amortisation and write-downs of excess value totalled NOK 454 million, an increase of NOK 51 million from MNOK Operating profit before amortisation and write-downs The merger of Oslo Børs Holding ASA and VPS Holding ASA was registered on 26 November At the time of the merger, Oslo Børs Holding ASA changed its name to Oslo Børs VPS Holding ASA. The merger was recognized for accounting purposes as a transaction with Oslo Børs Holding ASA as the acquiring company. The excess value analysis, which was carried out by independent financial advisers, identified excess values of NOK 640 million for IT systems, NOK 87 million for customer relationships and NOK 10 million for licences. Goodwill, after deferred tax on excess value (increase of NOK 177 million) and adjustment for step acquisition (reduction of NOK 93 million), amounted to NOK 1,931 million. The expected life of IT systems and customer relationships was initially estimated to be 15 years. 20

21 The balance sheet item for intangible assets comprises the excess values described above and capitalised costs incurred by Oslo Børs and VPS in developing and implementing IT systems since the merger came into effect. The balance sheet value of goodwill has been reduced by write-downs of NOK 363 million and NOK 1,102 million carried out in 2008 and 2009 respectively. The market value of outstanding derivatives positions totalled NOK 793 million. As part of its normal business, Oslo Clearing is a formal counterparty in derivative transactions traded on Oslo Børs and in derivative transactions or securities borrowing and lending transactions notified for clearing. Counterparty risk is measured using models designed under international standards. Counterparty exposure is covered through individual collateral provided by each customer. In accordance with IAS 39 and IAS 32, the clearing business is required to recognise in its balance sheet the commitments borne by the company as a central counterparty in derivative contracts. The estimated market value of the positions is recognised as a current liability, with a matching entry under current receivables. Claims and liabilities that can be assigned to outstanding derivative positions are netted against each other to the extent that such offsetting is permitted. Pension liabilities increased by NOK 1 million to NOK 184 million compared to the 2009 year end. In accordance with the alternative treatment permitted by IFRS, actuarial losses at the close of 2010 were applied directly to comprehensive income. Reported pension liabilities therefore represent gross pension liabilities less the calculated value of pension assets. Further information can be found in Note 7 to the accounts. The equity of Oslo Børs VPS Holding was NOK 1,626 million at the end of 2010, representing a consolidated equity capital ratio of 55%. The holding company, which produces its accounts in accordance with Norwegian generally accepted accounting practice, reported equity of NOK 1,010 million and an equity capital ratio of 58%. The holding company s equity includes distributable reserves of NOK 835 million. The group generated cash flow from operational activities of NOK 388 million in Cash flow from investment activities represented an outflow of NOK 51 million. Following an outflow of NOK 345 million for financing activities, net cash flow for the year was an outflow of NOK 7 million. Liquidity at year end was NOK 899 million, a decrease from NOK 906 million at 2009 year end. In addition, NOK 25 million of liquid assets are classified as financial fixed assets. The boards of directors of the subsidiary companies Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS have proposed group contribution payments to the parent company Oslo Børs VPS Holding ASA of NOK 285 million, NOK 146 million and NOK 3 million respectively, totalling NOK 434 million. Following these transfers, the unconsolidated accounts of Oslo Børs VPS Holding ASA show an accounting profit for the year in 2010 of NOK 312 million. As part of its approval of the Annual Report and Accounts, the Board of Oslo Børs VPS Holding ASA intends to propose to the Annual General Meeting that an ordinary dividend of NOK 8.00 per share, equivalent to NOK 344 million in total, be approved. The dividend proposed is unchanged from 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. Generally accepted Norwegian 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 311,559,455 should be covered as follows: Provision for dividend: NOK 8 per share NOK 344,032,000 Transfer from other equity NOK 32,472,545 Total allocations NOK 311,559,455 The composition of the Board and its work The Board of Directors held 11 meetings in 2010, including two strategy meetings for the entire group. The Board has focused in particular on the group s strategy, the new competitive situation, improving efficiency, risk management and major projects. Personnel and organisational issues The Oslo Børs VPS group had 261 employees at 31 December 2010, of which 10 employees were employed on fixed term contracts. Female staff accounted for around 33% of employees at the close of Female staff hold 10 of the senior management positions. Salary statistics do not show any differential caused by gender. Three of the seven shareholder-elected members of the Board of Directors of Oslo Børs VPS Holding ASA are female. No special measures have been implemented to 21

22 encourage the promotion of female employees to management positions. 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. The group currently has two employees of non-scandinavian origin. The average age of the group s employees is 43. In 2010, parental leave of absence totalled the equivalent of a little over 6.5 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 also makes arrangements for employees with partial disability in order that they are able to continue with their role in the group. 16 new employees were recruited in 2010 on permanent terms. 30 permanent employees resigned in In overall terms, the group s employees represent a sound pool of experience and expertise. 54% of employees have been with the group for five years or more. 64 employees had been recruited over the last 3 years, representing approximately 25% of the workforce. This represents a sound mixture of new expertise and employees with long-standing experience. However, the picture is somewhat different when looking at the individual companies in isolation, and VPS stands out as the company with a markedly higher proportion of employees with long service. 58% of VPS employees have been with the company for more than 10 years. Results from employee satisfaction surveys carried out in 2010 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 22

23 caused by working at computer terminals. Absence due to sickness in 2010 of 5.5% was largely due to a higher number of employees on long-term sick leave caused in part by reasons not connected with workplace issues. 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. VPS has launched a campaign to encourage more investors to elect to receive electronic messages through VPS Investor Services rather than receiving printed communications by post. Research and Development Oslo Børs VPS does not carry out any research or development activity. However, the group does develop its own IT systems. Risk factors and areas of 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. All aspects of material exposure to operational risk are monitored and reviewed using risk evaluation procedures that are standardised across the group, and risk-reducing measures are documented and monitored as appropriate. 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. Exposure to financial risk arises in respect of liquidity, foreign currency, market 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 and other financial investments are exposed to market risk in that their value can be affected by changes in profits, dividends and interest rates. Oslo Clearing is a central counterparty for transactions in equity and derivative instruments. This business involves exposure to market risk and credit risk. Steps are taken to reduce risk exposure by requiring the provision of collateral, the operation of a default fund for clearing of equity instruments, joint and several liability between the participants to derivative transactions and routine credit evaluation of counterparties. Oslo Clearing carries out routine stress tests and monitoring of its risk exposure in accordance with international standards. The key systems operated by Oslo Børs maintained high and stable levels of availability in The former trading system for equities, Saxess, which was in use until 12 April 2010, achieved availability of 100%. Saxess was replaced by the TradElect system for trading in equities and fixed income instruments in April, which has achieved availability of 99.8%. The Sola trading system for derivatives achieved availability of 99.9%. The real-time data system OCDF achieved availability of 99.9%. Overall availability for the systems operated by VPS was 99.98% in Oslo Børs, VPS and Oslo Clearing have implemented and operate internal control procedures in accordance with the Internal Control regulation issued by The Financial Supervisory Authority of Norway. Work on risk management and internal control is a continuous process of implementing measures to improve identified areas and monitoring their effectiveness. Certain challenges have been identified at VPS in respect of implementation and compliance with the regulation in certain specific areas, and measures have been implemented to rectify these weaknesses. The Board of Directors is of the opinion that, other than as mentioned above, the operations of Oslo Børs VPS are not exposed to any particularly significant risk factors. 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. Prospects for 2011 Oslo Børs VPS strives to operate with a pricing structure that is competitive and that promotes active use of the services the group offers. Competition is expected to increase in the future. Oslo Børs VPS will again in 2011 consider changes in certain fees/prices and measures to improve the efficiency of its services to the benefit of its customers. 23

24 The 2009 annual report stated that operating costs for 2010 before amortisation and write-downs of excess value were expected to be in the order of NOK 500 million. Depreciation and capitalisation of internal resources were expected to be NOK 75 million and NOK 30 million respectively. Amortisation of excess value was expected to amount to NOK 80 million. Operating costs before amortisation and write-downs of excess value amounted to NOK 488 million in Depreciation and capitalisation of internal resources amounted to be NOK 61 million and NOK 19 million respectively, while amortisation of excess value amounted to NOK 82 million in Oslo Børs VPS has the solidity and liquidity needed to take an aggressive approach to carrying out the projects it plans and meeting the challenges it faces in The group expects the operating costs it will incur in 2011 will be somewhat higher than in 2010 as a result of projects planned for the Oslo Børs trading system and for the renewal of the VPS IT platform. The renewal of the VPS IT platform will include migrating the applications used for the mutual funds service onto a new platform. Work on this project started in January The turbulent conditions in financial markets over recent years and increasing competition continue to cause some uncertainty over the future level of transaction volumes and activity. 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, 12 April 2011 Leiv Askvig Giséle Marchand Svein Støle Ottar Ertzeid Chair Deputy Chair Board member Board member Benedicte Schilbred Fasmer Benedikte Bettina Bjørn Harald Espedal Board member Board member Board member Bente A. Landsnes Group CEO 24

25 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 2010 to 31 December 2010 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, 12 April 2011 Leiv Askvig Giséle Marchand Svein Støle Ottar Ertzeid Chair Deputy Chair Board member Board member Benedicte Schilbred Fasmer Benedikte Bettina Bjørn Harald Espedal Board member Board member Board member Bente A. Landsnes Group CEO 25

26 Oslo Børs VPS Holding ASA - GROUP Statement of comprehensive income, at 31 Dec (Figures in NOK 1,000) Note OPERATING REVENUES Operating revenues TOTAL OPERATING REVENUES OPERATING COSTS Salaries and related costs 4,7, Depreciation Amortisation of excess value Write-down of excess value Other operating costs TOTAL OPERATING COSTS OPERATING PROFIT Income from investments in joint ventures 4, Financial income Financial expense NET FINANCIAL ITEMS ORDINARY PRE-TAX PROFIT Income tax expense PROFIT/-LOSS FOR THE YEAR Actuarial gains/losses on defined benefit pension scheme Tax effect COMPREHENSIVE INCOME Earnings per share Diluted earnings per share

27 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 8, Customer relationships 8, Licences 8, Goodwill 8, Total intangible assets Tangible assets Property Fittings, IT equipment, vehicles etc Total tangible assets Financial fixed assets Investment in joint ventures Investment in shares 5, Deferred tax assets Bank deposits Other long-term receivables Total financial fixed assets Total fixed assets CURRENT ASSETS Receivables Accounts receivable Market value of outstanding derivatives positions Other receivables Total receivables Investments 11, Bank deposits Total current assets TOTAL ASSETS

28 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 Share premium reserve Other paid-in equity Total paid-in equity Other equity Other equity - - Total other equity 0 0 Total equity LIABILITIES Long-term liabilities Pension liabilities 7, Deferred tax Total long-term liabilities Current liabilities Trade creditors Tax payable Payroll tax and other deductions Cash collateral Market value of outstanding derivatives positions Other current liabilities Total current liabilities Total liabilities TOTAL LIABILITIES AND EQUITY Oslo, 12 April 2011 Leiv Askvig Giséle Marchand Svein Støle Ottar Ertzeid Chair Deputy Chair Board member Board member Benedicte Schilbred Fasmer Benedikte Bettina Bjørn Harald Espedal Board member Board member Board member Bente A. Landsnes Group CEO 28

29 Oslo Børs VPS Holding ASA - GROUP Statement of changes in equity Other Own Share premium paid-in Other Total (Figures in NOK 1,000) Share capital shares reserve equity equity 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 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 Transfer from share premium reserve Buy-back of own shares Dividend for Total transactions with owners Equity capital at 31 December Share premium on the issue of new shares is transferred to the share premium reserve. Use of the share premium reserve is restricted pursuant to Section 3-2 of the Public Limited Liability Companies Act. The share premium reserve was reduced by TNOK 564,219 in The reduction was applied as an equity reserve. Other paid-in equity is an equity reserve, and can be applied as decided by the General Meeting. 29

30 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 Gain/loss on sale of fixed assets Depreciation of fixed operating assets Amortisation and write-downs of excess value 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 Investment in/sale of shares etc Income from investments in joint ventures Interest income Dividends received Receipts from sale of fixed assets Payments for purchase of fixed assets Net cash flow from investment activities Cash flow from financing activities Payment on purchase of own shares Repayment of borrowings from financial institutions 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 TNOK 13,356 (TNOK 13,178 in 2009 and TNOK 12,565 in 2008). Cash and liquid assets include a balance of TNOK 2,746 on the company s settlement account due to be transferred to members on the following settlement day. A guarantee of TNOK 25,319 in respect of future pension payments is classified as a fixed asset and is not included in the holdings shown above. TNOK 28,673 relates to cash collateral for settlement of equity capital instruments deposited by member firms in foreign banks that is included in the group s consolidated liquidity. 30

31 Oslo Børs VPS Holding ASA - GROUP Notes Accounting principles The consolidated accounts of Oslo Børs VPS Holding for 2010 were approved by the Board of Directors on 23 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 trading in securities and other stock exchange listed financial instruments, settlement of trading in financial instruments, clearing of derivatives and equities, 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. The accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by the EU. Oslo Børs VPS Holding 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 the principles of historic cost accounting, save for investments available for sale, which are valued at fair value. Comparable figures For comparison with previous years, comparable figures are provided for balance sheet items for the last two years, while for profit and loss items comparable figures are provided for the last three years. Consolidation principles The group comprises Oslo Børs VPS Holding ASA and the subsidiary companies Oslo Børs ASA, Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS. Oslo Børs VPS Holding ASA holds 100% of the share capital of these companies. Oslo Børs VPS Holding ASA and Oslo Børs ASA operate from offices at Tollbugata 2, 0152 Oslo, Norway. Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS operate from offices at Biskop Gunnerus gate 14A, 0185 Oslo, Norway. Minority 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. 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 consideration and the book value of the ownership interest is applied directly to the majority owner s equity. Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS are included in the consolidated accounts with effect from 27 November 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. Any deficit or uncovered loss in a subsidiary company is also allocated to the minority owner, even if this causes the minority interest to be shown with a negative amount in the company s equity. This treatment represents a change with effect from 1 January 2010 as a result of the implementation of the amendments to IAS 27. 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 minority 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 as other income and costs form part of 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 IAS 31. A joint venture is a business over which the group has shared control through a contractual agreement between the parties. Such an investment is recognized 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 between 20% and 50%). The consolidated accounts include the group s share of the profit or loss from associated companies recognised in accordance 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. Other investments are accounted for in accordance with IAS 39. 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. Prior to 1 January 2010, such costs were added to the cost price. 31

32 Notes - GROUP 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. In the case of acquisitions carried out before 1 January 2010, conditional consideration was included as consideration if it was more likely than not that the amount would be paid. In addition, changes in deferred consideration were treated as changes to acquisition cost and adjusted against goodwill. 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 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 depreciated, but is tested at least annually for impairment. If the impairment test shows that book value is in excess of fair value, goodwill is written down to fair value. 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 minority interests at fair value, or on the basis of the minority interests share of identified asset and liability items. Goodwill is tested annually for impairment. In connection with this, goodwill is allocated to cash generating units or groups of cash generating units 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 recognized to profit immediately 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. In the case of acquisitions carried out before 1 January 2010, the earlier ownership interest was not adjusted to fair value upon acquiring additional ownership interest. For such acquisitions, goodwill was the estimated total of goodwill associated with each acquisition transaction. Cash and cash equivalents Cash includes cash held in the tills and bank deposits. Bank deposits with a fixed term of one year or longer are classified as fixed assets. Cash equivalents are short-term liquid investments with a maximum term of three months that can readily be converted to a certain cash amount. Collateral pledged in relation to clearing of equity instruments Certain member firms have pledged liquid assets as collateral for the settlement of clearing of equity instruments in the form of deposits denominated in approved currencies in foreign banks. These deposits are included in the group s liquid assets, and the matching liability is reported as cash collateral as part of current liabilities. Accounts receivable Accounts receivable are recorded at their nominal value less provisions for expected losses. Financial derivatives that are not hedging instruments Financial derivatives that are not accounted for as hedging instruments are valued at fair value. Changes in fair value are recognised to profit and loss as they occur. The group did not hold any such instruments at the close of 2010 or As part of its normal business, the subsidiary Oslo Clearing ASA is a formal counterparty in derivative transactions traded on Oslo Børs and in derivative transactions or securities borrowing and lending transactions notified for clearing. Counterparty risk is measured using models designed under international standards. Counterparty exposure is covered through individual collateral provided by each customer. In accordance with IAS 39 and IAS 32, the clearing business is required to recognise in its balance sheet the commitments borne by the company as a central counterparty in derivative contracts. The estimated market value of the positions is recognised as a current liability, with a matching entry under current receivables. Claims and liabilities that can be assigned to outstanding derivative positions are netted against each other to the extent that such offsetting is permitted. 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 other expenses that are expected to produce future economic benefits are capitalised. Intangible assets are recognised in the balance sheet if it is likely that the expected future commercial 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 commercial life are 32

33 Notes - GROUP valued at acquisition cost less accumulated amortisation and write-downs. 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 commercial life: IT systems acquired through merger Other IT systems Customer relationships Licences Real estate Vehicles, fixtures and fittings etc. 3-9 years 3-10 years 9 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. 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 commercial life of an asset, the book value at the start of the accounting period is depreciated over the new remaining commercial life. Operational assets that are leased on terms that transfer the major part of financial rights and liabilities to the group are treated as tangible operational assets at the current value of the minimum rental payments, or at fair value if this is lower. The lease payment liability is included as a long-term liability. For other leasing agreements, lease rental payments are treated as operating costs and are allocated systematically over the same period. 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 2008, 2009 and 2010 the group held instruments in the categories loans and receivables and available for sale. Loans and receivables are valued at amortised cost. Financial instruments classified as available for sale are valued at fair value, as observed on the balance sheet date, with no deduction for costs associated with disposal. Gains or losses that arise from changes in the fair value of financial investments classified as available for sale are recognised over other income and expenses in the Comprehensive income. In 2010, Oslo Clearing became a clearing house for trading in equity instruments. The accounts apply the settlement date for the recognition of income. In practical terms, this means that sales and purchases take place simultaneously. If a member firm defaults on its settlement obligations, Oslo Clearing may have to carry a position for a short period. 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 which 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. The reserve for unrealised gains includes the total net change in fair value of financial instruments classified as available for sale, until an investment is disposed of or is deemed to be of no value. Revenues Fees charged for services provided on a daily basis represent the group s principal source of revenue. Annual fixed fees are invoiced in advance at the start of 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 recognized 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 33

34 Notes - GROUP 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. Non-monetary items valued at fair value denominated in foreign currency are translated at the exchange rate on the balance sheet date. Currency valuation differences are recognised as they occur in the accounting period. Employee benefits The group s pension arrangements comprise 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 applied directly to comprehensive income. For the defined contribution scheme, payments into the scheme are recognized as a cost as they are incurred. The group has no further obligations in respect of the defined contribution scheme. Income taxation Tax expense is made up of tax payable and changes in deferred tax assets. 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, associated companies 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. The group capitalises deferred tax assets that have not previously been capitalised to the extent that it has become likely that the group can make use of the deferred 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 payable and deferred tax are charged directly to equity if the tax items relate to an equity transaction. Taxes related to items recognized in other income and expenses in comprehensive income or directly to equity (equity transactions), are equivalent recognized to other income and expenses in comprehensive income or to equity. Borrowing costs Borrowing costs are recognized to profit and loss when they are incurred. Borrowing costs are capitalised to the extent that they relate directly to the purchase or manufacture of a fixed asset. Write-down of financial assets Financial assets valued at amortised cost are written down to fair value 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 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 if the original write-down had not been taken into account at the time of the reversal. Reversals of earlier write-downs are reported as part of net financial items. Segmental information The Oslo Børs VPS Holding ASA group has four segments: Oslo Børs, VPS, Oslo Clearing and Oslo Market Solutions. Segment information has been prepared in accordance with IFRS 8. Contingent liabilities and assets Contingent liabilities are not recognised in the annual accounts. Information is provided on any material contingent liabilities, excluding contingent liabilities where the likelihood of the liability materialising is low. Contingent assets are not recognised in the annual accounts, but information is provided if there is a reasonable degree of likelihood that the group will receive such a benefit. 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. 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, 34

35 Notes - GROUP 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 16. Financial items Financial items relating to daily settlement of derivatives and equity instruments are recognised as operating revenue and operating costs. Other financial items are recognised as financial income or financial expense. New accounting standards The following IFRS and IFRIC standards have been approved or amended and come into effect for accounting periods beginning after 1 January Amendments to IFRS 7 Financial Instruments Disclosures The amendments relate to additional information to be provided in the notes to the accounts in connection with transfers of financial assets in which the company retains an interest. The amendments to IFRS 7 are due to come into force for accounting periods beginning on or after 1 July 2011, but the revised standard has not yet been approved by the EU. IFRS 9 Financial Instruments IFRS 9 replaces the provisions on classification and measurement currently provided in IAS 39 Financial Instruments: Classification and Measurement. IFRS 9 will require that financial assets with basic loan features are recognised in the accounts at amortised cost unless the company chooses to recognise such assets at fair value, while other financial assets will be recognised at fair value. IFRS 9 is due to come into effect for accounting periods beginning on or after 1 January 2013, but the standard has not yet been approved by the EU. IAS 24 (revised) Related Party Disclosures The revised IAS 24 simplifies and clarifies the definition of related parties. The standard is due to come into effect for accounting periods beginning on or after 1 January Changes to IFRIC 14 - IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction Prepayments of a Minimum Funding Requirement The revised standard permits an entity to treat the prepayment of a minimum funding requirement for a defined benefit pension scheme as an asset rather than an expense. The changes to IFRIC 14 come into effect for accounting periods beginning on or after 1 January IASB: Improvements to IFRSs 2010 The IASB approved changes to a number of IFRS standards in 2010 as part of its Improvements to IFRSs program. These changes come into effect for accounting periods beginning on or after various dates, the earliest being 1 July These changes have not yet been approved by the EU. IFRS 3 Business combinations IFRS 7 Financial instruments Disclosures IAS 27 Consolidated and Separate Financial Statements IAS 1 Presentation of Financial Statements IAS 34 Interim Reporting The company will implement the standards and interpretations from such time as the EU stipulates that they should be observed. None of the standards in question are expected to affect figures provided in the accounts for previous years, but may affect future transactions that take place subsequent to their implementation. The date at which standards have to be applied is linked to the start of the accounting period, and standards therefore apply with effect from the accounting year that starts on or after the date on which the standard comes into force. New and revised accounting standards applied by the group The group applied the following new standards and revised standards in 2010: IFRS 3 (revised) Business Combinations Relative to the former IFRS 3, the revised standard introduced certain changes and clarifications with respect to the use of the acquisition method for acquisitions carried out after 1 January Relative to the previous rules, the revised standard will have consequences for the accounting treatment of goodwill in stepwise acquisitions, the valuation of minority interests, and the treatment of conditional consideration and of costs incurred in relation to acquisitions. IAS 27 (revised) Consolidated and Separate Financial Statements The revised standard gives more guidance than the former IAS 27 on the accounting treatment of changes in ownership interests in subsidiaries and the derecognition of subsidiaries. The revised standard also addresses the treatment of losses and negative equity in subsidiary companies, which must be allocated between the controlling interest and minority interests even if this results in a deficit for the minority interests. IFRIC 17 Distributions of Non-cash Assets to Owners The interpretation addresses the accounting treatment of distributions to owners using assets other than cash. The implementation of these new and revised standards and interpretations has not had any effect on the group s accounts for 2010 since the group does not have any transactions or circumstances that were affected by the rules in question. 35

36 Notes - GROUP Note 1 Segment information Following the merger of Oslo Børs Holding and VPS Holding, the business of Oslo Børs VPS Holding has four segments: Oslo Børs, VPS, Oslo Clearing, and Oslo Market Solutions. Oslo Børs ASA and its former subsidiary Oslo Børs Informasjon AS were merged in As a result of this merger, Oslo Børs Informasjon is part of the Oslo Børs segment. Prior to this, Oslo Børs Informasjon was part of the Oslo Market Solutions segment. The business activity of Oslo Børs is to operate marketplaces for 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. Oslo Clearing carries out clearing for trading in derivatives contracts and equity capital 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. The identification of segments is based on the organisational structure of the group and its management reporting. The segments are based on the three units subject to statutory authorisation: Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Clearing ASA. Oslo Market Solutions is included in its own segment, while Oslo Børs VPS Holding is included in the segment Other. Segment information is based on the unconsolidated accounts of Oslo Børs ASA, Verdipapirsentralen ASA, Oslo Clearing 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. VPS, Oslo Clearing and Oslo Market Solutions are included in the consolidated accounts with effect from 27 November Oslo Børs VPS Holding only operates in Norway. 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 14% of total revenue. The next largest customer accounts for less than 10% of total revenue. (Figures in NOK 1,000) Oslo Market Other/ 2010 Oslo Børs VPS Oslo Clearing 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 The entry for netting in respect of other assets includes netting of shareholdings in subsidiaries and intercompany payables and receivables between subsidiaries. 36

37 Notes - GROUP (Figures in NOK 1,000) Oslo Market Other/ 2009 Oslo Børs VPS Oslo Clearing 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 (Figures in NOK 1,000) Oslo Market Other/ 2008 Oslo Børs VPS Oslo Clearing 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

38 Notes - GROUP Note 2 Business combinations No business combinations were carried out in 2010, 2009 or BUSINESS COMBINATIONS IN 2007 The merger of Oslo Børs Holding ASA and VPS Holding ASA was registered and came into force on 26 November Oslo Børs Holding simultaneously changed its name to Oslo Børs VPS Holding ASA. The merger was recognized for accounting purposes on a transaction basis, with Oslo Børs Holding ASA as the acquiring company. The acquisition date was 27 November The implementation of the merger involved the exchange of the entire share capital of 5 million shares in VPS Holding (with the exception of 499,000 shares owned by Oslo Børs Holding) for shares in Oslo Børs VPS Holding ASA. The exchange ratio was agreed in the Merger Plan as 4 shares in Oslo Børs VPS Holding for 1 share in VPS Holding. The merger caused the issue of 18,004,000 new shares in Oslo Børs VPS Holding. The costs involved in the issue, NOK 1.7 million (after tax), were applied directly to equity in Based on the last traded price for the Oslo Børs Holding share prior to the implementation of the merger (NOK 141), the fair value of VPS Holding was calculated to be NOK 2,820 million. The purchase price, including purchase cost of NOK 18 million, was NOK 2,838 million. VPS Holding owned 100% of the share capital of Verdipapirsentralen ASA, Oslo Clearing ASA (formerly VPS Clearing ASA) and Oslo Market Solutions AS (formerly Manamind AS). The respective activities of these companies are: the registration of rights in the financial instruments and settlement of trading in financial instruments; clearing of derivatives and equities trading; and sales of financial market data and related systems. An excess value analysis of VPS Holding produced the following results (figures in NOK 1,000): Balance at Fair value Fair value time of Allocation of after allocating Step after effect of acquisition excess value excess values acquisition step acquisition IT systems Customer relationships Licences Goodwill Deferred tax asset Other fixed assets Cash Other current assets Total assets Equity Long-term liabilities and commitments Current liabilities Total liabilities and equity The excess value analysis, which was carried out by independent financial advisers, identified excess values of NOK 640 million for IT systems, NOK 87 million for customer relationships and NOK 10 million for licences. Goodwill, after deferred tax on excess value (increase of NOK 177 million) and adjustment for step acquisition (reduction of NOK 93 million), amounted to NOK 1,931 million. IT systems and customer relationships were to be written off over 15 years. The amortisation periods applied to customer relationships and IT systems were changed from 15 years to 9 years in the fourth quarter of 2008 as a result of increased uncertainty over the useful life of IT systems and customer relationships. Goodwill arising from the acquisition relates to factors such as the workforce, expected future earnings and expected synergy benefits. 38

39 Notes - GROUP Note 3 Accounts receivable/losses on receivables Accounts receivable are recorded at their nominal value less provisions for expected losses. Provisions are made on the basis of case-by-case evaluation of amounts due. Losses on accounts receivable are recognized as other operating costs. The provision for losses has developed as follows (figures in NOK 1,000): Specific General provision provision Total 31 December Provided for during the year Provision applied in the year Provision written-back - 31 December Provided for during the year Provision applied in the year Provision written-back December Ageing of customer receivables is as follows: 2010 Total Not yet due < 30 days days days days >120 days Total Not yet due < 30 days days days days >120 days Note 4 Specification of profit and loss items (Figures in NOK 1,000) Salaries and related costs Salaries Pension cost Employer s social security contributions Other benefits Restructuring costs Capitalised internal resources 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

40 Notes - GROUP In 2010, VPS cancelled the purchase of the Mutual Funds system from an external supplier, and the amount reported for use of external contractors is affected because part of the purchase price was refunded to VPS. (Figures in NOK 1,000) Financial items Share of profit in joint ventures Interest income Other financial income Interest expense Other financial expense including currency losses Net financial items Note 5 Specification of balance sheet items (Figures in NOK 1,000) Investments in shares Shares in Link Up Markets Investments in shares Other long-term receivables Loans to joint ventures Other long-term receivables Other long-term receivables Other current receivables Loans to employees Prepayments Accrued income Other receivables Other current receivables Other current liabilities Salaries due, holiday pay etc Accrued costs Prepaid income Restructuring costs Settlement payments due to members Other current liabilities Other current liabilities The terms of 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. 40

41 Notes - GROUP Note 6 Taxation (Figures in NOK 1,000) Pre-tax profit Non-tax-deductible costs/non-taxable income Write-down of goodwill Write-down of shares Income from joint ventures Change in temporary differences Pensions applied to overall profit Correction of tax on group contributions not tax deductible Other Tax base for the year Tax charge: Tax payable at 28% Change in deferred tax assets Change in deferred tax liabilities Over (under) tax charge in previous year s accounts R&D tax credit 404 Other Tax charge for the year Reconciliation of tax charge: Total tax charge for the year % 8.01 % % Nominal tax rate % % % Difference caused by non-tax-deductible costs etc % % % Change in temporary differences not giving rise to deferred tax asset 0.03 % % 0.08 % Over/under recognition of tax in previous year s accounts 0.00 % 0.58 % 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. Effect on profit and loss Applied to overall profit 31 Dec Dec Goodwill Tangible fixed assets Pension liability Other Total deferred tax asset Tangible assets IT systems Customer relationships Licences Other Deferred tax liabilities Deferred tax liabilities in respect of excess values arising from the business combination with VPS Holding are not netted in the balance sheet against deferred tax assets associated with other assets. The amount in question at 31 December 2010 was TNOK 105,

42 Notes - GROUP The following tax positions were applied as other income and costs in arriving at comprehensive income for 2010 (figures in NOK 1,000): Gross Tax effect Net Pension actuarial gains/losses The investments in joint ventures do not give rise to any temporary differences. Note 7 Pension costs and pension liabilities Insured schemes The group has arranged both defined benefit and defined contribution collective pension schemes through Storebrand Livsforsikring. The group also has defined contribution pension schemes with Skagen and Storebrand. The defined benefit scheme is closed to new members, and all new employees are automatically members of a defined contribution scheme. Assuming that the employees who are members of a defined benefit plan enjoy a continual increase in salary from year to year, the premiums paid in respect of a defined benefit plan increase sharply as employees approach pension age. For accounting purposes it is considered prudent to recognise the accrued entitlement to pension rights on a straight-line basis over the period that rights are earned. Pension liabilities are therefore calculated as the net discounted present value of future benefits assumed to have accrued by the balance sheet date, based on the assumption that employees earn their entitlement to future pension on a straight line basis over their period of employment. Pension fund assets are recognised at fair value and are netted against pension liabilities in the balance sheet. 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 1 times and 6 times the National Insurance base amount (G) and 8% of salary between 6G and 12G. Risk insurance is equivalent to that offered by the closed defined benefit scheme, except that the closed defined benefit scheme also provides for a surviving partner s pension. At the close of 2010, the group s defined contribution pension schemes had 144 members. The collective pension schemes offered by the group satisfy the requirements of the Mandatory Occupational Pensions Act. Uninsured schemes In 2007, Oslo Børs and VPS established a pension scheme paid from operations for employees with salary over 12G. The scheme offers a pension equivalent to 63% of final salary for employees of Oslo Børs and 70% of final salary for employees of VPS. Further details of the pension costs and liabilities involved are provided below. The expected cost for 2011 including employers social security contributions is TNOK 3,311. Oslo Børs ASA established a voluntary early retirement scheme in 1997, offering retirement at 64 years for all employees. The scheme offers a pension equivalent to 60% of gross salary. This scheme was closed to new members in For certain managers, based on seniority and the management position in question, the scheme offers retirement at age 60. Further details of the pension liabilities involved are provided below. The expected cost for 2011 including employers social security contributions is TNOK 1,705. An agreement to make future pension payments was entered into in connection with the departure of former President and CEO Kjell Frønsdal. The uninsured liability in this respect, which was recognised and expensed in 1999, is estimated at net discounted current value and capitalised in an amount of TNOK 2,895. The cost recognised to profit and loss in 2010 was TNOK 147. Actuarial losses of TNOK 34 that arose in connection with changes to the assumption used for calculating the pension liability in respect of this agreement have been recognized as part of other income and costs in arriving at overall profit for the year. The expected cost for 2011 including employers social security contributions is TNOK 98. Former President and CEO Sven Arild Andersen retired at the expiry of his employment contract on 31 December He was entitled from the date of retirement until he reached 65 years of age (in 2009) to 67% of his salary at retirement. Upon reaching 65 years of age, he is entitled to a lifetime pension of 60% of his salary at retirement (TNOK 2,800, index linked in pace with the National Insurance Base Amount to TNOK 3,364), 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 his employment contract, his pension entitlement also includes the right to a widow s pension of 60% of retirement salary. The capitalised liability at 31 December 2010 is TNOK 24,998 and the cost recognised in the profit and loss account for 2010 including employers social security contributions was TNOK 1,

43 Notes - GROUP Actuarial losses of TNOK 1,660 that arose in connection with changes to the assumption used for calculating the pension liability in respect of this agreement have been recognized as part of other income and costs in arriving at overall profit for the year. The expected cost for 2011 including employers social security contributions is TNOK 1,054. 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 widower 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. A liability of TNOK 35,718 was recognized in the balance sheet at 31 December The cost recognised in the accounts for 2010 including employers social security contributions was TNOK 2,390. Actuarial losses of TNOK 2,023 that arose in connection with changes to the assumption used for calculating this pension liability have been recognized as part of other income and costs in arriving at overall profit for the year. The expected cost for 2011 is TNOK 2,754 including employer s social security contributions. Jan S. Hellstrøm retired from his position as Deputy Group CEO and CEO of VPS in September The agreed retirement age for Jan S. Hellstrøm was 63 years of age. Under the terms of his employment contract, he is entitled to a pension of 70% of salary, reduced in respect of benefits received from the National Insurance Fund, with a spouse s pension at 42% of salary. A liability of TNOK 9,298 was recognized in the balance sheet at 31 December 2010, of which TNOK 2,260 relates to the insured pension scheme for salaries for salaries in excess of 12 times the National Insurance base amount. The cost recognised in the accounts for 2010 was TNOK 1,413. The expected cost for 2011 is TNOK 1,467 including employer s social security contributions. Ole-Wilhelm Meyer was appointed CEO of Verdipapirsentralen ASA in September (Meyer resigned from his position in February 2011, se note 21). His agreed retirement age is 63 years of age. Under the terms of his employment contract, he is entitled to an early retirement pension from his agreed retirement age until age 67. The early retirement pension will be equivalent to 70% of salary. His normal retirement pension, from the age of 67, will be linked to the rights accrued in the company s group defined contribution pension scheme, together with the company s supplementary pension scheme financed from operations for salaries in excess of 12 times the National Insurance base amount. His employment contract also provides for a 50% spouse s pension.a liability of TNOK 1,848 was recognized in the balance sheet at 31 December The cost recognised in the accounts for 2010 including employers social security contributions was TNOK 1,228. The expected cost for 2011 is TNOK 1,480 including employer s social security contributions. 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, the expensed effect of any change in the pension scheme or the estimates used, the expensed difference between actual and expected yield and the accrued liability for employer s social security contributions. The expected cost for 2011 is TNOK 15,749 including employer s social security contributions. Pension cost for defined contribution plans comprises the cost of contributions for the period and related costs. Contributions made for 2010 totalled TNOK 4,816 excluding employer s social security contributions. The expected cost for 2011 is TNOK 4,762 excluding employer s social security contributions. Employer s social security contributions in respect of payments to the collective pension scheme are capitalised to the extent that the payments increase pension assets. The provision made for uninsured pension liabilities includes employer s social security contributions. Actuarial gains or losses are recognized as part of other income and costs in arriving at overall profit for the year. Composition of pension assets: Sub portfolio Proportion Shares 15 % Bonds 28 % Bonds held to maturity 22 % Real estate 16 % Other 19 % The book investment return as reported in Storebrand s Q interim report was 1.5% (3.2% for the year to date). 43

44 Notes - GROUP The following assumptions are applied in calculating pension liability: Group Expected return on pension funds 4.70 % 5.10 % 4.80 % Discount rate 3.70 % 4.10 % 3.80 % Expected rate of increase in salaries 4.00 % 4.25 % 4.00 % Expected rate of increase in the National Insurance base amount (G) 3.75 % 4.00 % 3.75 % Expected rate of increase in pension benefits - G increases 3.75 % 4.00 % 3.75 % Expected rate of increase in pensions - minimum increase 2.00 % 2.00 % 2.00 % Average rate for employer s social security contributions % % % Mortality table used K2005 K2005 K2005 The discount rate is determined on the basis of observed yields on Norwegian government bonds plus a margin for the longer maturity. The average maturity of pension liabilities is calculated to be 30 years. The margin added is calculated by reference to the yield differential between long and medium-term US Treasury yields denominated in USD. 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 2.5%. Actuarial assumptions are based on risk tables. The mortality table, K2005, is based on best estimates for the Norwegian population. The risk table dated 31 December 2009 shows expected average life expectancy of 80 years for men and 84 years for women. 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 Mortality rates At age Men Women % 0.11 % % 0.47 % % 4.54 % Likelihood of disability At age Men Women % 0.16 % % 0.35 % % 1.94 % 80 NA NA 44

45 Notes - GROUP Summary of pension liabilities: (Figures in NOK 1,000) Insured scheme Uninsured scheme Uninsured Group CEO Former for salaries under for salaries over early retirement and Deputy Oslo Børs G 12 G scheme Group CEO CEOs Total Liability at 1 Jan Charged to profit and loss in Contributions Payments Actuarial gains/losses Liability at 31 Dec Insured defined benefit scheme for salaries under 12 times the National Insurance base amount: No. of members at 31 Dec 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 Effect of changes to the pension scheme Net pension costs before employer s social security contributions Accrued employer s social security contributions Net pension costs including employer s social security contributions 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 Pensions paid/paid-up policies Reduction in future liabilities due to staff leaving Reduction in pension liabilities due to staff leaving Calculated gross pension liability at 31 Dec

46 Notes - GROUP Pension fund assets at 1 Jan Expected return on pension fund assets Premium payments Actuarial gains and losses Pensions paid/paid-up policies Reduction in pension fund assets due to staff leaving Pension fund assets at 31 Dec Net pension assets before employer s social security contributions Accrued employer s social security contributions Net pension liabilities Changes in the insured scheme liabilities: Net capitalised liability at 1 Jan Pension cost charged to profit and loss Premium payments Payments Actuarial gains/losses Net capitalised liability at 31 Dec Uninsured defined benefit scheme for salaries over 12 times the National Insurance base amount : No. of members at 31 Dec 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 Gain arising from staff leaving Net pension costs before employer s social security contributions Accrued employer s social security contributions Net pension costs including employer s social security contributions

47 Notes - GROUP 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 Reduction in pension liabilities due to staff leaving Calculated gross pension liability at 31 Dec Accrued employer s social security contributions Net pension liabilities Change in the insured scheme liabilities: Net capitalised liability at 1 Jan Pension cost charged to profit and loss Actuarial gains/losses Net capitalised liability at 31 Dec Uninsured early retirement scheme for Oslo Børs In addition to the assumptions set out above, the following assumptions are applied for calculations in respect of the uninsured scheme: No. of employees eligible for the scheme at 31 Dec Expected drawings under the scheme - employees under 40 years 25 % 25 % 25 % Expected drawings under the scheme - employees years 50 % 50 % 50 % Expected drawings under the scheme - employees over 50 years 100 % 100 % 100 % Pension costs and pension liabilities 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 Accrued employer s social security contributions Net pension costs including employer s social security contributions

48 Notes - GROUP 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 Pensions paid/paid-up policies Calculated gross pension liability at 31 Dec Accrued employer s social security contributions Net pension liability Change in the uninsured scheme liabilities: Net capitalised liability at 1 Jan Pension cost charged to profit and loss Payments Actuarial gains/losses Net capitalised liability at 31 Dec Note 8a) Fixed assets Fixtures, Operating IT equipment, assets not (Figures in NOK 1,000) Property vehicles etc. depreciated Total 2010 Total 2009 Acquisition cost 1 Jan Additions during the year Disposals during the year Acquisition cost 31 Dec Acc. ordinary depreciation 1 Jan Ordinary depreciation for the year Write-downs for the year 0 Acc. Ordinary depreciation for assets sold Acc. ordinary depreciation 31 Dec Book value 31 Dec Expected economic life (years) N/A Depreciation plan Linear Linear N/A The group had no commitments to purchase fixed assets at 31 December

49 Notes - GROUP Note 8b) Intangible assets - developed in-house Of which not Customer (Figures in NOK 1,000) IT systems completed relationships Goodwill Licences Total 2010 Total 2009 Acquisition cost 1 Jan Completed in Disposals during the year - including in-house developments Additions through merger 0 0 Disposals during the year Acquisition cost 31 Dec Acc. ordinary depreciation 1 Jan Ordinary depreciation for the year Amortisation for the year Write-down for the year Acc. Ordinary depreciation/ write downs for assets sold Acc. ordinary depreciation 31 Dec Book value 31 Dec Expected economic life (years) N/A N/A Amortisation plan Linear Linear N/A N/A Licenses comprise the authorisations held by Verdipapirsentralen ASA and Oslo Clearing ASA to carry on business as a securities register and a clearing house respectively. The licences have no definite time limit, and are therefore not depreciated. IT systems include both development of in-house systems and in-house work on customising systems supplied or rented by third parties. In the case of Oslo Børs, this relates to work on developing and customising peripheral systems in connection with the migration to the TradElect trading system. Additions in 2010 totalled NOK 24 million. Of the total balance outstanding for IT systems, NOK 82 million relates to systems at Oslo Børs. Oslo Børs ASA completed implementation of a new trading system, TradElect, in The system came into production in April 2010, and has an expected life of 7 years. Oslo Børs uses the LSE as its systems supplier, and at the start of 2011, LSE migrated to a new trading system known as Millennium. Oslo Børs has established a preliminary project to investigate whether it should migrate onto the same system. Oslo Clearing launched a new IT system in 2010 for CCP clearing of equities. This system was developed in collaboration with VPS from 2009, and in 2010 Oslo Clearing became the owner of the system. Additions in 2010 totalled NOK 7 million. Of the total balance outstanding for IT systems, NOK 12 million relates to Oslo Clearing. Oslo Market Solutions did not make any material investments in IT systems in Of the total balance outstanding for IT systems, NOK 17 million relates to Oslo Market Solutions. VPS capitalises costs involved in developing in-house systems where the system in question has a clearly defined future income stream. 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 49

50 Notes - GROUP systems, infrastructure systems and administration systems. Individual projects for in-house developed systems that have a cost price of less than NOK 2.5 million are charged directly to profit and loss. Additions in 2010 totalled NOK 16 million. Of the total balance outstanding for IT systems, NOK 347 million relates to VPS. Brief history of IT development work carried out by VPS over recent years: VPS Investor Services was developed to support account operators in administering customer accounts and providing advice to customers. Some aspects of the Issuer business area have been renewed, with the development of a new solution for managing fixed income instruments. This application is known as VPS Fixed Income and is used by new issue managers, Issuer Account Operators, Norsk Tillitsmann AS (loan trustee) and Oslo Børs ASA. VPS approved a new IT strategy in In accordance with the strategy, VPS will carry out a number of projects in 2011 that are designed to modernise the company s IT platform, including the applications used in the mutual funds area. Write-down of the next-generation mutual funds system VPS has been involved since spring 2008 with the development of a new mutual funds system, with the objective of renewing the services it offers for fund management companies and their distributors. In January 2010 the board of directors of VPS decided to repudiate the contractual relationship with the supplier of the system, and halt this project. As a consequence, the book value of this project was written down by NOK 39 million, representing the capitalised value of the project as at 30 September Costs incurred in the fourth quarter of 2009 totalling NOK 17 million were recognized as operating expenses. These costs were reported in the 2009 accounts as NOK 5 million for capitalisation of internal resources and NOK 12 million for other operating expenses. Note 8c) Summary of write-down amounts for each cash generating unit Capitalised goodwill in the consolidated accounts totalled NOK 464 million at 31 December Goodwill arose as a result of the merger with VPS Holding (see note 2). The subsidiary companies Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS are deemed to be the cash generating units in the group, and goodwill was allocated to these units in the amounts of NOK 1,818 million, NOK 81 million and NOK 33 million respectively, totalling NOK 1,931 million, at 31 December Goodwill was tested for impairment at 31 December 2010, and the result showed that there was no need for further write-downs. The recoverable value is determined on the basis of an evaluation of the unit s total value. Total value is calculated on the basis of the discounted present value of expected future cash flows after tax, applying the appropriate post-tax discount rate that takes into account the useful life and risk. The interest rate applied to discount cash flows was 11.4% (11.7% at 31 December 2009). This is based on the risk-free return at the close of 2010 of 3.9% (4.2%), and an equity risk premium of 8.3% (8.3%). The required return on equity is determined posttax. Applying this together with an equity ratio of 90% and assuming the post-tax cost of capital at 4.2% (4.5%) gives a weighted average cost of capital of 11.4% (11.7%). The forecast period is from 2011 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 (2.5%). Summary of the book value of goodwill at 31. December 2010: (Figures in NOK 1,000) Verdipapirsentralen Oslo Clearing Oslo Market Solutions Total Book goodwill 1. Jan Write down Book goodwill 31. Dec

51 Notes - GROUP The assumptions made for cash generating units were as follows: VPS Operating revenue and cash flow are expected to be lower in 2011 than in This is due in particular to the implementation of T2S and the implementation of central counterparty (CCP) clearing for equities. An average annual reduction in operating revenue of just under 4% is assumed for the period 2010 to Operating costs (before amortisation and write-downs) are forecast to fall on average by around 0.4% per annum over the same period. In a scenario where the fall in revenue is double that anticipated, the scale of the write-downs needed increases by just over NOK 320 million. If the required yield is increased by 1 percentage point (from 11.4% to 12.4%) the scale of write-downs needed increases by just over NOK 40 million. Note 9 Share capital and shareholder information The share capital of Oslo Børs VPS Holding at 31 December 2010 was as follows: Net share No. of No. of capital and shares own shares Value own shares No. of shares 31 Dec NOK 2 NOK All shares have the same rights in respect of voting and dividends. Oslo Børs VPS Holding purchased own shares in 2010 in connection with the share purchase program for employees. In total it acquired 6,000 shares at NOK 61 and sold 7,674 shares at NOK There were no other changes in share capital or own shares in the period. The 20 largest shareholders at 31 December 2010 were: Ownership Nationality No. of shares Percentage VITAL FORSIKRING ASA % KLP FORSIKRING % PARETO AS % ORKLA ASA % NBI HF ICELAND (NOM) ICELAND % NORSK HYDROS PENSJONSKASSE % ARENDALS FOSSEKOMPANI % GOLDMAN SACHS INT (NOM) GREAT BRITAIN % STATE STREET BANK (NOM) USA % UBS SECURITIES LLC (NOM) USA % JPMORGAN CHASE BANK (NOM) GREAT BRITAIN % MSF-MUTUAL USA % MUST INVEST AS % CITIBANK USA % SUNDT AS % JPMORGAN CHASE BANK (NOM) LUXEMBURG % SPAREBANKEN VEST % MORGAN STANLEY & CO GREAT BRITAIN % MSF-MUTUAL USA % ELTEK HOLDING A/S % Total % 51

52 Notes - GROUP Registered holders (Nominee) with share owners at 10 February 2011: Registered holder Owner Shares % of total 1 VITAL FORSIKRING ASA 8,233, % 2 KOMMUNAL LANDSPENSJONSKASSE 4,300, % 3 PARETO AS 3,662, % 4 ORKLA ASA 3,510, % 5 NBI HF ICELAND 2,812, % Horn Investment 2,812, % 6 NORSK HYDROS PENSJONSKASSE 2,173, % 7 ARENDALS FOSSEKOMPANI ASA 1,996, % 8 GOLDMAN SACHS INT EQUITY 1,554, % Armor Capital Partners 906, % Armor Qualified 346, % Goldman Sachs clearing account 291, % Private holders 10, % 9 JPMORGAN CHASE BANK 1,436, % Nordea Nordic Small Cap Fund 790, % Franklin Mutual European Fund 622, % Nordea 1 SICAV 24, % 10 BANK OF NEW YORK MELLON SANV 1,251, % MSF Mutual Financial Services Fund 911, % MSF Mutual European Fund 340, % 11 STATE STREET BANK AND TRUST COMPANY 1,048, % Smallcap World Fund 1,002, % Wasatch International Opps Fund 32, % Wasatch Global Opportunities Fund 13, % 12 UBS SECURITIES LLC 940, % Teton Partners 646, % UBS as principal 294, % 13 CITIBANK NA 888, % National Financial Services clients 659, % Charles Schwab FBO clients 208, % UBS as principal 20, % 14 MUST INVEST AS 708, % 15 SUNDT AS 657, % 16 SPAREBANKEN VEST 550, % 17 MORGAN STANLEY & COMPANY INTERNAT PLC 550, % Explora Active Fund 550, % 18 CLEARSTREAM BANKING SA 400, % Hauck & Aufhaeuser Bank, Luxembourg private clients 200, % Bankhaus Neelmeyer, Bremen clients 100, % Hauck & Aufhaeuser Bank, Luxembourg private clients 100, % 19 MORGAN STANLEY & COMPANY INC NEW YORK 350, % Cascabel Fund 249, % Cascabel Offshore 100, % 20 UBS AG LONDON BRANCH 326, % Centaurus Capital funds 290, % Nightscape Global Value Master Fund 36, % SUM top 20 37,351, % 52

53 Notes - GROUP Shares held by Board Members, executive personnel and their close associates: Shares held Name Office held Shares owned by associates Leiv Askvig Gisele Marchand Chair of Oslo Børs VPS Holding /Oslo Børs /Board member VPS Board member Oslo Børs VPS Holding /Oslo Børs Benedicte Schilbred Fasmer Board member Oslo Børs VPS Holding /Oslo Børs Svein Støle Board member Oslo Børs VPS Holding Harald Espedal Board member Oslo Børs VPS Holding /Oslo Børs Benedikte Bettina Bjørn Ottar Ertzeid Kim Dobrowen Anne Johnsrud Hagen Knut Erik Robertsen Gunn Oland Audun Bø Board member Oslo Børs VPS Holding Board member Oslo Børs VPS Holding Chair of VPS Board member VPS Board member VPS Board member VPS Board member VPS Morten Nordby Employee representative VPS /Employee observer Oslo Børs VPS Holding 50 Sissel Bakker Employee representative VPS /Employee observer Oslo Børs VPS Holding 20 Gunnar Haug Deputy employee representative Oslo Børs /Deputy employee observer Oslo Børs VPS Holding 651 Marianne Klingen Deputy employee representative Oslo Børs /Deputy employee observer Oslo Børs VPS Holding Christian Falkenberg Kjøde Employee representative VPS /Employee observer Oslo Børs VPS Holding Ingvild Resaland Employee representative VPS /Employee observer Oslo Børs VPS Holding 65 Vidar Nordtømme Deputy employee representative Oslo Børs /Deputy employee observer Oslo Børs VPS Holding 75 Guro Steine Deputy employee representative Oslo Børs /Deputy employee observer Oslo Børs VPS Holding 367 Bente A. Landsnes Group CEO/CEO Oslo Børs Ole-Wilhelm Meyer CEO VPS Anders Brodin Deputy CEO Oslo Børs Øivind Amundsen SVP Legal Affairs, Oslo Børs from February Jorunn B. Øystese EVP Legal/Compliance VPS 51 Harald Næss EVP Development and IT VPS 551 Kjetil Nysæther SVP IT Oslo Børs Geir Heggem Acting CFO VPS Barbro Wiik Pedersen Acting CFO Oslo Børs 25 Per Eikrem SVP Corporate Communications Oslo Børs Leif Arnold Thomas EVP Customers and Market VPS Hugo Sundkjer CEO Oslo Market Solutions Christian Sjöberg CEO Oslo Clearing ASA Håvard Thorstad VP Risk Management Oslo Clearing 292 Kari Geier Sara Lillefloth VP Business Development Oslo Clearing Head of Clearing Operations Oslo Clearing Pareto Securities AS and Pareto AS, which hold 85 shares and 3,662,230 shares respectively, are close associates of Svein Støle. Leiv Askvig is the CEO of Sundt AS. Sundt AS holds 657,500 shares. Ottar Ertzeid is a Group Executive Vice President of the DnB NOR group, which includes Vital Forsikring ASA. Vital Forsikring ASA holds 8,233,680 shares. Benedicte Schilbred Fasmer is Director Capital Markets Division at Sparebanken Vest. Sparebanken Vest holds 550,505 shares. 53

54 Notes - GROUP 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) 8.00 Distributed dividend per share (NOK) Dividends shown as paid in 2008 and 2009 were distributed in 2009 and 2010 respectively. Distribution of dividend to the parent company s shareholders does not affect the company s tax payable or deferred tax. Note 11 Investments in joint ventures, shares etc. Oslo Børs purchased 50% of the share capital of Fondsmeglernes Informasjonstjeneste AS on 15 August Based on the shareholder agreement between the Norwegian Securities Dealers Association and Oslo Børs, the company is judged to be a joint venture. The ownership interest in this company is recognised in the consolidated accounts using the equity method. The proportion of profit recognised, less dividend, is transferred to the reserve for valuation differences. 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 Fondsmeglernes Informasjonstjeneste AS 2006 Oslo 50 % 50 % Excess value analysis (50% share): Book value for Oslo Børs ASA at time of acquisition Excess value of systems 720 Excess value of customer relationships 297 Goodwill Acquisition cost Calculation of balance sheet value at 31 Dec 2010 Balance sheet value at 31 Dec Share of profit for the year 711 Write-down of goodwill Amortisation of excess value 0 Write-down 0 Dividend received -700 Balance sheet value at 31 Dec

55 Notes - GROUP Share of balance sheet and profit and loss items 31 Dec 2010: Current assets Long-term assets 8 Current liabilities 27 Long-term liabilities Revenue Costs 715 Date of Registered Ownership Proportion of Company acquisition office interest voting shares held FinansNettNorge AS 2007 Oslo 50% 50% Excess value analysis (50% share): Book value for Oslo Børs VPS Holding ASA at time of acquisition 623 Acquisition cost 623 Calculation of balance sheet value at 31 Dec 2010 Balance sheet value at 31 Dec Acquisition cost Share of profit for the year Balance sheet value at 31 Dec Share of balance sheet and profit and loss items 31 Dec 2010: Current assets Long-term assets 400 Current liabilities 505 Long-term liabilities 400 Revenue Costs Date of Registered Ownership Proportion of Company acquisition office interest voting shares held NaC AS 2007 Sandnes 50% 50% The company was incorporated in 2007 and has share capital of TNOK 200. The company did not carry out any activities in 2008, 2008 or The company s business is to develop and operate databases. The book value is TNOK 112. Company Ownership interest Book value Link UP Markets S.L. 9,09 % 0 Link Up Markets S.L. is a collaborative venture between eight European central securities depositories (CSDs) and its objective is to increase business between the CSDs and reduce the cost of cross-border securities trading in Europe. The investment in Link UP Capital Markets S.L. is treated as an available for sale asset, and is recognized in the accounts at fair value with any change in value applied to other income and costs in determining the overall profit for the year. As a result of the company s financial performance, VPS wrote down the value of its shareholding in 2010 to NOK 0. 55

56 Notes - GROUP Investments -Treasury Bills In connection with the introduction of a central counterparty for equity capital instruments, Oslo Clearing has invested part of its liquidity in Treasury bills. Of its holding of NOK 15 million of Treasury bills, NOK 10 million is pledged as collateral in favour of Norges Bank in respect of settlement relating to equity capital instruments. Treasury bills are interest-bearing securities issued by the Norwegian government with original maturity of less than one year, and pay no fixed or floating interest rate. The return on Treasury bills is the difference between the purchase price and the nominal value that is paid on maturity. Fair value is equivalent to the sales price at 31 December 2010, which was NOK 15 million. Treasury bills are treated as an available for sale asset, and are recognised in the accounts at fair value with any change in value applied to other income and costs in determining the overall profit for the year. The value of the investment is the fair value determined by the price of the Treasury bills in question on Oslo Børs at 31 December Note 12 Financial instruments The group has exposure to financial instruments such as loans, accounts receivable, accounts payable, and financial assets available for sale. 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 14% of total revenues in 2010 and 11% 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. Oslo Clearing acts as the central counterparty to all parties, becoming the buyer for all sellers and the seller for all buyers. In respect of financial instruments that use the central counterparty model for clearing, Oslo Clearing accordingly takes over the counterparty risk between its members. Counterparty exposure is covered through individual collateral provided by each customer. The maximum risk exposure in respect of counterparty risk is reported as the capitalised value of outstanding derivative positions and the value of positions in equity instruemnts that is not recognised in the accounts. The calculated market value of outstanding derivative positions to which Oslo Clearing is a counterparty and which are not marked to market on a daily basis totalled NOK 793 million at 31 December The fair value of derivative positions is determined on the basis of the market value of the derivative contracts in question on the balance sheet date. Receivables and liabilities that can be assigned to outstanding derivative positions are netted to the extent that set-off can be applied. The fair value of outstanding positions in respect of equity instruments that are not yet due for settlement amounted to NOK 2.9 billion at 31 December Positions are netted for each member firm in respect of trades carried out in the same ISIN for the same settlement date. The figures for the outstanding position show the amount to which Oslo Clearing is exposed in respect of counterparty risk on both buyers and sellers. As the formal counterparty in transactions in equities, ETFs and equity capital instruments, the amounts that Oslo Clearing undertakes to pay or receive as a counterparty in the event that the financial instruments in question are not transferred on the settlement date are included in its balance sheet with liquidity effect with an offsetting entry in the form of a current liability or receivable due as appropriate. As at 31 December 2010, the amount due to be received totalled NOK 2.8 million. As part of the process of establishing central counterparty clearing of equity capital instruments, Oslo Clearing has established a default fund that holds collateral in the form of cash, bank guarantees or interest-bearing instruments. The value of the default fund at 31 December 2010 was NOK 202 million. The contribution each member fund makes to the default fund is a function of the average exposure it represents for Oslo Clearing, subject to a minimum contribution dependent on the type of membership (General Clearing member (GCM) NOK 15 million, Direct Clearing Member (DCM) NOK 8 million). Other receivables totalling TNOK 675 are classified as fixed assets and are secured by charges over real estate. 56

57 Notes - GROUP The maximum credit risk is equivalent to the book value of receivables, which totalled NOK 897 million at 31 December Interest rate risk The group placed part of its surplus liquidity in fixed-rate term deposits not exceeding 6 months in Other bank deposits are on floating rate terms. A change of 1 percentage point in the level of interest rates would have affected earnings and equity by approximately NOK 9 million. In relation to operating as a central counterparty for equity capital instruments, Oslo Clearing has pledged Treasury bills in favour of Norges Bank as collateral for its settlement obligations. Liquidity risk general The group s strategy is to maintain cash sufficient for at least 6 months operating costs at any time. The group has committed drawing facilities in respect of the clearing activities of Oslo Clearing ASA. Surplus liquidity is held in accounts with a number of banks. In relation to operating as a central counterparty for equity capital instruments, Oslo Clearing has invested in Treasury bills. NOK 10 million of its holding of Treasury bills is pledged in favour of Norges Bank as collateral for settlement of transactions in equity capital instruments. The table below shows the group s financial liabilities and their maturity structure. With the exception of the market value of derivative positions, the liabilities reported represent unconditional claims on the group. Liquidity risk clearing The market value of derivative positions represents the fair value of derivative positions for which Oslo Clearing is the central counterparty. The group is exposed to the risk that a counterparty does not have sufficient liquidity to settle its liabilities. This risk is reduced in that settlement takes place through a settlement system that fully complies with international recommendations. The company (group) manages its capital structure and makes necessary changes to its structure on the basis of regular reviews of the economic conditions in which its businesses operate, and future prospects in both the short term and medium term. Oslo Clearing is required by the provisions of the Securities Trading Act to have sufficient capital to cover its risk exposure. The company s primary capital must be at least NOK 50 million, and an amount equivalent to at least half the primary capital must be available at any time either on deposit with a financial institution or by way of unconditional drawing rights with a financial institution. Surplus liquidity is managed in order to maintain the lowest possible risk exposure. Oslo Clearing ASA has a policy of investing its primary capital as bank deposits in banks with at least an AA rating. These assets are classified as liquid assets in the balance sheet. Some customers have pledged collateral in respect of settlement of equity capital instruments in the form of liquid assets held in foreign banks. These balances are included in the consolidated bank deposits with an offsetting entry as cash collateral from members, and totalled NOK 28.7 million at 31 December 2010 Currency 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 was not party to any forward foreign exchange contracts at the close of 2009 or Oslo Clearing ASA is also exposed to currency risk to the extent that members pledge liquid assets as collateral that are denominated in a permitted foreign currency. Oslo Clearing ASA applies a security margin when calculating the value of liquid assets denominated in foreign currency pledged as collateral in order to allow for consumers. In the event that the currency amount pledged falls short of the value of collateral required, Oslo Clearing has procedures in place to demand that additional currency amounts are pledged as collateral. 57

58 Notes - GROUP Market risk With the exception of its clearing activities, the group s assets and liabilities have little exposure to market risk. The value of shareholdings and investments in joint ventures are exposed to market risk. Market risk clearing activities The group is exposed to the risk that the value of a portfolio may change as the result of movements in the financial markets. This may, for example, relate to changes in share prices, interest rates or exchange rates. Oslo Clearing takes steps to reduce this risk by requiring collateral. Collateral requirements take into account both market risk and the number of days that Oslo Clearing considers would be needed to close a defaulted position. Determining fair value Fair value of financial assets classified as available for sale is determined by specific evaluation. The fair value of derivative positions is determined on the basis of market value of the derivative contract in question on the balance sheet date. Fair value is calculated as the last traded price * number of underlying contracts. The fair value of equity capital instrument positions is determined on the basis of the market value as quoted on Oslo Børs on the balance sheet date. Fair value recognition is not applied to cash, accounts receivable, other current receivables and interest-bearing borrowings. The book value of cash and bank deposits is virtually equivalent to fair value given that these instruments have short maturities. Similarly, the book value of accounts receivable and accounts payable is virtually the same as fair value since these transactions are entered into on normal terms. Financial strategy Oslo Børs VPS Holding 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. Norwegian legislation requires that a clearing house must maintain capital at a level prudent to the scale of business carried out. Primary capital must be at least NOK 50 million. An amount equivalent to at least half the undertaking s primary capital must be available at any time either on deposit with a financial institution or by way of unconditional drawing rights with a financial institution. Stock exchange and securities depository operations are required to maintain a prudent level of primary capital. The group s equity at the close at 2010 totalled NOK 1,626 million. The group had no interest-bearing borrowings at 31 December Maturity structure of financial instruments (figures in NOK 1,000): 2010 On demand < 3 months 3-12 months 1-5 years >5 years Total Accounts payable Tax payable Payroll tax and social security contributions payable Cash collateral Market value of derivative 0 positions outstanding Market value of equity capital instruments not in the accounts Other current liabilities Total

59 Notes - GROUP 2009 On demand < 3 months 3-12 months 1-5 years >5 years Total Accounts payable Tax payable Payroll tax and social security contributions payable Market value of derivative 0 positions outstanding Other current liabilities Total Assets recognized at book value 31 Dec 2009 Note Level 1 Level 2 Level 3 Total Assets Securities available for sale Outstanding derivatives positions Total assets Liabilities Outstanding derivatives positions Total liabilities Assets recognized at book value 31 Dec 2010 Note Level 1 Level 2 Level 3 Total Assets Non-capitalised value of equity capital instruments Securities available for sale 11 0 Outstanding derivatives positions Total assets Liabilities Non-capitalised value of equity capital instruments Outstanding derivatives positions Total liabilities Note 13 No. of employees Number of employees at 31 Dec

60 Notes - GROUP Note 14 Remuneration of officers, executive personnel, the auditor etc. Remuneration of the Board of Directors, the Group CEO, and other executive personnel (figures in NOK 1,000): Variable Pension Pension Pension Total Pension Salary Fees salary Benefits cost liability contribution remuneration liability Chair of the Board Holding and Oslo Børs. Member of the Board VPS. Leif Askvig Member of the Board Holding Svein Støle Member of the Board Holding Ottar Ertzeid Member of the Board Holding and Oslo Børs Benedicte S. Fasmer Member of the Board Holding and Oslo Børs Giséle Marchand Member of the Board Holding and Oslo Børs Harald Espedal Member of the Board Holding and Oslo Børs Benedikte Bettina Bjørn Chair of the Board VPS Kim Dobrowen Member of the Board VPS Anne Johnsrud Hagen Member of the Board VPS Knut Erik Robertsen Member of the Board VPS Gunn Oland Member of the Board VPS Audun Bø Employee Representative Holding and VPS Morten Nordby Employee Representative Holding and VPS Norunn Dale Seland (to May) Employee Representative Holding and VPS Sissel Bakker (from May) Employee Representative Holding and Oslo Børs Christian Falkenberg Kjøde Employee Representative Holding and Oslo Børs Lena A. Johannessen (to May) Employee Representative Holding and Oslo Børs Ingvild Resaland (from May) Chair of the Nomination Committee Holding Erik Must 12 Member of the Nomination Committee Holding Leif Teksum Member of the Nomination Committee Holding Ida Espolin Johnsen Member of the Nomination Committee Holding Christian Berg Chair of the Control Committee VPS and Oslo Clearing Håkon Persen Søderstrøm Member of the Control Committee VPS and Oslo Clearing Vegard Østlien Member of the Control Committee VPS and Oslo Clearing Kjell Sverre Hatlen Member of the Control Committee VPS and Oslo Clearing Kristin Normann Member of the Control Committee VPS and Oslo Clearing Cecilie Kvalheim 40 Group CEO Bente Landsnes Executive Vice President Ole-Wilhelm Meyer Executive Vice President Per Anders Brodin Executive Vice President Geir Heggem Executive Vice President Christian Sjöberg

61 Notes - GROUP The above remuneration amounts are entered as expenses in the accounts for 2010 of the companies that make up the group. Salaries include a provision for the holiday allowance to be disbursed in 2011 relative to the holiday allowance disbursed in Bonuses consist of a variable salary portion for 2010, which was provided for in the annual accounts for 2010 for disbursement in January Benefits in kind comprise established benefits such as a company car, free telephone etc. The amounts are exclusive of employer s social security contributions. Pension costs and pension commitments are calculated based on the assumptions specified in Note 7. Pension cost and pension liability include both the insured and uninsured schemes. The employment contract of Group CEO Bente A. Landsnes provides for an annual salary of TNOK 3,162 plus a company car or company car benefit as well as free telephone and newspapers. Her salary was increased to TNOK 3,225 from 1 January 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 widower s pension of 55% of retirement salary. The Group CEO is contractually entitled to a full pension contribution period at Oslo Børs and full pension from Oslo Børs at retirement age. She is therefore deemed to have 16 out of 30 years of contribution upon joining Oslo Børs. 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. Ole-Wilhelm Meyer, CEO of VPS, is entitled to six months notice of termination of employment and twelve months salary after termination of employment. His agreed retirement age as CEO is 63 years. Under the terms of his employment contract, he is entitled to an early retirement pension from his agreed retirement age until age 67. The early retirement pension will be equivalent to 70% of salary. His normal retirement pension, from the age of 67, will be linked to the rights accrued in the company s group defined contribution pension scheme, together with the company s supplementary pension scheme financed from operations for salaries in excess of 12 times the National Insurance base amount. His employment contract also provides for a 50% spouse s pension. The employment contract of Executive Vice President Per Anders Brodin, provides for early pension from 60 years of age at 60% of final salary. Other than the benefits described above and the general scheme for early retirement described in Note 7, 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 except the members of executive management. The Board of Oslo Børs considers whether to award a bonus to the Group CEO annually. A share purchase program for employees was carried out in Shares were sold at fair value, but with a discount of 20% on purchases up to NOK 7,500. Loans to employees totalled TNOK 746 at year-end. Interest is charged on loans totalling TNOK 686 at normal rates of interest. No interest is charged on the remaining balance of loans. There were no loans to members of the board or the group CEO. A loan of TNOK 57 is made available to an employee representative on the board of VPS. The loan is due to be repaid before the end of 2011, and interest is charged at normal rates. Auditor A fee of TNOK 1,505 paid to Ernst & Young for ordinary audit services was expensed in Fees expensed in 2010 for other services provided by Ernst & Young totalled TNOK 2,631, made up of TNOK 144 for reporting services, TNOK 93 in respect of taxes and duties, and TNOK 2,394 for other non-audit services. Non-audit services are mainly related to a project in VPS. The accounting firm KPMG is appointed as the independent internal auditor of Oslo Børs, VPS and Oslo Clearing. A provision totalling TNOK 710 was made in the 2010 accounts in respect of KPMG s services. All figures exclude value added tax. 61

62 Notes - GROUP Note 15 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 12 years Production and operations equipment Up to 1 years In April 2009, Oslo Børs entered into an agreement with the London Stock Exchange (LSE) for the rental of a trading system. The rental period is 7 years. The fee payable for use of the system is linked to revenue, but is subject to a minimum fee. Oslo Clearing has entered into an agreement with OMX Technology for operating services for the clearing system. The rental period runs to Oslo Clearing pays a fixed annual fee. VPS rents premises at two locations in Oslo, and has also entered into a lease contract for new premises with a start date of 1 April One lease contract expires in September 2013, with an option to extend for a further five years. The other lease contract expires in May 2015, with the right to terminate two years earlier. This contract includes options to extend the term by five years and a further five years. The new lease contract expires in March 2023, with an option to extend for a further five years. 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 run for five years, and expire in September All three sub-leases are linked to the consumer price index published by Statistics Norway. VPS has entered into a leasing agreement for production equipment. The agreement runs for three years, and expires in December 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 Note 16 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 depreciation and impairment of goodwill and other intangible assets. Book value at 31 December 2010 was NOK 536 million (excluding IT systems). - Evaluating whether to capitalise costs incurred in the development of IT systems. Book value of IT systems at 31 December 2010 was NOK 457 million. - Net pension liabilities, with book value at 31 December 2010 of NOK 184 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 according 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 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 reasonable, but 62

63 Notes - GROUP these assumptions of necessity involve uncertainty, and it is according the case that the actual values in the future may differ from the estimated values. See Note 8 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 commercial 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 economics 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 technology 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 commercial and actuarial assumptions, including the discount rate used, future salary growth, life expectancy of employees 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. The group has applied a lower discount rate in its calculations to reflect the uncertain conditions in the financial markets. Note 17 Contingent liabilities On 9 July 2009, Periscopus AS issued legal proceedings against Oslo Børs ASA and Erik Must AS. Periscopus claims that the Stock Exchange Appeals Committee s resolution 1/2009 should be declared void. The resolution relates to the offer price for a mandatory offer by Erik Must AS for the shares in Gyldendal ASA. In addition, the proceedings claim that Oslo Børs ASA and Erik Must AS should be held jointly and severally liable for the amount that Periscopus AS claims to have lost as a result of the difference between the offer price set and the price that Periscopus AS maintains should have been the correct price. The claim is for TNOK 37,182 plus interest and expenses. No accounting provision has been made in respect of this claim. On Tuesday 21 December the Oslo District Court issued its ruling on a claim brought by DNO International against Oslo Børs in connection with the decision of the Stock Exchange Appeals Committee in respect of DNO s duty to disclose information to Oslo Børs. DNO s claim that the Committee s decision was invalid did not succeed and DNO was not granted compensation for its costs. Oslo Børs was awarded its costs in the litigation. DNO International issued civil proceedings against Oslo Børs on 17 March 2010 claiming that the Stock Exchange Appeals Committee s decision of 17 September 2009 was invalid and that the violation charges imposed on DNO in relation to the Committee s ruling were to be paid back. In addition DNO claimed compensation for its costs of litigating. DNO has lodged an appeal against the Court s ruling. No accounting provision has been made in respect of this claim. Note 18 Other liability Under the Securities Register Act of 5 July 2002, VPS is liable for losses resulting from errors that occur in connection with registration activities. 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, VPS is subject to normal liability that is not limited. The Act assumes that losses will be covered through insurance or other guarantees. 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 for the balance of NOK 700 million. A rights holder has made a claim for compensation of NOK 2 million. The claim was made against one of the company s account operators in 2009, and VPS was joined as a defendant to the action in VPS is of the opinion that the conditions for making a claim are not fully satisfied, and therefore denies any liability to pay compensation. At the request of the claimant, the case has now been referred to the VPS Appeals Committee. 63

64 Notes - GROUP VPS liability in this case is a formal liability pursuant to Section 9-1 of the Securities Register Act. The Business Terms and Conditions of VPS stipulate at Section 15.3 that in the event of any error caused by matters relating to an Account Operator or for which an Account Operate is responsible, VPS has a right of regress to the Account Operator to recover the entire loss suffered by VPS as a result of the error. The risk that VPS would incur a loss by paying compensation in this case is considered, in the final instance, to be extremely low. No compensation was paid in Note 19 Related parties The group accounts comprise the annual accounts of Oslo Børs VPS Holding ASA and the annual accounts of the following subsidiary companies: Ownership Consolidated from and including Oslo Børs ASA 100 % 100 % May 2001 Verdipapirsentralen ASA 100 % 100 % November 2007 Oslo Clearing ASA 100 % 100 % November 2007 Oslo Market Solutions AS 100 % 100 % November 2007 The following table shows the totals for transactions with related parties: Sales of Purchases of services services Receivables Liabilities Joint ventures - Fondsmeglernes Informasjonstjeneste 25 - Finans Nett Norge Nac The group owns 50% of the shares in each of the joint ventures. Transactions with related parties are carried out on normal commercial terms. The loan of TNOK 1,000 to Finans Nett Norge is repayable in five equal annual instalments from 2008 to The interest rate on the loan is 5% pa. Note 20 Outstanding derivatives positions As part of its normal business, the subsidiary Oslo Clearing ASA is a formal counterparty in derivative transactions traded on Oslo Børs and in derivative transactions or securities borrowing and lending transactions notified for clearing. Since VPS Clearing is acting as a formal counterparty, the positions are not regarded as own-account trading, but are a documentation of counterparty risk. Counterparty risk is measured using models designed under international standards. Counterparty exposure is covered through individual collateral provided by each customer in the form of financial instruments, bank guarantees and cash. In accordance with IAS 39 and IAS 32, the clearing business is required to recognise in its balance sheet the commitments borne by the company as a central counterparty in derivative contracts. The estimated market value of the positions at 31 December 2010 of TNOK 792,828 is recognised as a current liability, with a matching entry under current receivables. Claims and liabilities that can be assigned to outstanding derivative positions are netted against each other to the extent that such offsetting is permitted. Setoff is applied for positions relevant to recognition that are related to the same clearing representative, are in the same derivative series and with the same maturity date Gross outstanding derivatives positions TNOK Set-offs TNOK Net outstanding derivatives positions TNOK Note 21 Events after the balance sheet date Ole-Wilhelm Meyer elected to resign from his position as CEO of VPS on 14 February The Board of VPS appointed Ola Forberg as the company s acting CEO. Ola Forberg will serve in office until the company appoints a permanent CEO. 64

65 Oslo Børs VPS Holding ASA Profit and loss account Figures in NOK 1,000 Note OPERATING REVENUES Operating revenues TOTAL OPERATING REVENUES OPERATING COSTS Salaries and related costs 7, Depreciation Other operating costs TOTAL OPERATING COSTS OPERATING PROFIT Income from investment in subsidiaries 1, 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 Dividend Transfer from/to other paid-in equity Transfer from/to other equity TOTAL ALLOCATIONS

66 Oslo Børs VPS Holding ASA Balance sheet, at 31 Dec Figures in NOK 1,000 Note FIXED ASSETS Intangible assets Deferred tax asset Total intangible assets 0 0 Tangible assets Property 0 0 Fittings, IT equipment, vehicles etc. 0 0 Total tangible assets 0 0 Financial fixed assets Investment in subsidiaries Investment in shares etc Other receivables 0 0 Total financial fixed assets Total fixed assets CURRENT ASSETS Receivables Accounts receivable Group contribution receivable Other intragroup receivables Other receivables 0 0 Total receivables Bank deposits Total current assets TOTAL ASSETS

67 Oslo Børs VPS Holding ASA Balance sheet, at 31 Dec Figures in NOK 1,000 Note EQUITY Paid-in equity Share capital Share premium reserve Other paid-in equity Total paid-in equity Other equity Other equity 0 0 Total other equity Total equity LIABILITIES Long-term liabilities Intragroup liabilities Total long-term liabilities Current liabilities Interest-bearing current liabilities Trade creditors Tax payable Provision for dividend Intragroup balances Other current liabilities 0 10 Total current liabilities Total liabilities TOTAL LIABILITIES AND EQUITY Oslo, 12 April 2011 Leiv Askvig Giséle Marchand Svein Støle Ottar Ertzeid Chair Deputy Chair Board member Board member Benedicte Schilbred Fasmer Benedikte Bettina Bjørn Harald Espedal Board member Board member Board member Bente A. Landsnes Group CEO 67

68 Oslo Børs VPS Holding ASA Cash flow analysis, at 31 Dec Figures in NOK 1, Cash flow from operational activities Ordinary pre-tax profit Income from subsidiaries Tax paid in the period Write-down of financial fixed assets Dividends and group contribution received Change in accounts receivable Change in trade creditors Change in other accruals Net cash flow from operational activities Cash flow from investment activities Capital contribution to Oslo Clearing ASA Group contribution to Oslo Clearing ASA Net cash flow from investment activities Cash flow from financing activities Payment on repayment of long-term borrowings Net payment on purchase of own shares Net 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. 68

69 Oslo Børs VPS Holding ASA Notes Principles applied for the parent company accounts Oslo Børs Holding ASA was incorporated in April At the end of May 2001 the entire assets, undertaking and liabilities of the self-owning institution Oslo Børs were transferred to Oslo Børs ASA with shares in Oslo Børs ASA as consideration. The shares in Oslo Børs ASA were transferred to Oslo Børs Holding ASA with shares in Oslo Børs Holding ASA as consideration. The shares in Oslo Børs Holding ASA were sold through a Public Share Offer in May The merger of Oslo Børs Holding ASA and VPS Holding ASA was registered on 26 November Oslo Børs Holding ASA simultaneously changed its name to Oslo Børs VPS Holding ASA. The merger was recognized for accounting purposes on a transaction basis, with Oslo Børs Holding ASA as the acquiring company. The acquisition date was 27 November The implementation of the merger involved the exchange of the entire share capital of 5 million shares in VPS Holding (with the exception of 499,000 shares owned by Oslo Børs Holding) for shares in Oslo Børs VPS Holding ASA. The exchange ratio was agreed in the Merger Plan as 4 shares in Oslo Børs VPS Holding for 1 share in VPS Holding. The merger caused the issue of 18,004,000 new shares in Oslo Børs VPS Holding. Classification of revenue and expenditure in the profit and loss statement Revenues and costs that are related to normal operations are classified as operating revenues and operating costs and are included in the calculation of operating profit. Financial items are taken into account following the calculation of operating profit but before arriving at ordinary pre-tax profit. The allocation of the profit for the year is shown in the annual accounts. Classification of assets and liabilities in the balance sheet Assets which are to be held or used over the long term are classified as fixed assets in the balance sheet. Other assets are classified as current assets. Receivables due for payment within one year are also classified as current assets. Liabilities that fall due for repayment in their entirety within one year are classified as current liabilities. Where any part of provisions for liabilities falls due for payment within the current year, this is not reclassified as a current liability. Revenues and costs Revenues Revenue is recognised to income in the period the revenue is earned. Fixed assets are initially valued at acquisition cost. If there are indications that a fixed asset may have fallen in value, investigations are carried out to see whether there is any need to write down the book value to actual value (the higher of net sales value and value in use). Where necessary, book value is written down to actual value. With effect from the 2007 financial year, investments in subsidiaries are recognised in the parent company s accounts in accordance with the cost method. Under the cost method, dividends and group contribution proposed by subsidiaries are recognized as income to the extent that they result from profits earned during the parent company s period of ownership. Tax liability arises in respect of the accounting profit, and is made up of tax payable and changes in deferred tax. Deferred tax and deferred tax assets in the balance sheet are calculated at the nominal rate of tax on the basis of temporary differences between accounting and taxation values. Differences that relate to fixed assets and that will be reversed at a distant future date are not included in the calculation of deferred tax assets. Net deferred tax assets are capitalised on the balance sheet to the extent that it is likely that they will be capable of use in the future. Based on the last traded price for the Oslo Børs Holding share prior to the implementation of the merger (NOK 141), the fair value of VPS Holding was calculated to be MNOK 2,820. In addition, purchase costs totalled MNOK 18. Accounting principles The accounts have been prepared in accordance with Norwegian legislation and generally accepted accounting practice in Norway. The accounting principles set out below have been applied in a uniform and consistent manner in the accounts presented. Costs Costs are recognised to profit and loss in the same period as the income to which they relate. Costs that cannot be directly related to income items are recognised to profit and loss as they are incurred. Valuation of assets and liabilities in the balance sheet Current assets are valued at the lower of acquisition price and true value, and current liabilities are valued at the higher of their value when created and actual value. 69 In connection with the merger with the VPS group in 2007, a temporary difference arose in respect of shares in subsidiaries. The company has not included this temporary difference in its tax calculation since the shares in the subsidiaries are not held for sale. In the case of uncertainty over specific assets and liabilities, estimated values are used. Changes in amounts estimated in previous periods are recognised to profit and loss in the period in which the changes are made.

70 Notes Note 1 Shares in subsidiary companies Shares in subsidiary companies are recognized in accordance with the cost method. Shares in Oslo Børs Informasjon AS were transferred to the parent company from Oslo Børs ASA in The purchase price of the shares was TNOK 400,000. The acquisition was treated in accordance with the continuity principle for accounting purposes and with accounting effect from 1 January The book value of the shares in the balance sheet of Oslo Børs ASA was TNOK 9,598. In accordance with the continuity principle, the difference between the sales price and the book value, TNOK 390,402, was credited to the value of the shares in Oslo Børs ASA. Oslo Børs ASA and Oslo Børs Informasjon AS, both wholly-owned subsidiaries of Oslo Børs VPS Holding ASA, were merged in The merger involved the issue of 682,000 shares. Since the two companies were under common control, the transaction was recognized in accordance with the continuity principle, and the book values of assets and liabilities were carried forward with effect from 1 January Shares in Verdipapirsentralen ASA, Oslo Clearing ASA and Oslo Market Solutions AS were acquired in connection with the merger with VPS Holding ASA. The book value of the shares in each company was determined on the basis of an excess value analysis carried out in connection with the merger. The values of the shares in these subsidiaries were written down by MNOK 1,005 in This write-down was carried out as a consequence of uncertainty regarding future market conditions. The impairment test was based on a post-tax yield requirement of 11.7% (11.2% in 2008). An impairment test of the shares in these companies was carried out at the close of 2010, and it was concluded that there was no need for any write-downs as at 31 December The impairment test was based on a post-tax yield requirement of 11.4%. In November 2007, the company acquired approximately 10% of the shares in VPS Holding ASA from Oslo Børs ASA. The acquisition was treated in accordance with the continuity principle for accounting purposes and with accounting effect from 1 January The purchase price of the shares was TNOK 294,410. The book value of the shares in the balance sheet of Oslo Børs ASA was TNOK 109,600. In accordance with the continuity principle, the difference between the sales price and the book value, TNOK 184,810 was credited to the value of the shares in Oslo Børs ASA. Figures in NOK 1,000 Date Registered Ownership/ Capital injection Group Book Equity at Company acquired office voting interest 2010 contribution value Oslo Børs ASA 2001 Oslo 100 % Verdipapirsentralen ASA 2007 Oslo 100 % Oslo Clearing ASA 2007 Oslo 100 % Oslo Market Solutions AS 2007 Oslo 100 % Total The share value of Oslo Clearing is added to the group contribution from Oslo Børs VPS Holding, NOK 0.8 million. 70

71 Notes Note 2 Tax expense/deferred tax assets Figures in NOK 1,000 Oslo Børs VPS Holding ASA Pre-tax profit Permanent differences Write-down of shares (permanent difference) Group contribution - without tax deduction Group contribution to subsidiary Tax base for the year Tax payable Tax payable - previous year Tax on group contribution paid out Tax charge for the year There were no temporary differences in the company at 31 December 2010 and accordingly no deferred tax/deferred tax asset. The merger gave rise to a temporary difference in respect of shares in subsidiaries. The company has not included this temporary difference in its tax calculation since the shares in the subsidiaries are not held for sale. If the temporary difference were to be taken into account in the tax calculations, this would cause a temporary difference of approximately NOK 2 billion which would lead to an increase in tax of approximately MNOK 20. Note 3 Receivables and payables between companies in the same group Current receivables: Oslo Børs ASA - dividend/group contribution due Verdipapirsentralen ASA - dividend/group contribution due Oslo Market Solutions AS - dividend/group contribution due Oslo Børs ASA - intragroup balances Verdipapirsentralen ASA - intragroup balances Oslo Clearing ASA - intragroup balances 0 18 Oslo Market Solutions AS - intragroup balances Total

72 Notes Trade receivables: VPS ASA 30 0 Oslo Børs ASA 20 0 Oslo Clearing ASA 10 0 Oslo Market Solution AS 0 0 Total 60 0 Long-term liabilities: Verdipapirsentralen ASA Oslo Børs ASA Total Current liabilities: Oslo Børs ASA - intragroup balances Verdipapirsentralen ASA - intragroup balances Oslo Market Solutions AS - intragroup balances 0 16 Oslo Clearing ASA - intragroup balances Total Supplier credit: Oslo Børs ASA VPS ASA Total Note 4 Equity Share Share premium Other paid-in Figures in NOK 1,000 capital reserve equity Other Total Equity at 31 December Holdings of own shares Dividend received on holdings of own shares Profit Dividend proposed Equity at 31 December Holdings of own shares Dividend received on holdings of own shares Reduction in share premium reserve Profit Dividend proposed Equity at 31 December

73 Notes Note 5 Share capital and shareholder information The company s share capital at 31 December 2010 was as follows: No. of shares Par value Own shares Total Shares NOK NOK Total NOK NOK Shares held by Board Members, senior employees and their close associates: Shares Shares held Name Office owned by associates Leiv Askvig Chair of Oslo Børs VPS Holding ASA/Oslo Børs ASA/Board member VPS ASA Gisele Marchand Board member Oslo Børs VPS Holding ASA/Oslo Børs ASA Benedicte Schilbred Fasmer Board member Oslo Børs VPS Holding ASA/Oslo Børs ASA Svein Støle Board member Oslo Børs VPS Holding ASA Harald Espedal Board member Oslo Børs VPS Holding ASA/Oslo Børs ASA Benedikte Bettina Bjørn Board member Oslo Børs VPS Holding ASA Ottar Ertzeid Board member Oslo Børs VPS Holding ASA Kim Dobrowen Chair of VPS ASA Anne Johnsrud Hagen Board member VPS ASA Knut Erik Robertsen Board member VPS ASA Gunn Oland Board member VPS ASA Audun Bø Board member VPS ASA Morten Nordby Employee representative VPS ASA/Employee observer Oslo Børs VPS Holding ASA 50 Sissel Bakker Employee representative VPS ASA/Employee observer Oslo Børs VPS Holding ASA 20 Gunnar Haug Deputy employee representative VPS ASA/ Deputy employee observer Oslo Børs VPS Holding ASA 651 Marianne Klingen Deputy employee representative VPS ASA/ Deputy employee observer Oslo Børs VPS Holding ASA Christian Falkenberg Kjøde Employee representative VPS ASA/Employee observer Oslo Børs VPS Holding ASA Ingvild Resaland Employee representative VPS ASA/Employee observer Oslo Børs VPS Holding ASA 65 Vidar Nordtømme Deputy employee rep Oslo Børs ASA/Deputy employee observer Oslo Børs VPS Holding ASA 75 Guro Steine Deputy employee rep Oslo Børs ASA/Deputy employee observer Oslo Børs VPS Holding ASA 367 Shares Shares held Name Office owned by associates Bente A. Landsnes Group CEO/CEO Oslo Børs Ole-Wilhelm Meyer CEO VPS Anders Brodin Deputy CEO Oslo Børs Øivind Amundsen SVP Legal Affairs, Market Surveillance, Listing and Issuer Services Oslo Børs Geir Heggem Acting CFO VPS Barbro Wiik Pedersen Acting CFO Oslo Børs 25 Per Eikrem SVP Corporate Communications Oslo Børs Hugo Sundkjer CEO Oslo Market Solutions

74 Notes Name Office Shares Shares held owned by associates Harald Næss EVP Development and IT VPS 551 Kjetil Nysæther SVP IT Oslo Børs Jorunn Blindheim Øystese EVP Legal/Compliance VPS 51 Leif Arnold Thomas Kari Geier Christian Sjöberg EVP Customers and Market VPS VP Business Development Oslo Clearing CEO Oslo Clearing ASA Håvard Thorstad VP Risk Management Oslo Clearing 292 Sara Lillefloth Head of Clearing Operations Oslo Clearing Pareto Securities AS and Pareto AS, which hold 85 shares and 3,662,230 shares respectively, are close associates of Svein Støle Leiv Askvig is the CEO of Sundt AS. Sundt AS holds 657,500 shares. Ottar Ertzeid is a Group Executive Vice President of the DnB NOR group, which includes Vital Forsikring ASA. Vital Forsikring ASA holds 8,233,680 shares. Benedicte Schilbred Fasmer is Director Capital Markets Division at Sparebanken Vest. Sparebanken Vest holds 550,505 shares. The 20 largest shareholders at 31 December 2010 were: Ownership Nationality No. of shares Percentage VITAL FORSIKRING ASA % KLP FORSIKRING % PARETO AS % ORKLA ASA % NBI HF ICELAND (NOM) ICELAND % NORSK HYDROS PENSJONSKASSE % ARENDALS FOSSEKOMPANI ASA % GOLDMAN SACHS INT (NOM) GREAT BRITAIN % STATE STREET BANK (NOM) USA % UBS SECURITIES LLC (NOM) USA % JPMORGAN CHASE BANK (NOM) GREAT BRITAIN % MSF MUTUAL USA % MUST INVEST AS % CITIBANK N.A. NEW YORK BRANCH USA % SUNDT AS % JPMORGAN CHASE BANK (NOM) LUXEMBURG % SPAREBANKEN VEST % MORGAN STANLEY & CO GREAT BRITAIN % MSF MUTUAL USA % ELTEK HOLDING AS % Total % 74

75 Notes Earnings per share is calculated as follows: Figures in NOK 1, Profit after tax Average number of shares (1,000) Earnings per share (NOK) Diluted earnings per share (NOK) Shares were split 1:5 in May The merger with VPS caused the issue of 18,004,000 shares on 26 November Note 6 Financial expense Figures in NOK 1, Financial expense from group companies: Interest expense - group Other financial expense - group Total financial expense from group companies Financial expense: Write-down of shares in subsidiaries Interest expense on borrowings Other financial expense Total financial expense Note 7 Remuneration of executive personnel The company has no employees. The Chief Executive Officer does not receive any payment or other remuneration for her duties from Oslo Børs VPS Holding ASA, but she does receive remuneration from another company in the group. Note 8 Pension costs and pension liabilities The company has no liability to operate a pension scheme under the terms of the Occupational Pensions Act. Note 9 Auditor A fee of TNOK 250 paid to Ernst & Young for ordinary audit services was expensed in Fees expensed in 2010 for other services provided by Ernst & Young totalled TNOK 53, made up of TNOK 21 in respect of tax related advice, TNOK 23 for certification services, and TNOK 9 for other non-audit services. All figures exclude value added tax. 75

76 Auditor s Report 76

77 77

78 Board of Directors statement of policy on corporate governance Introduction Oslo Børs VPS Holding ASA holds 100% of the share capital of Oslo Børs ASA, Verdipapirsentralen ASA, Oslo Clearing ASA, and Oslo Market Solutions AS. These companies make up the Oslo Børs VPS Holding group. This statement applies to all the companies in the group. Oslo Børs VPS Holding is committed to all aspects of corporate governance, including ensuring the proper direction and control of its own activities and organisation. Corporate governance is also important for Oslo Børs VPS as a central player in the infrastructure of the Norwegian securities market. Confidence in the infrastructure of the market will be determined in part by the extent to which the participants adhere to good corporate governance practices. General The following factors form an important starting point for this statement of policy on corporate governance for Oslo Børs VPS: Oslo Børs operates the only regulated marketplaces in Norway for trading in securities. Verdipapirsentralen operates the only securities register in Norway, together with related settlement and clearing activities. Oslo Clearing is the only central counterparty in Norway for the equities and derivatives markets. Many parties have an interest in the group s activities. This includes its owners, investors, issuers of securities, investment firms, account operators, employees and the official authorities, as well as other participants in the securities chain. 78

79 It is important that all the operations that make up the group avoid any situation that might lead to any inference that they have abused the group s position in the securities market, either generally or in relation to any other player or players. The Board of Directors of Oslo Børs VPS Holding ASA (the Board ) takes the view that its main duty is to work to ensure that the company s shareholders benefit from a sound return on the company s capital over the long term. However, the Board also takes care to balance this duty with the needs and wishes of other interested parties. The prospects for longterm return on the group s capital are dependent on maintaining confidence in its activities and in the products it offers. Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Clearing ASA are authorised pursuant to the Stock Exchange Act, the Securities Register Act and the Securities Trading Act, and are subject to supervision by Finanstilsynet (the Financial Supervisory Authority of Norway). Oslo Børs carries out supervision of market participants that are also its customers. This arises partly because it operates as a regulated market, and partly as a result of specific duties delegated by the authorities. Responsibility for inspecting and approving prospectuses was transferred to Finanstilsynet in Oslo Børs has a duty to report any suspected breaches of rules and regulations by its customers to the authorities, and pursuant to the Stock Exchange Act it can impose violation charges on individual customers for breaches of the Stock Exchange Act or the Stock Exchange Regulations. The Board of Oslo Børs resolved in 2002 that if the income (fees) arising from violation charges exceeds the costs incurred by implementing and monitoring such sanctions, the surplus should be applied to measures designed to strengthen confidence in the Oslo market and market integrity. The amounts received in respect of violation charges have as yet not exceeded the costs incurred. The Securities Trading Act of 2007 stipulates that violation charges paid by stock exchange listed issuers for breaches of the statutory duty of disclosure are payable to the State. Violation charges in respect of other breaches will continue to be paid to Oslo Børs VPS. 1. Corporate governance policies The Board of Oslo Børs VPS Holding ASA is of the view that the company s policies for corporate governance are in accordance with the Norwegian Code of Practice issued on 21 October The group has clearly defined corporate values and each subsidiary company has ethical guidelines based on these values. Unified ethical guidelines have been developed for the entire group. The officers and employees of the companies in the group are subject to a range of rules laid down by legislation and regulation, as well as internal guidelines. The group intends to develop guidelines for corporate social responsibility in The following sections provide an explanation of how Oslo Børs VPS has addressed the various issues covered by the Norwegian Code of Practice. 2. Business activities The business objective of each company in the group is specified in its articles of association. The articles of association of Oslo Børs VPS Holding ASA restrict the company s business objective to holding ownership interests in companies that operate stock exchange activities and securities registers, together with other activities normally associated with these activities. The Board believes that the business objectives laid down in the company s articles of association provide predictability and direction for the company s business strategy and the activities that it may acquire or initiate. The articles of association of Oslo Børs VPS Holding ASA can be found at page 88 of the annual report. The group conducts an annual strategy process that leads to the production of a strategic plan for the group as a whole and for the individual subsidiaries. An account of the group s strategy and focus areas can be found in the directors report on page 13 of the annual report. 3. and 4. Share capital and dividends, equal treatment of shareholders and transactions with close associates Page 86 of the annual report provides information on the company s shareholder policy and dividend policy. Oslo Børs VPS strives to maintain its equity capital at a level appropriate for its strategy and risk profile. If the group holds liquidity in excess of the capital considered necessary for its operations, taking into account possible acquisitions, investment plans and the need to maintain satisfactory liquidity and solidity, including the requirements stipulated by the authorities, steps will be taken to distribute the surplus to shareholders. The Board has not been granted any mandates to carry out transactions that increase the company s share capital. The annual general meetings from 2006 to 2010 granted the Board a mandate to buy back up to 1% of the company s own shares. Any proposal made to the annual general meeting to grant a mandate to the Board to carryout a transaction that increases the company s share capital will be restricted to an identified purpose. 79

80 In the event that any mandates to increase the company s share capital are granted in the future, the Board will take a cautious approach to waiving the principle that existing shareholders have a right of pre-emption to subscribe for new shares. If the Board does decide to waive pre-emption rights at any time, the announcement of this decision will provide an explanation of the reasons for the decision. Similarly, the Board is very cautious about buying back shares in any way other than through the market at market price. The Board will only consider exceptions to these principles where they are clearly justified in the interests of the company and its shareholders. The group has not entered into any transactions with shareholders, members of the Board, members of management or close associates of any such parties other than such transactions as form a normal part of stock exchange activities. Internal guidelines require that any member of the Board or the executive management, or any other employee, who has a personal interest in any transaction(s) involving any of the companies in the group must disclose his or her interest. In the event that such a transaction proceeds and is not immaterial, the company will seek independent valuation of the values involved. 5. and 6. Freely negotiable shares and general meetings Page 86 of the annual report provides information on ownership restrictions, restrictions on voting rights and general meetings. The Stock Exchange Act and the Securities Register Act impose restrictions on the ownership of shares in Oslo Børs VPS Holding ASA and on voting rights in the company. The Board believes that such restrictions are in principle to be avoided, but takes the view that these restrictions are not unreasonable in view of the particular need to maintain independence and inspire confidence in view of the activities carried out by the group. The Board believes that the company s policies and practice for holding general meetings are in accordance with the Norwegian Code of Practice. It notes in particular that notices calling general meetings are in practice sent out one month prior to the date of the meeting, that the company s articles of association do not require shareholders to give notice of their intention to attend a general meeting, that shareholders are given the opportunity to propose an independent chairman to the meeting if they wish, that the chairman of the Board is nominated as a person available to act as a proxy to cast votes on behalf of shareholders, that the company has prepared a proxy form that allows shareholders to give specific instructions on each resolution to be considered and that the proxy form allows separate voting instructions for each candidate nominated for election. The articles of association permit the company to use a simplified form of notice calling a general meeting in accordance with the provisions of the Public Limited Companies Act. 7. Nomination Committee The general meeting has approved guidelines for the nomination committee in the form of a mandate approved by the annual general meeting held in May As required by the articles of association of Oslo Børs VPS Holding ASA, a nomination committee has been appointed to make recommendations to the company in general meeting for the election of members to the Board of Oslo Børs VPS Holding ASA. At the Board s request, the nomination committee will also propose candidates for the members of boards of subsidiaries and the remuneration to be paid to these boards. The nomination committee is required to propose the remuneration to be paid to the members of the Board and the control committees. Candidates for election to the nomination committee are proposed by the committee itself. The nomination committee has a minimum of three members. The chairman and other members of the nomination committee are elected for a three-year term of office by the general meeting. In order to ensure a degree of rotation, the nomination committee is required to consider each year whether a member of the Committee should step down, for example the member with the longest period of service on the committee. Neither the chief executive officer nor any other employee of the company is permitted to be a member of the nomination committee. Details of the current nomination committee can be found on When making proposals for new members of the nomination committee, the nomination committee is required to attach importance to principles such as independence and impartiality, while at the same time identifying candidates that have an understanding of the company s situation. As part of its work on identifying new members of the nomination committee, the nomination committee is expected to maintain contact with shareholders that have significant ownership interests in the company. There are no relationships of dependence, between any member of the nomination committee and any member of the company s Board or management. However, it should be noted that a member of the Board, Ottar Ertzeid, and a member of the nomination committee, Leif Teksum, are both members of the executive management of the DnB NOR group. 80

81 The nomination committee is required by its mandate to identify candidates that meet the requirements of the appointment in question, cf. the company s articles of association and the legislation and other requirements imposed by the authorities that apply to the group s activities at anytime. The nomination committee is required to identify candidates that are suitable for approval taking into account the shareholder composition of the company. The nomination committee s mandate requires it to take the following factors into account when proposing candidates for election to the Board by the general meeting and to report accordingly: That the Board should have sufficient expertise and experience to handle both its routine operational responsibilities and the strategic challenges that the company faces. In addition to ensuring the availability of suitable expertise, the committee is asked to pay attention to factors such as the balance of age and gender. That the candidates are sufficiently independent of the company s management, and that the Board as a whole is sufficiently independent of any single shareholder or particular customer group. That the candidates have sufficient time in relation to their other appointments and employment to carry out their duties as a member of the Board. The nomination committee shall maintain contact with the various groups of shareholders. The committee makes its decisions by majority voting. In the event of a tie, the chairman has an additional casting vote. The nomination committee s recommendations form an appendix to the notice calling the general meeting, and in addition to personal details they must contain information on each candidate s education, current employment, relevant previous work experience and details of all board and other appointments, as well as confirmation that the candidate has confirmed that he or she is willing to accept the appointment if elected. There is no specific timetable for the nomination committee s recommendations. However the committee normally completes its work around one month before the annual general meeting, which is normally held in May. The remuneration of the members of the boards and control committees is approved by the general meeting, which considers recommendations from the nomination committee. The mandate for the nomination committee stipulates that the remuneration of the members of the committee shall be based on an account of the time spent on the work of the committee. The scale of work undertaken by the nomination committee shall normally be agreed by the chairman of the Board of Directors before the work is undertaken. However, the annual general meeting, with the agreement of the nomination committee and the Board, has approved a fixed annual fee for the members of the nomination committee. The nomination committee shall be represented at the annual general meeting in order to present the committee s recommendations and to answer any questions. 8. Composition of the Board of Directors and its independence The articles of association stipulate that the Board of Oslo Børs VPS Holding ASA shall have at least five and no more than twelve members. Members are appointed for a two-year term of office. The chairman and deputy chairman of the Board are elected by the general meeting. The Board of Oslo Børs VPS Holding ASA has seven members. The employees elect four observers to the Board. Further information on members of the Board can be found on page 12 of the annual report. The Board is of the opinion that, in total, it has sufficient expertise and capacity to carry out its duties in a satisfactory manner. The Board has not produced a specific operational definition of impartiality and independence, but has routinely evaluated the impartiality and independence of its various members. Such evaluations will continue to take place in the future. This draws attention to the issue of impartiality and independence, and helps to maintain an awareness of the issues involved. It is also important that Oslo Børs VPS Holding ASA has an experienced Board that understands the financial sector and the financial markets. This can lead from time to time to situations in which one or more members of the Board has a particularly close relationship to an issue due for consideration by the Board. Oslo Børs VPS Holding ASA therefore practices a particularly strict interpretation of the legislative provisions on disqualification. This ensures that no member of the Board can participate in the consideration of any matter where he or she has a financial or other interest, either on his or her own account or through any undertaking with which he or she is associated. 81

82 With the exception of the employee observers, there is no relationship of dependence between any member of the Board and the management of the company. Each of the businesses that make up the group has a range of customers. With the sole exception of DnB NOR ASA and its subsidiaries, no customer that represents a significant proportion of revenue is represented on the Board. The Chairman of the Board, Leiv Askvig, is a member of the board of directors of Astrup Fearnley AS, which owns the stock exchange member firm Fearnley Fonds ASA. Ottar Ertzeid, who is a member of the Board, is an Executive Vice President of DnB NOR ASA, which is a listed company, and of DnB NOR Bank ASA, which is a member firm, a clearing and settlement member and a securities account operator. Benedicte Schilbred Fasmer, who is a member of the Board, is an employee of Sparebanken Vest, which is an issuer of listed equity certificates and bond loans, and which has a subsidiary company that is a stock exchange and settlement member where Benedicte Schilbred Fasmer is the chair of the board of directors. Board member Svein Støle is the Chief Executive Officer and majority shareholder of Pareto AS, which is the majority shareholder in Pareto Securities AS, a firm which is a stock exchange member and is also a clearing and settlement member. Board member Harald Espedal is the Chief Executive Officer of Skagen AS, which is a customer of VPS. Giselé Marchand, who is the Deputy Chair of the Board, is a member of the boards of Norske Skog ASA and Fornebu Utvikling ASA, both of which are listed companies. Benedikte Bettina Bjørn, who is a member of the Board, is an attorney and Company Secretary at Statoil ASA, and she is also a deputy member of the corporate assembly of Orkla ASA and a member of the supervisory board and nomination committee of Gjensidige Forsikring ASA. All these companies are listed on the stock exchange. Moreover, the appointments held by these members of the Board are not considered to compromise their independence. If matters arise that concern the companies involved, the Board will pay particular attention to whether these members should be excluded from participation. Three of the seven members of the Board either hold a senior position with a shareholder of Oslo Børs VPS Holding or have a material ownership interest in a shareholder (see table below). With the exception of Ottar Ertzeid, all the members of the Board are deemed to be independent of the company s largest shareholder. The Board believes that, on an overall evaluation, the criteria set out in the Code of Practice for the Board s independence from shareholders, business connections and the executive management are satisfied. Several of the members of the Board of Oslo Børs VPS Holding ASA have ownership interests in or are employees or elected officers of customers of the group, but only one of these customers, DnB NOR, falls into the category of a main business connection for the group. As part of its normal activities, the Board deals with a number of issues that may have a positive or negative effect on parties that are represented on the Board. Certain members of the Board represent shareholders/customers that may be affected in different ways by the strategic decisions taken by the group. This represents a particular challenge for the Board that it has fully recognised and discussed. The table on next page shows the attendance at Board meetings by each member of the Board in Board member Position held Shareholder Shareholder s relationship to the group Chairman Leiv Askvig Managing Director Sundt AS 1.8% Shareholder s shareholding in Oslo Børs VPS Holding Ottar Ertzeid Svein Støle Benedicte Schilbred Fasmer Executive Vice President of DnB NOR ASA Chief Executive Officer and majority shareholder Vital Forsikring ASA wholly owned subsidiary of DnB NOR ASA Pareto AS Member of the exchange and a clearing and settlement member firm, operator of securities accounts and issuer of listed financial instruments Majority shareholder in Pareto Securities which is a member of the exchange and a settlement and clearing member firm Executive Vice President Sparebanken Vest Operator of securities accounts and issuer of listed securities 19.1% 8.5% 1.3% 82

83 Board meetings Oslo Børs VPS Holding ASA Leiv Askvig (Chairman) X X X X X X X X X X X Gisele Marchand X X X X X X X X X X Benedicte S. Fasmer X X X X X X X X X X Svein Støle X X X X X X X X X X Harald Espedal X X X X X X X X X X Ottar Ertzeid X X X X X X X X X X X Benedikte B. Bjørn X X X X X X X X X X Christian F. Kjøde (observ./empl.repr.) X X X X X X X X X X X Lene A. Johansen (observ./empl.repr. to Feb 10) X X Astrid L. Øyehaug (observ./empl.repr. to Apr 10) X X X Ingvild Resaland (observ./empl.repr. elected May 10) X X X X X X Morten Nordbye (observ./empl.repr.) X X X X X X X X X X Gunnar Haug (observ./deputy empl.repr. elected May 10) X* Norunn Dale Seland (observ./empl.repr. to Apr 10) X X X X Sissel Bakker (observ./empl.repr. elected May 10) X X X X X Marianne Klingen (observ./deputy empl.repr. elected May 10) X* Vidar Nordtømme (observ./deputy empl.repr. elected May 10) Guro Steine (observ./deputy empl.repr. elected May 10) X= as a member X*=as a deputy member 9. The work of the Board The Board produces an annual plan as part of its planning. The plan includes a schedule for the main tasks carried out by the Board annually and for other routine tasks. The work of the Board is based on a formal mandate. The mandate sets out guidelines for the Board s work and procedures and for the main responsibilities and duties of the chief executive officer in respect of the Board, as well as defining the authority and the jurisdiction of the Board in accordance with current legislation. The Board approves job descriptions for the chief executive officer and the senior managers responsible for each subsidiary that specify the duties and tasks of the individual and defines his or her authority and responsibility. The Board of Directors has not established an audit committee. The Board is of the opinion that the duties that would be carried out by an audit committee are dealt with in a satisfactory manner by the Board as a whole. The Board of Oslo Børs VPS Holding ASA has appointed a remuneration committee. The remuneration committee prepares matters for consideration by the Board in relation to the remuneration of the chief executive officer, the group s policy on remuneration of its other executive personnel and the principles to be applied for variable salary payments to the group s other employees, and it also advises the chief executive officer on the remuneration of other executive personnel. The members of the remuneration committee are Leif Askvig and Benedicte Schilbred Fasmer, both of whom are independent of the group s executive personnel. Kim Dobrowen, the chairman of the board of Verdipapirsentralen ASA, participate in meetings of the remuneration committee when the committee so wishes. With the assistance of an external facilitator, the Board regularly reviews its performance, the expertise it offers in relation to the company s needs, its working procedures and the work of the chief executive officer and her relationship with the Board. This review is carried out annually in the first quarter, and the results are made available to the nomination committee in connection with the committee s considerations prior to the annual general meeting. 10. Risk management and internal control Each company in the group has approved a policy on risk management and internal control that specifies methodology, documentation and reporting requirements for its various activities, and this applies to both the managing director and the management of the subsidiary in general. Oslo Børs ASA and Verdipapirsentralen ASA operate the same policy in this respect. 83

84 Work on risk management and internal control by each subsidiary involves carrying out risk assessments of all significant areas of activity, producing action plans for all the risk factors identified, and producing and updating quality assurance documentation. The documentation produced addresses organisational matters and procedures and reporting routines through the organisational levels up to its board. Reporting also includes issues related to corporate values and ethical guidelines. Each subsidiary has a system for any concerns over illegal or unethical conduct to be notified to the board. Reporting will also include corporate social responsibility once the guidelines in this respect are in place. The managing director of each subsidiary produces a report for the board of directors of the subsidiary and the group chief executive officer on the status of risk management and internal control, based on the arrangements described above, at least once each year. The board of directors of the subsidiary and the group chief executive officer also receive quarterly reports on risk-reducing measures and quarterly reports detailing any exceptions. The group chief executive officer reports in turn to the Board of Oslo Børs VPS Holding ASA. Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Clearing ASA are subject to the statutory Regulation on risk management and internal control, and as part of these requirements each company must have an internal audit function. The internal audit function for each company reports to its board of directors. The internal control arrangements described above also include the internal control of financial reporting. The internal control procedures include setting policies for financial management, instructions, guidelines and procedures for the various processes involved in financial reporting and detailed descriptions of the procedures for the work involved. This includes stipulating levels of authority for entering into contracts, placing purchasing orders, authorising documents and authorising payments, as well as reporting arrangements for delegated authority. The internal control environment also includes clearly defined accounting principles, competent staff and prudent separation and allocation of responsibility. Risk assessments are carried out at least once a year to identify any potential sources of error in financial reporting. Steps are taken to ensure that any unacceptable level of residual risk is resolved, and the measures implemented are properly followed up and reported. Control activities include a range of functions in order to help ensure that control activities are comprehensive, relevant and carried out with due care. 84 Use of the intranet, document management systems and financial information systems ensure a good flow of internal information and make essential documents, financial information etc. easily available to employees. Both the executive management and the Board receive comprehensive monthly financial reports. External factors are monitored both through publicly available information and by use of databases of specialised and processed information. The internal control system is kept under continuous review, taking into account changes in requirements or any weaknesses that are identified. Changes in the organisational structure, products, operating parameters etc. may require changes to one or more levels of the internal control procedures. Exceptions are corrected and reported on a continual basis, and the executive management and the Board receive exception reports of instances that exceed predetermined criteria. The external audit function is carried out by external personnel who report to the Board and the annual general meeting. Due notice is taken of any areas of potential improvement identified by the audit processes. 11. and 12. Remuneration of members of the Board of Oslo Børs VPS Holding ASA and executive personnel in the group The remuneration of members of the Board is decided by the general meeting, which receives recommendations from the nomination committee in this respect. All members of the Board, with the exception of the chairman, deputy chairman, and employee observers, receive the same remuneration. Remuneration of the members of the Board is not linked to the company s earnings. The remuneration paid to members of the Board is made up of a fixed annual fee. Deputy members of the Board receive a fixed fee for each meeting in which they participate. Members of the Board who sit on board committees receive additional remuneration for each meeting attended in respect of this work. No other additional remuneration is paid to members of the Board. Members of the Board may receive additional remuneration in accordance with the Board s mandate if they take on an assignment or other duties for the company that do not form a natural part of the responsibilities of a Board member. Any such assignment or duties to be carried out must be approved in advance by the Board and be governed by a written agreement defining the scope of the assignment or duties, their duration and terms of payment. This agreement must be in accordance with normal commercial terms in respect of payment and other matters. No member of the Board carried out any such assignment or other duties in 2010.

85 The Board takes a positive view of ownership of shares in the company by members of the Board, management and other employees. Shares in Oslo Børs VPS Holding are listed on the OTC list of the Norwegian Securities Dealers Association, and are the subject of regular trading. It is therefore possible for both appointed officers and executive personnel to purchase shares at will. Share ownership programs were made available in each year from 2006 to 2010 to give employees the opportunity to buy shares in Oslo Børs VPS Holding ASA. The Board is considering whether to propose a similar program for 2011 to the annual general meeting to be held in May Oslo Børs VPS Holding ASA has not granted any share options. The Board of Oslo Børs VPS Holding has produced guidelines for the remuneration of executive personnel. The guidelines stipulate that remuneration shall be determined on an individual basis, taking into account performance, expertise and experience. The remuneration of executive personnel will follow the same principles as apply for other employees in respect of the limits set for annual salary increases, the date of such increases and total remuneration comprising fixed and variable salary. The remuneration of the group chief executive officer is determined by a meeting of the Board. Salary increases for other executive personnel are decided by the managing director of the subsidiary in question after submitting the increases to the Board s remuneration committee and reporting the decisions made to the Board. The guidelines are placed before the annual general meeting for an advisory vote in accordance with the requirements set out in the Public Limited Companies Act. No member of the Board or of the executive personnel is entitled to any form of remuneration linked to shares, share prices or related derivative instruments. The group operates a scheme for variable bonuses for all employees. The scheme is based on profit for the current year, achieving specific targets for the year and a number of other factors. The members of the group management and certain other senior managers are entitled to a separate variable bonus arrangement that provides for bonuses of up to 25% of fixed salary. In accordance with the Code of Practice, further information on the fees paid to members of the Board and the remuneration and benefits of the executive management and other executive personnel can be found at note 14 to the accounts. 13. Information and communications Page 86 of the annual report provides information on the company s shareholder policy, including its policy on dividends and information. Oslo Børs VPS Holding ASA has decided to act in this respect as though the company was listed on the stock exchange. However, the company s shareholders are not subject 85 to the requirements that apply to shareholders in listed companies in respect of disclosing significant changes in shareholding, the duty to make a mandatory offer etc. 14. Takeover The Board will not take any steps to hinder or obstruct an offer for the company s activities or shares unless there are particular reasons for this. Moreover, in such a situation the Board will not exercise mandates or pass any resolutions that obstruct the takeover bid unless this is approved by the general meeting following the announcement of the bid. If a bid is made for the company s business activities or shares, the Board will arrange for a valuation by an independent expert and issue a statement evaluating the bid including a recommendation to shareholders as to whether or not they should accept the offer. Any transaction that is in effect a disposal of the company s activities will be submitted to the general meeting. Any resolution in respect of merger, dividing up the activities or disposing of a material part of the activities of Oslo Børs or Verdipapirsentralen that are subject to official authorisation must, pursuant to the Stock Exchange Act and the Securities Register Act, be notified to the Ministry of Finance, and the Ministry is entitled to veto any such resolution or impose conditions on the implementation of any such resolution. 15. Auditor The auditor produces an annual audit plan that is submitted to the Board. The auditor submits a Management Letter to the Board following the annual audit of the interim and annual accounts. The Management Letter also includes an evaluation of the company s internal control arrangements and those of its subsidiaries. The auditor presents his conclusions to the Board in person. The Board holds at least one meeting a year with the auditor that is not attended by the chief executive officer or any other member of the company s management. In connection with the issue of the auditor s report, the auditor provides the Board with a declaration of independence and objectivity. The auditor participates in the Board meeting at which the Board approves the annual accounts, and also participates in the annual general meeting. The proposal for approval of the remuneration paid to the auditor provides a breakdown of the total remuneration between the statutory audit tasks and other assignments. Guidelines are in place for the use of the auditor as a consultant within the group.

86 Share information Restrictions on share ownership, voting, general meetings etc. 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 Stock Exchange Act and the Securities Register Act establish the general principle that no single party may own shares that represent more than 20% of the share capital or voting capital of Oslo Børs VPS Holding. Any acquisition of a significant ownership interest in a regulated market can only be carried out after giving prior notice to Finanstilsynet (the Financial Supervisory Authority of Norway). A significant ownership interest for this purpose is defined as a direct or indirect ownership interest that represents at least 10% of the share capital or voting capital, or an interest which in some other way makes it possible to exercise significant influence over the management of the company. Exemptions from the general principle on ownership interests are available for entities that as their main business operate or own a regulated market or similar marketplace or operate or own infrastructure activities related thereto. The company s articles of association contain no specific provisions on the notice required to call a general meeting. The provisions of the Public Limited Companies Act therefore apply, and notice must be given no later than three weeks before the date of the meeting. In practice Oslo Børs VPS Holding aims to send out the notices calling general meetings four weeks before the date of the meeting. All shareholders are entitled to participate in general meetings. The articles of association do not require prior notice from shareholders who wish to participate, and shareholders may therefore participate in a general meeting without giving prior notice of their intention. For practical reasons shareholders who do wish to attend a general meeting are asked to give notice of this in advance. All shareholders of Oslo Børs VPS Holding ASA can participate in a general meeting, either through personal attendance or through a proxy appointed by a written, signed and dated authority, subject to the following: a) The shareholder s shareholding must be registered in the share register maintained by the Norwegian Central Securities Depository (Verdipapirsentralen or VPS ), or b) If the shareholding is not apparent from the share register, the shareholder must provide evidence of the holding prior to the general meeting. This implies that shareholders holding shares registered through a nominee are permitted to participate in the general meeting if the shareholder gives notice of the shareholding to the company in advance, and provides evidence of this in the form of confirmation from the nominee registered in the VPS shareholder register. When appointing a proxy to vote on their behalf, shareholders may specify how the proxy should vote on specific matters. The members of the company s Board of Directors and its Chief Executive must be present at a general meeting. The Board will ensure that an independent person is proposed to chair the general meeting. Mandates to the Board of Directors The Board of Oslo Børs VPS Holding ASA has not been granted any mandate to issue shares, convertible loans or any other form of equity instrument. The Board og Oslo Børs VPS Holding ASA holds a mandate to acquire up to 1% of the company s own shares in connection with a share purchase program for employees. The mandate was granted by the 2010 annual general meeting, and is valid until the 2011 annual meeting. Shareholder and IR Policy The basis for the shareholder policy adopted by the Board of Directors is for the group s extensive range of activities to be managed and conducted in such a way as to focus on creating long-term value for shareholders in Oslo Børs VPS Holding. The Board of Oslo Børs VPS Holding also fully recognises the role that the group s activities play for Norwegian business and industry. The Board believes that fulfilling this role will represent little restriction to the objective of creating long-term value for shareholders in Oslo Børs VPS Holding. In addition, the company will strive to meet the standards of best practice for: The provision of information to shareholders Equal treatment of all shareholders Shareholder influence Oslo Børs VPS Holding will seek to increase the group s earnings through measures such as marketing to its customers as well as through product development, and measures to build confidence. As infrastructure operators, both Oslo Børs and Verdipapirsentralen are exposed to a high proportion of fixed costs that are not affected by changes in the level of activity in the market. The group therefore pays particular attention to 86

87 managing its costs. The group s capital structure and dividend policy will be evaluated on the basis of what is considered appropriate and desirable for its shareholders. The Board of Oslo Børs VPS Holding ASA considers it to be in general appropriate that at least half 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 solidity, including the effect of planned and possible investment on liquidity and solidity. Oslo Børs VPS Holding ASA has elected to operate its information policy as though the company were stock exchange listed. All events or decisions that might be expected to have an effect on the price of the company s shares will be published immediately. The company has also elected to publish quarterly interim reports and will normally publish these reports in the month following the end of each quarter. Presentations of the interim reports are held at the offices of Oslo Børs and are open to all. Members of the Board of Oslo Børs VPS Holding ASA and board members of all its subsidiaries, as well as members of the executive management team and the management teams for all subsidiaries, are classified as primary insiders and are required to give notice of any purchases and sales of shares in Oslo Børs VPS Holding. Oslo Børs VPS Holding provides investor relations pages at and the information on these pages is regularly updated. The investor relations pages provide key operational figures which are updated monthly, financial information, information on primary insiders and other published information, shareholder information etc. Dividends Shareholders Resolutions Last day of Amount matters to the of the trading inclusive Payment Oslo Børs VPS Holding ASA per share general meeting general meeting of dividend date Ordinary dividend for 2010 NOK Mar 2011 Ordinary dividend for 2009 NOK Mar May May June 2010 Ordinary dividend for 2008 NOK Mar May May June 2009 Ordinary dividend for 2007 NOK Apr May May June