NOTE 2 - PERSONNEL EXPENSES

In 2004 the Group introduced an agreement on variable pay which can be paid as a bonus after an assessment of the company’s overall financial results. This scheme applies to all employees and bonuses are awarded in accordance with fixed rules.

Provision for post-employment benefit totals NOK 0.9 million.

Loans to employees total NOK 0.8 million. Interest is calculated at a stipulated rate of interest. No loans have been granted to the President & CEO, senior employees or members of the Board of Directors.


NOTE 3 – REMUNERATION TO CEO AND ELECTED OFFICERS ETC

A collective pension scheme premium of NOK 0.4 million paid for the President and CEO in 2005 is not included in the above table. The President and CEO has six months’ notice and the right to six months’ salary after termination of employment. In special cases salary can be paid for a further 12 months. The agreed retirement age for the President and CEO is 63. His contract of employment may be extended beyond this age if both parties so wish.

Guidelines have been established for remuneration to senior employees of VPS ASA. Remuneration essentially comprises fixed salary which is normally adjusted once a year based on individual assessment. A car allowance is provided at specified rates. Variable salary of up to 25% of base salary can be awarded. Maximum levels of variable salary are fixed annually by the Board of Directors after an overall assessment of the company’s results. Within these maximum levels, variable salaries are determined by the President/CEO by individual assessment. Manamind’s Managing Director has a separate agreement featuring a larger element of performance-related salary. No share option or share allotment programmes exist for employees of VPS Holding ASA, VPS ASA or Manamind AS. No agreements on post-employment pay for senior employees exist beyond the agreement with the President/CEO. Overall remuneration to senior employees of VPS ASA and the managing director of Manamind AS totalled NOK 9 million in 2005.
No agreements have been established with members of the Board on profit-sharing, allocation of options or the like.

VPS Holding ASA and VPS ASA have the same Board of Directors and President and CEO. Their remuneration is paid by VPS ASA.


NOTE 4 – AUDIT SERVICES

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Computer hardware is depreciated over 3 to 5 years, depending on its estimated lifetime. Movables and other equipment are depreciated over five years. Structural installations must be fully depreciated when the initial periods of the leases expire in 2008 and 2013. Depreciation is on a linear basis.
The fair value of the fixed assets will not deviate significantly from their book value.


NOTE 6 – INTANGIBLE ASSETS

VPS recognises its own systems development in the balance sheet. Capitalised projects have clearly defined future cash flows. The projects are decomposed in terms of assessed period of use, and balance sheet values of previously capitalised projects are valued on a continuous basis. The depreciation period varies from 3 to 10 years.

Capitalised systems development covers VPS’s own development and/or adaptation of mercantile systems, systems linked with infrastructure and administrative systems. Projects linked with systems developed by VPS with a cost price of less than NOK 1 million are expensed.

NOTE 7 – GOODWILL

Goodwill is considered to have an infinite lifetime within book value, and reflects the value of business defined in the subsidiary Manamind AS. The future business value of services delivered by Manamind AS and synergies this creates for the VPS Group are valued at a minimum at the equivalent of book value.


NOTE 8 – LEASES

VPS has leases for premises in two locations in Oslo. The contractual period for one lease is 5 years, expiring in May 2008, with an option to extend the lease by two further five-year periods. The other lease, for 10 years, expires in May 2015, and can be terminated 2 years earlier. This agreement includes an option to extend the lease by two further five-year periods.

The rental under both agreements is adjusted annually based on Statistics Norway’s consumer price index. Total rentals for 2005, including joint expenses, totalled NOK 13 million.

Sub-lease contracts have been established with three different lessees. One contract is for 3 years starting September 2005 with the option of a further 2 years. Annual rental, including joint expenses, totals NOK 0.6 million.

The other two contracts are for 5 years starting July 2003 with the option of a further 5 years provided VPS still disposes over the premises. Rentals in 2005, including joint expenses, totalled NOK 2 million. All sub-lease contracts are regulated based on Statistics Norway’s consumer price index.

VPS has leasing agreements for production equipment. The contractual period is 3 years starting 1 September 2005. Expensed costs in 2005 amounted to NOK 1.0 million.


NOTE 9 – OTHER OPERATING EXPENSES

NOTE 10 – TRADE DEBTORS
Net receivables amounted to NOK 29,653,365 at 31 December 2005. This refers mainly to December invoices to customers. The Group recorded a loss of NOK 58,825 on trade debtors in 2005.


NOTE 11 – OTHER RECEIVABLES

NOTE 12 – LIQUID ASSETS
The company’s locked-in capital amounts to NOK 4.7 million and comprises tax withholdings.

Liquid reserves are managed on the principle of the lowest possible risk. The company has opted to invest available liquid assets in interest-bearing paper distributed between bond and money market funds with a low risk profile. At end-2005 investments stood at NOK 111 million. These funds are classified as liquid assets in the balance sheet.

Under the Securities Register Act of 5 July 2002, VPS ASA is liable for losses resulting from errors that occur in connection with registration activities. Legal liability only applies to direct losses and is limited to NOK 500 million per claim. For losses that are due to circumstances unrelated to registration activities, VPS has a common liability that is not limited. It is presumed in the Act that losses will be covered through insurance or other guarantees. Under the new Act, account operators no longer have a joint and several liability. VPS ASA has therefore increased its liability insurance to NOK 1 billion per year, with a deductible of NOK 2 million per claim.

No claims for compensation were filed in 2005.


NOTE 14 – PENSION COMMITMENTS
The Group has a group pension insurance policy which covers all employees. The pension basis corresponds to ordinary salaries. The retirement age for employees is 67. All pension commitments are included in the actuarial calculation.

The calculation of pension commitments is based on the following assumptions:

The actuarial calculations show a net pension commitment of NOK 15.6 million, i.e. a reduction of NOK 12.8 million in the recorded commitment. The change is due to a plan change in the group pension scheme in 2005 which entailed a significant reduction in the commitment. The reduced commitment resulting from the plan change was recognised in the profit and loss account for 2005 in an amount of NOK 12.3 million. In light of the changes, paid-up policies have been issued on accumulated pension rights, bringing a significant reduction in pension assets.

The calculations also show NOK 8.9 million in accumulated commitments not recognised in the profit and loss account that result from estimate variances and changes. A positive estimate variance of NOK 3.1 million was similarly recorded in 2004 after the implementation of IFRS. The change is mainly due to a 1.5 per cent reduction in the discount rate compared with the calculation for 2004.

NOTE 15 – TAXES
31.12.2005

NOTE 16 – PARTICIPATION IN JOINTLY CONTROLLED ACTIVITY

Equity participation in Finans Nett Norge (FNN) is incorporated in VPS ASA’s company accounts by the equity method. VPS’s share of the company’s equity capital is NOK 1.8 million and its share of the result for 2005 is a negative NOK 1.1 million.


NOTE 17 – EQUITY INVESTMENT
Investments were made in the shares of NOS ASA in 2005. At year-end the holding amounted to 19.06%, equal to the voting entitlement.

Evaluation of the holding is based on fair value/market value at 31 December, and the value change is reflected in equity capital, in conformity with IAS 39.

NOTE 18 – SHARE CAPITAL
The company’s share capital at 31 December 2005 consisted of:

* On 2 July 2004 the Ministry of Finance authorised DnB NOR Bank ASA to own 16.58% of the shares of VPS Holding ASA for three years. The ministry imposed the condition that DnB NOR Bank ASA cannot vote at the General Meeting of VPS Holding ASA for more than 10% of the votes in the company or for more than 20% of the votes represented at the General Meeting.

NOTE 19 – PROFIT PER SHARE

NOTE 20 – EVENTS AFTER THE BALANCE SHEET DATE
The recommended dividend amounts to NOK 80 million. In conformity with IFRS, this has not been recorded in the accounts. See note 19.