Annual report At EDB, the measuring stick for everything we do is the contribution IT makes to value creation. more from IT.

Transcription

1 Annual report 2007 At EDB, the measuring stick for everything we do is the contribution IT makes to value creation. more from IT.

2 Contents More value from solutions 4 More capacity and more expertise through global sourcing 6 More value through renewal and innovation 8 Chief Executive Officer s introduction 10 This is EDB Business Partner 12 The year in brief 12 EDB in EDB entering Management review 18 Market and operating conditions 18 Strategy, value drivers and risk 20 Strategic agenda 22 Business review 24 Corporate responsibility 27 Report of the Board of Directors Annual accounts group 34 Annual accounts EDB Business Partner ASA 66 Auditor s report 73 Corporate governance at EDB 74 Investor information 80 Executive management 84 Addresses 86

3 Today s information technology offers limitless opportunities. But customers expect more than opportunities. They need to experience for themselves that technology makes a real contribution to value creation in their businesses. EDB has added value, through IT solutions that create the measuring stick for everything they do. This affects what we deliver to our customers and steers our strategic development. It is why we invested heavily in offshoring in And it is why we are now committing major resources to renewal and innovation. 3

4 More value from solutions. Most businesses in every industry and sector are experiencing the same trends: Business processes and value chains are becoming more sophisticated, and every thing has to happen more quickly. Also, users are gaining greater power and control. The unlimited opportunities offered by IT make it the driver behind these developments and a crucial factor for competitiveness. In other words: IT is becoming ever more business-critical. In such a world, using a strong and experienced IT provider is the key to achieving business objectives. The IT partner must understand the customer s business, be able to offer secure and reliable operations, and be well equipped to deliver the newest and best that technology can offer. EDB is committed to fulfilling this role a partner for creating value and building competitive advantage. Oil, gas and process industries. In January 2008 EDB announced that it had acquired IS Partner, the leading Norwegian IT services company in the oil and gas sector. Through the integration of IS Partner, serves customers in 50 countries around the world, EDB can now deliver IT consulting, development and operating services throughout the entire petroleum industry value chain and anywhere in the world. Together with IS Partner, EDB now has extensive expertise for global industrial businesses in terms of both business processes and production. IS Partner s customer list includes major Nordic businesses with sizeable international operations, including StatoilHydro, Hydro, Yara, Borealis and Kerling. THE TWO LARGEST IT PROJECTS IN NORWAY. IS Partner carried out the two largest-ever IT projects in Norway in The first of these was the integration of StatoilHydro s oil and gas operations, it included the installation of new PCs and transferring almost applications, including highly sophisticated solutions, onto a common platform. The second project involved the spin-off and establishment of Hydro as an aluminium-focused company. Both projects were completed successfully and on time. More at 4

5 BANKing AND FINANCE. EDB is the leading IT services provider to Norwegian banks and has the Nordic region s largest IT development operation for banking and finance. Working closely with our customers, we have developed cutting edge solutions including internet banking that have made Scandinavian banks some of the most advanced and customer-oriented in the world. We are now focusing on new challenges, both to deliver efficient, secure and reliable processes and to add even more value in the relationship between banks and their customers. We help Nordic banks to expand internationally and also offer Nordic solutions for international banks that establish operations in our region. In 2007, we launched the next generation of Internet banking, signed the first contract for our new core bank solution, and sold our advanced card solutions to several new customers. SPAREBANK 1. SpareBank 1 and EDB Business Partner established a strategic collaboration in 2007 to develop banking and finance solutions that will deliver competitive business processes. These solutions will combine SpareBank 1 s indepth technical and business expertise with EDB s experience of developing components for the banking and finance market. The new solutions will be market leading in the Nordic region, and will be delivered through a collaboration that shares development costs between the parties. The collaboration agreement runs for an initial period to the end of PUBLIC SECTOR. The Scandinavian public sector has set ambitious targets for its future development. It aims for smarter ways to handle its administrative tasks so that more resources can be allocated to important social spending. In addition, it wants the public to find it easier to inter act with the public authorities. IT is the key to achieving these objectives. EDB is committed to these ambitions, and is focused on being an active partner for central gov ernment, local government and health authorities. We demonstrated our commitment in 2007 with the launch of the EDB Digital Public Sector suite of solutions. It represents the largest investment in IT for the public sector anywhere in the Nordic region. The platform is SAP-based, ensuring access to international best practice and future development. RØROS REGION. EDB announced that Røros region had entered into an agreement to supply accounting solutions to the three municipalities Os, Røros and Holtålen. The solutions are based on EDB Digital Public Sector. This agreement gives the municipalities access to a platform-independent solution delivered on a web-based interface. The objective is to create better dialogue both within the municipalities and with the citizens that use their services. RETAIL AND SERVICES SECTOR. In the retail and services sector, IT can help create competitive advantage throughout the value chain from production, through logistics and point-of-sale. Retail and This makes the reliability and security of their systems a critical competitive factor. Many businesses in this sector have benefited by working with EDB, and freed up their resources by outsourcing their IT operations to us. In addition to operating services, we offer market-leading applications, including complete SAP solutions. RELACOM. Relacom is the country s largest contractor for project management, installation, service and maintenance of telecommunications and data networks, providing customer response and help desk services with 24/7 availability. Relacom depends on secure, reliable and efficient solutions. By delivering this, EDB is helping Relacom build its position as the preferred supplier in its market. 5

6 More CAPACITY and MORE EXPERTISE through global sourcing. GLOBAL DELIVERY MODEL. In addition to cost reduction and access to expertise, global sourcing plays an important role in strengthening EDB s capacity as a supplier to Nordic companies with global operations. With the acquisition of IS Partner, we now serve customers in 50 countries around the world and are able to offer a global delivery model that can serve customers entire international infrastructure. DEVELOPING OUR ORGANISATION. Our global sourcing strategy is re flected throughout EDB s organisation. We view global sourcing not just as additional capacity and expertise, but as an opportunity to enhance the way we use our Scandinavian resources. This will benefit our customers, as we develop broader and stronger interfaces with them, and deliver even better advice and support to end-users. FOOTHOLD IN NEW MARKETS. The companies we now own in the Ukraine and India do not only serve EDB and EDB s customers. Each company has its own valuable customer portfolio, comprised of international companies based in the USA and Western Europe, including banks and financial institutions. Over time, these customer relationships can open new opportunities for EDB. In addition, the local markets, particularly in the Ukraine, are attractive to many Scandinavian companies. Our foothold in these markets puts us in a good position to serve as a partner for companies expanding there. 6

7 SPAN INFOTECH. In October 2007, EDB announced one of the largest investments a Norwegian IT company has ever made in Asia, when it acquired 50.1 percent of the Indian company Span Infotech. The company was established in 1993 and has around 550 highly qualified employees at three locations in Bangalore, India. Around 80 percent of Span Infotech s revenue comes from the USA, with Scandinavia accounting for the balance. Most of its customers are in the banking and finance sector. The company principally works in the areas of applications development and applications management. Demand for IT services is growing strongly, leading to shortages of key resources. At the same time, there is an almost unlimited market for highly qualified people, created by a combination of new technology and globalisation. This has led to the emergence of global sourcing using resources from other countries that offer high levels of expertise at lower costs. In 2007, EDB took major steps to give its customers access to the benefits of global sourcing. We acquired majority interests in two companies in the Ukraine and one in India, employing a total of almost highly qualified IT specialists. This makes us an even stronger partner, both for development expertise and delivery capacity. At the same time, we maintain our close relationships with customers through our strong Nordic roots. INFOPULSe. In January 2007, EDB acquired 60.1 percent of the Ukrainian IT company Infopulse Ukraina LLC. The company was established in 1992 and has 450 employees. Over 80 percent of Infopulse s employees have postgraduate qualifications in ICT. The company has many years experience of working for West European and American companies. MIRATECH. In July 2007, EDB made a further acquisition of a Ukrainian IT company with its purchase of 60.1 percent of Miratech. The company, established in 1989, is the oldest IT firm in the Ukraine. Miratech has 200 employees, and its workforce is highly educated. The majority of Miratech s customer base is drawn from the American and European markets. More at 7

8 More value through renewal and innovation. EDB s APPROACH TO inno VA TION. The best new solutions are the result of an optimal interaction between industry standards and the adaptations needed for local market conditions and the customer s needs. This interaction should also allow the initial costs to be shared between a number of eventual purchasers. Customer requirements Customer-specific solution Adapted for the Nordic market Industry standard, e.g. SAP and i-flex Cost INDUSTRY STANDARDS ARE THE KEY. A particular dimension of innovation that is important for our customers is that solutions are built on industry-standard platforms. A good example of this is our new solution for the public sector EDB Digital Public Sector which is built around SAP. This gives customers access to best practice and the reassurance of access to continuing development, while also time delivering applications suited to use in Norway and the particular requirements of each customer. We see similar requirements in most of the private sector as well: industry standard platforms are the key to innovation and value creation, all the way up the value chain. Using Industrystandard platforms also ensures that the high initial costs for developing technology can be shared between a larger number of customers. 8

9 INCREASED INVESTMENT. EDB intends to further increase its investment in innovation and renewal over the years ahead. For the strategy period going forward through to 2010, we designate NOK 1 billion to a range of innovation projects equivalent to 30 percent of activities in the Solutions business area. Much of this development activity will be organised in specialist groups. EDB has a clear objective to be a leader in using IT to create value. This means that we must also be at the forefront of innovation and renewal. At the same time, we aim to be a strong and attentive IT partner. Therefore, innovation must take place in close collaboration with our customers. This is how we have achieved our biggest breakthroughs, such as the launch of Internet banking 10 years ago and it is how we intend to work in the future. We also believe that innovation will increasingly become less about IT systems and more about customer service. NEXT GENERATION OF INTERNET BANKING. The launch in 2007 of the next generation of Internet banking solution was a good example of the kind of innovation that EDB prioritises. The new Internet bank is portal-based. It offers greater scope for tailoring service delivery to end-users requirements, through what is known as event-based service. This means that the bank will contact the customer if changes in his or her personal situation indicate the need for new products or services. An important principle is that customers decide on the degree of contact they prefer, and can manage this through their Internet banking accounts. Developing this kind of solutions are only possible through close collabo ration with the bank, and this means that we need to be a discussion partner in determining the bank s product strategy. Nonetheless, it is not enough just to know what the customer needs. We must also be fully aware of the opportunities technology can offer, and have a determined and inquisitive approach to keeping ahead of developments. Simultaneously, we must recognize that using the very latest technology can involve some risk. This means that as a supplier we must be comfortable that while our solutions are innovative, they are also well tried and tested. One example of this is mobile banking, which EDB delivered for the first time in This solution uses proven technology applied in a new way that is still secure and reliable. More at 9

10 IT S ALL ABOUT ONE THING CREATING MORE VALUE DEAR EDB INVESTOR. Over the course of 2007, EDB strengthened its position in the Nordic market, and acquisitions in the Ukraine and India have given us excellent access to valuable expertise. At the start of 2008, we acquired IS Partner from StatoilHydro, giving us scope for major synergy benefits and important opportunities for further growth will be the year when the overall competitive strength of EDB s employees will become fully apparent. An important element of EDB s strategy over recent years has been to ensure profitable growth through a better balance of revenue developing a revenue mix that reflects the pattern of demand in the Nordic IT services market. This helped EDB to increase EBITA by 12 percent in 2007 to NOK 607 million. EBITA margin improved from 9.3 percent in 2006 to 9.5 percent last year. Cash flow for 2007 as a whole was 14 percent higher at NOK 807 million. Reported earnings per share was 34 percent higher at NOK In accordance with EDB s dividend policy, the Board has decided to recommend that the AGM should approve a dividend of NOK 1.20 per share, equivalent to NOK 108 million. This is a 9 percent increase from the dividend for A market with opportunities EDB will continue to play an active role in consolidation of the Nordic IT services market. We will develop the many successful companies we have acquired, and by realising the potential for collaboration we will deliver a better and broader range of products and services for our customers. The overall Nordic IT services market is worth NOK 120 billion annually, and offers a number of opportunities for EDB s continuing growth: We have a balanced business portfolio, and can grow through industry verticals and different solutions areas, as well as by expanding into new regions or niches for our products and services. The areas of SAP and Banking and Finance card services show doubledigit growth. EDB won sizeable market share in both these areas in 2007, and we intend to do the same again in We believe that uncertainty over the macroeconomic outlook will encourage greater focus on costs, leading to in - creased demand for outsourcing. As a market leader for outsourcing, we are well placed to win our share of this growth. A sound platform for further progress In early 2007, we launched a program aimed at improving our work processes and delivery quality. This is a long-term task, which continues with undiminished emphasis. Experience shows that this kind of program can deliver significant results in the form of improved customer satisfaction and higher productivity. Our focus on the environment measures delivered significant results in In response to the results we have already achieved and the corporate responsibility that EDB recognises as a leading com pany, we intend to increase our efforts in this area in Our objective is to make a positive environmental contribution through a broadly based commitment not only by EDB as company but also by our employees, partners and customers in order to ensure that the entire value chain operates with the appropriate level of environmental responsibility. Global sourcing paves the way for valuable growth EDB acquired businesses in the Ukraine and India in 2007 which have employees in total. These companies have worked with global sourcing for their customers for many years, and they bring to EDB valuable expertise in this area. EDB has management in place locally, in both India and the Ukraine, to monitor these companies and their progress with our projects. The effect will become successively more apparent over the course of 2008 as we move from the current situation, where we source almost 100 per cent of our resources from within the Nordic countries, to a more even balance between Nordic and global resources towards the end of the year. EDB is by far the largest IT services company in the Ukraine, and we are in dialogue with a number of Nordic businesses on supplying solutions and operating services locally in this rapidly expanding market. A high tempo into 2008 EDB will rapidly realise the very significant potential we see in IS Partner, make full use of the capacity we have established in the Ukraine and India, and focus on organic growth in the Nordic countries will be the year when the combined competitive strength of EDB s employees will become fully apparent. Endre Rangnes Chief Executive Officer 10 EDB Business Partner ASA Annual report 2007

11 From the ceo > Endre Rangnes > It s all about one thing creating more value we will strengthen the coordination of our combined resources to offer broader and better services to the customers of EDB. Annual report 2007 EDB Business Partner ASA 11

12 The year in brief 2007 OVER THE COURSE OF 2007, EDB strengthened its Nordic competitiveness by acquiring operations in the Ukraine and India. At the same time, the group strengthened its position in the Nordic market through acquisitions of the card processing company CEKAB, the SAP specialist TeamR3 and the Swedish consulting firm Tre60. EDB won contracts with a range of new customers and expanded its business with existing customers, giving a total order inflow of NOK 6.7 billion. Operating revenues totalled NOK 6.4 billion in 2007, with operating profit for the year of NOK 607 million. Key figures (For detailed information on Key figures, see page 82) 19% Application Services 21% Solutions 60% IT Operations Operating revenues by business area in Operating profit (NOK million) Highlights January: EDB acquires 60.1 percent of the Ukrainian IT company Infopulse Ukrania LLC. Infopulse has 300 highly qualified em ployees with long-standing experience of delivering nearshore services for international customers. EDB s Internet banking-based solution for electronic invoicing in the corporate market, is implemented by DnB NOR with coverage of around 60 percent of the Norwegian corporate market. February: EDB acquires the Swedish card processing company CEKAB for SEK 257 million, making it the leading player for capture and administration of card transactions in the Nordic market. CEKAB has 52 employees and reported turnover of SEK 150 million in march: EDB launches EDB Digital Public Sector, a new solutions platform designed to meet the future needs of municipalities and health authorities. This is the largest unified investment in new IT solutions for public administration ever seen in Norway. As part of the new concept, EDB enters into an extensive partnership agreement with SAP, and major elements of EDB s new solutions for public sector entities are SAP-based. april: EDB s subsidiary Guide Konsult AB acquires the Swedish IT consulting firm Tre60. Tre60 has a strong position in Business Intelligence consulting. july: EDB purchases 60.1 percent of the Ukrainian IT company Miratech. Miratech is one of the leading IT services companies in the Ukraine, and the majority of its customers are in the USA and Europe. september: EDB purchases the Danish IT company TeamR3 AS with 80 employees, and integrates the business with EDB s subsidiary Spring Consulting. Following this acquisition, EDB is one of the leading Nordic vendors of IT consulting services for SAP, with over 300 consultants specialising in this area. october: EDB purchases 50.1 percent of the Indian IT company Span Infotech, with an option to acquire the remaining shares in the company. This acquisition is one of the largest-ever investments in Asia by a Norwegian IT company. Span has around 550 highly qualified employees, and represents a major addition to EDB s strategy for using global service resources January 2008: EDB purchases IS Partner AS from Statoil- Hydro. IS Partner is the largest Norwegian IT services for the oil and gas and process industries, with revenue of around NOK 1.7 billion in This acquisition confirms EDB s position as definitively the largest IT company in Norway. IS Partner gives EDB world-leading expertise for industrial businesses EBITA before extraordinary items (NOK million) Earnings per share (NOK) 12 EDB Business Partner ASA Annual report 2007

13 This is EDB Business Partner > Key figures, highlights and contracts > EDB in 2007 > EDB entering Cash from operations (NOK million) Important contracts Investment in fixed assets (NOK million) Net interest bearing liabilities (NOK million) Number of employees Return on invested capital (ROIC) (percent) January: EuroConex Tech nologies Nordic signs a frame work agreement for transaction processing. The agree ment runs for 3 years, with total contract value of around NOK 22 million. February: EDB makes a breakthrough in the Finnish card services market by winning a contract for Aktia Kort & Finans. EDB is to deliver card services for Aktia s Finnish activities. The agreement runs for 5 years, with an option for a further 5 years. EDB signs strategically important framework agreements on ap plication services with 5 major Nordic groups Volvo IT, AstraZeneca, Ericsson, SAS and Ekornes representing estimated total contract value in the order of NOK 400 million. april: Four municipalities in Ryfylke county Strand, Sauda, Suldal and Hjelmeland become the first to sign up for EDB Digital Public Sector. Telenor signs a 10-year frame work agreement for IT services used by its Nordic activities. The agreement forms a basis for long-term collaboration. As part of the framework agreement, Telenor signs initial contracts with total contract value of NOK 500 million. EDB signs an agreement with SAS to supply application services and Scandinavian helpdesk services for the SAS Eurobonus system. june: The SpareBank 1 Alliance signs an agreement with EDB to buy solutions and banking operating services with an estimated value of NOK 2.5 billion over a period through to 2014, with an option to extend for a further 4 years. Including the option, the agreement represents estimated total contract value of NOK 3.6 billion. Contract signed with PayEx Solutions AS to supply IT operating services for the PayEx card payment platform for point-ofsale and Internet transactions in Norway and Sweden. The contract runs for 3 years, and represents total value of around NOK 15 million. Handelsbanken Norge extends its contract for EDB to supply banking solutions and IT operations for Handelsbanken s Norwegian activities. The agreement represents total contract value over 5 years of around NOK 300 million. The agreement with EDB covers the major part of Handelsbanken Norway s IT requirements. Verdibanken extends its strategic agreement with EDB to july: GE Money Bank signs an agreement to buy solutions and banking operating services for its activities in Denmark and Norway, with an option to extend to the other Nordic countries and the Baltic states. The agreement runs for 7 years, with expected total contract value in the first phase of NOK 160 million. The City of Trondheim expands its collaboration with EDB and signs an agreement for maintenance of its new ERP solutions. These services are part of the EDB Digital Public Sector platform. The agreement runs for 5 years, with total contract value of NOK 60 million. SJ AB and Linkon AB extend their contract with EDB for IT operating services. The agreement pro vides for EDB to continue to supply application services and communications solutions to the two Swedish companies through to september: Pareto Privat decides to launch a banking operation using IT solutions and operating services from EDB, and signs a 5 year agreement for deliveries to the new bank. EDB supplies a banking portal for the bank s customers, employees and business partners. The shipping company BW Gas signs a 3-year agreement with EDB for the operation of its IT systems. The agreement represents total contract value over its life of around NOK 30 million. october: The new life insurance company Frende Livsforsikring signs an agreement with EDB for solutions and operating services for its core life insurance systems. The agreement runs for 5 years, with total contract value of NOK 40 million. EDB s subsidiary TAG Systems signs an agreement with SEB Kort for card services. TAG is to be responsible for production, personalisation and distribution of around half the company s cards in Sweden, Norway, Denmark and Finland. The agree ment runs to the end of Annual report 2007 EDB Business Partner ASA 13

14 EDB Business partner in 2007 Main products and services EDB s objective is to ensure that its customers realise the full potential of IT. This means that we have in-depth specialised knowledge both of the services we offer and of the sectors and industries we serve. Our organisational structure reflects this. EDB operated in 2007 through three business areas: IT Operations, Solutions and Application services. Simultaneously, we maintain a dedicated focus on each of the main sectors and industries we serve. We exchange experience, knowledge and capacity across business areas and industry groups. This creates economies of scale as well as better solutions for the customer. Solutions Share of revenue 21% Application services Share of revenue 19% EDB offers one of the largest and most advanced solutions development environ ments in the Nordic countries, with an extensive portfolio of software solutions and services for areas such as: ERP Industry-specific solutions E-business Media database Web2Print Industry focus Banking and finance Public sector EDB s consulting and training offers services that cover the entire range of an organisation s IT requirements: Project management Systems development Systems integration Applications management Business development SAP Business Intelligence Industry focus All industries IT Operations Share of revenue 60% EDB has a long history of delivering business-critical IT operations. More than professional IT users across the Nordic region rely on services delivered by EDB, which include: operating services for infrastructure and applications Network services Security services User support Business support services Industry focus All industries 14 EDB Business Partner ASA Annual report 2007

15 This is EDB Business Partner > Key figures, highlights and contracts > EDB in 2007 > EDB entering 2008 Main products and services Position Banking and Finance Share of revenue 33% EDB Financial Suite all the solution components a financial business could need, built around FLEXCUBE from i-flex Card solutions IT Operating services leading supplier of IT services to Nordic banks largest development environment for banking and finance in the Nordic region Public sector Share of revenue 14% EDB Digital Public Sector a complete SAP-based platform for resource and operational management IT Operating services IT supplier for 300 municipalities in Norway, as well as a number of regional health authorities and national public bodies A strong emerging IT provider to the public sector in Sweden Retail and Industry Share of revenue 11% IT Operating services market leading applications, including complete SAP solutions EDI and print solutions main IT partner for a number of major companies in the Nordic retail and industry sector Telecom Share of revenue 10% Operating services for distributed IT solutions main activities in this sector are deliveries to Telenor in Norway and Sweden Banking and Finance Public sector Retail and Industry Telecom Solutions Application services IT Operations EDB meets the market through an organisational structure that combines in-depth technical competencies with a strong focus on industry-specific requirements. Annual report 2007 EDB Business Partner ASA 15

16 EDB Business partner Entering Norway 110 Denmark 130 Continental Europe 15 UK 650 Ukraine 20 Bulgaria Sweden 23 USA 550 India 3 Singapore EDB IS A LEADING NORDIC IT group that delivers the entire range of business-critical IT services, from application services and industryspecific solutions through to IT operating services and network solutions. EDB s ambition is to be a strong and attentive IT partner which applies its extensive industry-specific expertise and international scale to help its customers realise the full potential that IT can offer sees EDB in an even stronger position to deliver on this promise. The acquisitions of IS Partner and companies in the Ukraine and India have made EDB a more international company. At the same time, the group has maintained and strengthened its Nordic roots (figures show headcount numbers). VISiON EDB will be a Nordic powerhouse for gaining added value from IT. VALUE PROPOSITION EDB a strong and attentive IT partner. CORPORATE VALUES Resourceful, inspiring and attentive. BUSINESS CONCEPT EDB believes that collaboration and sharing resources are key to creating added value from IT. We have unique expertise in making optimal use of IT, and the solutions and infrastructure we offer represent important economies of scale. We can therefore create added value for our customers by developing and operating their IT solutions. EDB s development over recent years has followed a clear strategic path: From being largely a supplier of IT operating services in Norway, the company is on the way to being a complete vendor of businesscritical IT services, with a leading position in the Nordic countries and a strong international foothold. The acquisition of IS Partner in January 2008 has given EDB a new dimension, and establishes the company as a leading international player for industrial IT. In the IT services market, EDB is No. 1 in Norway and No. 4 in the Nordic region. For IT operations, the company is No. 2 in the Nordic region. EDB s revenue grew by 9 percent in EDB won NOK 6.7 billion of new contracts in 2007, and the company s order backlog at the start of 2008 totalled NOK 14.6 billion. EDB is in good financial condition, and is well positioned for continuing profitable growth both in the Nordic region and internationally. EDB Business Partner is listed on the Oslo Stock Exchange. Ambition to be the leading Nordic IT vendor and to expand internationally EDB has a solid position in the Nordic IT services market, and is following a growth strategy to reinforce the company s strong position as a Nordic vendor of IT services. EDB is focusing in particular on generating organic growth in line with, or faster than the market. In addition, EDB is well positioned to play an active role in the consolidation of the Nordic IT services sector and has carried out a number of transactions in this respect over recent years. The most important examples over recent years are the acquisitions of the companies that now form the Application Services business area and the acquisition of IS Partner in January This most recent acquisition has given EDB a sound foothold in the oil and gas sector and with global industrial businesses. 16 EDB Business Partner ASA Annual report 2007

17 This is EDB Business Partner > Key figures, highlights and contracts > EDB entering 2008 > EDB entering 2008 Revenue by industry* (percent) Revenue by business area* Geographic analysis of revenue* *Following acquisition of IS Partner 14% Application Services incl. global sourcing 21% IS Partner 16% Solutions 49% IT Operations 68% Norway 24% Sweden 2% Global sourcing 6% Others Global delivery model EDB s commitment to developing global sourcing is a crucial part of its growth strategy. During 2007, EDB acquired majority interests in two companies in the Ukraine and one in India, represent ing over highly qualified employees. This strengthens EDB s offer to its customers, both in terms of development expertise and its delivery capacity, while retaining its strong Nordic roots and closeness to its customers. In addition to the cost benefits and access to expertise offered by global sourcing, the global sourcing model plays an important role in strengthening EDB s position as a vendor to Nordic companies with global operations. Together with the acquisition of IS Partner, EDB is now fully capable of offer ing a global delivery model that can address a customer s entire international infrastructure. Structured for further growth Over the last two years, EDB has attained more balanced turnover in terms of industries, business areas and geographic markets. This means that EDB now covers much more of the entire market for IT services and its activities are more widely spread than ever before. Following the acquisition of IS Partner, IT Operations now generates 49 percent of annual revenue, with 21 percent from IS Partner, 16 percent from Solutions and 14 percent from Application Services. EDB operates as a unified group, with EDB Business Partner Norge and EDB Business Partner Sverige as its operational companies, together with the acquired businesses Guide Konsult, Dropit, Avenir, Spring Consulting, TAG Systems, Astrakan, CEKAB, Tre60, Infopulse, Miratech, Span and IS Partner. The acquisition of IS Partner adds a new industry verticals to our market-focused organisation: Manufacturing and Oil and Gas. A further adjustment to the organisational structure is the addition of Global Sourcing to the Application Services business area. The group s structure focuses its activities in line with EDB s growth ambitions. The organisational structure reflects the company s six industrial focus areas: Banking and Finance, Public sector, Retail and Services, Telecom, Manufacturing and Oil and Gas. In addition, there are three areas defined by their activities rather than target industry: Solutions, Application Services and Global Sourcing, as well as IT Operations (see model below). Each of these areas reports directly to EDB s executive management, which ensures rapid and efficient decisionmaking and close collaboration between the areas. Banking and Finance Solutions Application services and Global sourcing IT Operations Public sector Retail and Services Telecom History EDB has a 50 year long history as a technology innovator. EDB, or as Elektronisk Databehandling, began its life in 1961 as a data centre for the insurance companies Sigyn, Norsk Alliance and Norden. Over the years more than 50 other IT-related businesses have been incorporated into EDB. The IT solutions that now underpin today s IT-based society, from agri culture to local government and banking, trace their history back to one or more of the companies that became EDB. EDB is now one of the largest Nordic IT groups, with sizeable international activities. Manufacturing IS Partner Oil and Gas Annual report 2007 EDB Business Partner ASA 17

18 MARKET AND OPERATING CONDITIONS the Nordic IT market continued to grow in IT services, the segment in which EDB operates, grew by around 5 percent. The IT services segment accounts for around half of the total IT market, which is worth NOK 120 billion in total. The strongest growing area in the IT services segment was IT consulting. IDC, an independent research firm, expects these trends to continue in EDB is well positioned to build an even stronger foothold in this market. The company s intensified focus on solutions and application services meets the market s requirements for industryspecific solutions and consulting. The acquisition of IS Partner in the first quarter of 2008 strengthens EDB s offer to Nordic companies in the energy and process industries with major international activities industry verticals where EDB previously had a more limit ed presence. Expanding EDB s geographical and industrial coverage creates new business opportunities and reduces overall risk exposure. There is a long-standing shortage of skilled IT expertise and capacity in the Nordic countries. The continuing growth of the IT market in 2007 made this shortage all the more acute. This makes greater emphasis on offshoring and nearshoring essential. For EDB, 2007 was a milestone year in this respect, with the acquisition of two companies in the Ukraine and one in India. In total, these acquisitions give EDB access to an additional highly qualified employees. IT services market The Nordic IT services market can be divided into three categories: IT consulting, outsourcing and customer support. These account for 38 percent, 44 percent and 18 percent of the market respectively. The main source of market growth in 2007 came from consulting. This segment grew by 10 percent, while outsourcing and support saw more modest growth at 3 percent and 1 percent respectively. Consulting, in EDB terms, comprises the business areas Solutions and Application Services. The market for consulting services is expected to continue to grow in 2008, driven not least by growth in demand for industry-specific solutions. This includes Internet-based self-service functionality and more efficient working processes. Areas of growth in this segment include bank and finance card solutions, where growth is expected to be over 20 percent, and the SAP area, where growth is expected to exceed 10 percent. EDB is well positioned to meet growing demand from the finance and public sectors, as well as from other industries. EDB expanded its product range in 2007, including the launch of its next-generation Internet banking system and the EDB Digital Public Sector solutions platform. In addition, the acquisition of IS Partner gives EDB a new and strong position for consulting and solutions in the area of business processes and work processes for global energy and industrial businesses. Outsourcing is currently a segment with few large new contracts, and this is not expected to change in the short term. However, EDB is seeing strong growth in demand from the retail and industrial sectors as well as the public sector, characterised by small and mediumsized contracts. We expect modest growth also in However, the possibility of economic downturn could change this picture. Experience shows that customers view outsourcing as a method of cutting costs when economic conditions deteriorate. Customer support is expected to show only slow growth in This segment accounts for only a small proportion of EDB s services at present. However, as global sourcing provides an increasing proportion of EDB s production of operating services and systems development over time, it will be possible to use the resources this releases to strengthen customer focus by putting greater emphasis on customer support services. The public sector and the banking and finance industry are the biggest buyers 2007 saw no change in the distribution of sector spending on IT services in the Nordic region. The public sector, including healthcare, accounts for almost a third of total spending, while bank/finance/ insurance and industry/energy each account for around one-fifth. Slowest growth was seen for retail sales and telecommunications, which are becoming less important segments for IT services suppliers. EDB has a history of strength in both the public sector and the 18 EDB Business Partner ASA Annual report 2007

19 Management review > Market and operating conditions > strategy, value drivers and risk > strategic agenda > business review > corporate responsibility Fastest growing segments of the Norwegian ICT market (percent) IT services by category in the Nordic region IT services by industry (Total NOK 126 billion) Source: Gartner, IDC, Electronics Industry, EDB 18% Customer support 38% IT Consulting 19% Bank/Finance/ Insurance 26% Other 7% Retailing 44% Outsourcing 8% Telecom Source: IDC Source: Gartner, IDC Industry 17% Central government 13% Local government 10% finance sector. The acquisition of IS Partner will strengthen EDB s position with the important market segments of energy and industry. Market consolidation continues The Nordic IT market continued to consolidate in 2007, bringing the total value of acquisitions in the period to NOK 50 billion. Examples include the acquisition of the consulting business of Siemens Business Services by WM-Data/LogicaCMG and Fujitsu s acquisition of Mandator in Sweden. In Norway, the consulting firm BEKK was acquired by Ergo Group. EDB has also played a role in consolidation, including its acquisition of the Swedish card services company CEKAB and the merger of the Danish SAP specialist TeamR3 into the EDB company Spring Consulting. The Nordic IT services market is still very fragmented, and consolidation is likely to continue. This is driven by European companies striving to become large Top 10 IT services companies in the Nordic region company Market share 1. IBM 14.2% 2. TietoEnator 7.5% 3. WM-data 7.1% 4. EDB Business Partner* 6.5% 5. HP 5.8% 6. CSC 4.2% 7. Ergo Group 3.5% 8. Accenture 2.9% 9. KMD 2.6% 10. Capgemini 2.4% *including IS Partner Source: IDC Annual report 2007 EDB Business Partner ASA enough to compete with global suppliers, and by local players seeking to expand outside their domestic markets. Private equity companies are playing an ever more active role in the consolidation process, and account for an increasing proportion of transaction volumes. Drivers of market growth The IT market is expected to keep growing in step with the continued digitalisation of business, commerce and society at large. People s expectations of what IT can offer are an increasingly important driver for market growth. One of the most significant trends in 2007 was a 20 percent increase in sales of PCs to consumers, demonstrating that the shift of control towards the end-user continues. This trend is spilling over to the corporate market, as consumer trends become an even more important driver of business decisions. Not least of these is the expectation that products and services must be available over the Internet. At the same time, customers are expecting higher yield from their IT investments, looking for demonstrated benefits to both the top line and bottom line. IT is becom ing ever more interdependent with commercial and strategic objectives. If economic growth slows, the pressure for a short payback period on IT invest ments will be even greater. This will in turn lead to increased demand from the public and private sectors for solutions that make work processes more efficient Source: McKinsey, EDB Consolidation in the European IT market (No. of transactions) Eastern Europe and Scandinavia Western Europe 19

20 STRATEGY, VALUE DRIVERS AND RISK EDB s recent development has followed a clear strategic path: From being largely a supplier of IT operating services in Norway, the company is on the way to being a complete vendor of business-critical IT services, with a leading position in the Nordic countries. We are well on the way to achieving our strategic objectives. In the IT services market, EDB is No. 1 in Norway and No. 4 in the Nordic region. For IT operations, the company is No. 2 in the Nordic region including IS Partner. Entering 2008, our share of the Nordic market has reach 6.5 percent. Markets outside Norway generated 33 percent of EDB s revenue in 2007 as compared to 24 percent in 2006 and 14 percent in If IS Partner is included in the figures, this figure increases to 32 percent. Three events were particularly important for our strategic development in 2007, and set EDB s direction for the future: Establishing a strong position in application services, a breakthrough in global sourcing, and the acquisition of IS Partner in January Strong position established in application services Application Services was launched as a new business area in The intention was to expand EDB s overall offer to better reflect the mix of IT services that customers demand. The business area principally comprises newly acquired companies, each of which is a successful expertise-driven business: Spring Consulting, Avenir, Guide Konsult, Dropit and Tre60. In addition, the Danish SAP specialist TeamR3 was purchased and integrated with Spring Consulting in October Through these companies, EDB established a position as a leading Nordic centre of expertise for SAP, Microsoft, Oracle and other tech nologies demonstrated the success of EDB s focus on application services. The business area s revenue grew by 42 per cent from 2006, and now accounts for 19 percent of total revenue. The companies in the Application Services business area have also played an important role in making EDB a more international business. Breakthrough for global sourcing EDB took crucial steps in 2007 to secure the benefits of global sourcing for its customers. We acquired majority interests in two A leading player in the Nordic market IT Services in Norway 1. EDB 2. Ergo Group 3. IS Partner 4. IBM 5. Umoe IKT 6. Accenture 7. CSC 8. TietoEnator 9. Logica 10. Capgemini IT Services in the Nordic region 1. IBM 2. TietoEnator 3. Logica 4. EDB 5. HP 6. CSC 7. KMD 8. Capgemini 9. Accenture 10. Ergo Group Outsourcing in the Nordic region 1. IBM 2. EDB 3. CSC 4. TietoEnator 5. HP 6. Logica 7. Ergo Group 8. EDS 9. KMD 10. Capgemini Source: IDC 20 EDB Business Partner ASA Annual report 2007

21 Management review > Market and operating conditions > strategy, value drivers and risk > strategic agenda > business review > corporate responsibility Ukranian companies Infopulse and Miratech and one in India Span Infotech. These organisations employ a total of over highly qualified specialists. This makes us an even stronger partner, in terms of development expertise and delivery capacity. In addition, global sourcing plays an important role in strengthening EDB s position as a supplier to Nordic companies with global operations. The combination of global sourcing and the acquisition of IS Partner means that EDB is now capable of offering a global delivery model that can address a customer s entire international infrastructure. The investment in global sourcing also frees up resources to further develop our Scandinavian organisation and build a broader and stronger interface with our customers, offering even better advice and support to end users. IS Partner International strength and added industrial speciality In January 2008 EDB announced that it had agreed to purchase IS Partner, the leading IT services vendor in Norway for the oil, gas and process industries. As IS Partner serves customers in 50 countries around the world, the acquisition means that EDB can now offer IT consulting, development and operating services throughout the value chain for the petroleum industry anywhere in the world. IS Partner also brings to EDB in-depth expertise of business and production processes for global industries. IS Partner s customer base includes major Nordic businesses with extensive international operations, such as StatoilHydro, Hydro, Yara, Borealis and Kerling. Value drivers and risk EDB is well positioned with respect to the factors that we believe will drive value creation in the IT industry in the future. We believe that this is about the ability to deliver solutions that create indisputable added value and improved competitiveness for the customer. EDB recognises that any downturn in the economy will have some effect, but not to a dramatic extent. However, it is important to ensure flexibility in EDB s own cost structure, and to ensure that the solutions it offers meet the market s expectations for rapid payback. If economic conditions do weaken, this may also create opportunities for EDB. Many of EDB s solutions give the customer better control of costs and are therefore in particular demand in a downturn. When economic conditions are uncertain, businesses place greater weight on the stability of their earnings. EDB is well placed in this respect. Between 60 and 70 percent of our revenue over the next years is guaranteed by contracts in place with customers, and we have an order backlog entering 2008 of NOK 14.6 billion. A further risk factor is the continuing growth of the 24/7 society: The need for solutions to be available both to our clients and their end-customers at all times increases daily. This creates opportunities for EDB, but also involves risks in terms of both our relationship with individual customers and our reputation as a vendor. This makes it all the more important that EDB s commitment to quality assurance continues with undiminished force. Practical implications of EDB s strategic direction EDB will continue to pursue its established strategy. In practical terms this involves five main objectives: Structural growth and consolidation Profitable organic growth Global sourcing and organisational development Continuous improvements to processes and quality assurance Innovation and renewal The first two objectives demonstrate that the company has definite ambitions to continue its growth, which is essential if EDB is to maintain its strategic freedom and take the initiative in a sector characterised by continuing consolidation. The three other objectives stress that we recognize the continual challenge of developing our offer and improving the quality of our products and services. Ensure strategic flexibility 1. Structural growth and consolidation 2. Profitable organic grow Improve our services and capacity to deliver 3. Global sourcing and organisational development 4. Continuous improvements of processes and quality assurance 5. Innovation and renewal EDB s priorities towards 2010, see also page Annual report 2007 EDB Business Partner ASA 21

22 Strategic agenda Structural growth and consolidation Description Play an active role in consolidating the Nordic IT services market Ensure critical size Ensure strategic flexibility Important events in 2007 Established global sourcing through business acquisitions in India and the Ukraine Strengthened market position in niches with good growth, including the acquisitions of the card transactions processing company CEKAB in Sweden and the SAP specialist TeamR3 in Denmark Acquisition of IS Partner (implemented January 2008) Profitable organic growth Target to grow in pace with or faster than the overall market for IT services while satisfying the group s profitability target Renewal and extension of strategic partnerships with key customers Continued development of the Solutions product and services portfolio Launched an innovation and quality enhancement program for the IT Operations business area Increased recruitment for growth areas in the Application Services business area Global sourcing and organisational development Additional capacity and expertise through offshoring/nearshoring Free-up capacity for greater interaction with customers Establish a global delivery model Acquisition of offshoring capacity in the Ukraine and India Process and quality improvements Innovation and quality improvement program Make processes more efficient, implement new environmental targets and reduce costs Launched innovation and quality enhancement program using well tried lean manufacturing methodology Established global sourcing to ensure access to expertise New process model for EDB s overall activities Innovation and renewal Focus on services innovation new applications based on industry-standard platforms Close collaboration with customers sharing development costs for greater effect EDB Digital Public Sector and EDB Financial Suite launched Strategic partnership with SpareBank 1 for product development 22

23 Management review > Market and operating conditions > strategy value drivers and risk > strategic agenda > business review > corporate responsibility Focus towards 2010 Ensure critical mass and strengthen market position in our areas of focus Build stronger market position in niches with good growth prospects Selective international expansion Revenue growth following the acquisition of IS Partner 6.4 NOK bill 8.2 NOK bill Develop new delivery concepts for customers and market segments Innovation and renewal of the Solutions portfolio Intensified focus on energy and process industries through IS Partner Increase in order flow NOK bill +117%* 3.0 NOK bill * +36% growth adjusted for SpareBank 1 Global sourcing operations to provide 33 percent of headcount by 2010 Continuing development of the global delivery model Research and development expenditure as percentage of revenue (percent) 33% 14% 24% 10% Continue the quality and productivity enhancement program Pro is EDB s program for process and quality improvement Proactive Professional Productive NOK 1 billion designated to innovation through to 2010 Major part of this development activity to be organised in specialist groups Designated to innovation 30% of the activities in the Solutions area designated to innovation towards

24 BUSINESS REVIEW EDB carried out its business operations in 2007 through three business areas: IT Operations, Solutions and Application Services. The trend seen in 2006 for EDB s activities and revenue to better reflect the mix of its customers needs for IT services continued in In parallel with this, EDB continued its internationalisation. IT OPERATIONS EDB is the second-largest supplier of IT operating services in the Nordic countries, and IT Operations is the company s largest business area. The business area comprises network services, operation of infrastructure and applications, security services and user support, as well as electronic business support services such as invoice management, payment services and messaging. IT Operations provides its customers with accessible and stable IT systems, to ensure that their employees and customers have access at all times. The activities of the IT Operations business area cover all industries and sectors, and it operates in Norway and Sweden. Main features of 2007 The Nordic outsourcing market saw only a very small number of major new outsourcing contracts in However, EDB has developed standardised operating services concepts that have allowed it to win a number of new medium-sized contracts in the retail and industry segment. IT Operations reported a 2 percent increase in revenue to NOK million in 2007, making up 60 percent of EDB s total revenue*. The business area s EBITA margin was 8.4 percent as compared to 8.7 percent in EDB has a very clear ambition to improve profitability in this area and its PRO program will play a central role in this. PRO is an 18-month program designed to streamline and simplify operations and improve dialogue. Work on improving delivery quality continues. Delivery quality across the business area showed a clear, document ed improvement in 2007, not least as a result of significant improvements to the core network. This work will continue in The program of work to integrate mainframe operations to Oslo was completed in As part of EDB s focus on global sourcing, work started on establishing a mirror operations environment in EDB s subsidiary, Infopulse, in the Ukraine. This will both increase capacity while reducing costs. Customer projects In a year when very few new outsourcing contracts were put out to tender in the market, EDB was very pleased to win a number of sizeable extensions and expansions of existing customer relationships. Long-term contract with SpareBank 1. In June 2007, EDB signed an agreement with the SpareBank 1 Alliance for solutions and standard banking operations representing estimated total contract value of NOK 2.5 billion. The agreement covers the period 1 July 2007 to 31 December In addition, SpareBank 1 has the option to renew the contract for a further 2+2 years. Including the options, the estimated total contract value is NOK 3.6 billion. Extension to operating agreements with the City of Trondheim and the City of Oslo. Both the City of Trondheim and the City of Oslo agreed on two-year extensions of their contracts with EDB for IT operating services. The two agreements represent total contract value of NOK 250 million over the extended periods. Following these extensions, the contract with Trondheim runs to 2011, while the contract with Oslo runs to the end of Nordic-wide agreement with Telenor. In April 2007, EDB announced a 10-year framework agreement with Telenor to supply IT services for Telenor s activities in the Nordic countries. The agreement gives EDB responsibility for establishing and operating a common PC platform for Telenor s Nordic organisation. EDB and Telenor have also agreed on a contract for EDB to supply operating services for Telenor s mobile telephony business in Sweden. This represents total contract value of around NOK 500 million over five years, and Telenor has the option to extend the contract to include operating services for its other activities in the Nordic countries. In conjunction with this, EDB will transfer some aspects of its activities related to network components to Telenor. Strategic focus Customers primary expectations from a supplier of IT operating services are stability and reliability. This increases in importancy as the 24/7 society becomes more and more prevalent. EDB intends to *not including IS Partner 24 EDB Business Partner ASA Annual report 2007

25 Management review > Market and operating conditions > strategy, value drivers and risk > strategic agenda > business review > corporate responsibility Solutions Revenue (NOK million) and EBITA margin (percent) Application Services Revenue (NOK million) and EBITA margin (percent) IT Operations Revenue (NOK million) and EBITA margin (percent) % % % % % % 600 8% 600 8% % 300 4% 300 4% 800 4% 0 continue its systematic work on further increasing its delivery precision. Improving profitability through the PRO program will also be a high priority. Work on applying EDB s new global sourcing model will demand dedicated focus. Important elements in this task include establishing a mirror operations environment in the Ukraine and integrating the new resources of IS Partner. Outlook for 2008 The outsourcing market is characterised by a sound growth in the retail and industry segment and in the public sector. However, few large contracts are being offered for tender, so the overall market shows only modest growth. Increased uncertainty over the macroeconomic outlook will cause businesses to focus more closely on costs and on their core businesses, which will lead to growth in demand for outsourcing. SOLUTIONS The Solutions business area offers a complete range of software and consulting services for the Nordic banking and finance sector. It also serves the Norwegian public sector, with solutions for Nor wegian municipalities, health authorities and national public sector entities. The public sector vertical in Sweden supplies document-handling solutions. Main features of saw a number of major new product launches. For the banking and finance sector, EDB launched its next generation of Internet banking, and signed its first contract based on EDB Financial Suite. In addition, even more banks signed up for EDB s advanced card solutions, including a number of banks in Great Britain was in many ways a year of international breakthrough for EDB s banking and finance solutions. EDB further strengthened its position in this market by acquiring CEKAB, the market leading card transaction company in Sweden. Following this transaction, EDB is a leading player for capture and processing of card transactions across the Nordic market also saw the launch of EDB s Digital Public Sector, which is the largest investment in solutions for the public sector anywhere in the Nordic countries. The solution is based on a SAP platform, which ensures access to best international practice and continuing future development. EDB has so far signed contracts based on the Digital Public Sector platform with 8 Norwegian municipalities. Solutions reported a 13 percent increase in revenue to NOK million in 2007, making up 21 percent of EDB s total revenue*. The business area s EBITA margin was 14.6 percent as compared to 14.8 percent in Customer projects EDB won a number of major contracts from both the banking and finance industry and the public sector, confirming that EDB s new solutions are attractive to customers that want to be at the leading edge of progress in their business. Banking solutions and operating services for GE Money Bank. In July, EDB announced an agreement with GE Money Bank for banking solutions and operating services for its activities in Denmark and Norway, with an option to extend to the other Nordic countries and the Baltic States. The agreement runs for 7 years, and represents expected total contract value in the first phase of NOK 160 million. EDB will deliver standard components for cards, payments and reporting to the authorities. In addition, EDB will supply a general customer account ledger system based on FLEXCUBE from i-flex. GE Money Bank is a large and exciting player in the international banking market, and this agreement opens the door to long-term collaboration with the bank across the European market. Four British banks order card solutions from EDB. In November, 4 British banks entered into agreements to use EDB s solutions for delivery of card services. The agreements represent total contract value of around NOK 25 million over a 5-year period, and were won against tough international competition from other suppliers. EDB is seeing strong interest in the company s banking solutions from the UK market, and has opened an office in London to develop this market. EDB already supplies a number of other British banks, and these new contracts bring the total number of banking clients in the UK and the Channel Islands to 20. EDB s card administration systems are now used by a total of 150 Norwegian and international banks. City of Trondheim chooses EDB Digital Public Sector. In July 2007, the City of Trondheim signed an agreement for the purchase and maintenance of new ERP solutions. The solutions ordered are from EDB s new Digital Public Sector solutions suite for the public sector. The agreement runs for 5 years, and represents total contract value of around NOK 60 million. The new solutions will make the city authority s administration more efficient, and pave the way for greater digital interaction with citizens. The new solutions will meet the authority s requirements with respect to payroll, human resources, accounting and finance, investments and purchasing. Accounting solutions for Røros region. In November, EDB announced an agreement to supply accounting solutions to the 3 municipalities Os, Røros and Holtålen in the Røros region. The solutions are based on EDB Digital Public Sector. This agreement gives the Røros region municipalities access to a platform-independent role-based solution delivered on a web-based interface. The objective is to create interactive dialogue both within the municipalities and with the citizens that use their services. Strategic focus The strategy of the Solutions business area is centred around adding real value for the customer. This means that we must continue to develop our ability to be a strategic partner for our customers, based on in-depth understanding of their business. For banking and finance customers, we aim to support them in the international markets, and enable them to offer the best possible customer service at the point where the delivery of efficient and reliable services meets the offer of good financial advice. In the public sector, we aim to help our customers to make smarter use of IT for their administrative processes, so that a greater proportion of their resources Annual report 2007 EDB Business Partner ASA *not including IS Partner 25

26 can be redirected to important areas of social spending. We also want to make it easier for the citizens to interact with the public sector, building on expertise in self-service solutions we have developed in the banking area. The acquisition of IS Partner has given EDB a new portfolio of solutions for a wider range of industries and sectors. This expertise and experience will play an important role in building EDB s new solutions portfolio. Outlook for 2008 Market growth is driven by customer investment in Internet-based self-service solutions, and also solutions to improve the efficiency of internal work processes. Application Services EDB established the Application Services business area in early 2006 through the acquisitions of Avenir, Guide Konsult, Dropit, Software Technology Integration (STI) and Spring Consulting. These businesses brought to EDB extensive expertise in SAP, Microsoft and Oracle technology, as well as in project management, systems development and systems integration. These companies operate in areas where customers have specific needs for IT services, and thus strengthen EDB s overall offer. Avenir has specialist expertise in Microsoft/SharePoint and operates from offices in Oslo and Bergen. Spring Consulting represents the group s Nordic SAP initiative, and operates in Norway, Sweden and Denmark. Guide is a Swedish consult ing firm with particular strengths in sales tools and training. The company operates from offices in Stockholm and Gothenburg. STI is a Norwegian Oracle specialist based in Oslo. In 2007, EDB acquired the Danish SAP specialist TeamR3, which is now part of Spring Consulting. The Ukrainian IT company Infopulse, which EDB acquired towards the end of 2006, is also part of Application Services, as are the Indian offshore IT company Span Infotech and the Ukrainian IT company Miratech, both of which were acquired in Main features of 2007 The year demonstrated the crucial role of Application Services in realising EDB s strategy. The business area now employs approximately consultants, and revenue grew by 42 percent in All the businesses acquired have continued to perform strongly. Revenue for Application Services reached NOK million in 2007, making up 19 percent of EDB s total revenue. The business area s EBITA margin was 12.2 percent as compared to 10.4 percent in The business area again achieved a high average capacity utilisation rate for its consultants in Application Services has demonstrated its ability to help the EDB group achieve a more balanced distribution of revenue, both between industries and business areas and in terms of geographic markets. This makes the business area an important part of EDB s commit ment to serving the entire IT services market. The acquisition of TeamR3 further strengthens our position in the SAP area. In addition, the business area has acquired the Swedish IT consulting firm Tre60 through its subsidiary Guide Konsult. Tre60 has a strong position in Business Intelligence consulting. Customer projects EDB reaffirmed and strengthened its position in 2007 as one of the leading Nordic vendors of application services. Over the course of the year, EDB signed contracts for a number of new and exciting customer projects. The following assignments for customers in the banking sector, the public sector and retail and distribution provide some examples of this: Contract with DnB NOR. Avenir signed a new contract with DnB NOR to supply IT consulting and development services. Avenir will support DnB NOR by supplying services for testing, test management and deployment of business critical services (Internet banking and share trading) through self-service channels. Development partner for Sparebanken Vest. Sparebanken Vest has selected Avenir as its partner to develop a customer management solution and portal for the bank s employees. The new solution will give users a comprehensive overview of each customer s relationship with the bank. In its second phase, the solution will be expanded with new and improved CRM functionality. Framework agreement with Läkemedelsverket. Guide Konsult has signed a framework agreement with Läkemedelsverket in Sweden for the delivery of consultancy services in the areas of IT management, technical support, helpdesk, business development and project management. e-commerce system for Ellos. Guide Konsult has developed a new Nordic website and e-commerce system for Ellos in record time. A single customer portal brings together the company s markets in Sweden, Finland, Norway and Denmark. Guide took on total responsibility for planning, project management and system development. Strategic focus The companies that make up Application Services have demonstrat ed their ability to deliver high-quality services that meet market demands and thus strengthen EDB s overall offer. The challenge for the future is to build synergies with EDB s other activities, including IS Partner. Spring Consulting is developing solutions based on the Digital Public Sector platform. Identifying more opportunities such as this, to make use of shared strengths across the EDB group, is a strategic priority. Collaboration with EDB s new offshoring/nearshoring resources will also be important and we expect to make use of global sourcing in many of our major contracts in future. We will also focus on organic growth, which emphasises the importance of recruitment and staff training. We are still a small and less visible player relative to many of our competitors, but expansion must always be combined with maintaining our close relationships with customers. Outlook for 2008 IT consulting and application services represent the fastest-growing segments of the IT services market. Shortages of experienced people caused some increase in 2007 in the market rates charged for consultants. Vendors are increasingly striving to compensate for the limited supply of resources in the Nordic region by making greater use of offshore/nearshore resources. 26 EDB Business Partner ASA Annual report 2007

27 CORPORATE RESPONSIBILITY Management review > Market and operating conditions > strategy, value drivers and risk > strategic agenda > business review > corporate responsibility Our success depends on recognizing our responsibility as a participant in society as a whole. We must identify what factors are particularly important in relation to the business we carry out, and work systematically to recognize our corporate responsibility in these areas. EDB s activities dictate a particular focus on 3 areas of corporate responsibility: Environmentally friendly operations Secure and reliable operation of systems that are of critical importance for society as a whole Ethical conduct, with particular emphasis on new international operations Environmentally friendly operations On a global basis, the IT industry generates as much CO 2 emissions as the airline industry, at around 2 percent of all emissions. The trade organisation ICT Norway estimates that PCs, servers and other IT equipment account for at least 20 percent of power consumption in commercial premises. The production of this power generates tonnes of CO 2 each year as much as emissions by cars. The research company IDC estimates that power will account for half of all hardware costs by 2010, and will increase in subsequent years. Facts such as this provide the background for the Green IT project promoted by ICT Norway. EDB will follow the advice developed by the project to help reduce power consumption. A number of measures have also been implemented across the group. EDB s new head office at Skøyen uses waste heat from the data halls for heating. In addition, EDB s machine park is gradually being replaced with what is known as green hardware, which features low energy consumption and uses recyclable materials. Electronic waste is dealt with in collaboration with equipment suppliers, in accordance with national regulations and well-established arrangements for equipment returns. EDB intends to increase its commitment to Green IT, both in respect of its own operations and in the solutions it delivers to customers. Operating services for socially important systems A number of the systems operated by EDB, both for private and public sector customers, are of critical importance for society at large. Ensuring the secure and stable operation of these systems is not only a commitment to our customers, but also a commitment to the public and society as a whole. This makes the security and reliability of the systems the highest priority. We fully comply with the highest industry standards in this area, and are fully up-to-date with the latest technology. Annual report 2007 EDB Business Partner ASA Ethical conduct The foundation for our work on ethical conduct is our Code of conduct. This document makes particular mention of the company s commitment to respecting the human rights of its employees in accordance with the standards set by the International Labour Organisation (ILO). It also states that EDB will be a forerunner in its approach to health, safety and the working environment in order to create a high standard of working conditions and employee health. In 2007, EDB launched a training program for all em ployees known as Repu tation, which focuses on ethical conduct. The web-based program introduces the company s ethical guidelines and invites employees to learn more by making decisions on a range of situations and dilemmas. Once they have completed the training program, employees must sign a declaration that they will comply with the company s guidelines. The program will be rolled out throughout the EDB s organisation in 2008, including the subsidiaries in the Ukraine and India. Reputation is now also part of the introduction programme for new employees. Ethical conduct is of particular relevance to our work with banking systems. Some of our employees have access to personal data on banking customers. Strict procedures are in place to ensure that this data is kept confidential. How ever, at the end of the day, even the best systems depend on the ethical standards of individual employees. We therefore pay great attention to ensuring that our employees working in this area are fully aware of their responsibilities. The acquisitions of businesses in the Ukraine and India also create a need to ensure that we maintain good working conditions in these companies in the same way as for any other company in the group. In the first instance, this represents a duty to ensure that local legislation, regulations and guidelines are fully respected. The businesses in the Ukraine and India employ highly qualified professionals. The companies have been in business for up to 15 years, and have established guidelines for corporate responsibility that will now be brought into line with EDB s guidelines. The companies also have extensive experience of working for international companies, and they have harmonised their practices with the high standards these companies expect. EDB has arrangements in place that allow its employees to report any breach of rules and guidelines anonymously also known as whistleblowing. Supporting development efforts EDB has worked as a UNICEF partner and completed a school project in Eritrea. EDB also supports development work in the third world through the PLAN organisation s scheme for sponsoring children. The Swedish subsidiary Guide contributes by sending employees to a school in Peru, where they work as volunteers for 1 3 month periods. The company pays their salary and travel costs. At Spring Consulting, every employee contributes to a variety of development aid projects, and the company matches their monthly donations with an equivalent amount. EDB intends to intensify its focus on corporate responsibility in 2008, and has launched a process to identify specific measures it can adopt to strengthen its position as an environmentally and socially responsible company. The internationalisation of EDB reinforces the importance of corporate responsibility, and the company will pay particular attention to building links with the communities in which it operates. 27

28 REPORT OF THE BOARD OF DIRECTORS 2007 The nordic IT service market is worth NOK 120 billion annually, according to estimates from the research company IDC. The market grew by 5 percent in EDB Business Partner grew by 9 percent in 2007, of which 3 percent was organic growth. International and global companies control around 50 percent of the total market. Following the acquisition of IS Partner from StatoilHydro at the start of 2008, EDB Business Partner is the fourth largest vendor in the market. EDB has played an active role in the consolidation of the market for a number of years, and the Board is committed to ensuring that the company s acquisitions are based on a sound industrial logic, are in line with the approved strategy and will create added value for shareholders. Over the course of 2007, EDB strengthened the company s competitiveness by acquiring 60.1 percent of the share capital of both Infopulse and Miratech in the Ukraine. In the fourth quarter of 2007, EDB acquired 50.1 percent of the share capital of Span Systems in India. EDB has an option to acquire all the remaining shares in these companies. These three companies are now core elements in the EDB group s focus on global sourcing. Together, they have around employees, a scalable business model that ensures good access to highly qualified employees and many years experience of deliveries to European and American businesses. With effect from March 2007, EDB acquired CEKAB, the leading Swedish vendor of card processing services. This business, in combination with EDB s own activities in this area, will spearhead the company s international expansion in the banking and finance area. The purchase of the application services company Tre60 in Sweden and the SAP specialist TeamR3 in Denmark in 2007 strengthen the group s position in important market segments that show good growth. EDB has followed a growth strategy over recent years to establish its position as a Nordic IT services provider, with a balance of revenue that reflects the structure of the market. Following the takeover of IS Partnerat the start of 2008, EDB has approximately employees and an order backlog of NOK 14.6 billion. Adjusted for acquired businesses (proforma), 2007 revenues reached NOK 8,250 million. IS Partner brings in-depth industrial expertise to EDB. With our combined technical expertise, we are now a competitive supplier for larger industrial customers. The Board places particular importance on measures that strengthen the group s focus on innovation, cross selling and other methods that help to generate organic growth in line with, or better than, the overall market growth. The main focus for the next few years will be on realising the considerable potential represented by IS Partner, making good use of the capacity created through investment in global sourcing, achieving organic growth in the Nordic countries and strengthening delivery quality. Sound profitability and improved cash flow in 2007 have allowed the Board of EDB to propose a 9 percent increase in dividend, to NOK 1.20 per share. 28 EDB Business Partner ASA Annual report 2007

29 Board of directors report > Overview > financial result > business areas > organisation > corporate governance > outlook Bjarne Aamodt (62) Chairman Senior Vice President, Telenor Previous employment: Group CEO Alcatel STK ASA, Deputy Managing Director of Det Norske Veritas Education: Engineering degree from the Norwegian University of Science and Technology (1974) Other board appointments: Board member of a number of Telenor s companies and board member of NordPool ASA. Deputy Chairman of the Supervisory Board of Nordea Bank Norge ASA Aamodt has been a member of EDB s Board since June 2002 Shares in EDB: STAFFAN BOHMAN (58) Deputy chairman Independent entrepreneur Previous employment: Group CEO of DeLaval AB and Group CEO of Gränges AB and Sapa AB Education: MBA graduate of the Stockholm School of Economics, with further qualifications in management from Stanford Other board appointments: Member of the boards of Atlas Copco AB, Scania AB, Ratos AB, Trelleborg AB, Boliden AB, InterIKEA Holding SA, Swedfund International AB and OSM AB Bohman has been a member of EDB s Board since 2005 Shares in EDB: Financial results EDB Business Partner reports a 9 percent increase in consolidated operating revenue for 2007 to NOK 6.4 billion. In accordance with the company s strategy, EDB took steps in 2007 to strengthen its international presence. Operating revenue generated outside Norway increased by 47 percent to NOK million in This is equivalent to 33 percent of total consolidated operating revenue. EDB strengthened its position in the Swedish market through the acquisitions of Tre60 and CEKAB in Organic growth in Sweden was 13 percent in EDB s businesses in Sweden generated revenue of NOK million in total in EDB has three business areas, of which IT Operations is the largest, accounting for 60 percent of the group s total operating revenue. Solutions and Application Services account for 21 percent and 19 percent respectively of the group s operating revenue. The group s operating profit before intangible asset amortisation and non-recurring items (EBITA) was NOK 607 million in 2007, compared to NOK 541 million in EBITA margin was 9.5 percent in 2007, compared to 9.3 percent in the previous year. Ordinary depreciation for the group was NOK 291 million in 2007, compared to NOK 311 million in Intangible asset amortisation totalled NOK 96 million in 2007, compared to NOK 87 million in The book value of goodwill at 31 December 2007 was NOK million. This represents an increase of NOK 291 million from 2006, mainly due to businesses acquired. The group has tested the value of its goodwill in accordance with IFRS and has not identified any impairment. Annual report 2007 EDB Business Partner ASA The group s operating profit for 2007 was NOK 547 million, compared to NOK 310 million in Net financial expense was NOK 123 million in 2007, compared to NOK 53 million in Consolidated pre-tax profit was NOK 424 million in 2007, compared to NOK 257 million for The group produced cash from operations before non-recurring items of NOK 807 million in This was 14 percent higher than Cash from operations, after costs incurred with respect to cost reducing measures, was NOK 707 million. The group s liquidity reserves totalled NOK million at 31 December 2007, including undrawn committed credit facilities of NOK 530 million. The group s net interest-bearing liabilities totalled NOK million at the end of 2007, compared to NOK million at the end of 2006, due to the financing of acquisitions made during the year. The group s equity at 31 December 2007 was NOK million, compar ed to NOK million the previous year. EDB Business Partner ASA s distributable reserves amounted to NOK 891 million at 31 December EDB is exposed to currency risk in con - nection with its international investments. The company seeks to reduce this exposure through matching foreign currency borrowings. Information on the group s procedures for handling other risks can be found in the separate section on Corporate Governance. As required by Section 3 3 of the Norwegian Accounting Act, the Board confirms that the annual accounts have been prepared on the going concern assumption. This assumption is based on the company s results for 2007, the group s business strategy and its current budgets. As a subsidiary of Telenor, which was listed on NASDAQ, EDB has been subject to the Sarbanes Oxley Act (SOX). In 2007, Telenor decided to discontinue its NASDAQ listing. The Board of EDB decid ed, in connection with the delisting, that the company would adopt a policy of continuing to comply to all practical intents with the requirements of the Sarbanes Oxley Act. For further information, see the separate section on Corporate Governance. IT Operations business area IT Operations comprises network services, operation of infrastructure and 29

30 ANNE GRETHE DALANE (47) Member of the Board Senior Vice President for Human Resources at Yara International Previous employment: Vice President Finance at Norsk Hydro, as Finance Director of a Norsk Hydro company in England and more recently head of the financial analysis department at Norsk Hydro Education: Business economics graduate of the Norwegian School of Economics and Business Administration and qualified as a financial analyst Other board appointments: Member of the board of Prosafe ASA Dalane has been a member of EDB s Board since May 2006 Shares in EDB: 0 HANS KRISTIAN RØD (55) Member of the Board Managing Director for the Norwegian activities of the energy company Fortum Previous employment: Managing Director of Neste Petroleum AS, Executive Vice President (E&P) at Fortum Ovj Education: MBA graduate of the University of Wisconsin, Madison and a graduate of the Norwegian School of Management Other board appointments: Deputy Chairman of Fredrikstad Energi AS Rød has been a member of EDB s Board since 2000 Shares in EDB: MONICA CANEMAN (53) Member of the Board Independent entrepreneur Previous employment: Deputy CEO of Skandinaviska Enskilda Banken Education: MBA graduate of the Stockholm School of Economics Other board appointments: Chair of the boards of Point International AB, SOS International AS and Linkmed AB and a board member of Investment AS Öresund, Svenska Dagbladet AB, Citymail AB, SJ AB, Lindorff Holding AB, Poolia AB, Schibsted ASA, Orexo AB, SOS Barnebyer Sverige, Pon Card Group AB, Securia AB and Nordisk Energiforvaltning ASA Caneman has been a member of EDB s Board since April 2003 Shares in EDB: 0 applications, security services and user support, as well as electronic business support services such as invoice management, payment services, messaging and printing. The activities of the IT Operations business area, which operates in Norway and Sweden, cover all industries and sectors. The main benefits of outsourcing are that it frees up resources to focus on core activities, improves productivity, delivers more reliable IT operations, secures access to relevant expertise and reduces operational sensitivity and risk. Customers increasingly need to offer 24/7 operations, and the IT Operations business area is well placed to meet this need. IT Operations increased its operating revenue by 2 percent in 2007 to NOK million. Growth was entirely organic, and was in line with the growth rate of the outsourcing market in general. Operating profit before intangible asset amortisation (EBITA) was NOK 330 million in 2007 compared to NOK 336 million in EBITA margin was 8.4 percent, compar ed to 8.7 percent in Investment in operational assets was 13 percent lower in 2007 at NOK 207 million. This is mainly due to lower customer-related investment spending. During 2007, IT Operations renewed and extended important con tracts with a range of Nordic customers. As part of its continuing partnership with Sparebank 1 Group, IT Operations will carry out an assignment to modernise the bank s IT operations platform over the next two years. EDB has developed standardised operating service concepts that have allowed the business area to attract a range of new mediumsized contracts from customers in the retail and industrial segments. In addition, the business area has signed a 10-year framework agreement with Telenor to deliver IT services in the Nordic countries and signed a contract with Telenor Mobile in Sweden that was a breakthrough for the new framework agreement. The impact of the loss of a large customer contract in Sweden, with effect from 2008, has been offset by new contracts and cost savings. IT Operations launched a quality assurance program in the first half of 2007 with the objective of strengthening quality of delivery for the business area s customers. This is a priority effort, and work on the program will continue throughout In the second half of 2007, IT Operations opened an operations centre in the Ukraine that secures access to expertise and paves the way for more efficient resource allocation, which will strengthen the competitiveness of the business area in the future. In addition, IT Operations renegotiated hardware and software contracts towards the end of This will help to ensure that the business area can maintain its high level of profitability. IT operations retained its position as the second largest vendor of IT operating services in the Nordic countries and the largest of the regional players in this market. The acquisition of IS Partner will strengthen its market position significantly and will help to ensure that the business area has critical mass in the future. Solutions business area The Solutions business area offers a complete range of software and consulting services for the Nordic banking and finance sector. The business area serves the Norwegian public sector with solutions for Norwegian municipalities, health authorities and national public sector entities. In Sweden, the business area supplies document handling solutions for the public sector. Solutions reported a 13 percent increase in revenue to NOK million in The acquisition of the Swedish card processing company CEKAB, with effect from April 2007, has strengthened the business area. After adjusting for acquisitions, organic revenue growth was 5 percent, which is in line with general growth in the markets in which Solutions operates. 30 EDB Business Partner ASA Annual report 2007

31 Board of directors report > Overview > financial result > business areas > organisation > corporate governance > outlook ANNE-LISE AUKNER (51) Member of the Board Managing Director, Nexans Norway AS Previous employment: Corporate attorney at Alcatel STK ASA, and as Vice President of Gjensidige Forsikring responsible for the company s total claims settlement activity Education: Qualified lawyer and business economics graduate of the Norwegian School of Management Other board appointments: Board member of Nemko AS and Norsk Industri in addition to a number of internal appointments with group companies Aukner has been a member of EDB s Board since May 2006 Shares in EDB: 0 WENCHE BRATENG (35) Elected by the employees Systems Architect Education: Engineering graduate of the Norwegian University of Science and Technology (1995) Brateng has been a member of EDB s Board since September 2007 Shares in EDB: 0 JOHN INGVAR BREKKE (49) Elected by the employees Business Manager Education: Qualified business economist Brekke has been a member of EDB s Board since November 2002 Shares in EDB: 84 EIRIK BORNØ (47) Elected by the employees Premises Manager Education: Further education college Bornø has been a member of EDB s Board since November Shares in EDB: 0 The Banking and Finance unit has agreed a contract to continue its collaboration with Sparebank 1 Goup to the end of The contract involves developing a broad range of banking and finance solutions. The new solutions will be at the cutting edge of development in the Nordic market, and will be delivered through a collaboration that ensures that the costs will be shared. The Banking and Finance unit also achieved a breakthrough for its partnership with i-flex by winning a Nordic contract for GE Money Bank. The contract covers EDB s standard components for cards, payments and reporting to the authorities, and in addition EDB will provide a general ledger system based on FLEXCUBE from i-flex. The Public Sector unit launched a comprehensive and platformindependent solutions suite for municipalities and health sector authorities in 2007, known as EDB Digital Public Sector. The suite is based on standard international components from SAP, with specialised EDB solutions for the public sector that have been updated and upgraded with new functionality. EDB has already won a number of contracts, including an agreement with the City of Trondheim. The first municipalities to use the solutions will take delivery in the first half of Operating profit before intangible asset amortisation (EBITA) was NOK 200 million in 2007, compared to NOK 180 million in EBITA margin was 14.6 percent in 2007, compared to 14.8 percent in Cost of goods sold increased by 21 percent to NOK 186 million in 2007 due to purchases of card blanks by TAG Systems and the use of temporary consultancy staff on contract for customer deliveries. The increase in other operating costs reflects the effect of businesses acquired. Annual report 2007 EDB Business Partner ASA Investment in operational assets was NOK 12 million, in line with the previous year. Costs of NOK 132,3 million, relat ed to in-house software development, were capitalised in 2007 compar ed to NOK 76 million in A major portion of these costs was tied to the development of EDB s new SAP-based solutions for public sector entities in the local authority and health authority sectors. Application Services business area The Application Services business area comprises around Nordic-based consultants. The business area has extensive expertise in SAP, Microsoft, Oracle and IBM technology and in project management, systems development and systems integration, as well as in customising and implementing standard systems. During 2007, EDB established a base of around highly qualified employees in India and the Ukraine, through the acquisitions of Infopulse Ukraine, Miratech and Span Systems. EDB s new delivery model, using global sourcing, is fully scalable and gives EDB assured access to qualified staff. With effect from 2008, Global Sourcing will report as a separate business area. This is intended both to identify the group s total exposure to global sourcing and to allow a separate focus on the Nordic consulting business. Application Services reported total operating revenue of NOK million in 2007 compared to NOK 862 million in The acquisitions of the Swedish company Tre60 and the Danish SAP specialist TeamR3 contribut ed to revenue growth. The Ukrainian companies Infopulse and Miratech, together with Span Systems in India, were also consolidated into the Application Services business area over the course of 2007 and contributed to the growth in revenue reported. According to figures from IDC, the IT consulting market grew by 8 percent in 2007, whereas EDB s Application Services business area increased its market share with organic growth of 12 percent. IDC reported a 5 percent increase in prices in the Nordic market in 2007, which is in line with salary growth in this business area. 31

32 Application Services has agreed extensions and expansions of its contracts with a number of customers across the Nordic countries. The business area has also won a number of new contracts. These developments will help to ensure a continuing good level of capacity utilisation for the business area s consultants. Operating profit before intangible asset amortisation (EBITA) was NOK 150 million in 2007 compared to NOK 90 million in EBITA margin improved from 10.4 percent in 2006 to 12.2 percent in The Application Services business area enjoyed strong activity throughout 2007, with a high level of utilisation of the area s consultants throughout the year. The business area has established a pan-nordic delivery structure to ensure optimum use of its resources across the entire Nordic region. The Application Services area carried out selective recruiting in 2007 and focused on further training of its exist ing staff, in order to ensure continuing strong organic growth and profitability. Organisation, working conditions and the external environment EDB operates throughout much of Norway and Sweden, with its headquarters in Oslo. Over the course of 2007, the company acquired operations in the Ukraine and India, expanded its presence in Denmark 2007 and established a sales office in London. In 2007, EDB was organised into three business areas that represented the group s total activities, namely IT Operations, Solutions, and Application Services. Business development is structured as a centralised function, while sales and customer contacts are the responsibility of each business areas. The group s activities in Sweden are responsible for sales and business development in Sweden and for co-ordinating EDB s activities in this market based on the group s strategies for each business area. The acquisitions of Infopulse, Miratech and Span have caused the company to decide to adopt English as the group s official language. The EDB group had employees at the end of 2007, of which were employed in Norway, in Sweden, in the Ukraine and India and 102 in Denmark. EDB pays continuing attention to developing skilled and committed employees who are proud to work for EDB. The company operates a common group-wide staff monitoring process with bi-annual employee surveys and a standardised structure of individual personal appraisal and personal development interviews. All EDB employees have an agreed personal development and objectives plan and in 2007 the company carried out performance ratings of all its employees in Norway and Sweden. Employees ability to create good relations and collaborate closely with colleagues and customers is as important as their technical skills. EDB has in 2007 held a programme for employees, providing relevant technical updating but also a focus on interpersonal relationships, corporate culture and values. The company will continue this work in 2008, with a particular focus on encour aging a shared approach to corporate culture and values. EDB carried out management appraisals in 2007 and established a new process for management review, in order to build a complete overview of the company s management capacity. The process was also used to identify management potential, with a particular focus on encouraging more female employees to take on management roles. All managers in the group have participated in training programs in performance management. The next stage of focus in management training will be on coaching-based management and what it means to be an employer. Female staff accounted for 24 percent of total employees in This is unchanged from In 2007, the proportion of management jobs held by women increased by 5 percentage points, to 24 percent. EDB is committed to more equal gender representation. The program for employment equality includes measures to achieve this. On a comparable basis, salaries of male and female staff are equivalent. The average salaries of male and female EDB employees are affected by differences in average age, length of service and the proportion of managers. Absence due to sickness for the group in 2007 was 3.2 percent, as compared to 3.4 percent in No serious work accidents or injuries were reported during the course of the year. EDB operates a More inclusive working life agreement with the Norwegian Labour and Welfare Administration s (NAV) Working Life Centre, to strengthen its focus on this important area. EDB is actively committed to preventing and reducing absence due to sickness, through training its managers and monitoring employees with sickness-related absence. The company enjoys good co-operation with the company health service and NAV. At the end of 2007, EDB changed its employers association membership to Abelia, a trade and employers association affiliated to the Confederation of Norwegian Enterprise (NHO). EDB made this change principally to improve its involvement in policy representations affecting its industry. The change to NHO/Abelia will make it necessary to revise the company s tariff agreements with its employees EDB does not carry out any activities that directly pollute the external environment. The group s impact on the external environment relates to energy consumption and the management of redundant electronic equipment. Both of these issues relate mainly to the IT Operations business area, which is committed to a program of continuous improvement by making more efficient use of its premises and reducing the electric power used by computers and air condition ing equipment in its computer centres. The disposal of redundant electronic equipment is managed in collaboration with the equipment suppliers in accordance with national regulations and established arrangements for product return. The group also makes use of opportunities to sort waste for recycling by type in accordance with the opportunities available at each location. EDB launched a group-wide environmental initiative at the start of 2008 linked to the Green IT program with the objective of taking greater responsibility for the group s impact on the environment throughout the value chain. EDB introduced guidelines in 2003 on business ethics for all its employees and officers, including members of the Board, managers, employees and temporary staff. The guidelines on which EDB s corporate values are based are intended to help the group s employees make the right decisions on issues they may encounter in their work. EDB is committed to maintaining a high ethical standard in all aspects of the group s work and responsibility. Corporate Governance The company is committed to ensuring that its corporate governance policies and practices follow the recommendations set out in the Norwegian Code of Practice for Corporate Governance. The group has updated its internal policies and guidelines, with effect from 2008, in order to comply with the revised Code published on 4 December The Board has appointed a Compensation Committee and an Audit Committee to support its work and res ponsibility in these areas in a more detailed manner. 32 EDB Business Partner ASA Annual report 2007

33 Board of directors report > Overview > financial result > business areas > organisation > corporate governance > outlook EDB has appointed an compliance officer at group level, who is responsible for supervising compliance with the company s guidelines on business ethics. To make it possible for employees of the group to report to the Board any potential concerns they might have about serious misbehaviour or illegal actions in a manner that ensures their anonymity in respect of the company s management ( whistleblowers ), EDB has also made arrangements with an independent law firm. Any matters reported to the law firm are handled in accordance with a policy approved by the Board. Reference is also made to the separate section on Corporate Governance in the annual report. Future prospects The Board expects continued growth in the Nordic IT services market in Growth in demand is expected in particular for industry-specific solutions and consulting services. EDB expects only modest growth in the outsourcing market in The IT Operations business area has structured its delivery concepts to address the market segments that are showing growth. At the same time, increased focus has been placed on measures to improve cost efficiency and delivery quality, with emphasis on using the group s global sourcing resources. The Solutions business area is well positioned for growth in demand for industry-specific solutions, both from the banking and finance industry and from the public sector. Market growth is driven by customer investment in Internet-based self-service solutions combined with solutions to improve the efficiency of internal work processes. The Solutions business area offers concepts that are fully competitive, not only in the Norwegian market but also internationally. The Nordic application services market, in which EDB is a significant player, is expected to show continuing good growth. The acquisition from StatoilHydro of IS Partner AS gives EDB the opportunity for a greater presence in the market for delivering IT services to oil and gas and industrial companies, through the industrial expertise, delivery methodology and new service concepts that IS Partner represents. The IT industry, both in Norway and internationally, is expected to see continuing consolidation. EDB has established a significant position in the Nordic IT services market. Our focus going forward is profitable growth and building shareholder value. Shareholder matters The largest single shareholder in EDB Business Partner ASA is Telenor Business Partner Invest ASA, which owns 51.3 percent of the company s share capital. Foreign shareholders held 11.8 percent of the company at the close of Otherwise, Norwegian institutional investors dominate the balance of the ownership structure. Further details can be found in Note 16 to the consolidated accounts on page 59. The company had shareholders at 31 December In connection with the group s share option scheme to employees, over shares were outstanding at 12 March As a result of the Norwegian government s statement on the State s role and ownership interest in Norwegian companies, the Annual General Meeting held on 9 May 2007 resolved that no further share options should be granted, but that existing option agreements can be completed. The accrued portion of the value of the options granted, including calculated employer s social security contributions on the benefit, represent ed a charge of NOK 7 million to profit and loss in This amount was allocated between the parent company and the business areas. EDB adopted a dividend policy in 2005 that aims to give shareholders an annual dividend equivalent to percent of normalised post-tax profit, subject to the Board being satisfied that the dividend has no adverse effect on the company s future growth ambitions and capital structure. The Board has decided to propose that the AGM should approve a dividend for the 2007 accounting year of NOK 1.20 per share, equivalent to NOK 110 million in total. This represents 40 percent of normalised post-tax profit. Allocation of the result for the year The parent company recorded a net profit of NOK 192 million for 2007, which is allocated to other equity. The dividend will be transferred from equity once it is approved by the Annual General Meeting. Stockholm, 12 march 2008 The Board of Directors of EDB Business Partner ASA Bjarne Aamodt Chairman of the Board Staffan Bohman Deputy chairman of the Board Hans Kristian Rød Monica Caneman Anne-Lise Aukner Anne Grete Dalane WENCHE BRATENG Employee representative John Ingvar Brekke Employee representative Eirik Bornø Employee representative Endre Rangnes Chief Executive Officer Annual report 2007 EDB Business Partner ASA 33

34 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes PROFIT AND LOSS ACCOUNT 1 January 31 December (NOK MILLion) Note Sales revenue Other operating revenue 11.7 Total operating revenue Cost of goods sold Wages and salaries 3, 4, Depreciation of operating assets Other operating costs Total operating costs Operating profit before amortisation of intangible assets Amortisation of intangible assets Operating profit Share of profit/loss in associated companies Financial income Financial expense Net financial items Profit before tax Tax on ordinary profit Profit for the year for continuing operations Profit for the year for discontinuing operations Profit for the year Whereof: Majority interest Minority interest Earnings per share (NOK) Diluted earnings per share (NOK) EDB Business Partner ASA annual report 2007

35 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes BALANCE SHEET as of December 31 (NOK MILLION) Note Fixed assets Deferred tax asset Goodwill and other intangible assets Total intangible assets Land, buildings and other real estate Machinery, equipment and fixtures Total tangible assets Investments in associated companies Other shareholdings Other long-term receivables Total non-current financial assets Total fixed assets Current assets Inventories Accounts receivables Other current receivables Total receivables Cash and bank deposits Total current assets Total assets Equity Share capital Own shares Share premium Other equity Total equity exclusive of minority interests Minority interests Total equity and minority interests Liabilities Deferred tax Pension liabilities Total provision for liabilities Other long-term interest bearing liabilities 17, Other long-term non-interest bearing liabilities Total other long-term liabilities ,2 Accounts payables Tax payable Deductions and duties payable Other current liabilities 17, 18, 19, Total current liabilities Total liabilities Total equity and liabilities Stockholm, 12 march 2008 The Board of Directors of EDB Business Partner ASA Bjarne Aamodt Chairman of the Board Staffan Bohman Deputy chairman of the Board Hans Kristian Rød Monica Caneman Anne-Lise Aukner Anne Grete Dalane WENCHE BRATENG Employee representative John Ingvar Brekke Employee representative Eirik Bornø Employee representative Endre Rangnes Chief Executive Officer annual report 2007 EDB Business Partner ASA 35

36 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes cash flow STATEMENT 1 january 31 december (NOK MILLION) Note Cash from/to operations: Ordinary profit before tax Gain/loss on sale of fixed assets Share of profit/loss in subsidiaries/associated companies Tax paid in the period Depreciation/write-downs Interest income / - expenses Paid interests Difference between pension cost and payments Change in inventories, accounts receivable and accounts payable Change in other accruals Net cash flow from operations Cash from/to investments: Investment in fixed operating assets Investment in in-house developed software Sale of fixed operating assets (sales proceeds) Investment in group companies Sale of group companies Purchase/sale of other shares and equity investments Net cash flow from investments Cash from/to financing: New borrowings (short and long-term) Borrowings repaid Dividends paid Share issues Net cash flow from financing Net change in liquid assets over the year Currency movement in liquid assets Cash and bank deposits at Cash and bank deposits at EDB Business Partner ASA annual report 2007

37 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow > statement of changes in equity > accounting principles > notes STATEMENT OF CHANGES IN EQUITY Majority interest Minority interest total equity PAID-in fair Share own share other value retained tarnsition CAPItal shares premium equity reserves earnings differenses total Equity at 1 January Share option scheme employees Cash flow hedges Currency translation differencees Aqusition of shares from minority Own shares used in connection with exercised options Dividend Profit for the year Equity at 31 December Share option scheme employees Cash flow hedges Currency translation differencees Additions of minority interests Own shares used in connection with exercised options Share issue Dividend Profit for the year Equity at 31 December Share option scheme employees Cash flow hedges Currency translation differencees Additions of minority interests Own shares used in connection with exercised options Share issue Dividend Profit for the year Equity at 31 December annual report 2007 EDB Business Partner ASA 37

38 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Accounting principles for the EDB group 1. Business activities The main activities of EDB Business Partner ASA and its subsidiaries (the group ) are the sale of software, IT solutions and consulting services, as well as the centralised and decentralised operation of computer systems. In addition, the group offers outsourcing services and services related to data communication, data security and electronic publishing. EDB Business Partner ASA is registered in Norway as a public limited liability company with its registered office in Oslo. The company is listed on the Oslo Stock Exchange ( Oslo Børs ). The Annual Accounts were approved by the Board of Directors at a meeting held in Stockholm on 12 March Basis of presentation In accordance with the Norwegian Accounting Act, the Annual Accounts (consolidated accounts of the group and unconsolidated accounts of the parent company) of EDB Business Partner ASA have been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by IASB and the EU. The figures presented in the annual accounts are in millions of Norwegian kroner unless otherwise stated. The accounts have been prepared on a historical cost basis with the exception of pensions and financial instruments, which are measured at fair value. The segment information is presented for business areas as the primary segment reporting format and geographic segments as the secondary reporting format. The group s business is divided into strategic business areas, each of which is organised and managed separately. The business areas sell different services and software targeted for different customer groups, and they have different risk and reward profiles. In preparing the accounts for the 2007 financial year, the EDB has implemented all the new and revised standards and interpretations issued by IASB that are relevant to its activities and that were in force for the accounting year commencing on January A review of the standards and interpretations that had not come into force for the 2007 financial year but that may be relevant for EDB can be found at Note 24 to the accounts. 3. Summary of material accounting principles The material accounting principles used to prepare the annual accounts of EDB Business Partner ASA are as follows: a) Presentation and functional currency The group presents its accounts in Norwegian kroner (NOK). This is also the group s functional currency. b) Consolidation principles The consolidated accounts include the parent company EDB Business Partner ASA and the companies over which EDB Business Partner has a controlling influence. A controlling influence is assumed to exist when the group, directly or indirectly, is able to exercise control over financial and operational decisions. Subsidiaries are recognised using the purchase method of accounting, whereby the acquisition cost of the shares is offset against the subsidiaries equity at the time of purchase. Any excess value resulting from this treatment at the time of purchase is allocated to identifiable assets and is depreciated over their expected life. Goodwill and identifiable assets with indefinite life are not depreciated. Goodwill is not calculated for minority interests. If further information becomes available following an acquisition in respect of assets and liabilities at the time of the transaction, the evaluation of value in use and assets and liabilities can not be changed beyond 12 months after the time of acquisition. Subsidiaries acquired during the period are consolidated from the date on which the group obtains financial and operational control. Similarly, businesses sold are included in the consolidated accounts until the purchaser takes over financial and operational control. All intra-group transactions and balances as well as internal gains are netted off in the accounts. Minority interests share of post-tax profit or loss is treated as a deduction and shown as a separate line in the profit and loss account. Negative minority interests are not carried in the balance sheet unless there is a guarantee of the shortfall. At the time of acquisition, minority interests are calculated as a portion of the equity of the subsidiary plus/minus excess/under value arising from the acquisition. Minority interests share is calculated on the basis of the subsidiary s post tax-profit, after internal netting, as included in the consolidated accounts. Companies in which the group has significant influence in financial and operational matters are recognised in accordance with the equity method of accounting. The group is normally assumed to have significant influence if its ownership interest is between 20 percent and 50 percent. The group s share of the company s profit/loss after tax, net of any write-down of excess value, is shown in the profit and loss account as Share of profit/loss in associated companies. c) Classification of assets and liabilities in the balance sheet An asset (liability) is classified as a current asset (short-term liability) if it satisfies the following criteria: a) it is to be sold in, or held for sale or use in, the normal turnover of the group s business, b) it is primarily held for trading, c) it is expected to be realised within 12 months of the balance sheet date, or d) it is in the form of cash or cash-equivalent assets. All other assets (liabilities) are classified as fixed assets (long-term liabilities). d) Recognition of revenue and costs Where operating services are provided through volume-based contracts, revenue is recognised on the basis of the actual use of services by the customer, or on a linear basis over the period of the contract for term-based contracts. Sales of dialogue services are recognised as revenue on the basis of actual customer usage. Revenue from a transition project that is an integral part of subsequent operating services contract is recognised on a linear basis over the period of the operating services contract. Revenue from transition projects that are not related to an operating services contract is recognised over the transition period. Service and maintenance agreements are recognised to income on a linear basis over the period of the contract. Sales of goods are recognised as revenue at the time of delivery. Sales of licences and rights to use software are recognised at the date the contract is signed since this corresponds to the time at which the software is made available to and can be used by the customer. Revenue from sales of software is separated from maintenance revenue on the basis of a separate pricing model and contractual structure. Revenue from software developed specifically for customers is recog-nised over the development period in line with the degree of completion. Revenue from consulting services is recognised as the services are provided. Sales of services on a fixed fee basis are recognised to income in line with the number of hours supplied relative to the total number of hours anticipated for the assignment, taking into account any expected additional work and any other expected additional costs. Cost of goods sold comprises directly allocated costs related to the delivery of goods, including maintenance and operational leasing of hardware and software, as well as the cost of consulting services that are directly related to the turnover of the goods. The costs of employing external consultants that are used for the group s normal operations and that are re-charged to customers, are classified as cost of goods sold. If a contract is identified as loss-making, provision is made in the balance sheet and recognised to profit and loss in full in the period when the contract is so identified. Costs incurred in performing service and maintenance contracts are accrued over the life of the contract. e) Inventories Inventories are valued at the lower of purchase price and net realisable value. Net realisable value is defined as the expected sale price under normal commercial conditions with a deduction for sales costs. Purchase price is determined on the basis of average cost price. f) Accounts receivable Accounts receivable are recognised in the accounts at nominal value after a deduction for possible losses. 38 EDB Business Partner ASA annual report 2007

39 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes g) Transactions in foreign currency Transactions in foreign currencies are translated at the exchange rate at the date of the transaction. Currency gains/losses that arise as a result of changes in the exchange rate between the date of the transaction and the payment date are recognised to profit and loss with the exception of translation differences that arise in respect of the group s net investment in overseas units. Currency gains/ losses that relate to receivables/liabilities that form part of net investment in overseas units are included in translation differences in equity. Assets and liabilities of foreign subsidiaries that use a functional currency other than Norwegian kroner are translated on the balance sheet date at the exchange rate on the balance sheet date, while profit and loss items are translated at the average exchange rate during the accounting period. When net investments are disposed of, the translation differences are recognised to profit and loss. Excess value, including goodwill and deferred tax assets arising from the acquisition of foreign units, are translated using the same principles as for other assets and liabilities of foreign units. Upon disposal of a foreign subsidiary, the cumulative translation difference in respect of the subsidiary is recognised to profit and loss. If part of a receivable/liability that is treated as part of net investment in a foreign unit is realised, a proportionate share of the cumulative translation difference is recognised to profit and loss. h) Shares in subsidiaries and associated companies Shares in subsidiaries and associated companies are recognised in the company s unconsolidated accounts in accordance with the cost method. Dividends and other profit distributions received from these companies are recognised as financial income in the period in which the payment is approved by the subsidiary or associated company to the extent that they result from profits earned during the period of ownership. i) Tangible assets Tangible operating assets are carried in the balance sheet at historic purchase price less accumulated ordinary depreciation and write-down. When tangible operational assets cease to be used, the historic purchase price and accumulated depreciation are removed from the accounts, and any gain or loss this causes is recognised to profit and loss. Ordinary depreciation is applied on a straight-line basis, following specific evaluation, over the following time periods: Leasehold improvements 5 10 years Machinery/equipment/fixtures 3 7 years Vehicles 5 years IT equipment 3 5 years The economic life and depreciation method used are reviewed regularly to ensure that the method and depreciation period reflect the expected useful commercial life of the assets in question. This also applies to disposal value. j) Impairment of non-financial assets with a limited commercial life Tangible operating assets and intangible assets with a limited commercial life are tested for impairment if specific events or changes in circumstances indicate that the carrying amount of an asset may have suffered a fall in value that is not temporary in nature. The fall in value is calculated by comparing the carrying amount of the asset (at the level of a valuation unit) against the recoverable amount. The recoverable amount is defined as the higher of value in use and net sales value. Value in use is calculated as net present value of future cash flow from continuing use, including cash flow arising from eventual disposal. The discount rate used to calculate the present value is the risk-free interest rate plus a risk premium appropriate to the asset being valued. Net sales value is calculated as the amount that an entity expects to obtain from the disposal of an asset in an arm s length transaction between knowledgeable, willing parties, after deducting the estimated costs of disposal. The smallest unit of a particular asset which can be separately assessed as a valuation unit for the purpose of determining whether there has been a fall in value is determined by the lowest level at which it is possible to identify cash flow independent of cash flow from other groupings of the same class of asset. In most cases, the group s business areas represent the smallest valuation unit for this purpose. An asset is written down to the recoverable amount if the recoverable amount is less than the Carrying amount before write-downs. Impairment losses are charged to profit and loss in the period the impairment loss is identified, and reduce the carrying amount of the asset by an equivalent amount. Impairment losses may subsequently be reversed to the extent that the reason for the impairment loss no longer applies. However, impairment losses are not reversed if the reversal would cause the carrying amount to exceed the amount that would have applied after applying normal depreciation for the period. k) Leasing Leasing of assets where the lessor retains the major part of risk and control are classified as operational leases. Other leasing contracts are treated as financial leasing. Operational leasing The leasing costs of operational leases are allocated on a linear basis over the period of the lease, and are classified as cost of goods sold or other operating costs in the profit and loss account. Financial leasing Financial leasing contracts are recognised as assets and liabilities in the balance sheet in an amount equivalent to the operating asset s actual value at the time the leasing contract was entered into or, if lower, the net discounted value of the future minimum payments under the terms of the lease contract. A financial leasing contract results in the recognition of both depreciation on the asset financed and financing costs. The depreciation plan for leased assets is equivalent to the depreciation plan for owned assets. If it is not likely that the group will take over the asset upon the expiry of the leasing contract, the asset is depreciated over the shorter of the life of the leasing contract and the depreciation period applied for equivalent assets owned by the group. l) Goodwill Excess value that cannot be attributed to identifiable assets and liabilities in subsidiaries at the time of acquisition is recognised as good will in the balance sheet. Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not capable of being individually identified and separately recognised. In the case of invest-ment in associated companies, goodwill is included in the cost price of the investment. Goodwill is not depreciated, but an assessment is made each year as to whether the carrying amount can be justified by future earnings. In addition, goodwill is tested for impairment at any time regardless of the annual test if there are indications that impairment may be needed. If the discounted cash flow is lower than the carrying amount, goodwill is written down to value in use. m) Intangible assets Intangible assets with limited commercial life are amortised and any need of impairment losses to be recognised is considered. Amortisation is carried out based on cash flow. Estimated amortisation and the method of amortisation are subject to annual review that takes into account the commercial reality of the intangible asset in question. The group does not have any intangible assets with unlimited commercial life. n) Research and development Expenses relating to research are recognised in the income statement when they are accrued. Expenses relating to development are capitalised if the following criteria are met in full: the product or process is clearly defined and its cost elements can be identified and measured reliably the technical solution for the product has been demonstrated the product or process will be sold or used in the company s operations the asset will generate future economic benefit; and sufficient technical, financial and other resources for completing the project are present. When all the above criteria are met, the costs relating to development are capitalised. Costs that have been charged as expenses in previous accounting periods are not recognised in the balance sheet. The evaluation of future commercial benefit is based on the expected licence revenue and/ or reduction in operating costs that will be achieved by carrying out the project. When calculating the profitability of a project, the group s WACC is applied plus a margin for project risk. annual report 2007 EDB Business Partner ASA 39

40 annual accounts and notes group > Profit And Loss Account > Balance sheet > Cash Flow Statement > Statement of Changes in Equity > Accounting Principles > Notes Capitalised development costs are depreciated in accordance with the expected cash flow from the project in question. The depreciation period used is 1 4 years. o) Pension liabilities The group s Norwegian subsidiaries operate collective defined benefit or defined contribution pension schemes for all employees. The costs associated with the contractual pension arrange-ments for employees are included with salary costs in the accounts. The starting point for calculating pension costs is linear application of pension entitlement earned against the likely accumulated pension liability at the time the pension is first drawn. Liability in respect of contractual pension arrangements is valued as the present value of the future pension benefits for which entitle-ment has been earned at the date of the balance sheet, and is calculated on the basis of assumptions about discount rates, the investment return on pension assets and expected growth in earnings and pensions. In addition the calculations are based on assumptions about a disability rate and a mortality rate (K2005). The disability rate is based on a estimate of the actual disability risk in EDB, while the mortality rate is based on an estimate made of the population of Norway. Pension invest-ments are valued at fair value at the date of the balance sheet. The cost of pensions is calculated on the basis of the discounted pension entitlement earned at the beginning and end of the year and the pension rights accrued during the year, less the return on the assets provided to fund pensions. The effect of any changes in the pension scheme that leads to the issue of fully paid-up policies is recognised in the period the change is made. The effect of other changes in the pension scheme is amortised over the expected average remaining service period. The effect of any changes in estimates, changes in assumptions and calculation differences that exceeds 10% of the higher of pension liabilities or pension assets is amortised over the average remaining service period. In addition to the defined benefit pension scheme described above for Norwegian employees, all employees in the group s Swedish companies are members of the ITP occupational pension scheme. This is an occupational pension insurance based on a collective agreement between Svenskt Näringsliv (the Confederation of Swedish Enterprise) and PTK (the Federation of Salaried Employees in Industry and Services). This scheme is recognised in the consolidated accounts as a contribution schemes because there are no calculation of the cost per employee. Pension premiums paid are recognised to profit and loss as they are incurred. The company also operates a pension scheme through operations for the group s executive management to which it makes annual contributions in proportion to the salaries of the individuals in question. This scheme is treated in the consolidated accounts as defined contribution schemes, and pension premiums paid are recognised to profit and loss as they are incurred. p) Taxation The tax charge is made up of tax payable and changes in deferred tax/tax assets. The value of deferred tax/tax assets in the balance sheet is calculated on the basis of all differences, with the exception of associated companies, subsidiaries and jointly controlled businesses, between accounting and taxation values of assets and liabilities (liability method). The amount provided includes all types of difference, and is calculated without being discounted to present value. Deferred tax and deferred tax assets are netted to the extent that temporary timing differences are reversed in the same period and are subject to the same tax system. Deferred tax assets are capitalised to the balance sheet to the extent that it is considered likely that the company in question will have sufficient taxable profit in subsequent periods to make use of the tax asset. At each balance sheet date, the group carries out a review of deferred tax assets not capitalised to the balance sheet and their accounting value. Deferred tax assets not previously capitalised to the balance sheet are capitalised to the extent that it appears likely from the review that the company in question will be able to make use of the tax asset. Similarly, companies will reduce the capitalised value of tax assets to the extent that they are no longer able to use the tax assets in question. If a company has reported a loss for the last three years, it will normally be assumed that the uncertainty over future profits is such that deferred tax assets should not be capitalised. Tax payable and deferred tax/tax assets are applied directly to equity to the extent that they relate to items that are themselves applied directly to equity. q) Cash Cash includes cash held and bank deposits. r) Cash flow statement The cash flow statement is presented using the indirect method. The group s activities are divided in to operational, financing and investment activities. s) Earnings per share Earnings per share is calculated by dividing the majority shareholders share of the profit/loss for the period by the weighted average number of ordinary shares outstanding over the course of the period. When calculating diluted earnings per share, the average number of shares outstanding is adjusted for all share options that have a potential dilutive effect. Options that have a dilutive effect are treated as shares from the date they are issued. t) Provisions A provision is recognised in the accounts only when the company is subject to a liability that is a consequence of an event that has already happened and where it is likely (i.e. more likely than not) that in order to reduce or discharge the liability the company will have to apply financially measurable resources, and the liability can be reasonably estimated. Provisions are evaluated at the end of each accounting period and adjusted to reflect the available information about the provision. In other cases, best estimate. If the time period to the date at which the liability may lead to payment has a material effect on the calculation, the provision will represent the discounted present value of the future liability. Increases in liability caused solely by the lapse of time are reported as an interest expense. Provisions for restructuring costs only include direct expenses linked to the restructuring which are both necessary for the implementation of the restructuring and which do not relate to the continuing ordinary activities of the company. Such provisions are recognised in the accounts when the company has a detailed plan for the restructuring in question that identifies which business areas will be affected, the locations affected, the functions and estimated number of employees due to receive termination payments, the costs that will be incurred and a time plan for implementation. There must be a real expectation by the parties affected that the company will implement the restructuring. This means either that implementation of the restructuring programme has commenced or that the main elements have been disclosed to the affected parties. u) Equity The nominal value of holdings of own shares is reported in the balance sheet as a deduction to share capital. The purchase price in excess of nominal value is charged to other equity. Gains or losses on transactions in own shares are applied directly to equity. If own shares are sold at a price in excess of cost price, the surplus is recognised as other paid-in equity. Realised loss related to sale of own shares are recognised against other paid-in equity, if positive, alternative against other equity. Transaction costs in relation to equity transactions are charged to equity after deducting tax. The fair value reserve includes cumulative net changes in fair value of financial instruments until the investment is disposed of or is judged to be of no value. v) Share options Certain key employees and the group s executive management have been granted options to purchase shares in the parent company. The fair value of these options is calculated at the date they are granted and is charged to profit and loss on a linear basis over the vesting period. 40 EDB Business Partner ASA annual report 2007

41 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes w) Hedging The group has established a strategy to hedge its net overseas investments. Derivative contracts are recognised as hedging instruments if they satisfy the following criteria: a) hedging is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk, with hedge effectiveness in the range perxent. b) the effectiveness of the hedging can be reliably measured c) there is adequate documentation on entry into the hedging to show that the hedging is highly effective d) hedging is reviewed regularly and has proved effective throughout the reporting periods for which it was intended The group takes active positions in various currencies to hedge its net investment in overseas units. Changes in the value of currency derivatives classified as hedging instruments are recognised as translation differences in the group s equity until the investment is disposed of, at which time the cumulative translation differences linked to the investment are recognised to profit and loss. The hedging instrument is recognised at fair value at the balance sheet date. If the hedging is evaluated as effective, the change in value is recognised to equity. If the hedging is evaluated not effective, the change in value is recognised to profit and loss. x) Financial instruments The group s financial instruments consist mainly of hedging derivatives. These derivatives are valued in accordance with IAS 39. All purchases and sales of financial instruments are recognised on the transaction date. Fair value is used as the cost price. Transaction costs are included in the cost price. Changes in fair value are recognised directly to equity until the investment is disposed of. Upon disposal, the cumulative gain or loss on the financial instrument in question that has been applied directly to equity is reversed and recognised to profit and loss. Derivatives that are not classified as hedging instruments are classified as available for sale and valued at fair value. Changes in the fair value of such derivatives are recognised to profit and loss. y) Contingent assets and liabilities A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent assets are not included in the annual accounts, but information is provided if there is a reasonable certainty that the benefit in question will accrue to the group. Contingent liabilities comprise: a possible obligation arising as a result of past events where the obligation depends on some uncertain future event a present obligation that is not recognised in the accounts since it is not probable that the obligation will result in a payment being made liabilities that cannot be measured reliably Contingent liabilities are not recognised in the accounts with the exception of contingent liabilities acquired as part of the purchase of a business. Continent liabilities acquired as part of the purchase of a business are recognised in the accounts at fair value even if the liability is not likely to crystallise. Information is provided in the accounts on material contingent liabilities except for contingent liabilities where the likelihood of a payment being made is low. z) Discontinued businesses The profit from operations until the date of sale and profit/loss of the sale is shown separately from continuing operations in the profit and loss account. The balance sheet and cash flow statement include businesses sold until the date of sale. In 2005, the business area Telecom was disposed. The results from these operations are shown in a separate line in the profit and loss account. æ) Loan fees Fees incurred in connection with drawing down a loan are capitalised and accrued over the life of the loan. ø) Use of estimated figures Certain accounting items in the balance sheet and profit and loss account in the annual accounts are based on estimates and judgements made by the group s management. This applies particularly to evaluating the depreciation of fixed assets and intangible assets, and determining the fair value of assets and liabilities for businesses acquired, goodwill and pension liabilities. Future events may cause changes to these estimates. Income recognition Where operating services are provided through volume-based contracts, revenue is recognised on the basis of the actual use of services by the customer. If there is no reconciliation/account of actual use at the end of the accounting period, revenue for the period is estimated on the basis of historic figures, adjusted for any known events/information that have influenced usage during the period. Claims by customers in respect of Service Level Agreements (SLA) for EDB s deliveries are recognized as a reduction in revenue. SLA claims are estimated on the basis of the individual contract and communications with the customer. Depreciation of fixed assets and intangible assets Depreciation is based on management s estimate of useful life. Such estimates may change as a result of technological developments, competition, changes in market conditions and other matters. This may cause changes in the estimated useful life and accordingly in depreciation. Purchase price analysis When acquiring new businesses and companies, the cost price is allocated between identifiable assets and liabilities based on estimated fair value. In the case of major acquisitions, EDB hires independent valuation experts to assist with the production of purchase price analyses. The determination of fair value is based on management s estimates and assumptions. Customer contracts are identified as intangible assets when businesses are acquired. The fair value of customer contracts is based on the discounted present value of future cash flow. The calculation of present value is based on management s estimates and assumptions in respect of matters such as margins, time horison and yield requirement. Goodwill The group tests goodwill for impairment annually. The book value of goodwill in the group s cash-generating units is measured against the value in use of goodwill in these units. The group s cash generating units correspond with the group s business segments. The recoverable amount from cash generating units is determined through calculations of value in use. These calculations are based on discounted cash flows that involve uncertainty and require the use of estimates. A change in the yield requirement used for discounting future cash flow will affect the book value of goodwill. An increase in the yield requirement will, in isolation, cause a lower value in use which in turn will cause a fall in the future value of goodwill. Note 10 to the consolidated accounts provides sensitivity analysis in respect of the calculation of value in use. Pension liabilities Pension costs and pension liabilities are calculated on the basis of a number of estimates and assumptions. Changes in estimates and assumptions and deviations between actual experience and estimates or assumptions (experience adjustments) will affect the fair value of net pension liabilities. Experience adjustments are not recognised to profit and loss until the accumulated adjustment exceeds 10 percent of the higher of pension liability and pension assets at the start of the accounting year. Capitalisation of development projects When capitalising development costs that relate to the use of internal resources, costs are estimated using an hourly rate based on the direct costs per employee, cf. IAS 19. Recognition of tax asset If there are net tax reducing timing differences, or there are tax reducing timing differences which can not be offset, the tax asset is recognised in the balance sheet at the amount that it is likely to be realised. If the tax reducing timing differences are related to losses carried forward, the assessment will be based on the expectation of future taxable profit. The expectations about future taxable profit are based on approved budgets. annual report 2007 EDB Business Partner ASA 41

42 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Notes group Note 1 Changes in group structure Businesses acquired in 2007 On 30 January, EDB Business Partner AB entered into an agreement to purchase 60.1 percent of the shares in the Ukrainian IT company Infopulse Ukraina LLC. Infopulse Holding Limited owns the remaining shares in the company. The company is consolidated in the accounts with effect from 1 September 2007, which is the date of transfer of control. Goodwill arising from the acquisition relates to the high level of expertise and education of the company s employees. The acquisition of Infopulse is important for EDB s investment in nearshore sourcing, and will help to strengthen EDB s delivery capacity for both existing and new customers. With effect from 1 April, EDB Business Partner AB acquired 100 percent of the shares in the Swedish card processing company Centralen for Elektroniska Korttransaktioner AB (CEKAB). Calculated goodwill arising from the acquisition relates to the company s position and expected growth in the card services market, as well as economies of scale and synergies between the group s businesses in Norway and Sweden. The acquisition will strengthen EDB s growth and market position in the capture and processing of card transactions in the Nordic market. With effect from 1 April, Guide Konsult AB acquired 100 percent of the shares in Tre60 AB. Tre60 AB is a Swedish IT consulting firm with a strong position in Business Intelligence consulting. Calculated goodwill arising from the acquisition relates to the company s position in the Swedish market for Business Intelligence, as well as the specialist expertise of its employees in this area. The acquisition will strengthen EDB s position in IT consulting and application services in the Swedish market. On 17 July EDB, Business Partner AB entered into an agreement to purchase 60.1 percent of the shares in Miratech Corporation Ltd. The remaining shares are owned by Solaya Holdings Limited (under incorporation) and Salasia Holdings Limited (under incorporation). Miratech is one of the leading IT services companies in the Ukraine. The company is consolidated in the accounts with effect from 1 December 2007, which is the date of transfer of control. Identified goodwill arising from the acquisition relates to the technical IT expertise of the company s employees. With effect from 1 October EDB, Business Partner ASA acquired 100 percent of the shares in the Danish IT company TeamR3 AS. TeamR3 is one of the leading vendors of SAP solutions in Denmark. Identified goodwill arising from the acquisition relates to the SAP expertise of the company s employees. This acquisition makes EDB one of the leading suppliers of SAP-related IT consulting in the Nordic countries. With effect from 1 November, EDB Business Partner AB acquired 50.1 percent of the shares in the Indian IT company Span Infotech, as well as 50.1 percent of the shares in its American sister company Span Systems Corporation Inc. The remaining shares are owned by Mr Pradeep Grama, Mr Prakash Grama, Mr Pramod Grama, Mr Naganand Doraswamy and Mr Ananthashapana Doraswamy. Goodwill arising from the acquisition relates to the IT expertise of the companies employees, and the importance of the companies for EDB s work on establishing a long-term strategy for Global Sourcing. The table below shows information on the allocation of purchase price for the acquisitions. The opening balances have been prepared in accordance with IFRS, restated at the exchange rate at the time of the transaction. The allocation of purchase price in respect of the acquisitions of CEKAB, Infopulse, TeamR3, Span and Miratech is provisional since these acquisitions were carried out towards the end of the year, and there is accordingly some uncertainty as to whether all the costs in respect of external support for the acquisitions have been taken into account in the opening balances (NOK MILLION) CEKAB tre60 Infopulse teamr3 Span Miratech Share 100% 100% 60.1 % 100% 50.1 % 60.1 % Goodwill Software Tangible fixed assets Financial fixed assets Inventory Receivables Cash/bank deposits Deferred tax/tax assets Long-term liabilities -8.1 Short-term liabilities Book equity at time of acquisition EDB Business Partner ASA annual report 2007

43 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes (NOK MILLION) CEKAB tre60 Infopulse teamr3 Span Miratech Identified excess value: Customer contracts Other intangible assets 9.0 Tangible fixed assets 0.1 Provisions -1.7 Deferred tax Adjusted fair value of equity 100% Adjusted fair value of equity share Goodwill from acquisition Net cash outflow Capitalised transaction costs EBITA after acquisition date Net Profit of acquired company after acquisition date Number of employees at time of acquisition The process of allocating excess value involves reviewing and evaluating the specific excess value items in the companies acquired. The acquisitions made in 2007 relate principally to consulting businesses (with the exception of CEKAB). When acquiring this type of business, EDB is principally purchasing the expertise of the employees. This expertise cannot be capitalised as a balance sheet asset, since it does not satisfy the requirements for capitalised intangible assets. It is therefore normal in the case of acquisitions of this kind of company for a major part of the cost price to be allocated to goodwill. The customer base of each of the businesses acquired has been reviewed and evaluated on a case-by-case basis. The fair value of customer contracts and customer relationships has been calculated using the discounted present value of expected future cash flows over the expected future life. The calculation of expected future cash flows is based on relationships with larger customers where it is expected that the customer relationship will continue. Expected sales are based on historic sales to the customer in question. For those customers where a framework contract has been agreed, this is used as a basis for the fair value calculation and it is assumed that sales will be realised according to the contract over its life. EDB has contractual call options to acquire the remaining shares in Infopulse, Miratech and the Span companies. The options can be exercised in fixed multiples equivalent to the market price following the end of the 2010 financial year. The minority shareholders in these companies have equivalent put options on equivalent terms. On the basis that the values of the call and put options offset each other, the options are recorded at their net value in the accounts at 31 December effect OF edb COMPANIES Consolidated pro forma figures 2007 (NOK MILLION) GROUP ACQUIRED proforma Consolidated operating revenue Operating profit before amortisation of intangible assets Profit before tax Profit after tax The proforma figures shows the results of the Group as it would have been reported if the aquisisted companies have been consolidated from 1 January Profit before tax is shown after depriciation of any identified excess value and financing expenses. Revenues and profits from foreign units are translated at average exchange rate. Businesses acquired in 2006 On 19 December 2005 EDB Business Partner ASA purchased 100 percent of the share capital of TAG Systems AS, including its wholly-owned subsidiary Viewcard AS and 74.5 percent of the share capital of the Swedish subsidiary Card TAGnology AB. The businesses acquired are consolidated with effect from 1 January Tag Systems supplies cards and card services to the Norwegian banking sector, including card personalisation, transaction monitoring to identify fraud, 24/7 call centre for Norwegian banking sector cardholders (customers of banks that issue cards). The goodwill identified in connection with the acquisition relates to the companies market position and expected growth in the card service area. The goodwill is also related to the companies expertise in card technology. The acquisition will help to strengthen EDB s growth and market position in the card service area. On 10 January 2006, EDB Business Partner AB acquired the business of the Swedish companies Datarutin AB and Datarutin Dokumentor AB. The businesses were transferred to EDB at the start of February Datarutin is one of the market-leading players in the Swedish market for IT operations, consulting services and document management, offering solutions for customers such as the Swedish unemployment benefit offices. Goodwill booked in respect of the acquisition relates to access to expertise, opportunities to improve operational efficiency and realise operational synergies as well as scope to attract new customers EDB s products. The acquisition will help to strengthen EDB s position in the Swedish market. Note 1 cont. next page annual report 2007 EDB Business Partner ASA 43

44 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 1 cont. With effect of 1 January 2006, EDB Business Partner ASA acquired the business of Avenir from Ementor. The goodwill identified in connection with the acquisition relates to the strategic access the group will gain to new customers and new products, as well as the high level of expertise of Avenir s employees. The business acquired by EDB has extensive expertise in Microsoft, SAP, IBM and Oracle technologies, as well as in project management, systems development and systems integration, and customising and implementing standard systems. With effect of 1 January 2006 EDB Business Partner ASA purchased 100 percet of the share capital of the IT consulting firms Spring Consulting AS and Annorledes Opplevelser AB, as well as 62.5 percent of the share capital of Spring Consulting Danmark A/S and Spring Consulting Partner ApS. The remaining shares in Spring Consulting Danmark A/S and Spring Consulting Partner ApS were acquired on 1 July Goodwill in respect of the acquisition relates to the high level of expertise of the employees and market-oriented management. With effect of 1 March 2006, EDB Business Partner ASA purchased 100 percent of the share capital of Software Technology Integration AS (STI AS). STI AS was merged with Avenir AS with effect from 1 January With effect of 1 April 2006, EDB Business Partner ASA purchased 100 percent of the share capital of the Swedish IT consulting group Guide Konsult AB. Guide is a leading supplier of IT consulting and application services in Sweden. Goodwill in respect of the acquisition relates to the fact that the acquisition makes EDB one of the leading companies within IT-consulting in the North. The aquisition also gives the EDB Group an ablility to deliver more to the swedish customers. With effect of 1 May 2006, Guide Konsult AB purchased 100 percent of the share capital of DropIT AB and its wholly-owned subsidiaries DropIT Software AB and GS2 Webhosting AB. See the table below for infomation about the allocation of aquisition price. The opening balances for the aqusitions of foreign entities are presented at the currency rate at aquisition date (NOK MILLION) tag Systems Datarutin Avenir Spring STI Guide Drop IT Goodwill Software Tangible fixed assets Financial fixed assets Inventory Receivables Cash/bank deposits Deferred tax/tax assets Long-term liabilities Short-term liabilities Book equity at time of acquisition Identified excess value: Customer contracts Software 3.8 Tangible fixed assets Financial fixed assets 2.3 Provisions -3.8 Deferred tax Goodwill on acquisition Net cash outflow Capitalise transaction costs EBITA after acquisition date * **47.4 ** Net Profit of acquired company after acquisition date * * ** 25.6 ** * Profit reported for STI AS is shown together with Avenir AS, since the companies were merged with effect from 1 December 2006 the company has not been reported as a separate unit of the group.. ** Profit in respect of the business of DropIT is shown together with the profit of the Guide Group. DropIT is reported both internally and externally together with Guide. For those acquisitons where customer contracts have been identified as an intangible assets. The fair value of these contracts are based on an analysis of the spesific contracts at the acquisitions date. Fair value is calculated for the contracts where it is likely that the customer ralationship will continue. For those customers where the relationship has a character of a framework contract, this is used as a basis for the fair value calculation and it is assumed that sales will be realised according to the contracts over the years of the contracts. For larger customers with no framework contract, an estimate of future sale is made based on historic sales. Expected future cash flow is discounted over expected contract period. Proforma consolidated figures (nok million) 2006 Proforma Operating revenue Proforma Net profit The proforma figures shows the results of the Group as it would have been reported if the aquisisted companies have been consolidated from 1 January Profit is shown after depriciation of any identified excess value and financing expenses. Revenues and net profits from foreign units are translated at average exchange rate. 44 EDB Business Partner ASA annual report 2007

45 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Businesses acquired in 2005 On 1 May 2005 the subsidiary EDB Business Partner Sverige AB purchased 100 percent of the share capital of BanqIT Business Application AB (BanqIT) for cash consideration of SEK 57.3 million equivalent to NOK 50.8 million. BanqIT offers software and components for the Nordic bank and finance market, with particular emphasis on solutions for bank branch offices. Goodwill created is related to BanqITs market position in the swedish market of bank branch offices. The acquisition will strengthen EDB s development capacity in Sweden for the bank and finance sector, and this will in turn strengthen EDB s market position and customer relationships in Sweden. The business acquired, with the exception of in-house developed software, was transferred from BanqIT to EDB Business Partner Sverige AB (AB) on 1 July 2005 and is not reported as a separate unit after that date Balance sheet (NOK million) BanqIT Goodwill 3.0 Customer contracts 11.2 Software 33.4 Tangible fixed assets 0.2 Receivables 12.0 Deferred tax/tax assets Liabilities -9.4 Net identifiable assets/liabilities 37.9 Goodwill arising from the acquisition 12.9 Net cash outflow 50.8 Capitalised transaction costs 0.4 Businesses sold in 2006 In 2006, the e-commerce company Paynet AS was sold to Netaxept, a company owned by DnB NOR, with effect from 1 May Consideration for the sale was NOK million. The group realised a gain from this transaction of NOK 3 million. Businesses sold in 2005 The Telecom business area was sold on 30 September The disposal included the business of the subsidiary EDB Telecom AS and the business carried out in the USA through the subsidiary Telesciences Inc. In the profit and loss account, earnings from the business sold through to the date of sale and the profit from the disposal of the business activities are shown on a separate line as profit from discontinued operations. In the balance sheet and cash flow statement, the Telecom business area is removed with effect from the date of sale, i.e. 30 September Profit and loss Telecom (NOK million) 2005 Sales revenue Profit from divestments 36.9 Operating costs Operating profit 43.4 Net financial items -1.1 Profit before tax 42.3 Tax on profit from divestments Tax on operations -1.5 Profit from discontinued operations -5.9 Cash flow telecom (NOK million) 2005 Cash from operating activities 6.7 Cash from investing activities Cash from financial activities -1.1 Foreign exchange differences 1.2 Net cash flow annual report 2007 EDB Business Partner ASA 45

46 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 2 Segment information The Segment information is presented for business areas and geographic segments.the group s business is divided into strategic business areas, each of which is organised and managed separately. The business areas sell different services and software targeted for different customer groups, and they have different risk and reward profiles. Business areas is therefor the primary segment reporting format and is also in accordance with internal reporting requirments. Primary segment reporting format Business areas The EDB Business Partner group is divided into the following business areas: a) IT Operations b) Solutions c) Application services The IT Operations segment offers services related to outsourcing of operations in the public and private sectors. Solutions offers applications and services for the bank and finance industry and the public sector. Application services delivers services related to SAP-, Microsoft-, IBM-, og Oracle technology, project management and systems development. Transactions within the segments are based on market conditions. All transactions between the segments are eliminated and shown separatly in the table below. The business area IT Operations is party to internal agreements based on the same terms and conditions as those for external customers. The rental of software and other IT equipment is based on the cost from an external supplier plus a margin. The business area Application Services charges an agreed price for other business areas equivalent to the price that it would charge its best customer. Internal transactions between the segments are eliminated and shown on the same line in the following presentation. Items included in Not allocated relate to support functions and non-recurring items. Not allocated for 2006 includes restructuring costs of NOK million, while not allocated items for 2007 include a non-recurring amount of NOK 36.8 million related to voluntary transfers to the defined contribution pension scheme. Eliminations includes netting of charges for internal services in respect of the project to establish EDB s new solution suite for the public sector using SAP-based solutions. 0perating of which OPeratING Depreci (NOK MILLION) revenue external EBITDA EBITA profit Assets liabilities capex ation IT Operations Solutions Application Services Not allocated Eliminations Total (NOK MILLION) IT Operations Solutions Application Services Not allocated Eliminations Total (NOK MILLION) IT Operations Solutions Not allocated Eliminations Total Secondary segment reporting format geographic segments The group s activities are divided between Norway, Sweden and other countries. Geographic breakdown Norway SwedeN Other Sum (NOK MILLION) Sales revenue Segment assets Investment EDB Business Partner ASA annual report 2007

47 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 3 Personnel costs etc. Personnel costs (NOK million) Wages and salaries Share based compensations Employer s social security contributions Pension costs Other benefits Total The average number of employees in the group was in 2007, in 2006, and in Loans to employees No loans have been given to the employees. Executive management remuneration (NOK million) Chief Executive Officer: Salary Bonus Cash settlement of options exercised Pension benefits earned through the year Other remuneration Fair value of options granted* FAIr value Other of options Other members of executive management 2007 (NOK million) SALAry Bonus Pensions remuneration granted 2007* Oddgeir Hansen John-Arne Haugerud Kristian Kuvaas Johansen Jan Erik Larsen Tone Øvregård Geir Remman Thomas Parmbäck Carl-Johan Lindfors Jan Ivar Borgersen Lars Bjertnæs Eva Trasti Ole Urdahl Previous members of executive management Tore Valderhaug Rikard Wannerholt Other members of executive management 2006 (NOK million) 2006 Ole Urdahl John-Arne Haugerud Oddgeir Hansen Jan Erik Larsen Tore Valderhaug Geir Remman Rikard Wannerholt Thomas Parmbäck Previous members of executive management: Petter Idar Jenssen Vibeke Nyvold Urban Doverholt annual report 2007 EDB Business Partner ASA 47

48 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 3 cont. Salary, bonus, pensions and other remuneration to other members of executive management 2005 (NOK million) Ole Urdahl John-Arne Haugerud Oddgeir Hansen Tore Valderhaug Vibeke Nyvold Urban Doverholt Jan Erik Larsen Petter Idar Jenssen Geir Remman * The fair value of granted options is calculated using the Black & Scholes option pricing model. The value is calculated at the day they are granted and then multiplied with the number of options granted. The total value is charged to profit and loss over the vesting period of three years. Executive management remuneration for 2005 is shown as an aggregate figure. The remuneration reported for 2005 includes pension premium paid for executive management, while the figures for 2006 and 2007 show the pension entitlement accrued separately. The following guidelines were set out in a Statement by the Board of Directors on 18 April 2007 pursuant to Section 6-16a of the Public Companies Act, and the Statement was approved by an advisory vote of the Annual General Meeting held on 9 May 2007: The remuneration of the members of EDB s executive management in the form of salary and other benefits shall be determined in accordance with the following principles: a) Remuneration shall be competitive in relation to senior management salaries in large Nordic IT companies. b) Remuneration shall be made up of both a fixed element and a variable element. The fixed element will be made up of basic salary and certain standard employment benefits, plus an additional amount in the case of certain key positions for the responsibility involved. The variable element will take the form of a bonus. The additional amount for responsibility will be determined individually each year, and the post-tax amount of this payment must be invested in EDB shares that cannot be sold for three years. c) The bonus scheme shall reflect both the company s results and the individual employee s performance, and shall take the form of a bonus program. For the members of executive management, bonus payments can be up to 50 percent of basic salary. 50 percent of any such bonus is paid on the basis of achieving key targets, while 50 percent is at the discretion of the Chief Executive Officer. As a general rule, no bonus payments will be made if the EBITA reported in the audited consolidated accounts is less than the target set for the year in question. However, bonus payments may be made for extraordinary effort even if the EBITA reported in the audited consolidated accounts is less than the target set for the year in question. The bonus payable to the Chief Executive Officer may exceed the guidelines and limits mentioned in this section. The total remuneration of the members of executive management should reflect the scope and responsibility of their role, the breadth and complexity of the organisation and the company s values and management standards. In addition, compensation should reflect EDB s attractiveness as an employer and its ability to retain key employees. The Chief Executive Officer has waived the redundancy rights provided by Chapter XII of the Working Environment Act, but has an individual agreement to receive salary for 12 months following the normal notice period of 6 months. Salary payable for the 12-month period would be reduced by up to 75 percent in respect of other income. However if the Chief Executive Officer s employment is terminated as a result of a change in the ownership structure of the company, he is entitled to receive salary for 18 months following the normal notice period of 6 months with no reduction in respect of other income. Some of the group s Executive Vice Presidents have agreements entitling them to salary for periods of up to 6 months following the normal notice period of 6 months. The members of executive management are included in the group s defined benefit group pension scheme and are also members of an operations-based pension plan for the portion of salary that exceeds 12 times the National Insurance base amount (G), cf. Note 4: Pensions. In the event an individual leaves the company s service before retirement age, accrued operations-based pension benefits will be paid as salary. No member of the executive management received any remuneration or other benefits from any other company in the group other than those shown above. No additional payments are made for special services over above an individual s normal management responsibilities. The remuneration to the CEO and the other members of executive management for 2007 are in line with the principals accounted for above. 48 EDB Business Partner ASA annual report 2007

49 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes A share option scheme for the Chief Executive Officer and other members of executive management has been approved by the Annual General Meeting. Further details of the option scheme can be found in Note 5. Options held by members of executive management are as follows: Options held Options Options Options Options held Average Average Average OPening balance granted expired exercised closing balance exercise price - A exercise price - B MAturity Endre Rangnes (CEO) yrs Oddgeir Hansen yrs John-Arne Haugerud yrs Kristian Johansen Jan Erik Larsen yrs Tone Øvregård yrs Geir Remman yrs Thomas Parmbäck yrs Carl-Johan Lindfors Jan Ivar Borgersen yrs Lars Bjertnæs Eva Trasti yrs Ole Urdahl yrs Previous members of executive management: Tore Valderhaug Rikard Wannerholt A - Average exercise price for options exercised during the accounting year B - Average exercise price for options held at the close of the accounting year Board of Directors Remuneration paid to the Board of Directors in 2007 for work performed in 2006, were as follows: (NOK MILLION) Telenor ASA (Bjarne Aamodts participation) Staffan Bohman Monica Caneman Hans Kristian Rød John Ingvar Brekke Eirik Bornø Ingrid Lund Anne-Lise Aukner Anne-Grethe Dalane Jan Gaarder (deputy board member, staff representative) Gisele Marchand* Anne Cecilie Fagerlie* Sum *previous memebers of the Board of Directors Auditor s remuneration The following table shows the proposed remuneration to be paid to the group s auditor, Ernst & Young AS, in respect of the audit for 2007, including the amounts invoiced in respect of audit-related and tax-related services. The amounts shown include both norwegian and foreign subsidiaries, and are exclusive of value added tax. (NOK MILLION) Audit fee Other services Other audit-related services Other taxrelated services Total annual report 2007 EDB Business Partner ASA 49

50 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 4 Pensiones The group provides pensions principally through insured collective schemes with life insurance companies. Pension arrangements relate to 4,064 active members and 294 pensioners. The company has an AFP arrangement for its employees. The group closed its defined benefit pension scheme with effect from 31 December In replacement, arrangements have been made with Vital for a defined contribution pension scheme. Existing employees will be free to choose whether to move to the new scheme. All new employees appointed after 31 December 2006 will be members of the defined contribution scheme. 360 employees chose to transfer from the defined benefit pension scheme to the defined contribution scheme. This had a positive accounting effect of NOK 36.8 million recognized to profit as a reduction/refund in accordance with IAS 19. Pension costs (NOK million) Current value of pension entitlement accrued over the year Interest on pension liabilities Gross pension expense Return on plan assets Booked differences due to changes in estimates and in the pension plan Employer s social security contributions Net pension expense Additional schemes and early retirement Pension costs charged to profit and loss Pension liabilities (NOK million) Gross liability to provide pensions Pension assets Changes not amortised Employers social security contributions Net pension liability Plan assets in the balance sheet Pension liabilities in the balance sheet Change in pension liabilities (NOK million) Pension liabilities in the balance sheet Pension costs Premium payments Acquisition/sale of business Other changes Pension liabilities in the balance sheet Fair value of plan assets (NOK million) Plan assets in the balance sheet Return on plan assets Additions and disposals Premium payments Pension payments Pension liabilities in the balance sheet The account of pension arrangements given above is based on calculations carried out by an independent actuary which are reviewed annually. The following assumptions are used in the actuarial calculations per Expected return on pension assets 6.5% 5.9% 4.7% 5.4% Discount rate 4.9% 4.5% 3.9% 4.5% Future salary inflation 4.3% 4.0% 3.0% 3.0% Growth in the basic state pension (G) 4.3% 4.0% 3.0% 3.0% Annual increase in pensions 3.8% 3.1% 2.5% 3.0% Staff turnover 10.0% 10.0% 10.0% 6.0% Mortality assumptions K2005 K2005 K63 K63 50 EDB Business Partner ASA annual report 2007

51 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes The mortality assumptions, K2005, are estimated based on the population of Norway.The risk table for disability is based on estimated disability risk in EDB. Below there is shown an extract from this risk tables. The table shows the probability for a employee to be disable or die within a year. The table also shows expected duration of life. DISABLe (percent) MOrtality (percent) expected duration of life age MAN WOMAN MAN WOMAN MAN WOMAN Early retirement plan rate of retirement The early retirement plan is based on assumptions about rate of retirement related to retirment age and wage. Retirement age Wages below NOK WAGes between nok and WAGes above nok years 20% 15% 10% 65 years 30% 25% 15% The plan assets as of 31 December were invested as follows: Investment category Bonds 53% 53% 53% 70% Equity securities 29% 28% 32% 26% Properties 14% 11% 12% Other 4% 8% 3% 4% Total 100% 100% 100% 100% The plan asset are invested in bonds issued by the Norwegian government, Norwegian municipalities, financial institution and corporations. Bonds held in foreign currencies are to a large extent currency hedged. Investments in equity securities are restricted to a maximum of 35 percent of the plan assets. The plan assets are invested both in Norwegian and foreign equity securities. The currency hedging policy for foreign equity securities are evaluated per investment. The plan assets are invested in accordance with the guidelines applying to life insurance companies. Expected pension premium for 2008 related to the defined benefit pension scheme for the EDB Group is estimated to NOK 89 millions. Other pension plans As of 1 January 2004, an operations based pension plan for Executive management was established. The operations pension plan is not comprised by legislation on contribution pension or legislation on enterprise pension and is not fund based. The annual pension entitlement is calculated as 30 percent of salaries exceeding 12G, and the annual return shall at minimum equal 12 months NIBOR 31 December previous year. The pension entitlement accrued for 2007 amounts to NOK 2.92 million and the return for the year on entitlement accrued in earlier years amounts to NOK 0.1 million. The accumulated accrued entitlement including investment return and employer s social security contributions totalled NOK 9.2 million at 31 December Uncertainty over estimates Calculations of pension cost for the year and the book value of pension liability are based on the assumptions detailed above. Considerable uncertainty attaches to the amounts calculated, which will principally vary in pace with the level of interest rates in Norway. The assumptions on future salary inflation, expected increase in pensions in payment and the expected annual increase in the national insurance base amount (the G amount) are based on observations of historic data, correlation between the various assumptions and the guidelines issued by the Norwegian Accounting Standards Board (NRS) in January The rate of discount applied is the most important assumption for the calculation of pension liabilities. IAS 19 stipulates that the discount rate should be equivalent to the yield on high-quality bonds of maturity equivalent to the average remaining period over which pension benefits will be accrued. The discount rate is estimated on the basis of the yield on 10-year Norwegian government bonds. We have then looked to the European government bond market for an indication of what the yield on Norwegian government bonds with maturity quivalent to the average remaining period over which pension benefits will be accrued, would be if bonds of such a maturity were to exist. According to guidelines issued by NRS in January 2008 the future salary inflation should be at 4.5 percent. This is based on an average norwegian company with an average age of the employeers of 40 years. The average age of the employeers in EDB is 49.3 years after closing the defined benefit pension scheme. Based on this the the future salary inflation is set to 4.25 percent, which is 0.25 percent lower than the guidelines. An isolated decrease in the discount rate will lead to an increase in the pension liabilities. An increase in annual earnings growth, growth in the basic state pension (G) and annual increase in pensions will lead to an increase in pension liabilities. The pension liabilities are specially sensitiv to changes in the discount rate. One percent change in the discount rate will give a expected change in the pension liabilities of percent. Changes in the other assupmtions will not have so large impact of the value of the pension liabilities. A change of one percent in future salary inflation and annual increase in pensions will have an estimated effect of the value of pension liabilities of 8 12 percent. One percent change in G-regulation will have an effect of approximately 4 percent. annual report 2007 EDB Business Partner ASA 51

52 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 5 Employee share options Share option scheme The company operates two share option schemes for members of executive management and key employees in specific senior positions. 44 employees were members of the share option scheme at 31 December Under the terms of the 2004 option scheme, one-half of the options granted may be exercised over each of the two years after they are granted options from the 2004 scheme were exercised in 2007: options on 8 February at an average share price of NOK and options on 30 April at an average share price of NOK The 2006 option scheme has a three-year vesting period and rights to one third of the options granted are accrued each year. Options can be exercised quarterly in a period 3 to 10 days following the publication of the company s quarterly report. The earliest exercise period for the first one-third of the options followed the publication of the second quarter report for The maximum gain on exercising share options is subject to a limit of 250 percent. 1.5 million options were granted on 1 June 2006 at an average price of NOK A further options were granted in 2007: options on 30 January at an average price of NOK and options on 1 March at NOK As a result of the Norwegian government s statement on the State s role and ownership interest in Norwegian companies, the Annual General Meeting held on 9 May 2007 resolved that no further share options should be granted, but that existing option agreements can be completed. The Board decides whether the exercise of options issued under the 2006 share option scheme will take place either from the company s holdings of its own shares or by cash settlement. The company accordingly purchased of its own shares on 9 June 2006 at NOK per share and of its own shares on 20 June 2007 at NOK per share. Options outstanding (NOK MILLION) Options outstanding at Options granted Options exercised Options terminated Options expired Options outstanding at Of which fully vested The average share price for options exercised was NOK 46.45, while the average share price was NOK The terms and conditions of options outstanding are as follows: Average Year of expiry exercise price no. of shares Total Of the total opitons outstanding, the options with expiry date in 2008 is related to the sceme of The options with expiry date in 2010 and 2011 is related to the scheme of Provision is made for employer s social security contributions on the difference between the exercise price of options fully vested and the market value at 31 January Provision for employer s social security contributions in the balance sheet was NOK 0 million in 2007, NOK 0.6 million in 2006 and NOK 3.9 million in The fair value of options is calculated when they are granted, and charged to profit and loss over the vesting period. The cost recognised for the option program was NOK 6.7 million in 2007, NOK 7.6 million in 2006 and NOK 6.9 million in Fair value of options is estimated using the Black and Scholes option pricing model. The average fair value of options granted in 2007 was NOK (2006: NOK and 2005: NOK 8.42). The following assumptions are used for the calculation: Share price when options are granted. The share price for options granted is the market share price on the day they are granted. Option exercise price. The exercise price is the average share price five days before and after the date the options are granted. Options can only be exercised if the share price at the date of exercise exceeds the exercise price plus annual interest of 5.38 percent since the date the options were granted. Volatility. Historic volatility is assumed to be a reasonable indicator of future volatility. Future volatility is therefore defined as historic volatility for the same period as the vesting period. This represents volatility between 27 percent and 31 percent for the individual elements of the option program. Life of the options. Staff turnover for key personnel is assumed to be 10 percent. The expected life of options granted is defined as the vesting period for the individual elements of the option program. Dividend. The calculations assume an annual dividend increasing over the life of the options from NOK 1.00 to NOK Risk-free interest rate. The risk-free interest rate used for option calculations is equivalent to the yield on government bonds over the same period as the life of the options. The risk-free interest rate assumed for options allocated in 2007 is between 4.49 percent and 4.60 percent. 52 EDB Business Partner ASA annual report 2007

53 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 6 Cost of goods sold and other operating costs (NOK MILLION) Cost of goods sold comprise: Purchase and lease of software Purchase and lease of hardware Consulting staff Other material costs Total cost of goods sold Other operating costs comprise: Premises rental and other premises costs Temporary consulting staff Other operating costs Total other operating costs The increase in consulting costs compared to 2006 is mainly due more use of subcontractors in the business area Application Services. Note 7 Financial items (NOK MILLION) Interest income Currency gains Other Total financial income Interest expense Currency losses 4.8 Other Total financial expense Note 8 Tax Deferred tax/tax asset is calculated on the basis of the differences which exist at year-end between accounting and taxation values. Deferred tax/tax asset arises in respect of the following timing differences: Timing differences (NOK million) Intangible assets Tangible assests Pension liabilities Profit and loss account Other timing differences Gross timing differences Losses carried forward Write-down of timing differences Basis for deferred tax/ (deferred tax asset) Deferred tax asset Deferred tax Note 8 cont. next page annual report 2007 EDB Business Partner ASA 53

54 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 8 cont. The group had tax losses carried forward at 31 December 2007 in respect of its Swedish activities of NOK 94.9 million. There are no time limits to carrying these losses forward. The deferred tax asset related to the losses carried forward is capitalised in the balance sheet since the Swedish activities have for the years 2006 and 2007 taxable profits, and are expected to produce taxable profits in the future. The losses carried forward are expected to be utilised before the end of The deferrred tax asset in balance sheet is realted to the Swedish activities, while the deferred tas in the calansce sheet is related to the Norwegian activities. Changes in deferred tax (NOK MILLION) Change in deferred tax to P&L Deferred tax related to sold/purchased business Other changes in deferred tax not taken to P&L Change in deferred tax in the balance sheet Tax cost for the year comprises (NOK MILLION) Tax payable Change in deferred tax Under/over accrual of tax prior year Total Effect of permanent differences (NOK MILLION) % of pre-tax profit Expenses not deductible Non-taxable income Losses/tax rate differences abroad Under/over accrual of tax prior year Other permanent differences Tax of the year Dividend of NOK 1.20 per share is proposed for In tax terms, a dividend payment is not tax deductible for the company making the payment. For shareholders that are EEA resident taxation subjects (cf. Tax Act Section 2-38 (1)), the dividend received is not taxable in accordance with the exemption method. Companies outside the EEA receiving the dividend will be subject to withholding tax in accordance with the double taxation agreement between Norway and their country of residence. If there is no double taxation agreement, withholding tax of 25 percent is deducted from the dividend. For personal shareholders, dividend receipts are in principle liable to tax. Personal shareholders resident in Norway are taxed on dividends in accordance with the standard deduction method. Foreign personal shareholders will be subject to withholding tax in the same way as companies resident outside the EEA. The company is responsible for deducting the withholding tax due on payments to foreign shareholders. Note 9 Earnings per share Ordinary earnings per share is calculated as profit for the year attributable to shareholders divided by the average weighted number of shares outstanding over the year. Diluted earnings per share is calculated as profit for the year attributable to shareholders adjusted for interest on convertible loan. The average weighted number of shares outstanding over the year are adjusted for all dilutive effects in respect of options and convertible loans. The denominator for the calculation of diluted earnings per share includes all shares that may be received by holders of convertible loans and all share options that are in the money and can be exercised. For the purposes of the calculation, it is assumed that such share options were exercised at the date the option was granted Profit for the year attributable to shareholders (majority) Interest convertible loan Average number of shares in the period Effect of employee options Effect of convertible loan Diluted average number of shares Earnings per share (NOK) Diluted earnings per share (NOK) Dividend proposed for approval by the Annual General Meeting (not recognised as a liability at 31.12): Proposed total dividend payment (NOK 000) Proposed dividend per share (NOK) EDB Business Partner ASA annual report 2007

55 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 10 Intangible assets IN-house customer Developed contracts (NOK MILLION) Goodwill software and software total Acquisition cost at Additions in the year Disposal/reclassification in the year Translation differences Acquisition cost at Accumulated depreciation/write-down at Ordinary depreciation in the year Disposals in the year-ordinary depreciation Translation differences Accumulated depreciation/write-down at Book value at Economic life Yearly assessment 1 4 years 2 10 years Method of depreciation based on based on Goodwill is tested for impairment annualy. cash flow cash flow Costs of NOK million in respect of software developed in-house were capitalised in Of this, NOK 2.3 million relates to software developed in-house by businesses acquired. Capitalisation of in-house software in the group relates principally to customer-specific projects. NOK 67.9 million relates to the project to establish EDB s new public sector solutions for municipalities and health authorities using SAP-based solutions. Other development work carried out in the group is almost entirely related to customer-specific projects. The income derived from these projects exceeds the development costs. Accordingly no material amount of costs for research and development was recognized in Customer contracts year of Recognised goodwill and other intangible assets arise from the following acquisitions (NOK MILLION) Goodwill and softwaree Purchase Fellesdata Guide Konsult AB IBM Local Government Outsourcings assignments Telenor Operating services division Tag Systems AS Spring Consulting Datarutin Capgemini Infrastructure Management Norway and Sweden Unigrid Avenir Drop IT AB EDB ASA BanqIT AB PDS STI AS Tre60 AB CEKAB Infopulse Ukraine LLC TeamR3 AS Span Infotech Miratech Corporation Ltd Other smaller acquisitions 17.3 Total Note 10 cont. next page. annual report 2007 EDB Business Partner ASA 55

56 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 10 cont. Allocation of goodwill to cash-generating units (NOK MILLION) IT Operations Solutions Application Services Total In accordance with IFRS, goodwill is tested for impairment annually by measuring the recoverable amount against book value. The test is made at the lowest level of cash generating unit in the group. The group s segment reporting determs the lowest level of cash generating unit. This is the level at which management reporting is carried out. The calculation of recoverable amount is based on future value in use, which is net present value of future cash flows from the cash generating unit. The number of cash generating units are reduced from six cash generating units in 2006 to three cash generating units in The geographic dimension does no longer exist. This is in accordance with the organisation and reporting structure in the group. When calculating future value in use there has been used estimates when assessing future cash flows and discount rate. There are uncertainty conected to those estimates. The calculation of value in use discounts future cash flows over a five-year period. The cash flows used are based on the budget for 2008 and the group s strategic plans until 2010, both as approved by management. Future cash flows are based on assumptions about parameters including revenue and EBITA margin. Revenue and EBITA margin assumptions are based on historic revenue/margin adjusted for future developments in the market. EDB expects continued growth in the Nordic IT services market in Growth in demand is expected in particular for industry-specific solutions and consulting services. EDB expects only modest growth in the outsourcing market in The IT Operations business area has structured its delivery concepts to address the market segments that are showing growth. At the same time, increased focus has been placed on measures to improve cost efficiency and delivery quality, with emphasis on using the group s global sourcing resources. The Solutions business area is well positioned for growth in demand for industry-specific solutions, both from the bank and finance industry and from the public sector. Market growth is driven by customer investment in Internet-based self-service solutions combined with solutions to improve the efficiency of internal work processes. The Solutions business area offers concepts that are fully competitive not only in the Norwegian market but also internationally. The Nordic application services market, in which EDB is a significant player, is expected to show continuing good growth. A terminal value is calculated for the end of the five-year period using a fixed growth rate. The calculations assume growth of 2 percent in the cash flows. Future cash flows are discounted to present value using a discount rate (WACC) of 10 percent. WACC is based on a 15-year risk-free interest rate of 5.5 percent, gearing ratio of 50 percent, equity market premium of 5 percent equity beta of WACC is in line with market expectations for EDB and is unchanged from the WACC used for 2006 and Sensitivity The calculations are based on assumptions about both macroeconomic and microeconomic factors. Stress tests have been carried out to evaluate the sensitivity of each cash generating unit to changes in these factors. For example, a reduction in growth rate to 0 percent, together with WACC of 12 percent, would not result in impairment for any of the business areas. A reduction in EBITDA margin would have a negative effect on the calculated values. A reduction in EBITDA margin of one percentage point, assuming WACC of 10 percent and a growth rate of 2 percent, will not result in impairment for any of the business areas. Impairment would only arise for any of the business areas in the event of a reduction in EBITDA margin in excess of three percentage points. 56 EDB Business Partner ASA annual report 2007

57 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 11 Tangible Fixed assets IMProvements to machinery/ (NOK MILLION) Leased premises fixtures* vehicles it equipment total Acquisition cost at Additions in the year Additions through acquisitions Disposals in the year Translation differences Acquisition cost at Accumulated depreciation/write-downs at Ordinary depreciation for the year Accumulated depreciation/write-down on sale Translation differences Accumulated depreciation/write-down at Book value at Depreciation rates 10 20% 15 30% 20% 20 33% Depreciation method linear linear linear linear * Fixtures and fittings in leased premises are depreciated over the residual period of the lease if this is shorter than the normal depreciation period. An amount of NOK 0.0 million of the book value of EDP equipment is financed through financial leasing as at 31 December Note 12 Interests in subsidiaries and associated companies Shares in subsidiaries owned by parent company (NOK MILLION) registered office Share voting Book value EDB Business Partner Norge AS Oslo * 28% 100% Fellesdata AS Oslo 100% 100% EDB Telekom AS Oslo 100% 100% 43.8 EDB Business Partner AB Stockholm 100% 100% Tag Systems AS Mo i Rana 100% 100% Avenir AS Oslo 100% 100% 18.6 Spring Consulting AS Oslo 100% 100% Annorledes Opplevelser AB Stockholm ** 49.9% 100% 36.2 Spring Consulting Partner ApS holte ** 37.5% 100% 1.4 Spring Consulting Danmark AS holte ** 30% 100% 5.4 TeamR3 A/S Viborg 100% 100% 98.4 Total *The parent company also controls 72 percent through the wholly-owned subsidiary Fellesdata AS. ** The parent company controls 50.1% of Spring Consulting AB through the wholly-owned subsidiary Spring Consulting AS. Spring Consulting AS controls the remaining 62.5% of Spring Consulting Partner ApS and the 50.1% of Spring Conulting Danmark AS. Spring Consulting Partner Aps controls the remaining 19.9% of Spring Consulting Danmark AS. Note 12 cont. next page. annual report 2007 EDB Business Partner ASA 57

58 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 12 cont. In addition to subsidiaries owned by the parent company, the following companies are consolidated in the group accounts in accordance with the past equity method: company registered office Share voting Fellesdata Eiendom AS Oslo 100.0% 100.0% EDB Business Partner Sverige AB Stockholm 100.0% 100.0% EDB Infovention AB Stockholm 100.0% 100.0% EDB Business Application AB Stockholm 100.0% 100.0% Kjonerud Eiendom AS Stange 100.0% 100.0% Kjonerud Teknologisenter ANS Stange 100.0% 100.0% Kommunedata AL Oslo 71.4% 71.4% Viewcard AS Mo i Rana 100.0% 100.0% Card Tagnology AB Mo i Rana 100.0% 100.0% Guide Konsult AB Stockholm/Guthenburg 100.0% 100.0% Astrakan Strategisk Utbilding AB Stockholm 100.0% 100.0% Drop IT AB Stockholm 100.0% 100.0% Guarditude AB Stockholm 100.0% 100.0% Guide Konsult Göteborg AB Guthenburg 100.0% 100.0% Guide Market Solutions AB Stockholm 100.0% 100.0% Guide Konsult Stockholm AB Stockholm 100.0% 100.0% Inspire U AB Stockholm 100.0% 100.0% Inspire T AB Stockholm 100.0% 100.0% Proconsa AB Stockholm 100.0% 100.0% Centralen for Elektroniske Korttransaksjoner AB Stockholm 100.0% 100.0% Tre60 AB Stockholm/Guthenburg 100.0% 100.0% NUK Holding AB Stockholm 60.1% 60.1% Infopulse Ukraina LLC Kiev 60.1% 60.1% EXMT Nordic AB Stockholm 60.1% 60.1% Miratech Corporation Ltd. Kiev 60.1% 60.1% Miratech Ltd. Kiev 60.1% 60.1% Miratech UK Ltd. London 60.1% 60.1% TeamR3 AS Vestby 100.0% 100.0% Spring Consulting Ltd Bulgaria 95.0% 95.0% Span Infotech (India) Private Limited Bangalore 50.1% 50.1% Span Systems Corporation Inc New Jersey. USA 50.1% 50.1% Virtu AS Oslo 100.0% 100.0% Guide Redina AB has merged with Guide Konsult Stockholm, and Dropit Software AB has merged with Dropit AB during The wholly owned subsidiaries EDB Telesciences S.A and EDB Telesciences AG are liquidated in Investments in associated companies are accounted for by the equity method. Investment associated companies: company Share BOOK value Treffo AB 49% 2.9 (NOK MILLION) Setec AB treffo AB Book value Our share of profit/loss Other changes -0.9 Disposal Book value Summarised financial information (NOK MILLION) Total assets 2.5 Total debt 0.7 Revenues 6.3 Net profit 1.0 The shares in Setec AB are disposed during Realised loss related to the disposal was NOK 1.3 million. 58 EDB Business Partner ASA annual report 2007

59 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 13 Accounts receivables Accounts receivables are recognised at their nominal value less a provision for losses. (NOK MILLION) Gross outstanding Provision for losses on receivables Net accounts receivables Loss on receivables to P&L Past due on Not due ON Less than BetweeN BetweeN Between Over Age distributed accounts receivables 31 December days days days days 180 days 68% 20% 4% 2% 5% 1% Note 14 Other current receivables (NOK MILLION) Deferred income Pre-paid costs Other current receivables Total Note 15 Cash and cash equivalents EDB has established a group bank account system whereby EDB Business Partner ASA operates the group account, while other group companies are sub-account holders. The bank nets all balances and withdrawals to create a net position that represents the credit or debit balance between Nordea and EDB Business Partner ASA. The group has issued a guarantee in respect of tax deductions from salaries due to the tax authorities. The guarantee amount was NOK million at 31 December Note 16 Share capital, shareholders etc. The share capital of EDB Business Partner ASA at 31 December 2007 consisted of: Number Par value (NOK) Book value (NOK) Ordinary shares Of which own shares Total shares outstanding There is only one class of shares. The company sold own shares in 2006 realted to the company s share option scheme (see note 5). In june 2007 the company bought own shares which lead to a total balance of own shares of shares. There are in 2007 issued total new shares of nominal value NOK The company had shareholders at year-end, and Norwegian shareholders held 88.2 percent of the total share capital. Note 16 cont. next page. annual report 2007 EDB Business Partner ASA 59

60 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes The largest shareholders at 31 December 2007 were: Shareholders Interest Telenor Business Partner Invest AS 51.3% Folketrygdfondet 9.8% Oslo Pensjonsforsikring 4.1% Orkla ASA 3.2% Odin Norden 2.5% KLP Liv Norge 2.0% Credit Suisse Securi (Europe) Prime broke 1.3% Arendals Fossekompani 1.3% EDB Business Partner 1.2% Varma Mutual company 1.1% Odin Europa SMB 1.0% VPF Avanse Norge 0.9% Svenska Handelsbanken 0.6% Skandinaviska Enskilda Banken 0.6% The Northern Trust company 0.5% Bank of New York. BR BNY GCM client account 0.5% AS Skarv 0.5% UBS AG London Branch S/A IPB Non Seg Acc 0.5% Other 17.1% Total 100.0% The following members of the Board of Directors hold shares/options: Name No. of shares No. of options Bjarne Aamodt Staffan Bohman Hans Kristian Rød John I. Brekke 84 The following members of executive management hold shares/options: No. of shares No. of options Name Endre Rangnes Oddgeir Hansen John-Arne Haugerud Kristian Kuvaas Johansen Jan Erik Larsen Tone Øvregård Geir Remman Thomas Parmbäck Jan Ivar Borgersen Lars Bjertnæs Eva Trasti Ole Urdahl Johnny Rindahl Mandates for the issue of shares General mandate: The Board is authorised to increase the company s share capital by up to NOK by issuing up to shares each of nominal value NOK 1.75 pursuant to the terms of Section of the Public Limited Liability Companies Act. The Board is authorised to waive the right of existing shareholders to subscribe for such shares pursuant to Section 10 4 of the Public Limited Liability Companies Act. This mandate is valid until June Mandate in respect of share options for key personnel: The Board is authorised to increase the company s share capital by up to NOK by issuing up to shares each of nominal value NOK 1.75 pursuant to the terms of Section of the Public Limited Liability Companies Act. The Board is authorised to waive the right of existing shareholders to subscribe for such shares pursuant to Section 10 4 of the Public Limited Liability Companies Act. This mandate is valid until June EDB Business Partner ASA annual report 2007

61 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 17 Other long-term interest bearing liabilities (NOK MILLION) Liabilities financial leases Due to other credit institutions Total Interest bearing liability Draw and maturity profile for interest bearing debt (NOK million) Credit FINAL total (NOK mill) AFter (NOK MILLION) Maturity NOK SEK Per Syndicated facility Syndicated facility Multi currency facility Obligation Leasing Other interest bearing liabilities Total Average interest on the credit per 31 December 2007 were 3 months NIBOR/ STIBOR percent. In addition to this, the Group has entered into two interest swaps exchanges (see note 21). Commitment fee and arrangement fee is capitalised by NOK 6.6 million. From this, NOK 3.1 million is charged as finance cost per 31 December The company has as part of the agreement obliged that net interest bearing debt over EBITDA (earnings before interest, tax, depreciation and amortisation) shall not exceed The company is in compliance with finacial covenants. The part of the interest bearing liability that is due within one year after the balance sheet date, is classified as current liabilities in the balance sheet. As of 31 December 2007 NOK 15 million is classified as current liabilities. Note 18 Other current liabilities (NOK MILLION) Expenses incurred Pre-paid to customers Provisions Loans on special terms Current liabilities financial leasing Interest bearing current liabilities Other current liabilities Total Note 19 Provisions (NOK MILLION) restructuring Premises total Opening balance at Provisions made in 2007 Provisions reversed in 2007 Provisions applied in Translation differences Closing balance at Short-term Long-term Note 19 cont. next page. annual report 2007 EDB Business Partner ASA 61

62 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 19 cont. Restructuring Capitalised restructuring provisions mainly relate to the restructuring which was carried out in autumn 2006 to reduce the cost base of the group s activities. premises Provision is made for premises leases where the premises are not used or are sub-let on less favourable terms. Note 20 Leasing contracts Group as lessee financial leasing Assets leased by the group under financial leasing contracts include IT equipment. Assets leased under financial leasing contracts are as follows: (NOK MILLION) IT equipment Accumulated depreciation Pre paid software lease Net book value Future minimum lease payments: Up to 1 year to 5 years 13.1 After 5 years Total future minimum lease payments 26.3 Interest -1.2 Present value of future minimum lease payments 25.1 Of which: current liabilities 12.6 long-term liabilities 12.5 These agreements do not impose any restrictions on the company s dividend policy or financing arrangements. Group as lessee operational leasing The group has entered into a number of operational leasing contracts for IT equipment, office premises and other facilities.the majority of these leasing contracts include options to extend. Leasing costs are made up as follows: (NOK MILLION) Office premises IT equipment. vehicles and other Total leasing costs The minimum future lease payments in respect of contracts with no cancellation option fall due as follows: 2007 Up to 1 year to 5 years After 5 years Total future minimum lease payments Significant lease agreements Platforms: In 2006 there was established a consolidated platform to utilize internal economy of scale. The hardware in this platform is leased from IBM. The technical useful life is expected to be at least 60 months. The total leasing period is 42 months, and the leasing contract will expire in September There is no regulation of the leasing amount during the leasing period. The company has an option to by the hardware at markert value in the future.. Rental agreement Skøyen: The rental agreement expire in The rent is regulated annualy with the changes in CPI. The rent i based on total m 2. The renter is responsible to keep original standard.. Rental agreement Horten: The rental agreement is a 80 year ground rent agreement. The rent is regulated every ten year in accordance with CPI. 62 EDB Business Partner ASA annual report 2007

63 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 21 Financial instruments Financial risk The group has established a strategy to manage the interest risk and currency risk associated with international investments. Interest risk and currency risk are managed to ensure a high degree of predictability and lower fluctuations in interest and currency costs from year to year. The group does not intend to trade actively in the market, but evaluates the risks and enters into appropriate hedging transactions for major projects and investments. Information on exposure to financial risk is reported on a half-yearly basis to the Board of Directors and the executive management. Currency risk EDB s activities in the Nordic countries involve investments denominated in foreign currencies that represent financial risk in the form of currency exposure. The group is principally exposed to two types of currency risk: foreign investments leading to future loan repayments and/or dividend payments contractual purchases or sales denominated in foreign currency Foreign investments are in principle financed in the same currency as the investment, and the maturity profile of borrowings is arranged so that repayment coincides with dividend receipts/loan repayments from the foreign unit. For each individual exposure in excess of the equivalent of NOK 50 million, at least 80 percent of expected cash flow is hedged in this way. At the close of 2007 the group had taken up a loan of SEK million to hedge its investments in Sweden. Translation differences in respect of this loan and receivables due from the Swedish activities are applied directly to equity and will be recognised to profit and loss when the investment is realised or the receivable due is repaid. Sensitivity analysis in respect of currency risk If the NOK had been 10 percent stronger/weaker relative to all currencies at 31 December 2007, and all other variables had remained constant, EDB s consolidated equity would have been NOK 22 million higher/lower. Interest-rate risk and liquidity ris The group s policy is to maintain a base of long-term bank borrowing and to draw on long-term banking facilities to finance long-term investments. Short-term interest-bearing financing is principally used as a temporary measure in anticipation of arranging long-term financing. The group s current short-term borrowing should not normally exceed more than percent of total borrowing in order to limit refinancing risk. The interest rate risk target for the company s borrowing portfolio is for the average interest rate fixing period to be between 0.5 and 2.5 years. Floating rate borrowing (interest rate fixing periods less than one year) shall not exceed 75 percent of borrowing. Similarly, fixed rate borrowing shall not exceed 75 percent of long-term borrowing. In order to manage the risk associated with the borrowing portfolio and fluctuations in underlying interest rates, and to ensure a stable and predictable cash flow, the company uses financial hedging instruments. In 2007, the company entered into a 5-year interest swap agreement whereby the company pays a fixed interest rate in return for receiving floating interest rate payments. The principal amount hedged is NOK 300 million, and the market value of the swap contract at 31 December 2007 was NOK 2.6 million, booked directly to equity. In 2006, the company entered into a 4-year interest swap agreement whereby the company pays a fixed interest rate in return for receiving floating interest rate payments. The principal amount hedged is SEK 350 million, and the market value of the swap contract at 31 December 2007 was NOK 6.3 million, booked directly to equity. The market value is calculated on the basis of the mid-price of prices quoted in the market on the balance sheet date. However, this does not represent a trading price that could be used for purchases or sales. Sensitivity analysis regarding interest risk The EDB Group calculates the valuation effects on their financial instruments by simulating a parallel shift in the interest rate curve. Based on simulations a 10 percent change in the curve (60 basis points) will represent a increase in the valuation of approximately NOK 10 million or a decrease in the valuation of approximately NOK 10 million. Energy contracts The company has agreed a strategy for energy purchasing. The objective of the strategy is to reduce the risk of fluctuation in the cost of future energy purchases, and thereby stabilise the company s cash flow and provide greater certainty for budgeting. The market value of the energy contracts entered into as at 31 December 2007 of NOK 2.8 million is included in interest-free long-term receivables. An amount of NOK 0.5 million was recognized to profit and loss as other financial income in 2007 in respect of the ineffectiveness of cash flow hedging related to energy contracts. Credit risk Credit risk relates to the loss that the group would suffer if a counterparty proved unable to fulfil its obligations. Since the group has a large number of customers, the credit risk associated with the group s accounts receivable is limited. The group s maximum credit risk at 31 December 2007 was NOK million. annual report 2007 EDB Business Partner ASA 63

64 annual accounts and notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 22 Related parties Telenor Business Partner Invest AS owns 51.3 percent of the shares and rights of EDB Business Partner ASA. The consolidated financial statements of EDB are a part of the consolidated financial statement of Telenor. The EDB Business Partner group is party to agreements for the sale of services to a number of companies in the Telenor group. Total revenue from sales to companies in the Telenor group in 2007 amounted to NOK million. The EDB Business Partner group purchased goods and services from the Telenor group in 2007 totalling NOK million. All transactions with the Telenor group are carried out on normal arm s length commercial terms. Services that different Telenor-companies is demanding for EDB Group is operation of IT-systems such as UNIX, networks and office platforms. Services that EDB Group is acquiring form Telenor are mainly communication services such as network services and mobile telephone services. Outstanding accounts with telenor-companies (NOK MILLION) Accounts reicevables Accounts payables Telenor Pensjonskasse has the administration of the plan assets. For information about remuneration to executive management and board of directors, see note 3. Note 23 Events after balance sheet date Acquisitions On 9 January 2008, EDB Business Partner entered into an agreement with StatoilHydro ASA to acquire 100 percent of the shares of IS Partner AS. IS Partner is the largest Norwegian IT supplier to the oil & gas and production industries. This acquisition reinforces EDB s position as definitively the largest IT company in Norway. It also strengthens EDB s competitive position as one of the leading IT vendors in the Nordic market. The transaction was approved by the competition authorities on 31 January, and the company will be consolidated with effect from February The following table provides a provisional allocation of the cost price. The allocation is based on the business case prepared in connection with the acquisition of the company since the final balance sheet and purchase analysis had not been completed at the time the accounts were prepared. The acquisition balance sheet has been prepared in accordance with IFRS. (NOK MILLION) Intangible assets Tangible fixed assets Financial fixed assets 6.7 Receivables Cash/bank deposits Deferred tax Long-term liabilities Short-term liabilities Book equity at time of acquisition Identified excess value: Customer contracts/relations Software 20.0 Provisions Deferred tax Goodwill from acquisition Net cash outflow Capitalised transaction costs 4.8 The acquisition of IS Partner has been financed by drawing down a long-term loan facility of NOK million. An interest rate swap agreement has been entered into in connection with this borrowing for NOK 500 million. 64 EDB Business Partner ASA annual report 2007

65 annual accounts AND notes group > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes Note 24 Approved changes to IFRS that came into force after the date of the accounts The following paragraphs provide an overview of changes to IFRS/IAS standards that are relevant to the group s activities but have not yet come into effect. IFRS 2 Share-based Payment: Vesting Conditions and Cancellations This amendment to IFRS 2 provides clearer guidance on what should be classified as vesting conditions. It also deals with the accounting treatment of the cancellation of rights in respect of equity instruments caused by failure to satisfy conditions other than vesting conditions. The group plans to apply the amendment with effect from 1 January The amendments to IFRS 2 will not affect the group s accounting recognition of material share-based payments. IFRS 3 (Revised) Business Combinations Relative to the current IFRS 3, the revised standard makes certain changes and clarifications to the application of the purchase method. This applies in particular to goodwill in the case of step acquisitions, minority interests, conditional consideration and acquisition-related costs. The group plans to apply IFRS 3 (R) with effect from 1 January IFRS 8 Operating Segments IFRS 8 replaces IAS 14 - Segment Reporting. The standard requires that the group use the management approach to identifying its segments. Generally, the information to be reported should be the information that management uses internally for evaluating segment performance and deciding how to allocate resources to operating segments. IFRS 8 therefore requires explanations of the basis on which the segment information is prepared and from which types of products and services each segment generates its revenue. The group will apply IFRS 8 with effect from 1 January IAS 1 (Revised) Presentation of Financial Statements The revised standard makes changes to the presentation of accounts, particularly the presentation of equity capital, and introduces a new presentation for non-owner transactions through a Statement of comprehensive expense and income. The group will apply IAS 1 (R) with effect from 1 January IAS 23 (Revised) Borrowing Costs The major change in IAS 23 (R) is that it is no longer permissible to immediately expense borrowing costs that relate to a qualifying asset. The only permitted treatment is to capitalise such borrowing costs. The group will apply IAS 23 (R) with effect from 1 January IAS 27 (Revised) Consolidated and Separate Financial Statements Relative to the current IAS 27, the revised standard provides guidance on the accounting recognition of changes in the ownership of subsidiaries and disposals of subsidiaries. It also makes changes to the current rules in respect of allocating losses between majority and minority owners to the effect that losses can be charged to a minority interest even if this makes the interest negative. The group plans to apply IAS 27 (R) with effect from 1 January IFRIC 11 Group and Treasury Share Transactions IFRIC 11 provides guidelines on how to apply IFRS 2 - Share-based Payment to share-based payment arrangements involving the company s own equity instruments or equity instruments of another entity in the same group. The interpretation requires a share-based payment arrangement in which a company receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments needed are obtained. The group will apply IFRIC 11 with effect from 1 January IFRIC 14 IAS 19 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The interpretation provides guidance on the limit on the amount of pension assets that can be recognized in the balance sheet when there is a statutory or contractual minimum funding requirement. The group will apply IFRIC 14 with effect from 1 January The group anticipates that the implementation of IFRS 8 will make it necessary to provide somewhat more information on customer composition. Other than this, the implementation of the changes listed below is not expected to have any material effect on the consolidated accounts when the changes are made. However, one effect of the implementation of IFRS 3 will be changes to the accounting treatment of acquisition costs and negative minority interests following the implementation date. annual report 2007 EDB Business Partner ASA 65

66 annual accounts and notes edb businesspartner asa > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > note > Auditor s report PROFIT AND LOSS ACCOUNT EDB Business Partner ASA 1 January - 31 December (NOK MILLION) Note Other operating revenue Total operating revenue Wages and salaries 1, Other operating costs Total operating costs Operating profit Income from investment in subsidiaries Other financial income Other financial expense Net financial items Ordinary profit before tax Tax on ordinary profit Profit for the year EDB Business Partner ASA annual report 2007

67 annual accounts AND notes edb businesspartner asa > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > auditor s report balance sheet EDB Business Partner ASA as of December 31. (NOK MILLION) Note Fixed assets Deferred tax assets Total intangible asset Investments in subsidiaries Other long-term shareholdings Other long-term receivables Total financial fixed assets Total fixed assets Current assets Other current deposits Cash and bank deposits Total current assets Total assets Equity Share capital Own shares Share premium Paid-in other equity Total paid-in equity Retained earnings Total equity Liabilities Pension liabilities Total provision for liabilities Other long-term interest bearing liabilities 8, Other long-term non-interest bearing liailities Total other long-term liabilities Current interest bearing liabilities Accounts payable 4.4 Tax payable Deductions and duties payable Dividends Other current liabilities Total current liabilities Total liabilities Total liabilities and equity Stockholm, 12 march 2008 The Board of Directors of EDB Business Partner ASA Bjarne Aamodt Chairman of the Board Staffan Bohman Deputy chairman of the Board Hans Kristian Rød Monica Caneman Anne-Lise Aukner Anne Grete Dalane WENCHE BRATENG Employee representative John Ingvar Brekke Employee representative Eirik Bornø Employee representative Endre Rangnes Chief Executive Officer annual report 2007 EDB Business Partner ASA 67

68 annual accounts and notes EDB Business Partner ASA > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > Auditor s report cash flow statement EDB Business Partner ASA 1 january 31 December (NOK MILLION) Cash from/to operations: Ordinary profit before tax Gain/loss on sale of fixed assets -6.9 Share of profit/loss in subsidiaries/associated companies Tax paid in the period Interest income/- expenses Paid interests Difference between pension cost and payments Change in inventories, accounts receivable and accounts payable Change in other accruals Net cash flow from operations Cash from/to investments: Investment in group companies Sale of group companies Net cash flow from investments Cash from/to financing: New borrowing (short and long-term) Borrowings repaid Dividends paid Sale of own shares Group contribution received/paid Net cash flow from financing Net change in liquid assets over the year Cash and bank deposits at Currency movement in liquid assets Cash and bank deposits at EDB Business partner ASA annual report 2007

69 annual accounts and notes EDB Business Partner ASA > Profit and loss account > balance sheet > cash flow > statement of changes in equity > accounting principles > notes > auditor s report STATEMENT OF CHANGES IN EQUITY Share own share PAID-in retained total CAPItal shares premium other equity earnings equity Equity at 1 January Share option scheme employees Sale of own shares Dividend Profit for the year Equity at 31 December Share option scheme employees Purchase of own shares Share issue Dividend Cash flow hedges Profit for the year Equity at 31 December Share option scheme employees Purchase of own shares Share issue Dividend Cash flow hedges Profit for the year Equity at 31 December annual report 2007 EDB Business partner ASA 69

70 annual accounts and notes EDB Business Partner ASA > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > auditor s report Notes EDB Business Partner ASA Accounting principles EDB Business Partner ASA The accounts of EDB Business Partner ASA are prepared in accordance with the regulation in the Norwegian Accounting Act that allow simplified application of International Financial Reporting Standards, cf. regulation no of 22 December This means that the accounting principles are the same as in the group accounts, while the disclosures are in accordance with the Norwegian Accounting Act. For information about accounting principles, see group accounts. Note 1 Personnel costs etc. Personell costs (NOK million) Wages and salaries Employer s social security contributions Pension costs Other benefits Charged other units Total The average number of employees was 10 in 2007 and 8 in 2006 and See note 3 Group regarding remuneration to executive management. Auditor s remuneration The following table shows the proposed remuneration to be paid to the group s auditor, Ernst & Young AS, in respect of the audit for 2007, including the amounts invoiced in respect of audit-related and taxrelated services. The amounts shown are exclusive of value added tax. (NOK MILLION) Audit fee Other services Other assurance services Tax advice Total Note 2 Pensions The company provides pensions principally through an insured collective scheme with a life insurance company. In accordance with IAS 19 this arrangement is deemed to be a defined benefit plan. Pension arrangements relate to 10 active members and 11 retired persons. Pension costs (NOK million) Current value of pension entitlement accrued over the year Interest on pension liabilities Gross pension expense Return on plan assets Booked difference due to changes in estimates and in the pension plan Employers social security contributions Net pension expense Additional schemes and early retirement 1.6 Pension costs charged to profit and loss Pension liabilities (NOK million) Gross liability to provide pensions Plan assets Changes not amortised Employers social security contributions Net pension liability Pension assets in the balance sheet Pension liabilities in the balance sheet For assumptions used in the actuarial calculations, see note 4 Group. 70 EDB Business partner ASA annual report 2007

71 annual accounts and notes EDB Business Partner ASA > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > auditor s report Note 3 Income from investment in subsidiaries Income from investment in subsidiaries relates to dividends received and/or group contribution from equity accumulated during the period of ownership by the parent company. Note 4 Financial items (NOK MILLION) Intra-group interest income External interest income Currency gains 1.0 Total other financial income Intra-group interest expense External interest expense Currency losses Other Total other financial expense Note 5 Tax Deferred tax is calculated on the basis of the differences which exists at year-end between accounting and taxation values. Deferred tax arises in respect of the following timing diferrences: Timing diferrences (NOK million) Short-term timing differences Long-term timing differences Prifit and loss account Gross timing diferrences Basis for deferred tax/(deferred tax asset) Deferred tax/(deferred tax asset) Calculation of tax base for the year Profit before tax Permanent diferrences Change in timing diferrences to P&L Basis for tax payable Tax cost for the year comprises Tax payable Change in deferred tax Under/over accrual of tax prior year -0.5 Total Movement in deferred tax Change in deferred tax to P&L Tax on equity transactions Change in deferred tax in the balance sheet Effect of permanent diferrences 28% of profit before tax Dividend from group companies -9.7 Expenses not deductible Non-taxable income Under/over accrual of tax prior year -0.5 Other permanent diferrences 1.3 Tax for the year annual report 2007 EDB Business partner ASA 71

72 annual accounts and notes edb business partner asa > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > auditor s report Note 6 Guarantees issued and contractual commitments The parent company has issued a guarantee of NOK 150 million for borrowings by subsidiaries as part of the group cash management account arrangements, and a tax deduction guarantee of NOK 2 million. Note 7 Interests in subsidiaries Shares in subsidiaries are recognised in accordance with the cost method. See also note 12 Group Note 8 Intra-group accounts receivable and payable (NOK MILLION) Receivables Long-term interest-bearing receivables Current interest-free receivables 4.0 Accured interst income Total Liabilities Long-term interest-free liabilities Long-term interest-bearing liabilities Current interest-free liabilities 29.4 Accured interst expenses Total Note 9 Share capital, shareholders etc. See note 16 Group for information about share capital, shareholders etc. Note 10 Other long-term interest-bearing liabilities (NOK million) Liabilities to credit institutions See note 17 Group for futher information. 72 EDB Business Partner ASA annual report 2007

73 annual accounts AND notes edb business partner asa > Profit and loss account > balance sheet > cash flow statement > statement of changes in equity > accounting principles > notes > auditor s report Auditor s report annual report 2007 EDB Business partner ASA 73

74 corporate governance at edb EDB is committed to good corporate governance practices that will strengthen confidence in the company and contribute to optimal value creation over time. The objective of corporate governance is to regulate the division of roles between shareholders, the Board of Directors and executive management more comprehensively than is required by legislation. The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance. The NCGB has members from a range of organisations representing shareholders, the auditing profession, finance and the stock exchange. Adherence to the Code of Practice is based on the comply or explain principle, which means that a company must comply with all the recommendations of the Code of Practice or explain why it has chosen an alternative approach to specific recommendations. The Oslo Stock Exchange (Oslo Børs) requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code of Practice in force at the time. EDB s commitment to corporate governance is based on the following elements: EDB will provide open, reliable and relevant communication to the outside world about the company s activities and its corporate governance. EDB s Board of Directors will be autonomous, and independent of the company s executive management. EDB will pay particular attention to ensuring that there are no conflicts of interest between the interests of its shareholders, the members of its Board of Directors and its executive management. Where conflicts of interest do arise, the company will ensure that it has rules and procedures to deal with the situation in a professional manner. EDB will ensure a clear division of responsibility between the Board of Directors and the executive management. EDB will treat all shareholders equally. 1. Implementation and reporting on corporate governance Implementation: EDB s Board of Directors (the Board ) and executive management carry out a thorough annual review of corporate governance. With effect from 2008, the company has updated its internal policies and guidelines in order to comply with the revised Norwegian Code of Practice for Corporate Governance issued on 4 December 2007 (the Code ). The revised Code can be found at EDB provides information on corporate governance in its annual report and on its web site at The group follows all the recommendations of the Code, and there are accordingly no deviations from the recommendations that require further comment. Corporate values and ethical guidelines: Confidence in EDB as a company and in its business activities as a whole is essential for the group s continuing competitiveness. EDB sees good corporate governance as more than following the relevant laws and regulations. Openness about the systems and procedures for the management of the group strengthens value creation, builds internal and external confidence and promotes an ethical and sustainable approach to business. To support this work, we have established shared corporate values and ethical guidelines for all EDB s employees. 74 EDB Business Partner ASA Annual report 2007

75 Corporate governance > Introduction > review > articles of association 2. Business The business objective of EDB Business Partner ASA is defined in the company s Articles of Association, which state that EDB is to develop, manage and operate its own and other parties IT solutions, to sell services and consultancy and any activities related to the foregoing. The company s Articles of Association are included on page 80 of the annual report, and are published on the EDB web site at 3. Equity and dividends Equity: The group s equity at 31 December 2007 was NOK million, representing an equity ratio of 33 percent. The Board considers this to be satisfactory. The group s capital adequacy is kept under constant review in relation to its objectives, strategy and risk profile. Dividend policy: The company s objective is to generate a return for its shareholders through dividends and increases in the share price that is at least in line with the return available on similar investment opportunities of comparable risk. EDB aims to pay an annual dividend to shareholders equivalent to percent of normalised post-tax profit. The Board proposes a dividend if it is satisfied that this will not have an adverse effect on the company s future growth ambitions and capital structure. The Board has decided to propose that the Annual General Meeting should approve a dividend for the 2007 accounting year of NOK 1.20 per share, equivalent to 40 percent of normalised post-tax profit and representing NOK 108 million in total. The EDB share will be listed ex-dividend from 8 May The approved dividend will be paid on 28 May 2008 to shareholders registered in the company s share register on 7 May Increases in share capital: The Board held two mandates in respect of share capital at 31 December Both mandates expire in Any new mandates will be valid for only one year to the date of the next AGM, and will be issued for specifically stated purposes. The Board will only propose increases in share capital when this is in the long-term interest of shareholders. It will normally be the case that existing shareholders will be given priority subscription and allotment rights in any major new issue of shares. Purchases of the company s own shares: The Board held a mandate at 31 December 2007 to buy back shares as part of the company s share option scheme. 4. Equal treatment of shareholders and transactions with close associates Equal treatment: The Articles of Association do not impose any restrictions on voting rights. All shares have equal rights. Transactions with close associates: EDB s Board and executive management are committed to treating all the company s shareholders equally. Telenor owns 51.3 percent of EDB s shares. EDB provides services to Telenor in accordance with an extensive operating services agreement. EDB s Board and management are satisfied that these and other business transactions and contracts between EDB and Telenor are on an arm s length basis. The Board will pay particular attention to obtaining independent valuations for any material transactions between the company and its close associates. 5. Freely negotiable shares Shares in EDB are freely negotiable. The Articles of Association do not impose any restrictions on transfers of shares. EDB Business Partner ASA is listed on the Oslo Stock Exchange (Oslo Børs). EDB works actively to attract the interest of potential new shareholders. Good liquidity in the company s shares is essential if the company is to be seen as an attractive investment and thereby achieve a low cost of capital. Members of the executive management team meet regularly with current and potential shareholders in Norway, Europe and the USA. The company strives to ensure that the information provided in stock exchange announcements, meetings, reports and presentations gives a complete picture of the company s strategy, business areas, operations and financial results. 6. General meetings The Annual General Meeting of EDB: The Annual General Meeting ( AGM ) is the company s ultimate corporate body. The Board strives to ensure that AGMs are an effective forum for communication between shareholders and the Board. Preparation for the AGM: The AGM is normally held before 1 June each year, and in any case not later than 30 June, which is the latest date permitted by company law. The 2008 AGM will be held on 7 May. The notice calling the AGM and all supporting documentation is made available on the company s website ( three weeks in advance of the general meeting, and this information is also sent to share-holders by post no later than two weeks in advance. The notice and supporting documentation include all the necessary information for shareholders to form a view on the matters to be considered. In accordance with the company s established practice, the deadline for shareholders to notify their intention to attend the AGM is not earlier than the day before the date of the meeting. The company s financial calendar is published on its web site and in the annual report. Participation in the AGM: Shareholders must give written notice of their intention to attend the AGM, either by post, telefax or . Shareholders who are unable to attend the meeting are encouraged to appoint a proxy. The arrangements for appointing a proxy allow shareholders to specify how their proxy should vote on each matter to be considered. The Board attends the AGM, together with at least one representative from the Election Committee, and the auditor. The executive management is represented at the AGM with, at a minimum, the CEO and the CFO attending. Annual report 2007 EDB Business Partner ASA 75

76 Contact information for Whistleblowers Law firm Hestenes and Dramer & Co attn. Frode Sulland, attorney Tel: Fax: The system secures anonymity for everyone reporting seriously harmful or criminal conduct. Agenda and conduct of the AGM: The Board decides the agenda for the AGM. The main agenda items are determined by the requirements of the Public Limited Liability Companies Act and Article 7 of the Articles of Association. Each AGM appoints a chairman for the meeting, thereby ensuring that the AGM has an independent chairman in accordance with the recommendations of the Code. The CEO gives a presentation of the group at each AGM. The AGM minutes are published on the EDB web site at 7. Election Committee EDB has an Election Committee comprising three members. The members of the Election Committee are elected by the AGM, and serve for a 2-year term of office. The AGM also issues the Mandate for the work of the Election Committee. These arrangements are formalised in the company s Articles of Association. In addition, the AGM decides each year on the remuneration of the Election Committee. The Election Committee s duties are to nominate candidates for consideration by the AGM for the Chairman of the Board, the other members of the Board and the deputy members of the Board, and to nominate candidates for the members of the Election Committee. The Mandate for the Election Committee includes guidance on selecting suitable candidates to ensure an appropriate composition of expertise on the Board. The Election Committee is also res ponsible for carrying out an annual review of the remuneration paid to the members and deputy members of the Board and submitting specific proposals in this respect to the AGM. The members of the Election Committee with effect from the 2007 AGM are: Erik Amlie, chair Nils Bastiansen, National Insurance Fund Bjør n Magnus Kopper ud, Telenor A S A Erik Amlie and Bjørn Magnus Kopperud come to the end of their terms of office at the 2008 AGM. Information on the membership of the Election Committee and the timetable for submitting proposals for new members can be found on the EDB web site at 8. Board of Directors: Composition and independence The Board of EDB Business Partner has nine members, of which six are elected by shareholders and three are elected by and from among the employees. Of the six shareholder-elected members, three are female, and one of the three employee representatives is female. Three shareholder-elected members of the Board come to the end of their term of office at the 2008 AGM. Elections to the Board: Pursuant to a ruling by the Industrial Democracy Commission in 2007, EDB does not have a corporate assembly. The Board is therefore elected by the AGM. The Chairman of the Board is elected by the AGM. The Deputy Chairman of the Board is elected by the Board. The composition of the Board: The shareholder-elected members represent wide-ranging experience, with industry specific expertise from banking and finance, telecommunications, industry and ICT, as well as professional expertise in HR/management, finance, accounting, technology, law and marketing. The members bring experience from Norwegian, Swedish and other European companies. EDB believes that the Board as a whole represents the best interests of all the company s shareholders. This is achieved in part by ensuring that the Board s expertise, capacity and diversity are well suited to the activities in which EDB is involved. The Annual Report includes CVs for members of the Board and information on their shareholdings in EDB. This information is also available and updated on Independence of the Board: The Chairman of the Board, Bjarne Aamodt, is an employee of Telenor. Aamodt is not responsible for purchasing services or negotiating contracts in respect of products and services purchased and sold between EDB and Telenor, nor does he have any operational responsibility in this area. None of the other shareholder-elected members has employment or business links to Telenor or EDB. The Board has rules on conflicts of interest to ensure that any potential conflicts are identified and handled in a professional manner. The Deputy Chairman leads the Board s consideration of any matter where the Chairman has a conflict of interest. The Board s guidelines require that members must notify the Chairman in advance if the Board is to consider any matter in which they may have a financial interest or are otherwise involved. Holdings of shares in EDB by members of the Board: Information on shares in EDB held by members of the Board can be found in Note 16 Group on page 59 of the annual report. 9. The work of the Board The work of the Board: The Board has the ultimate responsibility for the management at the group and for supervising its day-to-day management and activities in general. The main duties of the Board are to develop the company s strategy and monitor its implementation. In addition, the Board exercises supervision responsibilities to ensure that the company manages its business and assets and carries out risk management in a prudent and satisfactory manner. The Board is responsible for the appointment of the CEO. Mandate for the Board: In accordance with the provisions of Norwegian company law, the terms of reference for the Board are set out in a formal mandate that includes specific rules and guidelines on the work of the Board and decision-making. The Chairman of the Board is responsible for ensuring that the work of the Board is carried out in an effective and proper manner in accordance with legislation. Mandate for the CEO: The Board issues a mandate for the work of the CEO. There is a clear division of responsibilities between the Board and executive management. The CEO is responsible for the operational management of the group. 76 EDB Business Partner ASA Annual report 2007

77 Corporate governance > Introduction > review > articles of association Financial reporting: The Board receives periodic reports on the company s commercial and financial status. The company follows the timetable laid down by Oslo Stock Exchange for the publication of interim and annual reports. Board meetings: The Board holds regular meetings and a strategy meeting each year. Extraordinary Board meetings are held as and when required to consider matters that cannot wait until the next regular meeting. In addition, the Board has appointed an Audit Committee and a Compensation Committee to work on matters in these areas. Audit Committee: The Audit Committee is appointed by the Board, and its main responsibilities are to supervise the group s internal control systems and to ensure that the auditor is independent and that the annual accounts give a fair picture of the group s financial results and financial condition in accordance with generally accepted accounting practice. The Audit Committee has reviewed the procedures for risk management and financial controls in the major areas of the group s business activities. The Audit Committee receives reports on the work of the external auditor and the results of the audit. In addition, the Committee has reviewed the group s work on corporate governance in EDB. The Head of Internal Audit was appointed by the Audit Committee. The members of the Audit Committee with effect from the 2007 AGM are: Hans Kristian Rød, chair Anne-Lise Aukner Eirik Bornø Compensation: The Compensation Committee makes proposals to the Board on the employment terms and conditions and total remuneration of the CEO and other senior employees. These proposals are also relevant for other employees. The members of the Compensation Committee with effect from the 2007 AGM are: Monica Caneman, chair Anne Grethe Dalane John Ingvar Brekke Arrangements for anonymous employee contact with the Board: EDB places great importance on ensuring that employees should be able to freely express their views and provide feedback to the Board. In order to ensure anonymity, the Board has set up a contact point for whistleblowers through the law firm Hestenes & Dramer in Oslo to ensure that information can be submitted directly to the Chairman of the Board without the company knowing the identity of the sender. The Board s evaluation of its own work: The Board carries out an annual evaluation of its own performance, working arrangements and competence. The Chairman of the Board prepares a report on this evaluation, which is made available to the Election Committee. The Board also carries out a similar evaluation of the CEO. The evaluations carried out in 2007 involved external, professional assistance in order to quality-assure the evaluation methodology and the manner in which the evaluations were carried out. 10. Risk management and internal control Main features: EDB s risk management and internal control is based on elements of the COSO framework, and helps ensure that EDB has unified control in place that covers the company s operational activities, financial reporting and compliance with legislation and regulation. Group internal audit: EDB has a separate internal audit department which reports directly to the Board and the Audit Committee. The Board has approved a mandate that defines the objectives, authority and responsibility of the internal audit function. The internal audit department is managed by the Head of Internal Audit, and has six full-time equivalent employees. The department s work is based on an annual program which is considered and approved by the Board and the Audit Committee. Kredittilsynet (the Financial Supervisory Authority of Norway) is not directly respons ible for supervising EDB, but can exercise control over the group through the banks in accordance with the ICT Regulations. EDB has chosen to follow an open approach in its relationship with Kredittilsynet. Operational control: EDB has implemented a regime with an Approval Authority Matrix and guidelines to specify the level of authority granted to individuals and the next level of authority required to decide or approve matters beyond the individual s authority. The Matrix is approved by the Board, and the CEO has operational responsibility for ensuring that it is enforced. The group s organisational structure defines three levels of decision-making committees, which have clearly defined authority limits for all the relevant types of decisions. EDB has a separate legal department, managed by an in-house attorney who reports directly to the CEO. The attorney is also secretary to the Board and therefore has direct access to members of the Board. Procedures and guidelines are in place to ensure that the legal department is involved in all activity over a certain size that might represent legal risks for the group, including bidding for contracts and entering into agreements. The group has standard policies for contract terms and conditions. EDB s CEO and CFO hold monthly status meetings with each business area, both at the financial controller and senior management level. These meetings review commercial performance and decide on appropriate follow-up measures. Other members of the executive management team attend these meetings as required. EDB has established a risk management process that is included as part of its delivery and development processes. The CEO and Board receive periodic reports. EDB s framework for risk management (Risk Board) uses a predefined process and methodology that is implemented at the group level, at the business area level and by the individual units. This process is adapted to local operations, and ensures a pro-active approach to risk management so that the risks involved in normal operations are systematically identified, analysed and managed, and it ensures that risk exposure is continually monitored at several levels. Corrective measures are identified and defined, and responsibility for following up specific risk areas is clearly defined. Annual report 2007 EDB Business Partner ASA 77

78 EDB also continually monitors market conditions. The Board and executive management carry out a thorough review of market conditions and the company s financial key figures every six months, and this provides the basis for evaluating financial risk. Risk related to financial reporting: As a subsidiary of Telenor, EDB has been subject to the Sarbanes Oxley Act (SOX) because Telenor was listed on NASDAQ. Telenor decided in 2007 to discontinue its NASDAQ listing. The Board of EDB decided in connection with the delisting that the company would nonetheless continue to comply to all practical intents with the requirements of the Sarbanes Oxley Act. SOX compliance requires extensive documentation of internal control for significant processes in the company involving risk exposure. This reporting represents significant additional work for EDB, but also serves to improve the quality of the company s control systems and financial reporting procedures. Extensive testing is carried out to ensure that the established controls are properly applied. Neither EDB s executive management nor its auditor reported any substantive weaknesses in the related internal control systems at 31 December Compliance with laws and regulations: EDB s legal department, working in collaboration with the management of the business units, is responsible for ensuring that the company complies at all times with the relevant legislation and regulations, both in Norway and in the other countries where the company operates. The company has produced written guidelines for business ethics, and all employees are required to confirm their compliance in connection with their annual appraisal meeting. Annual review of internal control by the Board: The Board receives regular reports on risk management at its meetings, and also through routine financial reporting and the executive management s reports on each business area. In addition to its regular reviews of risk management, the Board carries out an annual review of the group s internal control systems and the major risk factors to which the group is exposed. The Board evaluates whether the systems are sufficient and appropriate, and whether they are being properly exercised. EDB has followed a growth strategy over recent years, and in view of this the Board has paid particular attention to ensuring that the internal control systems apply to all aspects of the group s activities. The Board also considers the need for any further measures in relation to the risk factors identified. 11. Remuneration of the Board Of Directors and the Election Committee The remuneration paid to the members of the Board is decided by the AGM having considered proposals by the Election Committee. The remuneration paid to the members of the Election Committee is decided by the AGM having considered proposals by the Board. 12. Remuneration of senior employees The Board has approved a policy for the remuneration of the CEO and other senior employees. The main features of this remuneration will be subject to an advisory vote by the AGM. EDB offers performance-based remuneration for its senior employees, which is linked to the creation of shareholder value and long-term earnings performance. The group s system for management by objectives provides the main basis for determining the remuneration of managers and employees. The group s financial objectives represent the main parameter for evaluating executive management performance, and also determine whether bonuses are paid. The financial objectives that provide the basis for executive management bonuses include budgeted EBITA, budgeted revenue targets and targets for EPS. The performance of other employees is appraised relative to parameters set by the management by objectives system, with objectives that are largely within the individual s control. In addition to financial targets, performance appraisal includes customer satisfaction and employee satisfaction. Information on payments of performance-based remuneration to senior employees can be found in Note 3 Group on page Information and communications Financial reports and announcements: EDB normally publishes its provisional annual accounts at the end of January/beginning of February. The complete annual report and accounts are distributed to shareholders no later than two weeks prior to the AGM. Quarterly interim reports are normally published in the third week following the end of the quarter. EDB publishes an annual financial calendar which can be consulted on the Oslo Stock Exchange website, through news agencies and on the EDB website. All stock exchange announcements are also distributed through Hugin. Other market information: EDB holds public presentations for investors in connection with the publication of its interim reports. These presentations review the published results, market conditions and the company s future prospects. The presentations are given by the CEO and the CFO at a minimum, and are distributed by webcast so that anyone unable to attend can follow the presentation in real time or view it at a later time. Following each quarterly presentation the CEO and the CFO hold further presentations for investors at various locations in Europe and the USA. Quarterly interim reports, presentation material and webcasts are all available on the EDB web site at Articles of Association for EDB Business Partner ASA As revised 9 May Name of the company The name of the company is EDB Business Partner ASA. The company is a public limited company. 2 Registered office The company s registered office is in Oslo. 3 Business objective The company s business is to develop, manage and operate its own and other parties IT solutions, to sell services and consultancy and any activities related to the foregoing. These activities may be carried out by the company itself, by its subsidiaries or through collaboration with other parties. 4 Share capital The share capital is NOK consisting of shares each of nominal value NOK Board of Directors The company s Board of Directors shall have a minimum of five and a maximum of eleven members in accordance with the decision of the General Meeting. The Chairman of the Board is elected by the General Meeting. The Board of Directors shall have a Deputy Chairman, who shall be elected by the Board. 78 EDB Business Partner ASA Annual report 2007

79 Corporate governance Introduction > review > articles of association In addition to these arrangements, EDB maintains regular dialogue with investment analysts and investors. The group considers it very important to inform shareholders and investors about the company s commercial and financial performance. EDB is committed to ensuring that the participants in the stock market receive the same information at the same time. The group therefore takes a cautious approach in its contacts with individual shareholders and investment analysts. The company does not participate in any meetings with investors or analysts for the four weeks prior to each quarter-end. EDB satisfies the requirements for the Oslo Stock Exchange Information Symbol and English Symbol. 14. Take-overs Fundamental considerations and responsibilities: The Board of EDB is committed to equal treatment of shareholders, and will ensure openness in respect of any takeover of the company. Against this background, the Board has drawn up guidelines for its conduct in the event that any bid is made for the company. The guidelines apply where a process is commenced with a view to making a bid to acquire all or part of EDB, subject to the process having made sufficient progress to be regarded as a realistic possibility. The guidelines also cover the situation if a formal bid is made. Equal treatment and openness: EDB s Articles of Association do not contain any restrictions or limitations on acquiring the company s shares. Telenor held 51.3 percent of the company s share capital at 31 December 2007, but has no special rights as a shareholder. The Board is committed to treating all shareholders equally. Evaluation of a bid: If a formal bid is made for EDB, the Board will normally seek to attract competing bids. This will not apply if the Board is able to unequivocally recommend a bid received, or if the process of seeking to attract a competing bid would cause a bid already made to be withdrawn or expire. If a bid is received for the company shares, the Board will issue a statement evaluating the bid together with a recommendation on whether shareholders should or should not accept the bid. If the Board finds that it is unable to recommend whether or not shareholders should accept the bid, it will explain its reasons for not making a recommendation. If the Board s statement is not the unanimous view of the Board, this will be explained. 15. Auditor Election of the auditor: EDB and Telenor are both audited by Ernst & Young, but different audit teams are responsible for each company. Auditor s relationship with the Board and the Audit Committee: The auditor attends at least one meeting each year with the Board at which the company s management is not represented. The auditor participates at meetings of the Board that consider the annual accounts and participates at all meetings of the Audit Committee. Auditor s relationship with executive management: The Board has issued guide lines for the conduct of the relationship between the auditor and the group. The Board regularly reviews this relationship to ensure that the auditor is fulfilling a sufficiently independent and satisfactory control function. The Board has ruled that EDB can only use the auditor for consultancy work where this is specifically approved by the Board. 6 Signing powers The Board of Directors acts on behalf of the company and has power of signing for the company. Power of signing for the company is also vested in the Chairman and one member of the Board of Directors signing jointly. 7 General Meeting The business of the Annual General Meeting shall be to consider and vote upon the following matters: To elect the Chairman of the Board of Directors and the other members of the Board of Directors, together with any deputy members of the Board of Directors To elect the Chairman and other members of the Election Committee To adopt the Board of Directors Report and the Annual Accounts, including the payment of any dividend Such other matters as by the law or by operation of the Articles of Association are to be dealt with at a General Meeting The Chairman of the Board of Directors opens the General Meeting and puts forward a proposal for a person to chair the General Meeting. Shareholders who intend to attend the General Meeting shall give the company written notice of their intention within a time limit given in the Notice of the General Meeting, which cannot expire earlier than five days before the General Meeting. Shareholders who have failed to give such notice within the time limit, can be denied admission. 8 Election Committee The company shall have an Election Committee. The Annual General Meeting shall determine the Mandate of the Election Committee and shall decide the remuneration of the members of the Election Committee. The Election Committee shall submit proposals to the Annual General Meeting in respect of the following matters: Election of persons to fill vacancies for the Chairman of the Board of Directors and members of the Board of Directors Any election of persons as deputy members of the Board of Directors Election of persons to fill vacancies for the Chairman and other members of the Election Committee The remuneration to be paid to the Chairman, the Deputy Chairman, the members of the Board of Directors and any deputy members of the Board of Directors. The Board of Directors shall submit proposals for the remuneration to be paid to the members of the Election Committee. 9 Share options and arrangements for distributing shares to employees The limits to be applied to share option schemes and arrangements for distributing shares to employees shall be approved in advance by the Annual General Meeting. Annual report 2007 EDB Business Partner ASA 79

80 INVESTOR INFORMATION FINANCIAL CALENDAR 16 April 2008 q interim report 7 May 2008 Annual General Meeting 17 July 2008 q interim report 22 October 2008 q interim report Share trading EDB Business Partner ASA is listed on the Oslo Stock Exchange (Oslo Børs) in the OB Match liquidity category. A total of EDB shares changed hands in stock exchange trading in 2007, equivalent to 30 percent of the total number of shares and 63 percent of shares in free float. Average daily turnover was shares per day. Return on investment and dividend The company s objective is to generate the best possible long-term return for its shareholders, both through dividends and increases in its share price, so that this is at least in line with the return available on similar investment opportunities of comparable risk. EDB aims to pay an annual dividend equivalent to percent of normalised post-tax profit, defined as post-tax profit adjusted for non-recurring items such as gains on disposals, provisions for restructuring and non-recurring tax charges, subject to the Board being of the view that this will not have an adverse effect on the company s future growth ambitions and capital structure. The Board has decided to propose that the AGM should approve a dividend for the 2007 accounting year of NOK 1.20 per share, equivalent to NOK million in total. If this dividend is approved, the EDB share will be listed ex-dividend from 8 May 2008 and the dividend will be paid on 28 May 2008 to shareholders registered in the company s share register on 7 May (NOK) Highest price Lowest price Closing price Dividend Increases in share capital The Board will only propose increases in share capital when this is in the long-term interest of shareholders. It will normally be the case that existing shareholders will be given priority subscription and allotment rights in any major new issue of shares, although the AGM has authorised the Board to waive these rights in certain circum-stances. The Board holds a general mandate to increase the company s share capital by up to 9.1 million shares, and is also authorised to issue up to shares in connection with the share options scheme for key employees. The Board is authorised to waive the priority rights of existing shareholders in respect of any shares issued under these mandates. Purchases of own shares In connection with a share option scheme for key employees of the EDB group, the Board has been granted a mandate to acquire shares in the company. The mandate is restricted to the company owning no more than 1.8 million shares. As at 31 December 2007 EDB held own shares. Investor relations EDB Business Partner ASA provides regular information to shareholders, investment analysts and other interested parties on the company s performance, activities and specific developments. The company strives to ensure that the information it provides represents the most complete and correct picture possible of its activities and current business status. This helps to ensure that the pricing of the company s shares reflects its underlying value and expectations of its future performance. EDB is required to issue announcements through Oslo Stock Exchange, as promptly as possible, of any events that might have an effect on the company s share price and that are of significance for the market. These announcements are subject to relevant rules and guidelines. The company has an established IR policy to clearly define what information must be treated as inside information and when this information must be notified to Oslo Stock Exchange. EDB maintains open and structured lines of communication with the investor market and other players. The objective is to ensure that all shareholder groups have access to the same information at the same time. This is achieved through annual reports, quarterly interim reports, presentations, webcasts of all open presentations, a capital markets day, meetings with investors and press releases. The financial calendar for EDB for the coming year is published on the company s web site. This provides the dates for events including the publication of quarterly interim reports and the Annual General Meeting. Investor road shows are an important part of our commitment to information and corporate communications. Members of the Executive Management team hold regular presentations in Europe and in the USA to give both potential and current investors information on EDB s business, strategy and financial results. Contact names for investor relations can be found on our web site. As at the end of February 2008, the analysts covering EDB were: ABG Sundal Collier hallgeir Hollup Carnegie ole Anton Gulsvik Cheuvreux Johan Eliason Danske Bank, Danske Equities Peter Trigarszky DnBNOR Markets Trygve Lauvdal First Securities ole Jørgen Rød Fondsfinans Arild Nysæther Glitnir Securities Arnfinn Løv-Mikkelsen Handelsbanken Anita Huun Kaupthing Erik Hjulstrøm Orion Securities mindaugas Lauzikas SEB Enskilda Securities ole Petter Kjerkreit Standard & Poor s Equity Research mattias Eriksson Shareholder structure Number of shareholders at Proportion held by Norwegian shareholders 88.2% 86.3% of which Telenor Business Partner ASA 51.3% 51.5% Proportion held by foreign shareholders 11.8% 13.6% Total number of shares at of which holdings of own shares Outstanding options and additional payments for responsibility As a result of the Norwegian government s statement on the State s role and ownership interest in Norwegian companies, the Annual General Meeting held on 9 May 2007 resolved that no further share option scheme would be established, but that existing option arrange ments would be honoured. 80 EDB Business Partner ASA Annual report 2007

81 Investor Information > Shareholder information > segment information > definitions Development EDB share price (NOK) EDB share price (Index) EDB Oslo Stock Exchange Benchmark Index Oslo Stock Exchange IT index The Annual General Meeting held on 10 May 2006 approved an option scheme for executive management and other key employees of EDB. When options are exercised, the Board decides wether the settlement will take the form either of delivering shares from the company s holding of its own shares or by cash payment, but not by issuing new shares. Pursuant to the mandate granted by the AGM, the Board of EDB allocated 1.5 million options to members of the executive management and other key employees on 1 June A further options were allocated on 30 January 2007 and options were allocated on 1 March The exercise price for the options granted is the average volume weighted closing price on Oslo Stock Exchange for the five days before and five days after the date of allocation. For options allocated to the CEO, the exercise price for the options granted is the average volume weighted closing price on Oslo Stock Exchange for the five days before the date of allocation. The maximum gain on share options is subject to a limit of 250 percent. The overall vesting period for options is three years, and the first one-third can be exercised after the first year of the vesting period in each of the subsequent four quarters in a period 3 10 days following each quarterly presentation. Similarly, the second one-third can be exercised after two years of the vesting period and the final one-third after the third year of the vesting period. The Board of EDB Business Partner granted approximately 1.9 million options in 2004 and 2005, to members of the executive management and some 50 key employees. These options have a vesting period of two years. The exercise price and exercise arrangements follow the same rules as the 2006 scheme. The exercise price for these shares is based on the average market price at the time they were granted, and options can only be exercised if the current share price is equivalent to at least the price at the time of allocation plus annual interest of 5.38 percent. The options outstanding at 31 December 2007 are as follows: options granted in October 2005 at a market price of NOK options granted in May 2006 at a market price of NOK options granted in May 2006 at a market price of NOK options granted in January 2007 at a market price of NOK options granted in March 2007 at a market price of NOK A total of options were exercised in Analysis of shares by shareholder group at 31 December 2007 NO. OF SHARES No. of percent OF TOTAL Percent OF TOTAL PER SHAREHOLDER SHAREHOLDERS SHAREHOLDERS SHARE CAPITAL % 0.5% % 0.5% % 5.2% % 18.0% % 24.5% Over % 51.3% total % 100.0% Larger shareholders at 31 December 2007 Telenor Business Partner Invest AS 51.3% Folketrygdfondet 9.8% Oslo Pensjonsforsikring 4.1% Orkla ASA 3.2% Odin Norden 2.5% KLP Liv Norge 2.0% Credit Suisse Securi (Europe) Prime Broke (nominee) 1) 1.3% Arendals Fossekompani 1.3% EDB Business Partner 1.2% Varma Mutual Pension Company 1.1% Odin Europa SMB 1.0% VPF Avanse Norge 0.9% Svenska Handelsbanken (nominee) 2) 0.6% Skandinaviska Enskilda Clients account (nominee) 3) 0.6% The Northern Trust Company (nominee) 4) 0.5% Bank of New York BR BNY GCM 0.5% AS Skarv 0.5% UBS AG London Branch S/A IPB Non Seg Acc 0.5% Other 17.1% TOTAL 100.0% In accordance with the recommendation issued by the Norwegian Society of Financial Analysts and Section 4 10 of the Public Limited Liability Companies Act, the company has asked for information on the shareholders behind the nominee accounts recorded in the company s share register. The following information was available at 31 December 2007 on nominee accounts among the 20 largest shareholdings: 1) Credit Suisse Securi (Europe) Prime Broke Information not available 2) Svenska Handelsbanken Handelsbanken Nordisk 0.4% Handelsbanken Nordenfond 0.2% 3) Skandinaviska Enskilda Investor Trading Aktiebolag 0,5% Apoteket AB Penjonstiftelse 0,1% 4) The Northern Trust Company ExxonMobile 0,4% S Fransisco CCERT-US 0,1% Annual report 2007 EDB Business Partner ASA 81

82 Key figures for the group Key figures (NOK million) Operating revenues Profit before depreciation (EBITDA) Profit before goodwill amortisation (EBITA) EBITA before non-recurring items EBITA margin 10.1% 6.8% 10.0% 9.3% 2.8% EBITA margin before non-recurring items 9.5% 9.3% 10.3% 9.3% 7.3% Return on invested capital (ROIC) 14.2% 14.6% 19.6% 19.1% 14.6% Number of employees Market capitalization IFRS NGAAP Geographical analysis of operating revenues (NOK million)) Norway Sweden Other Total Share of revenues outside Norway 33% 24% 14% 9% 7% Key figures per share (NOK) Earnings per share 3, Earnings per share (post-tax before goodwill amortisation) 3, EBITDA per share 10, Cash flow per share Book equity per share Average number of shares Solidity Equity ratio 33% 33% 44% 38% 48% Gearing , Net interest-bearing liabilities Net interest-bearing liabilities/ebitda LiQuidity (NOK million) Cash and bank deposits Liquidity reserve Cash flow from operations Investments in fixed assets Investments in software developed in-house Free cash flow Free cash flow return 12.4% 5.5% 4.3% 8.5% 2.5% Net working capital Working capital as percent of revenues 0.7% 2.0% 1.1% -6.6% -3.0% Key figures definitions Cash flow per share Net cash flow from operations divided by average number of shares outstanding. Average number of shares after dilution Average number of shares outstanding less the company s holding of its own shares plus the average number of new shares equivalent to the dilution effect of employee share options and convertible loans. Equity ratio Total equity capital as a percentage of total equity and liabilities. Gearing Net interest-bearing liabilities divided by total equity. Liquid assets Cash and bank deposits. Liquidity reserves Cash and bank deposits plus un-drawn committed credit facilities. Net interest-bearing liabilities Total of current and long-term interest-bearing liabilities less cash and bank deposits. 82 EDB Business Partner ASA Annual report 2007

83 Investor Information > Shareholder information > segment information > definitions Key figures by business area IT operations (NOK million) Operating revenue EBITA EBITA-margin 8.4% 8.7% 9.1% 9.4% 8.7% Operational investments (CAPEX) Number of employees IFRS NGAAP Solutions (NOK million) Operating revenue EBITA EBITA-margin 14.6% 14,8% 18.9% 14.5% 6.1% Operational investments (CAPEX) Number of employees application services (NOK million) Operating revenue EBITA EBITA margin 12.3% 10.4% 6.2% Operational investments (CAPEX) 3 2 Number of employees Order backlog ORDER BACKLOG ORDER BACKLOG distributed (NOK million) LATER IT Operations Solutions Application services Total order backlog Percent of total 38% 28% 19% 20% 8% The order backlog includes signed fixed-price contracts and forecast revenues related to signed contracts charged on an hourly basis. Return on invested capital (ROIC) EBITA adjusted for non-recurring items divided by invested capital. Invested capital Goodwill before amortisation but after any impairments, plus net working capital plus net long-term operational assets and commitments (deferred tax and provisions for restructuring are not included as operational items). Free cash flow Cash from operations less operational investment spending. Free cash flow return Free cash flow divided by market capitalisation. Annual report 2007 EDB Business Partner ASA 83

84 executive management Kristian Kuvaas Johansen (36) Executive Vice President Chief Financial Officer Ivar Arne Børseth (41) Executive Vice President IS Partner Johnny Rindahl (46) Executive Vice President IT Consulting & Application Services Thorolf Thorstensen (57) Acting Executive Vice President IT Operations Kristian Johansen is the Chief Financial Officer of EDB Business Partner. He joined EDB from AF Gruppen, where he was Executive Vice President and Chief Financial Officer. Johansen also worked for a number of years in Danske Bank s Corporate Finance departments in Oslo and London. He is a Master of Business Administration graduate of the University of New Mexico, USA. Shares: Share options: 0 Endre Rangnes (48) President and Chief Executive Officer President and Chief Executive Officer Endre Rangnes joined EDB in 2003 from his previous position as Managing Director of IBM Norway. Rangnes previously held a number of leading positions at IBM internationally and in Norway, and he is a member of the Board of Relacom. He has a Bachelors degree from the Oslo Business School, now the Norwegian School of Management. Ivar Arne Børset is Chief Executive Officer of IS Partner. He joined EDB through the acquisition of IS Partner from StatoilHydro. He held a number of senior IT/IS positions in the Hydro group before becoming CEO of IS Partner. Børset has a Bachelor of Science degree in computer engineering from the University of Utah. Shares: 0 Share options: 0 Johnny Rindahl is responsible for the IT Consulting and Application Services business area. Rindahl has extensive experience from working for Hewlett-Packard, both in Norway and internationally. Rindahl also has a number of years experience as the Managing Director of Spring Consulting, and was one of the founders of this company. Johnny Rindahl is a business economics graduate from Oslo Business School, now the Norwegian School of Management. Shares: Share options: Thorolf Thorstensen is a mathematics and informatics graduate of the University of Oslo. Thorstensen has many years experience in major negotiations and strategic acquisitions, involving companies such as Shell, Statoil, Nordea, DnB, DnB NOR, SJ- Data and Apoteket. He also participated in the acquisition of Capgemini. Thorstensen has extensive management experience in the IT industry at all levels. He was previously a member of the executive management team at Teamco and Fellesdata, and Managing Director of IF Assistor and EDB Sweden. Shares: 0 Share options: Shares: Share options: EDB Business Partner ASA Annual report 2007