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THE BOARD OF DIRECTORS’ REPORT |
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| 2004 was a good year for VPS, with a profit after tax of NOK 63.7 million. This good result can be ascribed mainly to increased income from growth in volumes due to the high activity in the securities market, and also to new services, changes in prices and effective cost control. In 2004, VPS Holding ASA purchased 100 per cent of the shares in Manamind AS, a company which provides information and Internet-based solutions for the securities market. This acquisition is in keeping with VPS’s strategy to increase its range of services, and it will strengthen VPS’s position as a provider of services to the securities market. The Group is organized in a holding structure in which the parent company, VPS Holding ASA, owns 100 per cent of the operating company, VPS ASA, and 100 per cent of Manamind AS. VPS ASA is licensed to register rights in financial instruments with the legal consequences following from the Financial Instruments Registration Act. The Group reported a pre-tax profit for the year of NOK 90.3 million, which is a substantial improvement compared with NOK 23.2 million in 2003. The profit for the year after tax was NOK 63.7 million. Operating income amounted to NOK 270.5 million, compared with NOK 202 million in 2003. Thanks to effective cost-cutting measures, there was only a marginal increase in operating expenses from NOK 181.6 million in 2003 to NOK 182 million in 2004. Development projects were capitalized at NOK 14.4 million. At the end of the year total book equity stood at NOK 209.5 million. However, these figures are not directly comparable, as the figures for 2004 include the fourth quarterly results for Manamind AS. Activity in the securities market was high throughout the year and the number of transactions linked with trades in shares, units and other VPS-registered securities increased by 35 per cent from 2003 to 2004. The number of holdings rose by 3.5 per cent, mainly in shares and mutual funds. At the end of the year, almost 2 million holdings in financial instruments were registered in 1.25 million VPS accounts. There was a net reduction of 4 mutual funds registered in VPS, giving a total of 597 at the end of the year. Fourteen new companies brought the number of VPS-registered companies to 1,176 at the end of the year. Focus on customers VPS distributes its services through banks, brokers and management companies and it attaches great importance to providing reliable and innovative solutions and to maintaining good customer relations. In close collaboration with its customers, VPS invests continuously in innovation and systems upgrading with a view to simplifying securities handling. This includes enhancing services for the end users – investors and issuers. In 2004 VPS prepared for the launching of new products and changes in VPS versions three times a year. This will give customers more predictability, in that they can relate to the next VPS version, and at the same time make it easier for VPS to plan and carry out sales and marketing. VPS has developed new statistics for participants in clearing and settlement, enabling individual participants to see the scope and efficiency of their own settlement and measure themselves against others. There was a considerable increase in 2004 in the number of our customers who have adapted to ISO 15022. This makes for speedier and more frequent information flow between the operators. In an endeavour to simplify things for investors in securities, VPS can now offer the option of receiving investor reports electronically or on paper. The paper-based reports can be sent periodically as desired by the customer. The account manager can also choose the layout in both electronic and paper-based reports. The use of VPS Tax Assistance by the most active investors increased in 2004, in spite of the introduction of the Shareholders’ Register. Activity in corporate actions, such as acquisitions, redemptions, issues and payment services, was on a par with previous years. There were a few less public issues but more private issues in 2004. VPS has developed a more reliable and more modern funds transfer system, which gives flexibility as regards time and type of payment. We have also developed a saving-in-shares programme for our customers, allowing employees, on their own Intranet, to control their monthly savings in shares and the chance of earning bonus shares depending on how long they hold the shares. VPS enjoys a good position in the mutual funds market and provides services for most of the funds management companies in Norway. Extensive product development has been initiated and agreements have been reached with important customers to expand VPS’s range of services. 2004 saw the introduction of nominee registration of shares in mutual funds and the VPS system was adapted to cater for this. Periodical reports for mutual funds became a reality in 2004. Through this service, shareholders can receive neutral, fact-based information about their investments twice a year. VPS has initiated the development of new solutions based on so-called service-oriented architecture, our third-generation web solution. This architecture will allow VPS to provide a modern, holistic platform in an Internet-based interface for our services that can also easily be integrated into our customers’ systems. Manamind AS Manamind supplies software, services and solutions for the finance industry, using Internet technology. The company develops and sells Manamind Collect software for the collection, enhancement and distribution of real-time market data, plus end user applications based on this software. Manamind enjoys a good position in the finance industry in Norway. It has a broad customer base with a substantial share of fixed income. Last year was characterized by successful product development and focus on sales of solutions to the domestic market. The value of Manamind’s ongoing contracts increased during the year and new prospects are plentiful. Integration with VPS gives the company a broader basis for the cultivation of new solutions in the information area. Reliability The VPS systems maintained their record of high reliability in 2004, with a system-up time of 99.9 per cent. The completion rate (number of trades settled on the agreed settlement date) remained relatively stable at just under 97%, about the same as in 2003. We had total data integrity again in 2004, which means that we had no intrusions into our systems. VPS carried out a review of significant risks and of measures taken to safeguard against these risks. This revealed no significant risks threatening VPS’s operations. Tests were made of continuity and contingency plans, in which all critical systems are recovered at a secondary location, and the results were satisfactory. VPS is certified in accordance with ISO 9001:2000. Emphasis is given in this standard to the internal processes which are needed to achieve the company’s goals. Veritas has carried out satisfactory, twice-yearly audits of VPS. Regular surveys are held to gauge customers’ attitudes to VPS’s services and products. Feedback from the customers is good. Administration At the end of the year, the Group had 129 employees (111 full-time equivalent positions). Employee surveys show that VPS has a good working environment. Human resources have been developed to supplement areas which are critical for VPS’s operations and special expertise has been reinforced in some development areas. VPS ASA has a contract with an occupational health service. In 2004, the sickness absence rate was 5 per cent, and 2.9 per cent of this figure was prolonged sick leave (more than 3 weeks). The company is not engaged in any activities that affect the outdoor environment by causing noise or emissions. Remuneration to the CEO, Board members, the Supervisory Committee and auditors is dealt with in Note 3 to the Accounts. The Board of Directors would like thank all employees for their efforts and commitment which have contributed to the good results achieved by the company in all essential areas. Gender equality Forty per cent of the Group’s 129 employees are women. The Group has 15 managers, 4 women and 11 men. The average annual salary for all employees, excluding the management team, is NOK 474,000. The women earn an average of 13 per cent less than the men. This is partly due to the fact that the men are an average of six years older than the women. The normal working time is 40 hours a week. Overtime is fairly evenly distributed between the men and the women. The great majority of the employees have a computer at home which can be connected up to VPS, and working from home is equally divided between men and women. A recent survey shows that the chance to work at home is greatly appreciated. VPS strives for gender equality and it works to recruit more women and to provide flexible working schemes Market structure VPS has had talks with the Oslo Stock Exchange on a possible merger of Oslo Børs Holding ASA and VPS. The Board of Directors could not see sufficient rationale and synergies in the merger to continue the discussions. In 2004, VPS submitted an offer to purchase all the shares in NOS Technology AS and NOS Clearing ASA. The NOS Board of Directors found no basis on which to take the matter further. Through NOS’s private offer of shares to Imarex ASA and VPS Holding ASA in January 2005, VPS purchased 16.7 per cent of the shares in NOS. In 2004, VPS ASA, the Association of Norwegian Stockbroking Companies and a number of brokerage houses established FinansNett Norge AS (FNN). This new company offers securities houses, banks, stock exchanges, etc. a future-oriented network for all types of data communication. International relations Clearing and settlement services in Europe are the subject of a great deal of attention from the EU authorities. The focus is on how the services can be standardized in order to achieve simple cross-border settlement. We expect to see significant changes in the next few years in regulations, standards and recommendations which VPS will have to comply with. VPS is a member of the European Central Securities Depositories Association (ECSDA). Active participation in the work of this association gives VPS the opportunity to take part in and influence the development of standards in the European securities market. VPS allocates securities numbers (ISIN) and is therefore a member of ANNA (Association of National Numbering Agencies). In 2004, VPS hosted ANNA’s annual conference, which was attended by delegates from 38 countries. Along with other CSDs, VPS is working to achieve a greater degree of standardization of the settlement systems. VPS is considering the possibility of broader collaboration with other CSDs with a view to achieving cost synergies by sharing IT, operating and development expenses and helping to harmonize settlement systems. VPS will therefore – while main-taining an independent position – be open for more cooperation in Scandinavia and with other players in the securities market. Future prospects It is the opinion of the Board of Directors that the company has the required basis to continue operations. The Board of Directors has expectations of further growth through increased activity in VPS’s core areas and in related areas. However, we have seen from experience that the stock market goes up and down and there is therefore some uncertainty regarding the volume of transactions in 2005. Realizing the income potential that lies in higher activity and in sales of products and services will be costly and we therefore expect expenses to rise somewhat. It will be necessary to invest in systems development, projects with other central securities depositories or purchase of shares in other companies. The Board of Directors finds it expedient to set aside part of the profit for the year for such purposes. Employment of the profit for the year The VPS Group achieved a profit after tax of NOK 63.7 million in 2004. After transfers from VPS ASA and Manamind AS, the profit for the year for VPS Holding ASA was NOK 70.4 million. The Board of Directors proposes that the profit for the year be employed as follows:
Board of Directors for VPS Holding ASA 16 February 2005 Leif Teksum (Chairman Leiv Askvig (Vice-chairman Anne Ekeren Bjone Elin Sjødin Drange Sveinung Dyrdal Anne Johnsrud Hagen Per Victor Nordan Svein Støle Claes Unger Jan Hellstrøm (President and CEO) TOP |
 The board of directors left to right: Claes Unger, Elin Sjødin Drange, Per Victor Nordan, Anne Johnsrud Hagen, Leif Teksum, Sveinung Dyrdal, Anne Ekeren Bjone, Leiv Askvig, Svein Støle. 1992 The bank crisis knocks the Norwegian stock market for six. Kreditkassen and Den norske Bank are deleted from the list of quoted companies. The State takes over as owner of both banks. The UNI Storebrand insurance company goes into liquidation and is deleted from the list. The three companies’ almost 240,000 shareholders lose their investments. The confidence in the banks and stock market is so badly shaken that it takes them years to recover. |
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