Registration Form • Apr 2, 2015
Registration Form
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| Risks | 2 | ||
|---|---|---|---|
| Strategic Risks | 3 | ||
| Financial Risks | 5 | ||
| Operational Risks | 6 | ||
| 1 | Presentation of the Group | 11 | |
| 1.1 Company profi le | 12 | ||
| 1.2 Strategy | 14 | ||
| 1.3 Description of the business | 15 | ||
| 1.4 Regulation | 27 | ||
| Corporate Governance | 31 | ||
| 2 | 2.1 Corporate governance | 32 | |
| 2.2 Management & control structure | 34 | ||
| 2.3 Report of the Supervisory Board | 45 | ||
| 2.4 Remuneration report | 47 | ||
| 2.5 Corporate social responsibility | 52 | ||
| Selected historical combined fi nancial | |||
| 3 | information and other fi nancial information |
57 | |
| 4 | General description of the Company | ||
| and its share capital | 61 | ||
| 4.1 Legal information on the Company | 62 | ||
| 4.2 Share Capital | 62 | ||
| 4.3 Shareholder structure | 64 | ||
| 4.4 Share classes and major shareholders 4.5 General meeting of shareholders |
64 | ||
| and Voting Rights | 69 | ||
| 4.6 Anti-takeover provisions 4.7 Obligations of Shareholders and Members |
70 | ||
| of the Managing Board to Disclose Holdings | 70 | ||
| 4.8 Short Positions | 71 | ||
| 4.9 Market Abuse Regime | 72 | ||
| 4.10 Transparency Directive | 72 | ||
| 4.11 Dutch Financial Reporting Supervision Act 4.12 Dividends and Other Distributions |
73 73 |
| 5 | Operating and financial review | 75 |
|---|---|---|
| 5.1 Overview | 76 | |
| 5.2 Relationships & related party transactions | 95 | |
| 5.3 Legal proceedings | 99 | |
| 5.4 Insurance | 101 | |
| 5.5 Liquidity and Capital Resources | 102 | |
| 5.6 Tangible fi xed assets | 103 | |
| Financial Statements | 105 | |
| 6 | 6.1 Consolidated Income Statement | 106 |
| 6.2 Consolidated Statement of Comprehensive Income |
107 |
|---|---|
| 6.3 Consolidated Balance Sheet | 108 |
| 6.4 Consolidated Statement of Cash Flows | 109 |
| 6.5 Consolidated Statement of Changes in Parent's Net Investment and Shareholders' Equity |
110 |
| 6.6 Notes to the Consolidated Financial Statements |
112 |
| 6.7 Euronext N.V. Company Financial Statements for the year ended 31 December 2014 |
151 |
| 6.8 Notes to Euronext N.V. Financial Statements | 153 |
| 6.9 Other information | 165 |
G Glossary 167
including the Annual Financial Report
Euronext N.V. (the "Company" or "Euronext" and together with its subsidiaries, the "Group") is a Dutch public company with limited liability (naamloze vennootschap), whose ordinary shares are admitted to listing and trading on regulated markets in the Netherlands, France, Belgium and Portugal. The applicable regulations with respect to public information and protection of investors, as well as the commitments made by the Company to securities and market authorities, are described in this Registration Document (the "Registration Document").
In addition to historical information, this Registration Document includes forward-looking statements. The forward-looking statements are generally identifi ed by the use of forward-looking words, such as "anticipate", "believe", "estimate", "expect", "intend", "plan", "project", "predict", "will", "should", "may" or other variations of such terms, or by discussion of strategy. These statements relate to Euronext's future prospects, developments and business strategies and are based on analyses or forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements represent the view of Euronext only as of the dates they are made, and Euronext disclaims any obligation to update forward-looking statements, except as may be otherwise required by law. The forward-looking statements in this Registration Document involve known and unknown risks, uncertainties and other factors that could cause Euronext's actual future results, performance and achievements to diff er materially from those forecasted or suggested herein. These include changes in general economic and business conditions, as well as the factors described under "Risk Factors" below.
This Registration Document was prepared in accordance with Annex 1 of EC Regulation 809/2004, fi led in English with, and approved by, the Stichting Autoriteit Financiële Markten (the "AFM") on 24 /03 /2015 in its capacity as competent authority under the Wet op het fi nancieel toezicht (as amended) pursuant to Directive 2003/71/EC (as amended, including by Directive 2010/73/ EU). This Registration Document may be used in support of an off ering to the public, or an admission to trading, of securities of the Company as a document forming part of a prospectus in accordance with Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) only if it is supplemented by a securities note and a summary approved by the AFM.
The format of Euronext's Registration Document and the presentation of its Table of Content respect the requirements of Annex 1 of the Prospectus Directive EC 809/2004 as applicable in the Netherlands. Euronext as a leading fi nanc ing centre in continental Europe is subject to risks and uncertainties that may aff ect its fi nancial performance. Key risks specifi c to a pan-European exchange operator relate to the general economic development globally and especially in Europe, as well as increased regulation, oversight and taxation, all of which depend on policy decisions by governments and regulators and which are not controlled by the C ompany. As for any c ompany, the business, results of operation or fi nancial condition of the Company could be materially adversely aff ected by the risks described below. These are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently considers immaterial may also impair its business and operations. A description of the risk management system is provided in "Risk management system".
The Company's operations and performance depend on market and economic conditions globally. Trends towards the liberalisation and globalisation of world capital markets have resulted in greater mobility of capital, greater international participation in local markets and more competition among markets in different geographical areas. As a result, global competition among trading markets and other execution venues has become more intense.
Euronext's operations are highly concentrated in France, Belgium, the Netherlands, Portugal and the United Kingdom, and its success is therefore closely tied to general economic developments in those countries and Europe generally and cannot be offset by developments in other markets. A weak economy and negative economic developments may impact growth targets and could limit the Group's future prospects.
During the past few years, European countries such as Greece, Ireland, Portugal, Italy and Spain have been particularly aff ected by the recent fi nancial and economic conditions. The European Union, the European Central Bank and the International Monetary Fund have prepared rescue packages for some of the aff ected countries. Other Eurozone countries have been forced to take actions to mitigate similar developments in their economies.
E conomic conditions aff ect fi nancial and securities markets in a number of ways, from determining availability of capital to infl uencing investor confi dence. Accordingly, generally adverse market conditions may have a disproportionate and adverse eff ect on the Company's business and impact its fi nancial results.
Euronext's industry is highly competitive. The Company faces competition for listing, trading and execution of cash equities and other cash products. In addition, the market for derivatives trading and clearing has intensifi ed as a result of competition and consolidation. This can have an impact on Euronext's pricing and related market share.
The Company's current and prospective competitors are numerous and include both traditional and non-traditional trading venues. These include regulated markets, multilateral trading facilities ("MTFs") and a wide range of over-the-counter ("OTC") services provided by market makers, banks, brokers and other fi nancial market participants. Some of these competitors are among Euronext's largest customers or are owned by its customers.
The success of the Group's business depends on its ability to attract and maintain order flow, both in absolute terms and relative to other market centres. The Company faces growing competition from fi nancial institutions that have the ability to divert trading volumes by "internalising" order fl ow that would otherwise be transacted on one of Euronext's exchanges. In the event of a decrease in trading volumes, there is a risk that markets become less liquid and thus less attractive to investors and issuers.
If Euronext fails to compete successfully, its business and fi nancial results may be impacted.
Euronext is optimising itself as a stand-alone company, through streamlining of processes and enhancing operational effi ciency, including eff ective disclosure and reporting controls and procedures, to achieve cost savings. Establishing the infrastructure necessary for a stand-alone publicly traded company, from an infrastructure inherited from NYSE Euronext and ICE, requires substantial organisational and operational change. T he Company has identifi ed the potential for operating optimisation and efficiencies of approximately €60 million by the end of June 2015 and of €80 million by the end of 2016 on a run rate basis. However, the realisation of any anticipated operating optimisation and effi ciencies and the timing of such realisation will be aff ected by a number of factors beyond the Company's control, including the risks described in this section. If the Group is unable to achieve the benefi ts that are currently anticipated, that could have an adverse eff ect on the fi nancial results.
The Group may enter into business combination transactions. The market for acquisition targets and strategic alliances is highly competitive, particularly in light of recent consolidation in the exchange sector and existing or potential future restrictions on foreign direct investment in some countries. Pursuing strategic transactions requires substantial time and attention of the management team, which could prevent them from successfully overseeing other initiatives. In addition, completing and recognising benefi ts of potential transactions takes time and can impact the Company's business, and fi nancial results .
Euronext intends to continue to explore and pursue opportunities to strengthen its business and grow the Company. In so doing, the Group may launch new products and enter into or increase its presence in other markets. In relation to the expansion of the Company's business, Euronext plans to invest time in developing new products or improving current product off erings. If these product off erings are not successful, a potential market opportunity may be missed and Euronext may not be able to off set the cost of such initiatives, which may have a material impact on the Company's fi nancial results.
Euronext's business in Europe is subject to extensive regulation at the European level and by national regulators in the relevant European jurisdictions where the Company has operations, including France, Belgium, the Netherlands, Portugal and the United Kingdom. Competitors, such as alternative trading venues that are not regulated markets or MTFs are subject to less stringent regulation than an exchange. In addition, as the Group seeks to expand its product base or the jurisdictions in which it operates, it could become subject to oversight by additional regulatory bodies.
Calls for enhanced regulatory scrutiny following the fi nancial crisis generate risks and opportunities . This may lead to the following impacts:
The regulatory regime within Europe is constantly being amended and extended and, in particular, the EU Markets in Financial Instruments Directive (MiFID) and the Market Abuse Directive (MAD) are due to be brought into force in the near future. Implementation will potentially change the competitive landscape and may, therefore, have an adverse eff ect on the Company's business.
Eleven Member States of the EU have publicly supported the introduction of a Financial Transaction Tax (the "FTT"). The FTT may cause a reduction in trading activity could make Euronext markets less attractive to market participants as a source of liquidity, which could have a material adverse eff ect on the Company's business, results of operations, fi nancial condition and cash fl ows.
A Group of Reference Shareholders own in aggregate 33.36% of our Ordinary Shares. This Group received a non-objection by the Dutch Ministry of Finance and signed a Reference Shareholders' Agreement (see infrastructure on 5-4-1 "Reference Shareholders" under Section 5.4 "Share classes and major shareholders"). This Group has applied its right to propose a third of the Supervisory Board directors (as they currently represent over 25% of issued shares of the Company), who were appointed by the EGM on 17 December 2014.
These three directors could be in a situation of confl ict of interest if a decision to be made at the Supervisory Board level for the business development of the company would potentially confl ict with their interest as a shareholder representative. We consider that the Dutch Civil Law (Book 2), the Dutch Corporate Governance Code, the rules and regulations under the Market Abuse Directive and our articles of association provide clear and robust standards and safeguards. In addition, the Articles of Association of Euronext provide not only that decisions of the Supervisory Board are made at the absolute majority of the votes cast (Article 10-1), but also forbid any Supervisory Board director to participate in the deliberation and decision-making process if it concerns a subject in which this member has a direct or indirect interest which confl icts with the interest of the company (Article 11.2). As a result of these safeguards, we deem the risk for business development based on such a confl ict of interest is mitigated.
Euronext has recently received the decision from the Dutch Minister of Finance to reject its "statement of objections" against certain elements of the exchange license granted to Euronext N.V. The Managing Board of Euronext acknowledges this decision and is considering all potential courses of action including the lodging of an appeal at the Rotterdam District Court. In the interim, the capital requirements of Euronext NV are unchanged and the company remains in full compliance with its obligations in this regard. Euronext believes the current capital requirements create an unlevel playing fi eld are inappropriate and overly burdensome.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to comply with regulatory requirements and to maintain an optimal capital structure to reduce the cost of capital and provide return to shareholders.
Euronext is a holding company and its ability to generate income and pay dividends is dependent on the ability of its subsidiaries to declare and pay dividends or lend its funds. The actual payment of future dividends by the Company and the payment of dividends to the Company by its subsidiaries, if any, will depend on a number of factors including distributable profi ts and reserves and minimum capital requirements mandated by regulatory authorities.
Additionally, under the amended term and revolving F acilities A greement Euronext entered into with a syndicate of lenders ("the Facilities Agreement"), the Company is no longer restricted from making any dividends or any other distributions greater than 50% of its net income in any fi nancial year. As Euronext has made repayments in excess of €125 million of the term loan facility under the Facilities Agreement, the Group will be permitted to make distributions, provided that following any such distribution, Euronext's ratio of total gross debt (as defi ned in the Facilities Agreement) to EBITDA is less than 1.5 times.
Due to factors mentioned above regarding results, mandated capital requirements by regulatory authorities and other agreements, the Company may be constrained with its use of capital.
The Group is dependent on the experience and industry knowledge of management and other key staff to operate its businesses and execute its business plans, particularly in the area of information technology. Euronext recognises there is a shortage in the employment market for true specialists in a number of areas, such as in the information technology fi eld and the fi eld of operation of markets and particular product niches, and the Company competes for staff with a large number of other enterprises in these industries. In addition, the months directly after the IPO have taken Euronext through a substantial organisational and operational change, and some of the staff might have concerns about their roles or the Group's prospects as a stand-alone company, including its ability to successfully operate the new entity and its ability to maintain its independence.
Throughout 2014 Euronext focused on establishing the necessary infrastructure for a stand-alone publicly traded company and replaced some key functions previously provided by its shareholder. The Company's success will depend in part upon its ability to continue to attract and retain key staff members in a number of disciplines. A loss of, or an inability to attract, management staff or other key staff could have a material adverse eff ect on the business, results of operations, fi nancial condition and cash fl ows.
The Group relies on third parties for certain clearing, technology and other services. In particular, under its clearing service agreements with LCH.Clearnet S.A. ("LCH.Clearnet"), the Paris based clearing house of LCH.Clearnet Group Ltd, which is majority owned by London Stock Exchange Group plc, one of our competitors, Euronext relies on LCH.Clearnet to provide Central Counter Party (CCP) services services for trades executed on the Company's cash and derivatives markets and to manage related CCP functions, such as risk, novation and multilateral netting.
The Group also relies on the services of Euroclear Group ("Euroclear") for the settlement of cash market trades other than in Portugal and on the services of Intercontinental Exchange, ("ICE") for the provision of network, colocation and data centre services and other short-term services.
To the extent that any of the third parties on which Euronext relies experiences diffi culties, materially changes its business relationship with the Company or is unable for any reason to perform its obligations, any such event could have a material adverse eff ect on the business, reputation, results of operations, fi nancial condition and cash fl ows of Euronext.
Technology is a key component of Euronext's business strategy, and it is crucial to the Company's success. The Group seeks to off er market participants a comprehensive suite of high quality technology solutions in a centralised environment. Euronext operates in a business environment that continues to experience signifi cant and rapid technological change. To remain competitive, the Company must continue to enhance and improve the responsiveness, functionality, capacity, accessibility, reliability and features of its trading platforms, software, systems and technologies. Its success will depend, in part, on its ability to develop and license leading technologies; enhance existing trading platforms and services and create new on es; respond to customer demands, technological advances and emerging industry standards and practices on a cost-eff ective and timely basis.
In addition, the Company's business depends on the performance and reliability of complex computer and communications systems. Heavy use of Euronext's platforms and order routing systems during peak trading times or at times of unusual market volatility could cause its systems to operate slowly or even to fail for periods of time. These events would cause unanticipated disruptions in service to exchange members and clients, slower response times or delays in trade executions and related impacts.
Exploiting technology and the ability to expand system capacity and performance to handle increased demand or any increased regulatory requirements is critical to Euronext's success. The Group could have impacts such as loss of trading share or volume, any of which could have an eff ect on business and fi nancial results if the Company does not execute.
The secure transmission of confi dential information over public and other networks is a critical element of Euronext's operations. As a result, the Group accumulates, stores and uses business data which is sensitive and/or protected by data protection laws in the countries in which it operates.
The Company's networks may be vulnerable to unauthorised access and other items including:
Security breaches or leakage of sensitive data, also impacting data protection laws, and other events could cause Euronext to incur reputational damage, regulatory sanctions, litigation and have an impact on its fi nancial results.
Euronext owns or licenc es rights to a number of trademarks, service marks, trade names, copyrights and patents that are used in its business. To protect its intellectual property rights, the Company relies on a combination of trademark laws, copyright laws, patent laws, trade secret protection, database laws, confi dentiality agreements and other contractual arrangements with its affi liates, customers, strategic investors and others. In the event t he protective steps taken are inadequate to deter misappropriation of our intellectual property , the Group's reputation could be harmed, aff ecting its ability to compete eff ectively. Further, defending intellectual property rights may require signifi cant fi nancial and managerial resources. Any of the foregoing could have a material adverse eff ect on the business, results of operations, fi nancial condition and cash fl ows.
Many aspects of Euronext's business involve litigation risks. Some other liability risks arise under the laws and regulations relating to the insurance, tax, anti-money laundering, foreign asset controls and foreign corrupt practices areas. These risks include, among others, potential liability from disputes over terms of a securities trade or from claims that a system or operational failure or delay caused monetary losses to a customer, as well as potential liability from claims that the Company facilitated an unauthorised transaction or that it provided materially false or misleading statements in connection with a transaction.
Dissatisfi ed customers make claims against their service providers regarding quality of trade execution, improperly settled trades, mismanagement or even fraud. Although aspects of the Group's business may be protected by regulatory immunity and/or contractual arrangements providing for limited or no liability clauses, Euronext could nevertheless be exposed to substantial liability under the laws and regulations and court decisions in the countries in which it operates, as well as rules and regulations promulgated by European and other regulators. The Company could incur signifi cant expenses defending claims, even those without merit. In addition, an adverse resolution of any lawsuit or claim against the Company may require it to pay substantial damages or impose restrictions on how it conducts its business, any of which could have an eff ect on both the business and fi nancial results, and the reputation of the group.
REVENUE €458.5m (+9%) adjusted(1)
€38m of efficiencies achieved in 2014
committed efficiencies will be delivered by the end of H1 2015. (run-rate basis)
53% EBITDA target by end of 2016 based on 5% CAGR (run-rate basis)
Revised commitment to deliver total net efficiencies of
€80m by the end of 2016 (run-rate basis)
cumulated restructuring expenses unchanged despite revised objective for efficiencies
(1) For the nine month period ending 31 December 2013 the changes in third party revenue and operational expenses have also been included when adjusted for the new derivative clearing agreement with LCH.Clearnet. This was included based on our estimate of the amount of revenue we would have received and the amount of associated expenses we would have paid under the Derivatives Clearing Agreement, based on our actual trading volume for the periods presented and assuming the Derivatives Clearing Agreement had been in effect from 1 April 2013
€257m by 31 December 2014
NET PROFIT OF €118.2m (+35%) adjusted(1)
€140m of term loan
to be repaid in March 2015
proposed dividend (subject to AGM approval), representing a 50% payout ratio on net profit
1
1
| 1.2 | Strategy | 14 |
|---|---|---|
| 1.1.3 Business environment | 13 | |
| 1.1.2 Ambition | 12 | |
| 1.1.1 History | 12 |
| 1.3 | Description of the business | 15 |
|---|---|---|
| 1.3.1 Business Overview | 15 | |
| 1.3.2 Strengths | 15 | |
| 1.3.3 Products and Services | 18 | |
| 1.3.4 Recent developments | 26 | |
| 1.4 | Regulation | 27 |
| 1.4.1 Overview | 27 | |
| 1.4.2 European Regulation | 27 | |
| 1.4.3 Ownership Limitations and Additional |
Euronext N.V. is a Dutch public company with limited liability (naamloze vennootschap) which has its registered offi ce in Amsterdam. Euronext N.V. has its main subsidiaries in Belgium, France, the Netherlands, Portugal and the United Kingdom. Euronext N.V. has a two-tier governance structure with a Supervisory Board and a Managing Board.
Euronext was incorporated under the name Euronext Group N.V. on 15 March 2014 in the context of a demerger of Euronext N.V., which was a company owned by ICE . Euronext Group N.V. changed its name to Euronext N.V. on 2 May 2014.
Today, Euronext is a pan-European exchange group, offering a diverse range of products and services and combining transparent and effi cient equity, fi xed income securities and derivatives markets in Paris, Amsterdam, Brussels, Lisbon and London. Our businesses comprise: listing, cash trading, derivatives trading, market data & indices, post-trade and Market Solutions & Other. Euronext also operates the MTF Smartpool and Interbolsa, the Portuguese CSD.
Euronext in its original form was created in 2000 at the same time as the introduction of the Euro and takes its roots from the European construction. It was fi rst the result of a three-way merger of the Paris, Amsterdam and Brussels exchanges, soon completed by the acquisition of the London-based derivatives market, LIFFE, and the merger with the Portuguese exchange. The continental exchanges were combined into a unique federal model with unifi ed rules and a Single Order Book (except for Portugal), operating on the same electronic trading platform and cleared by clearing house LCH. Clearnet , creating the first genuinely cross-border exchange in Europe and pre-dating all initiatives by policy makers to allow for the creation of pan-European market places.
In May 2006, Euronext entered into an agreement with NYSE Group for the combination of their respective businesses. The new holding company of these combined businesses, NYSE Euronext, was subsequently listed on the New York Stock Exchange and on Euronext Paris.
In 2010, NYSE Euronext launched Euronext London, a London-based securities market aiming at attracting international issuers looking to list in London and benefi ting from Euronext's value proposition.
In November 2013, ICE , an operator of global markets and clearing houses, acquired NYSE Euronext . A key element of the overall transaction was the separation and IPO of NYSE Euronext's continental European exchanges as a stand-alone entity. In order to do this, ICE carved the continental European operations of NYSE Euronext and Euronext London into a newly formed entity, which was subsequently renamed Euronext N.V. Since its successful IPO on 20 June 2014, Euronext N.V. has been an independent listed company.
As an industry leader, Euronext aims to be the leading pan-European marketplace for the real economy.
The Group offers a wide range of products and services to the community of issuers and gives them access to a broad and diversifi ed investor base for the listings activity. In a context of rising demand for new and diverse sources of capital, solutions for risks and the transfer of goods as well as growing pressure for more transparency and supervision, Euronext's role is of paramount importance.
As an operator of regulated markets, Euronext's mission is to bring together buyers and sellers in venues that are transparent, effi cient and reliable. The Group combines equity, fi xed income securities and derivatives markets in Amsterdam, Brussels, Lisbon, London and Paris. Euronext's broad portfolio of products, services and platforms covers the full range of market services, including the provision of market information, the development and operation of information technology systems, and the ease of access to settlement and clearing facilities.
As a pan-European group with a diversified profile, Euronext's ambition is to play a constructive role in the local ecosystems and act as an industry problem solver while contributing to making Europe an attractive block in a multipolar world. The Group's model is best suited to contribute to the construction of a true pan-European market. It operates regulated markets in Belgium, France, the Netherlands, Portugal and the UK, all of which are connected via a unique, single trading platform with a harmonised regulatory framework. Euronext's unique Single Order Book allows investors to get the benefi t of being able to trade, clear and settle in a uniform way throughout various jurisdictions while also accessing a broad and deep pool of liquidity.
As an exchange operator, Euronext's operations and performance depend signifi cantly on market and economic conditions in Europe, but also the US, Asia and the rest of the world. Euronext is operating in a business environment that is best described as a complex nonlinear system with dependencies on decisions of policy makers and regulators worldwide, with subsequent developments in the legal, regulatory and tax environment as well as the macroeconomic environment both in Europe and abroad. For details on this please see section 2 "Risks" .
Overall macroeconomic conditions in Europe affect Euronext's trading volumes, the number of companies seeking fi nancing and the demand for the products off ered by the Company. Economic uncertainty in Europe in recent years, in part caused by the series of fi scal crises in peripheral Eurozone countries, has adversely aff ected global financial markets. As a result of this uncertainty, equity markets in Europe have experienced volatility and a period of weak investor demand for Eurozone equities and overall equity trading volumes in the EU have been almost fl at over the last three years.
Nevertheless, macroeconomic conditions are improving directionally thanks to increasing maturity of the Eurozone governance, meaningful reforms such as the Capital Markets Union being set up, and looser monetary policies underpinning growth. Combined with a new regulatory paradigm and increasing disintermediation, these conditions defi ne a new positive cycle for capital markets. Overall growth is expected to pick up from 0.8% in 2014 to 1.1% in 2015, and then 1.7% a year in 2016-18 according to the November 2014 issue of the OECD Economic Outlook. In the Eurozone, a gradual recovery is underway following a double-dip recession lasting 18 months. For 2013, Eurozone GDP fell to -0.4% (after declining to -0.7% in 2012) and has risen to 0.8% in 2014.
This improvement in macroeconomic conditions has also been refl ected in a recovery in investor sentiment for Eurozone equities in 2013 and early 2014, which has driven the re-opening of the European IPO market since the fourth quarter of 2012. In the year ended 31 December 2014, 50 companies completed listing s on Euronext markets compared to 36 in the year ended 31 December 2013. Lower volatility in European markets and the improvement in European market indices provide a positive backdrop for the IPO pipeline in 2015. An increase in new listings on Euronext's markets would have a positive eff ect on the Company's revenues through an increase in admission fees and annual fees.
On the corporate listings side, Euronext faces competition in providing primary listing services to issuers based in the Company's home markets from other exchanges, in particular in respect of global companies and SMEs in the technology sector. While competition in the cash trading market is relatively mature, in recent years Euronext has faced increased pressure on pricing and market share in equity options trading , in particular from new entrants to the market that have fee structures that are signifi cantly lower than the Company's Competition for market data revenues has also increased. As for Market Solutions, the market for fi nancial IT is intensely competitive and characterised by rapidly changing technology and new entrants .
Euronext has addressed these competitive challenges across its various markets with success. For instance, the Company launched initiatives to stabilise market share and reviewed its pricing scheme.
Regulated markets are markets constituted in an EEA Member State's territory that are subject to the provisions of the MiFID. Regulated markets have higher disclosure and transparency requirements than MTFs. Trading on regulated markets is subject to stricter rules than on non-regulated markets. Euronext operates regulated markets in Belgium, France, the Netherlands, Portugal and the UK. Other major regulated markets in Europe include London Stock Exchange, Deutsche Börse and BATS-Chi-X Europe. The latter is the combination of the two former MTFs, BATS Europe and Chi-X Europe in 2011 and which became a Recognised Investment Exchange ("RIE") in May 2013.
Multilateral Trading Facilities ("MTFs") are primarily institutional investor-focused marketplaces off ering trading in pan-European securities on low latency, low cost platforms and are usu ally operated by fi nancial institutions (banks, brokerages) or operators of regulated markets. MTFs are subject to less stringent disclosure, transparency and trading rules than regulated markets and have more discretion to operate and organise themselves.
The systematic internaliser ("SI" ) regime was introduced by MiFID I in 2007 which defines a SI as 'an investment firm which, on an organis ed, frequent and systematic basis, deals on its own account by executing client orders outside a regulated market or an MTF'.
Organised trading facility ("OTF") i s a multilateral system which is not a regulated market or an MTF and in which multiple third party buying and selling interests. Unlike a regulated market or MTF, the OTF will only relate to bonds, structured fi nance products, emission allowances or derivatives.
In order to fulfi l its strategy defi ned pre-IPO, Euronext secured a strong starting position at its separation from ICE, operating a Single Order Book with a common technology, a unique federal model and a broad range of products. The Group now aims to extend its fi nanc ing centre model to become the leading pan-European marketplace for the real economy.
Euronext has selected four strategic objectives which will position the Group as the leading marketplace across Europe:
This strategy is fully aligned with Euronext's ambition, mission and assets and will allow the Group to provide superior value to its customers.
Focus on execution will be a key element of Euronext's DNA. To better illustrate and operationalise the strategy, eight actionable objectives were defi ned:
This strategy has been broadly assessed in terms of its impacts on Company fi nancials. It is fully aligned with the fi nancial objectives communicated to the markets, ie:
As a reminder, targets for 2016 are based on 2013 fi nancials adjusted for:
The priority for the Company in 2014 was to establish Euronext as an independent enterprise and enhance its position as a leading fi nanc ing centre in continental Europe.
The management team executed the pre-IPO strategy to reinvigorate and re-energise the Group and to optimise Euronext as a stand-alone company, while at the same time actively remixing the business profi le and developing underexploited businesses.
Owing to enhanced contacts with customers and other stakeholders , a large number of initiatives was initiated to leverage Euronext's unique model. These were regrouped based on two approaches :
Focus on execution allowed Euronext to operationalise the plan and deliver more products, services and platforms in 2014 than in the previous two years. The hiring of new talents played a key role in achieving this.
For instance, the Group continued to evolve its Supplemental Liquidity Provider ("SLP") scheme to ensure Euronext receives maximum benefi t for the value off ered to SLP participants, expanded its commodities franchise into Rapeseed meal and oil, signed a partnership with DeGiro, the fastest growing Dutch e-broker, in the Dutch options market, in response to the competitive dynamics in that market place, and signed four new trading platform deals in the Middle East and North Africa.
In 2015, the Company remains fully focused on executing the strategic plan launched in 2014 and fi ne-tuned with the Supervisory Board after the IPO. Through more optimal resource allocation and cost control, enhanced execution of the plan to optimise, defend, reposition and grow, and through stronger development of underexploited businesses, the Company will strive to deliver its solutions with a high level of customer value and profi tability.
Euronext is a pan-European exchange group off ering a diverse range of products and services and combining transparent and effi cient equity, fi xed income securities and derivatives markets in Paris, Amsterdam, Brussels, Lisbon and London. Euronext's businesses comprise listing, cash trading, derivatives trading, market data & indices, post-trade and Market Solutions & Other.
Euronext's markets provide the leading listing venues in continental Europe based on the number of companies listed as of 31 December 2014. As of 31 December 2014, approximately 1,300 issuers representing a combined market capitalisation of approximately €2.8 trillion were admitted to trading on Euronext's markets. In addition, the Company has approximately 631 exchange traded funds ("ETFs") and 192 open-end funds listed on its markets. As of 31 December 2014, Euronext ranked second in Europe in terms of market capitalisation of listed companies and second in terms of number of companies listed among the largest exchange groups in Europe, excluding Bolsas y Mercados Españoles (on which a large proportion of listed issuers are open-ended investment companies, limiting comparability). The Company also ranked second in terms of monthly trading volume in cash products for the last twelve months ended 31 December 2014 among the incumbent stock exchanges in Europe ( excluding BATS-Chi-X).
Euronext's pan-European cash equities trading venue is the market leader in cash equity trading in its four home continental European markets of France, the Netherlands, Belgium and Portugal, based on domestic market capitalisation as of 31 December 2014. Euronext provides multiple marketplaces for investors, broker-dealers and other market participants to meet directly to buy and sell cash equities, fixed income securities and exchange traded products ("ETPs"), including its MTFs, SmartPool and BondMatch.
Euronext's derivatives trading business has a strong market position, ranking third among European exchange groups in terms of open interests of derivatives traded as at 31 December 2014, with benchmark index futures and options such as the CAC 40, AEX, BEL 20 and PSI 20, single stock options and commodity derivatives. With the CAC 40 being the most traded national index in Europe for example, Euronext off ers options contracts based on all of the bluechip equities listed on Euronext, thereby reinforcing liquidity with respect to those equities. The commodity derivatives offered by the derivatives trading business include the milling wheat futures contract which is a world class contract for the EU agriculture market.
Euronext's Market Data and Indices business distributes and sells both real-time, historic and reference data to global data vendors, such as Reuters and Bloomberg, as well as to fi nancial institutions and individual investors. With a portfolio of over 500 benchmark indices, including CAC 40 in France and AEX in the Netherlands, the Company is a leading provider of indices.
Post-trade services are an important part of the services Euronext provides to its clients. In 2013, the Company entered into a clearing agreement with LCH.Clearnet S.A., the Paris-based clearing house of LCH.Clearnet Group Limited ("LCH.Clearnet"), in respect of the clearing of Euronext cash products. Euronext also entered into a derivatives clearing agreement with LCH.Clearnet that provides for a revenue sharing arrangement in respect of the clearing of Euronext listed derivatives. In addition, Euronext owns and operates Interbolsa, the Portuguese national Central Securities Depositary ("CSD").
Euronext's Market Solutions & Other business off ers technology solutions and services to exchanges and market operators. These solutions and services use the Euronext Universal Trading Platform ("Euronext UTP") and other applications developed by Euronext or licensed from third-parties. Originally developed by NYSE Euronext, Euronext UTP is a multi-asset class, multi-currency trading platform that provides complex functions for low latency markets. Euronext has a perpetual, royalty-free license from ICE to use, modify and sub-licenc e Euronext UTP. Please see "Relationships & related party transactions".
Established and diversifi ed sources of revenues
Euronext's sources of revenues are diversifi ed across the businesses, markets and client segments. For the year ended 31 December 2014, 46% of the Company's revenues were recurring revenues generated by the non-trading businesses, which include m arket d ata and i ndices, listings, and Market Solutions & Other. This helps to limit Euronext's exposure to cyclicality in demand for particular products or services or in individual markets. Eff ective 1 April 2014, the Derivatives Clearing Agreement entered into with LCH.Clearnet provides the Company with additional revenue from clearing services, thereby further diversifying sources of revenues.
The following table sets out information relating to the sources of total and adjusted and estimated total revenue for the year ended 31 December 2014 and for the year ended 31 December 2013:
| Year Ended 31 December 2014 | Year Ended 31 December 2013 | |||
|---|---|---|---|---|
| In thousands of euros | Revenue | % of Total revenues | Revenue | % of Total revenues |
| Listing | 61,737 | 12.5% | 53,282 | 11.1% |
| Trading revenue | 212,013 | 43.0% | 187,166 | 38.9% |
| of which: | ||||
| • Cash trading | 165,565 | 33.6% | 138,428 | 28.7% |
| • Derivatives trading | 46,448 | 9.4% | 48,738 | 10.1% |
| Market Data and Indices | 93,348 | 19.0% | 83,980 | 17.4% |
| Post-trade | 57,268 | 11.6% | 21,253 | 4.4% |
| of which: | ||||
| • Clearing | 35,979(a) | 7.3% | - | - |
| • Custody and Settlement | 21,289 | 4.3% | 21,253 | 4.4% |
| Market Solutions & Other | 33,443 | 6.8% | 41,009 | 8.5% |
| Other income | 645 | 0.1% | - | - |
| Related party revenue | 34,044 | 6.9% | 94,982 | 19.7% |
| Total revenue | 492,498 | 100% | 481,672 | 100% |
| Estimated derivatives clearing revenue | N/A (incl. in Post trade) | 33,753(a) | ||
| Related party revenue | (34.044) | (94,982) | ||
| Adjusted and estimated total revenue | 458,454 | 432,558 |
(a) The fi nancial benefi ts of the Derivatives Clearing Agreement with LCH.Clearnet came into force on 1 April 2014. To facilitate the comparison, Euronext has decided to provide adjusted fi gures for 2013, estimating the impact this contract would have had, had it been in place from Q2 2013 onwards.
Euronext benefits from a diverse client base, both in terms of geographic distribution and type of trading flow. The Company has an established continental European and UK client base, representing 56% of cash equities trading average daily volume and 75% of derivatives trading average daily volume for the year ended 31 December 2014. A substantial portion of the fl ow from the United Kingdom is from global clients with headquarters based in the United States. While U.S. and Asian clients accounted for 40% and 4% respectively of Euronext's cash equities trading average daily volume and 4% and 1% respectively of its derivatives trading average daily volume for the year ended 31 December 2014, the Group believes these geographic client segments are currently underexploited and off er potential for growth.
The Group's cash equities markets have a diverse member base by geography and trading profi le, making for a particularly rich and diversifi ed order book. Euronext off ers superior market quality to competitors: in 2014 Euronext provided on average 76 % presence at EBBO (European Best Bid and Off er), of which 58 % was the fi rst to set the EBBO. This ability to make the EBBO demonstrates the leading role of Euronext in the price forming of its listed securities and in ensuring the best execution for its investors. In addition the average displayed market depth at the Euronext best limit is equivalent to 6 times – or 61,500 euros – the average order size, thus demonstrating the ability to absorb large orders in full transparency and at minimal cost, as Euronext's average spread was 5.57 basis points.
| Blue Chips* (31 Dec 2014) |
Presence time at EBBO (%) |
EBBO with greatest size (%) |
EBBO setter (%) |
Relative spread (bps) |
Displayed market depth (€) |
|---|---|---|---|---|---|
| Euronext | 76% | 39% | 58% | 6.18 | 59,155 |
| BATS Europe | 22% | 0% | 3% | 16.44 | 14,732 |
| Chi-X | 60% | 5% | 21% | 6.65 | 27,621 |
| Equiduct | 7% | 0% | 2% | 69.45 | 41,388 |
| Turquoise | 51% | 2% | 11% | 7.39 | 19,145 |
* Blue Chips are classified as those securities that belong to the AEX-Index, AMX-Index, BEL 20, CAC 40, PSI 20, and SBF 120 indices.
Euronext operates an important bond market in continental Europe with approximately 4,500 corporate, financial institutions and government bonds listed on its markets and an internationally recognised derivatives platform. The Company is the third-largest exchange traded funds ("ETF") market in continental Europe by number of ETF trades, with approximately 631 listed ETFs and an average daily trading value of approximately €352 million from January to December 2014. Euronext is the second-largest warrants and certifi cates market in Europe, which had approximately 45,000 instruments and nearly 160,000 products listed at 31 December 2014 and more than 3.8 million trades in the twelve months ended 31 December 2014.
Euronext is also a leading pan-European derivatives trading venue, with derivatives trading activities across fi nancial and commodity derivative products. The Group has established the CAC 40 futures contract as the most traded national index in Europe, with an equivalent of €6.2 billion in nominal value on a n average daily basis. T he milling wheat contracts which are the leading wheat derivatives in continental Europe as well as rapeseed commodity contracts are included in the S&P World Commodity Index and Rogers International Commodity indices. This is the fi rst time non-U.S. grains contracts have been included in these global benchmarks.
Euronext is the only pan-European exchange operating across multiple jurisdictions with a harmonised regulatory framework, a Single Order Book for its exchanges in Paris, Amsterdam, Brussels and London and a single trading platform offering access to all markets through a single connection. The Single Order Book consolidates liquidity in each security to tighten spreads and increase market depth and achieves optimal price formation. Issuers listing on more than one of the Group's markets benefi t from enhanced visibility, qualifi cation for inclusion in more local indices and greater exposure for their volumes and prices.
The combination of Euronext's position as a leading pan-European trading venue, the quality of its markets and the expertise of the Company's teams have enabled Euronext to maintain a stable market share in cash equities of approximately 65% in the trading of the securities listed on its markets since June 2011 . The Group has generated sustainable and diversifi ed cash fl ows across institutional, high frequency and algorithmic trading, own account, agency brokerage and retail client classes. The Single Order Book model and pan-European technology are key to Euronext's unique federal market structure. This structure enables the Company to integrate its constituent markets while they remain subject to regulation by national regulators.
IPO activity in Western Europe picked up signifi cantly in 2014, with 318 listing s in Western Europe in the year ended 31 December 2014 (50 of which were on Euronext), compared to a total of 278 listings in Western Europe in the year ended 31 December 2013. In 2014, three of the fi ve largest IPOs in Europe took place on Euronext markets (Pershing Square Holdings, NN Group and Altice). The Group expects these favourable developments in European listing activity to continue in the near term as lower volatility in European markets and the improvement in European market indices provide a positive backdrop for the IPO pipeline in 2015 . Further, a nnual trading value of European equities in the end of 31 December 2014 were 18% higher than for the same period in 2013. Total European equities market capitalisation was €11.7 trillion as of 31 December 2014 compared to €11.4 trillion as of 31 December 2013, an increase of 2%.
Source: PwC
(1) New listing types include dual listing, exchange off er, cross listing, merger, IPO, private placement and transfers. ETFs (revenue only) (among Euronext markets).
Trading on Euronext markets takes place on the Euronext UTP. The Euronext UTP is a multi-asset class, multi-currency trading platform that supports many diff erent regulatory regimes. It off ers diversifi ed functions for facilitating liquidity in complex markets for example through strategy trading and implied pricing, and meets the low latency demands of algorithmic trading patterns.
The Euronext UTP and its predecessors have been delivered to over 25 third-party exchanges and market operators around the world. The diversity of business needs arising from internal and client requirements has driven IT development and helped Euronext to maintain its position at the forefront of the industry. With its rich function set, market model fl exibility and reliability, the Euronext UTP can host markets in cash equities and fi xed income products as well as equity, fi nancial and commodity derivatives.
Euronext's businesses are characterised by recurring revenue streams which generate resilient and robust free cash fl ow and allow Euronext to operate and invest in its business with fl exibility. The Group's market expertise and proven, multi-asset class technology infrastructure allow Euronext to launch new products without substantial additional capital expenditure. Further, the Company's trading businesses does not expose it to credit risk or counterparty risk, which is borne by the counterparties to the trade and not by the markets. Euronext believes that its capital-light business and resilient free cash fl ow generation provide a potential for attractive return for shareholders while observing its regulatory capital requirements .
Euronext's corporate client business services approximately 1,300 issuers admitted to trading on its market with a combined market capitalisation of €2.8 trillion as at 31 December 2014. the Group's issuer base is diverse, comprising companies from within its home markets as well as elsewhere in Europe and internationally and span 10 sectors by industry classifi cation benchmark. Euronext's corporate issuers diff er in size and include 258 large cap companies (companies with a market capitalisation above €1 billion) and 1,045 SMEs and micro-cap companies (companies with a market capitalisation under €1 billion).
Euronext's markets in 2014 provided fi nancing to the real economy with more than €100 billion raised on its markets in equity and debt fi nancing through securities admitted to trading. In 2014 over €104 billion was raised in the primary and secondary equity and bond compared to €92 billion in 2013. In terms of IPOs, according to a PWC IPO centre report, Euronext ranked as the second largest exchange in Europe and the sixth largest globally.
In addition, the Company enables issuers to become part of a family of leading index products in each of its national markets including the AEX in the Netherlands, BEL 20 in Belgium, CAC 40 in France and PSI 20 in Portugal . Euronext's family of index products provides investors and issuers benchmarks enabling them to measure and trade the performance of key segments and strategies. The Group also off ers extensive trading opportunities to investors, including in particular single stock derivatives on the underlying securities listed on its markets.
Euronext's ETF franchise has approximately 700 listings (including cross-listings) of approximately 631 ETFs from 16 prime domestic and international issuers. The listed products cover a wide range of asset classes and strategies, off ering investors in the Company's home markets unique investment opportunities.
Euronext off ers the open ended investment fund community a simple, effi cient means of enhancing the visibility and market awareness of their funds and enlarging their base of potential investors. Multiple issuers accounting for approximately 200 live listings have been attracted by Euronext's service off ering.
Since the fi rst warrant instrument was issued in France in 1989, there has been a significant increase in the number of issuers, product types and market participants involved in the warrants and certifi cates market. As at 31 December 2014, Euronext's warrants and certifi cates business had more than 100 active members and approximately 38,000 live listings. In the year ended 31 December 2013 alone there were approximately 45,000 live listings. In addition, as at 31 December 2014, more than 3.8 million warrants and certifi cates trades were executed on Euronext's markets, with a value traded of €16.3 billion. The Group's tailored warrants and certificates listing service offering is used by the warrants and certifi cates community who have relied on it to effi ciently run and expand operations.
Euronext, Alternext and Marché Libre, as well as Easynext, Trading Facility and Euronext Market Expert formerly the Belgian Public Auctions (Ventes Publiques/Openbare veilingen), enable corporate clients in diff erent stages of their development, whether early stage growth companies or more established businesses, to access a broad range of investors.
Euronext markets in Paris, Amsterdam, Brussels, Lisbon and London are regulated markets within the meaning of MiFID. Euronext
The EURO STOXX 50 comprises 24 Euronext listed issuers, and the EURO STOXX 600 comprises 134 Euronext listed issuers. In addition, Euronext is one of Europe's major centres for the listing of bonds, with over 4,500 corporate, fi nancial institutions and government bonds and money market instruments, representing nearly 600 issuers listed on Euronext's markets.
is dedicated to large corporates and SMEs. Euronext lists a wide variety of securities, including domestic and international equity securities, convertible bonds, debt securities (including corporate and government bonds), structured products (including warrants and certifi cates and structured notes), ETFs and open-ended investment funds.
In 2010, the Company launched a London franchise which became a regulated Euronext London market in 2014, part of its group of exchanges.
Euronext also established an offi ce in Hong Kong in 2014.
Alternext markets in Paris, Amsterdam, Brussels and Lisbon are MTFs within the meaning of MiFID. Alternext is dedicated to early stage and high growth SMEs. Alternext lists a wide variety of securities, including domestic and international equity securities, convertible bonds and corporate bonds. On 9 April 2014, Euronext announced that it would close Alternext Amsterdam. The closure of this market is currently planned for the fi rst half of 2016. Euronext Amsterdam has decided to focus on initiatives for SMEs through EnterNext and a recently launched fund for Dutch entrepreneurs. NL Ondernemingsfonds is a joint market initiative in which Dutch banks, pension providers and an asset manager joined forces to provide fi nancing for businesses in the Netherlands.
Furthermore, the Alternext All-Share Index improves investors' ability to benchmark Alternext-listed companies, which also helps promote trading.
Operating in Paris and in Brussels, the Marché Libre markets are MTF s within the meaning of MiFID, off ering early stage SMEs access to the capital markets and a framework adapted to their specifi c needs. This market is open to any company, regardless of size, performance, maturity or industry. Corporate bonds and structured products are also traded on the Marché Libre.
The professional segment of the regulated market of Euronext Paris enables issuers to list on Euronext Paris by benefi ting from a more fl exible regulatory environment as this segment targets qualifi ed investors only.
Euronext leverages this segment through the Fast Path procedure which aims to attract foreign companies seeking a listing in Europe to benefi t from a straightforward, fast and cost-effi cient process. Issuers can access Euronext regulated markets in Amsterdam, Belgium, Paris and Lisbon through the Fast Path procedure.
Euronext also off ers the following markets:
• Euronext Market Expert replaces the former fl oor-traded Belgian Public Auctions Market (Marché des Ventes Publiques/Markt van de Openbare Veilingen), based in Brussels, enables Euronext Brussels to negotiate prices for products not admitted to trading once a week. Such products include untraded shares, property certifi cates and bonds.
Euronext's markets offer issuers an established and credible financial marketplace for their capital markets needs. In order to attract issuers to the marketplace and maintain relationships with existing issuers, the Company undertakes ongoing outreach initiatives through direct prospecting and periodic client coverage meetings. Euronext also participates in conferences and holds events to promote its markets.
Euronext develops a long-term relationship with its large listed companies, covering a range of topics including recent developments in respect of Euronext, its markets, products and services, how clients can utilise the markets to fund on-going growth, the development of liquidity and trading on Euronext's markets, indexation eligibility, as well as in relation to the Group's education and networking events. Euronext's business development eff orts are centred around engaging directly with prospective listing candidates to discuss how Euronext's partnership proposition can assist in achieving their capital markets objectives. In addition, the Company engages with other parties in fi nancial markets that are involved in the listing and capital raising process.
Euronext also aims to attract international issuers from outside its home markets and to provide them with access to its markets. The Group targets international issuers from the Europe, Middle East and Africa region, Asia and the Americas that look to access the capital markets in Europe for a variety of reasons.
Launched in May 2013, EnterNext, Euronext's subsidiary designed to develop and promote its stock markets specifi cally for SMEs, has successfully played an active role in facilitating SME access to fi nancial markets and helping them generate the funds they need to grow at regional, national and pan-European level. In 2014, EnterNext took part in over 210 events promoting small and mid-caps with entrepreneurs as well as investors and ecosystem stakeholders. EnterNext's strategy aims at bringing greater proximity and education to company executives in 2015 .
EnterNext covers domestic companies listed on Euronext and Alternext that have a market capitalisation of up to €1 billion. As of 31 December 2014, EnterNext covers 797 companies in France, the Netherlands, Belgium and Portugal representing a combined market capitalisation of €131 billion. In 2014, over €9 billion was raised by SMEs on Euronext 's markets through equity and bond issues. In 2014, EnterNext assisted in attracting 31 newly listed SMEs.
In 2014, EnterNext initiated measures to address the lack of broker research on small and midcap companies . In order to support brokers' eff orts regarding fi nancial analysis on SMEs, brokers who publish regular research reports on EnterNext stocks have benefi tted since June 2014 from an incentive scheme on orders and trading fees. In addition EnterNext entered into agreement with Morningstar, a leading independent equity research provider, to launch a fi nancial analysis programme dedicated to the 220 TMT-sector Euronext listed SMEs to publish quantitative research reports on each company and quarterly sector reviews.
Following the creation of the PEA-PME, a French initiative aiming at supporting and encouraging national savings in SMEs, EnterNext performed the role of collecting the eligibility's declaration from listed issuers to create further interest and boost investment on SMEs. It also created family of indices known as Euronext PEA-PME.
EnterNext positioned itself at the heart of the market eff ort to boost the t echnology sector on European markets. With 320 listed SMEs representing a total market capitalisation of €41 billion, Euronext is the largest listing market in c ontinental Europe for technology companies.
Euronext aims to off er the ETF community a "one-stop shop" solution for multi-national listing and trading in ETFs and investments. The Company's ETF off ering is supported by a robust market infrastructure where product supply and demand meet within a framework of deep liquidity and advanced price formation. Euronext develops relations not only with issuers, but also with liquidity providers, intermediaries, investors, regulators and others in the ETF community to understand their challenges and needs, enabling the Group to create and launch innovative solutions to support industry growth.
Euronext's fund solutions off er asset managers ways to achieve better operational effi ciency and enhance asset gathering opportunities. By engaging in active discussions with the key stakeholders, the Company believes its off ering is a relevant choice for any issuer considering fund distribution in Europe.
In order to attract issuers, market makers and other key players in the warrants and certifi cates market to Euronext's markets, the Company maintains its relationship with existing clients and actively engages in discussions with new prospective clients. Euronext develops relationships with its issuers not only to expand their usage of existing tailored services but also to create new and innovative services for operational effi ciency and business expansion.
Euronext provides issuers with a range of services including:
Euronext provides advocacy to represent the interests of corporate client companies at the level of Euronext as well as at national and European levels for specifi c issues related to fi nancial markets. As part of this, Euronext regularly communicates with its issuers and Investor Relations organisations, organises issuer committees and participates in consultations with regulatory bodies on a wide range of topics.
ExpertLine is a team of market professionals based in Euronext's European Market Services room in Paris who provide issuers with feedback on real-time events that may affect their share price. ExpertLine acts as a fi rst port of call for all issuers listed on the Company's fi ve markets, listing sponsors and intermediaries, and the team develops and provides issuers with a suite of services such as the Connect web portal.
Companies listed on Euronext, Alternext and the Marché Libre in Belgium have access to Connect, a secure web portal that provides issuers with market intelligence and facilitates corporate publications on Euronext's website. Connect is also a publication tool, allowing issuers to upload and publish press releases, maintain their fi nancial calendar and update their company's profi le on Euronext 's website.
Euronext off ers its facilities to issuers who may host gatherings for investors or use them for their results presentations. In addition, Euronext informs and educates issuers on various topics such as new regulatory and legal developments, compliance, governance, social responsibility investments and new products. Through workshops, Euronext off ers listing ceremonies to issuers in conjunction with the listing of their securities and to celebrate important corporate milestones and events.
Euronext provides multiple marketplaces for investors, brokerdealers and other market participants to meet directly to buy and sell cash equities, fixed income securities and ETPs. One of the primary functions of the Group's markets is to ensure that orders to purchase and sell securities are executed in a reliable, orderly, liquid and effi cient manner. Order execution occurs through a variety of means and Euronext seeks to continue to develop additional and more effi cient trading processes.
The Company is the market leader in cash equity trading in its four home markets of France, the Netherlands, Belgium and Portugal. As at 31 December 2014, Euronext had a market share of 64.2 % excluding BATS-Chi-X and a strong blue chip issuer presence, with 24 issuers included in the EURO STOXX 50 stock index and 132 issuers listed on the EURO STOXX benchmark index (out of the 293 issuers included in the index). Euronext is ranked second in the European Union as measured by domestic market capitalisation and by average monthly equity trading value, excluding BATS-Chi-X. In addition, the Group has a solid ETF trading franchise based on the listing of approximately 631 ETFs in its markets. Clearnet. In 2014, the equity trading value on Euronext's cash equity markets (excluding reported trades) was €1,530 billion, up 17% from €1,308 billion in 2013.
Euronext operates equity markets of which the main financial instruments are shares. Shares are any share of capital stock or other equity securities issued by a corporation or other incorporated business enterprise.
Euronext is a leader in ETF trading with over 631 ETF listings from 18 issuers in Europe. Euronext has a sizeable footprint in the ETF industry thanks to its multi-domestic setup and broad participant coverage. The ETF trading volume increased by more than 18% in the year ended 31 December 2014 compared to the year ended 31 December 2013, while the Group's market shares for new ETF listings doubled from 2013 to 2014.
Euronext offers over 41,000 warrants and certificates to retail investors covering 40 geographical regions and 10 issuers. The warrants and certifi cates trading volume increased by more than 5% in the year ended 31 December 2014 compared to the year ended 31 December 2013.
Euronext operates bond trading on its regulated market with a particular focus on the retail market. Over 100 members trade 3,600 corporate, fi nancial institutions and government listed bonds, representing a monthly turnover of approximately €1 billion.
SmartPool is a dark pool dedicated to the execution of institutional order fl ow, off ering trading in stocks from fi fteen European equity markets, including stocks listed on Euronext's continental markets. Trading is cleared by the European Central Counterparty.
BondMatch, launched in July 2011, is an MTF for bonds that allows qualifi ed debt markets sell side and buy side participants to trade euro-denominated corporate, financial and covered bonds on a transparent order book with fi rm orders. It has been built to meet the "Expression of Needs" drawn up by representatives of the European bond market community. The objective of BondMatch is to provide liquidity, transparency and a level playing fi eld through an order book with fi rm orders, pre- and post-trade reporting and clearing and settlement solutions.
Cash trading on Euronext's markets is organised using the Universal Trading Platform . The Group's trading rules provide for an orderdriven market using an open electronic central order book for each traded security, various order types and automatic order matching and a guarantee of full anonymity both for orders and trades. While the core trading system is built on this order-driven principle, the fl exibility of the Euronext UTP enables Euronext to develop diff erent types of matching algorithms and functionalities to suit the diff erent price formation mechanisms that exist amongst the diff erent cash asset classes. The Euronext UTP also enables the Company to cater for diff erent market participant needs. For example, Euronext built the retail matching facility in order to bring to retail brokers an additional layer of liquidity specifi cally aimed at off ering price improvement for less informed retail order fl ow. The Euronext UTP's fl exible structure enables Euronext to integrate this liquidity directly into the central order book. The Company has also developed a supplemental liquidity provider programme which aims at improving market quality. Euronext's cash markets continue to yield the best market quality metrics amongst its competitors. These metrics include, amongst others, spread, market depth, best price setting and presence time at the best bid and off er spread. The programme encompasses both a presence time obligation at the best bid and off er spread and a minimum passive volume obligation. This volume obligation is of particular interest as, in combination with the presence time obligation, it creates order persistence and therefore increases probability of execution. In a fragmented trading environment, market quality metrics are actively used by trading firms as decision making parameters embedded in their order routing systems and therefore contribute to maintaining Euronext's market share.
As at 31 December 2014, Euronext had 195 direct trading members on its cash business, compared to 203 members as at 31 December 2013 and 217 members as at 31 December 2012. The Group has a diverse member base, with a deep presence in its four domestic markets and a strong international client base in London, which accounts for approximately half of trading volumes. A continued environment of increased regulation, tighter margins and capital constraints will require cost reduction and sustainable reform from most of our client base, therefore driving consolidation of continental tier three banks and brokers.
The average daily volume on Euronext's cash trading markets for the last twelve months ended 31 December 2014 amounted to €12.9 billion (both legs of the transactions are counted). The table below shows the breakdown of the average daily volume by type of customer for the last twelve months ended 31 December 2014.
The table below shows the proportion of Euronext's customer base by geographic origin (location of worldwide headquarters) using the Company's cash markets for the last twelve months ended 31 December 2014.
CASH TRADING ADV (AS OF 31/12/14)(1 )
(1) Both legs of the transaction are counted (double counted).
01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 12/14 (1) Including MTFs and excluding OTC.
Euronext is a leading pan-European derivatives trading venue with trading activities across fi nancial and commodity derivative products.
The Company off ers fi nancial derivatives trading in its markets in Amsterdam, Brussels, Lisbon and Paris, and, as of 31 December 2014, was the fourth largest market in index futures and the third largest in index options. Euronext off ers local markets access to the trading of futures and options based on global equities, local market indices including the CAC 40, AEX, BEL20, PSI20 and established pan-European equity indices such as FTSEurofi rst and FTSE EPRA/ NAREIT real estate indices.
Euronext also off ers commodity derivatives trading with futures and options based on four agricultural products: milling wheat, rapeseed, corn and malting barley. The Group is the leading agricultural commodity franchise in Europe. In 2014, the notional value of the derivatives traded on Euronext's derivatives markets was €3.3 billion, up 10% from €3 billion in 2013.
Equity options and futures enable holders to hedge against, or take position on, changes in the underlying share. More than 130 equity options and over 80 equity futures can be traded on Euronext, making the Company one of the leading markets for equity derivatives trading. Equity options trading has historically been particularly active in Amsterdam due to high retail participation.
Equity index derivatives allow holders to hedge against, or take position on, changes in the future level of a particular index, the investor paying or receiving a cash sum representing its loss or gain on the future or option. Euronext's equity index derivatives allow customers to hedge against fl uctuations in a range of European stock market indices and the European equity market as a whole.
Euronext's fl agship equity index products include the CAC 40 futures contract, which is the most traded national index future in Europe, and the AEX Index options contract, which is one of the most on-exchange traded national index options in Europe.
Euronext is a leading provider of agricultural commodity derivatives with several of the Company's contracts established as global price benchmarks to the international commercial and fi nancial community. Volumes have grown strongly in recent years as commercials and investors alike increasingly seek to hedge their risks or use commodities to help diversify their portfolios.
The average daily volume of the milling wheat futures contract, which grew over 1,600% over the 2006-2012 period, reached a volume of 33,000 lots traded on a daily basis, representing the equivalent of 1.65 million tonnes of wheat. This futures contract has attained benchmark status, along with Euronext's rapeseed derivatives, which have been included in the main global commodity indices (S&P World Commodity Index, Rogers International Commodity index), making them the fi rst non-U.S. grains contracts to be included in these global benchmarks .
Since November 2014 the entire oilseed sector purchase and output chain as well as its crushing margin can be hedged through Euronext's rapeseed complex made up of: rapeseed, rapeseed oil and rapeseed meal futures & options.
Currency derivatives allow investors to invest in, or protect themselves from, changes in the exchange rate between two currencies.
The average daily volume on Euronext's derivatives markets for the last twelve months ended 31 December 2014 amounted to €1.1 million billion (both legs of the transaction are counted). The table below shows the breakdown of the average daily volume by type of customers for the last twelve months ended 31 December 2014.
The table below shows the proportion of Euronext's customer base by geographic origin (location of worldwide headquarters) using derivatives listed on its markets for the last twelve months ended 31 December 2014.
1
Trading members in Euronext's derivative markets are either dealers or brokers or both. Their activities range from retail broking, investment banking, dealing, algorithmic and high frequency trading to international physical trading. The Group's client base comprises 342 members (of which 115 are both cash and derivatives and 112 are commodities trading members) as of 31 December 2014 and is significantly diversified both in terms of types of clients and geographic coverage. Trading members can also become liquidity providers, which is crucial to the good functioning of the price formation mechanism for derivative instruments. Liquidity providers enter into agreements with Euronext, specifying their obligations in terms of liquidity providing. Liquidity providers are able to place several orders at the same time through the use of mass quotes, allowing trading members to send buy and sell orders for many contract months using only one message, leading to optimal effi ciency in updating Euronext's full range of derivatives prices in a timely manner.
Source: FESE, WFE for non-Euronext data (1) EEA; (2) Excluding reported trades; (3) double counted
Euronext's m arket d ata and i ndices product off ering includes pre- and post-trade market prices, indices, and reference data. The Company's data is disseminated by over 375 vendors to approximately 150,000 screens in over 130 countries.
Euronext's m arket d ata and i ndices business consists of three product and service categories:
Euronext's main data off ering involves the distribution of real-time market data. This data includes price, trade and order book data on all instruments traded on the Company's cash and derivatives markets, as well as information about Euronext's indices. The data is marketed through different information products and can be packaged according to the type of instrument (shares, derivatives or indices), the depth of the information (depth of the order book, number of lines of bid and ask prices), and the type of customer (professional or private). The data are disseminated primarily via data vendors but also directly to fi nancial institutions and other service providers in the fi nancial sector.
Euronext owns and operates a leading benchmark and strategy index franchise that measures diff erent segments of the Euronext and other global markets, including CAC 40, AEX, BEL 20 and PSI 20. The Company also creates new proprietary indices creating added value for its market participants or to provide measurement tools for all types of investment categories regardless of listing venue. Many of Euronext's indices are licenc ed to asset managers as the basis for ETPs that are listed on the Company's markets. The index team also off ers third-party index calculation services for ETP issuers bringing innovative client driven products to the market place. As of 31 December 2014 there were over 5,600 Euronext listed products linked to Euronext indices, a 40% increase over the year. ETF assets under management linked to Euronext indices remained stable at just over €5 billion for the year.
In addition to real-time market data, Euronext also provides daily summary, historical and analytical data services, as well as reference and corporate action data services.
Euronext's post-trade business offers or facilitates clearing, settlement and custody services. In Portugal, the Group owns Interbolsa, the Portuguese national central securities depository, national securities settlement system and national numbering agency.
Clearing of trades executed on Euronext are currently handled by LCH. Clearnet S.A. for central counterparty clearing . SmartPool trades are cleared by the European Central Counterparty, the result of the recent merger between EMCF and EuroCCP . Settlement of transactions in the Portuguese market is managed through Interbolsa while trades in all other Euronext markets are settled through Euroclear Group.
Pursuant to the LCH.Clearnet Agreements, LCH.Clearnet provides clearing services for the full scope of Euronext listed cash and derivative products. Under the terms of Euronext's Derivatives Clearing Agreement with LCH.Clearnet, eff ective starting 1 April 2014, the Company agreed with LCH.Clearnet to share revenues and receives clearing fee revenues based on the number of trades on these markets cleared through LCH.Clearnet, in exchange for which Euronext has agreed to pay LCH.Clearnet a fi xed fee plus a variable fee based on revenues. The Derivatives Clearing Agreement features strong governance rights and Euronext is involved in all commercial aspects.
Interbolsa is the national Central Securities Depositary ("CSD") and the national Securities Settlement System for Portugal. As national Securities Settlement System, Interbolsa provides settlement services for regulated markets and MTFs, securities lending transactions, OTC transactions, free-of-payment and deliveryversus-payment transfers. It also processes corporate actions with respect to securities registered or deposited in the CSD as well as the calculation of corresponding fi nancial settlement and sending of payment instructions to the corresponding payment system TARGET2 for payments in central bank money (Euro) and Caixa Geral de Depósitos for payments in commercial bank money (in respect of currencies other than Euro). Interbolsa is also the national numbering agency in charge of the assignment of ISIN codes according to the ISIN codifi cation rules in force (namely to all Portuguese-issued equities and for debt instruments registered or deposited in Interbolsa's systems), nationwide disclosure of assigned ISIN codes and intermediating between national entities and other national numbering agencies. The use of Interbolsa is currently required by local rules and regulations.
Interbolsa is one of Euronext's wholly owned subsidiaries, while LCH. Clearnet and Euroclear are independent entities that provide services to the Company. Euronext has a representation on the Board of LCH. Clearnet S.A and LCH. Clearnet Group.
Market Solutions & Other comprises Euronext's commercial technology solutions and services businesses. Euronext offers turnkey solutions and managed services for market operators who require complex functional capabilities and low latency across multiple-asset classes. The Market Solutions off ering is based on the Euronext UTP, The Nouveau Système de Cotation ("NSC"), the SFTi network and colocation services and on the suite of supporting applications that provide the reference data, price calculation and control functions critical to the operation of an orderly market. By combining the technology the Company has developed for its internal markets with the expertise of its market solutions sales team, Euronext is able to off er a unique market technology service to partners and clients around the world. For more information on SFTi and colocation, please see "Relationships & related party transactions".
Euronext has a perpetual licenc e from ICE to use, modify and sublicenc e the Euronext UTP and other trading technology source code and uses this licenc e to develop new capabilities for internal markets and for third-party clients. The business model for Market Solutions & Other is to build on the developments made for Euronext's markets and to commercialise these for use by other market operators. In some cases client requirements can be met by simple confi guration changes to the Euronext UTP and in others custom development is required. Whichever approach is taken, the rights to new functions remain with Euronext and are incorporated into the Euronext UTP core product for the benefi t of all its users (including Euronext itself). This mutually benefi cial, user-community approach means the Group can maintain an industry leading platform with greater cost effi ciency than would otherwise be the case.
Euronext's ability to confi gure the Euronext UTP for a wide range of market operators means the Company can tailor its solutions to meet the needs of the three key segments of the marketplace: global exchange operators; regional exchanges; and local exchanges and commercial markets (e.g., MTFs and broker crossing networks).
Because the Euronext UTP was originally specifi ed for high-volume markets, it already has the capacity to meet the throughput and resilience needs of most global exchange operators. Euronext's development focus for this segment is now on integrating new technologies to reduce the server footprint while improving resilience and cost-eff ectiveness.
On its cash trading markets, Euronext optimised and defended its Equities regulated market franchise thanks to a new market making scheme and supplementary liquidity programme to improve quality, by launching a self-trade prevention service for liquidity providers on Equities regulated markets and by implementing an incentive scheme for brokers that publish equity research on Enternext companies.
The Company also repositioned and grew its franchises as it launched the 'Euronext Expert market' the Belgium Public Auctions Market which migrated to the Universal Trading Platform , launched the multicurrency trading service for ETFs and the Exchange Traded Vehicles ("ETVs") on Euronext Amsterdam.
On fi nancial derivatives markets, Euronext repositioned and grew its franchises as it launched Euronext and non-Euronext single stock futures, spotlight options and weekly futures on CAC and AEX indices. The Company also opened futures and options trading on new South European Banks Index on which Euronext derivatives have been launched and it also launched Single Stock Dividend Futures on Dutch, French, Belgium and Portuguese most liquid stocks.
Since November 2014 the entire oilseed sector purchase and output chain as well as its crushing margin can be hedged through Euronext's rapeseed complex, that is to say rapeseed, rapeseed oil and rapeseed meal futures & options.
On its market data and indices business, Euronext signed over 120 new vendors distributing delayed information and launched a market data application for which it had over 4,000 users at 31 December 2014. Euronext also repositioned and grew its i ndex franchises as it launched the CAC PME i ndex on which a Euronext listed ETF and a structured fund were launched. The Company also launched the Euronext Health Care & Equipment EW, the BEL 20 X5 Leverage NR and the BEL 20 X5 Short GR on which Euronext traded certifi cates have been launched.
On the post-trade business, Interbolsa has been actively involved in the adaptation plan to TARGET2-Securities ("T2S"), the future European settlement platform that will provide integrated, harmonis ed settlement of transactions in central bank money. Interbolsa has successfully completed two most relevant testing phases in 2014 – the Eurosystem Acceptance Testing, in August, and the Pilot Testing, in September. This has allowed it to start the Bilateral Interoperability Testing on 1 October as previously planned. Another important attainment was the implementation of IPLA (SWIFT Integration Platform) and the SWIFT connector to T2S, which will allow the adaptation of Interbolsa IT systems to T2S, using the new ISO 20022 messages. In addition, Interbolsa has also successfully implemented the new COLMS (Collateral and Operations Management System) project, namely the functionalities relating to the mobilisation/demobilisation of securities as collateral registered in Interbolsa for Eurosystem credit operations, changing the form and content of communication between Banco de Portugal, Interbolsa and credit institutions.
On its Market Solutions business, in 2014 Euronext signed contracts with four clients agreeing that they would migrate from the legacy NSC® platform to the new Hybrid platform and agreed fi nal end of service dates with its other two NSC® clients. These contracts include ten year service terms and improve the long-term stability of its maintenance revenues.
In the listing business, Euronext strengthened its position as a leading provider of funding for real economy companies and SMEs across its fi ve markets. In order to stimulate SME activity, Euronext, through its EnterNext subsidiary, entered into a programme with Morningstar to provide research coverage on 220 Euronext listed TMT stocks. EnterNext also announced new measures to assist tech companies to raise their profi le with investors including a special programme off ering support and coaching to unlisted companies.
Euronext is an organisation that provides exchange listing, trading, post-trade and related services in Europe. The Company operates exchanges in five European countries. Each of the European exchanges and/or its respective operator holds an exchange licence granted by the relevant national exchange regulatory authority and operates under its supervision. Each market operator is subject to national laws and regulations and other regulatory requirements imposed by exchange authorities, central banks and finance ministries as appropriate.
The fi ve national regulatory authorities coordinate their regulation and supervision of the regulated markets operated by the Euronext Group through the "Euronext College of Regulators", acting pursuant to memoranda of understanding which Euronext has committed to respect.
The regulatory framework in which Euronext operates is substantially infl uenced and governed by European directives and regulations in the fi nancial services area, many of which have been adopted pursuant to the Financial Services Action Plan, which was adopted by the EU in 1999 to create a single market for fi nancial services. This has enabled and increased the degree of harmonisation of the regulatory regime for fi nancial services, public off ers, listing and trading, amongst other activities.
There are three key pieces of European legislation that govern the fair and orderly operation of markets and trading: Markets in Financial Instruments Directive ("MiFID"), the Market Abuse Directive ("MAD") and Markets in Financial Instruments Directive ("MiFID II/MiFIR"). Both MiFID and MAD are already in place, and MiFID II/ MiFIR is expected to apply from January 2017. The current versions of these Directives are discussed below, but it should be noted that revised versions are under development and will be implemented in the next few years.
MiFID came into eff ect on 1 November 2007 and was designed to enhance the single market for fi nancial services by harmonising the Member States' rules on authorisation of investment fi rms, conduct of business, operation of trading venues and other related activities.
MAD came into eff ect on 12 April 2003 and was intended to assist in the harmonisation of rules for market abuse throughout Europe. Key elements of MAD include requirements for Member States to introduce a prohibition on insider dealing and on market manipulation. There are also obligations on issuers, including a requirement to publish inside information which concerns them as soon as possible and to maintain lists of persons working for them who have access to inside information. Further, a suspicious transaction reporting obligation and mechanism has been put in place.
MiFID II/MiFIR was adopted by the European Parliament on 15 April 2014 and by the Council on 13 May 2014 and entered into force on 2 July 2014. EU Member States are required to implement MiFID II in their national legislation within 24 months of the entry into force (i.e. June 2016), while MiFID II/MiFIR will apply in the markets within 30 months (i.e. January 2017).
From an Exchange perspective, the revised framework includes the following important elements:
EMIR is primarily focused on the regulation of CCPs but includes also the obligation for standardised OTC derivative contracts to be cleared through a CCP. EMIR came into eff ect on 16 August 2012, but most provisions only apply after associated delegated acts and regulatory technical standards enter into force. Delegated acts and regulatory technical standards in respect of, inter alia, the clearing obligation became eff ective on 15 March 2013.
A Regulation to harmonise securities settlement and regulate CSDs (the "CSD Regulation") was formally adopted in July 2014. The CSD Regulation harmonises requirements for the settlement of fi nancial instruments and rules on the organisation and conduct of CSDs. The CSD Regulation will impact the functioning of Euronext's CSD, Interbolsa, and will require regulatory or operational amendments to bring Interbolsa into compliance with the new requirements. In addition, the European Central Bank has introduced a new proposal ("T2S") to provide a central settlement function for the Euro area, with other European currencies invited to join. Euronext is in the process of preparing for the implementation of T2S by Interbolsa.
The rules regarding public off erings of fi nancial instruments and prospectuses, as well as on-going disclosure requirements for listed companies, are set out in the Prospectus Directive, the Prospectus Regulation and the Transparency Directive, as implemented in the countries in which Euronext operates.
Companies seeking to list their securities on Euronext's regulated markets must prepare a listing prospectus in accordance with the requirements of the Prospectus Directive and Prospectus Regulation, comply with the requirements of Euronext Rulebook I, the harmonised rulebook for the Euronext Market Subsidiaries, and any additional local listing requirements of Rulebook II and, following admission, comply with the on-going disclosure requirements set forth by the competent authority of their home Member State.
MiFID, MAD, ESMA standards and the Euronext Rulebooks all provide minimum requirements for monitoring of trading and enforcement of rules by Euronext as the operator of regulated markets and MTFs. In particular, market operators are required to meet, inter alia, all the requirements set out in MiFID (and reinforced in MAD) including the obligation to ensure that the markets they operate allow fi nancial instruments to trade "in a fair, orderly and effi cient manner".
To this end, Euronext has set up a framework to organise market monitoring by which it:
Market surveillance and monitoring are implemented through a two-step process consisting of real-time market surveillance and post-trade (i.e., "next day") analysis of executed trades. Euronext ensures member compliance with its rules by conducting on-site investigations and inspections.
The national regulators of Euronext's markets are parties to a memorandum of understanding most recently amended and restated on 24 June 2010 that established a "Euronext College of Regulators" and provides a framework to coordinate their supervision and regulation of the business and of the markets operated by Euronext. The Company commits itself to the memorandum of understanding, to the extent that any obligations arising from the memorandum of understanding apply to the Company or its subsidiaries.
These regulatory authorities have identifi ed certain areas of common interest and have adopted a coordinated approach to the exercise of their respective national rules, regulations and supervisory practices regarding listing requirements, prospectus disclosure requirements, on-going obligations of listed companies, takeover bid rules and disclosure of large shareholdings. Representatives of each national authority meet in working groups on a regular basis in order to coordinate their actions in areas of common interest and agree upon measures to promote harmonisation of their respective national regulations.
Euronext's market operators each hold licences for operating regulated markets. Some market operators also operate a number of markets that do not fall within the EU defi nition of "regulated markets" or MTFs. Each market operator is subject to national laws and regulations pursuant to its market operator status.
Both Euronext and Euronext Amsterdam N.V. have an exchange licence from the Dutch authorities to operate regulated markets. This means that they are subject to the regulation and supervision of the Dutch Minister of Finance and the Autoriteit Financiële Markten ("AFM"). Since the creation of Euronext in 2000, the Dutch regulators have taken the view that the direct parent company of Euronext Amsterdam, as controlling shareholder, has to be seen as co-market operator and, accordingly, also requires an exchange licence. Pursuant to section 5: 26 paragraph 1 of the Dutch Financial Supervision Act it is prohibited in the Netherlands to operate or to manage a regulated market without a licence granted by the Dutch Minister of Finance.
The Dutch Minister of Finance may, at any time, amend or revoke the licence if necessary to ensure the proper functioning of the markets or the protection of investors. The licence may also be revoked for non-compliance with applicable rules.
Euronext Brussels is governed by the Belgian Act of 2 August 2002 and is recognised as a market undertaking according to Article 16 of the Belgian Act of 2 August 2002. The Belgian Act of 2 August 2002 transferred to the former CBFA (now Financial Services and Markets Authority ("FSMA") some of the responsibility previously executed by the Brussels exchange (e.g., disciplinary powers against members and issuers, control of sensitive information, supervision of markets and investigative powers). Euronext Brussels is responsible for matters such as the organisation of the markets and the admission, suspension and exclusion of members and has been appointed by law as the "competent authority" for listing matters within the meaning of EU Directive 2001/34/EC dated 28 May 2001.
Euronext Lisbon is governed by Portuguese Decree of Law No. 357- C/2007 of 31 October 2007 which, along with the Portuguese Securities Code and regulations of the Comissão do Mercado de Valores Mobiliários ("CMVM"), governs the regime applicable to regulated markets and MTFs, market operators and other companies with related activities in Portugal. The creation of regulated market operators requires the prior authorisation in the form of a decreelaw from the Portuguese Minister of Finance, following consultation with the CMVM.
The CMVM is an independent public authority that supervises and regulates markets and market participants, public off erings and collective investment undertakings. Its objectives are to ensure investor protection and an efficient and regular functioning of markets, monitor information, prevent risk and prevent and suppress illegal actions. The entities subject to the supervision of the CMVM should co-operate with the CMVM as requested. The CMVM carries out "on-site" supervision of the entities subject to its supervision and makes public infringements and fi nes imposed in accordance with applicable law.
As a market operator, Euronext Paris manages the Euronext regulated markets in France. In accordance with Article L. 421-10 of the French Monetary and Financial Code, Euronext Paris adopts rules for each of these markets to ensure fair and orderly trading and effi cient order execution. The requirements for market access and admission of fi nancial instruments to trading are also covered by these rules, which are approved by the Autorité des Marchés Financiers ("AMF") and published on the market operator's website.
Euronext Paris markets are subject to the provisions of Article L. 421- 4 et seq. of the French Monetary and Financial Code, which authorises the French Minister of Economy to confer and revoke regulated market status upon proposal of the AMF, which has to consult with the Autorité de Contrôle Prudentiel et de Résolution ("ACPR").
Euronext London has been granted recognition by the Financial Conduct Authority ("FCA") to operate as a UK Recognised Investment Exchange ("RIE"), pursuant to section 290 of the Financial Services and Markets Act 2000 (the "UK FSMA"). As such, Euronext London has certain self-regulatory responsibilities for its markets. In order to retain its status as an RIE, Euronext London is required to meet various legislative and regulatory requirements and failure to comply with these requirements could subject it to signifi cant penalties, including de-recognition.
The regulatory framework applicable to Euronext London is supplemented by a series of legislative provisions regulating the conduct of participants. Importantly, the UK FSMA contains provisions making it an off ense for any person to engage in certain market behaviour and prohibits market abuse through the misuse of information, the giving of false or misleading impressions or the creation of market distortions. Breaches of those provisions give rise to the risk of sanctions, including fi nancial penalties.
In connection with obtaining regulatory approval of the acquisition of Euronext by NYSE Group, Inc. in 2007, NYSE Euronext implemented certain special arrangements which included a standby structure involving a Dutch foundation (stichting). Following the acquisition of NYSE Euronext by ICE and the Demerger, the Company became a party to these arrangements, which include a Further Amended and Restated Governance and Option Agreement (the "GOA"), to which ICE, the stichting and Euronext are parties. The stichting has been incorporated to mitigate the eff ects of any potential change in U.S. law that could have extraterritorial eff ects on the regulated markets operated by the Euronext Market Subsidiaries as a result of a U.S. shareholder holding a controlling interest in the Company. The board members of the stichting are independent from Euronext. Pursuant to the GOA, while the Company has U.S. shareholders with a controlling interest in the Company, the stichting is empowered to take actions to mitigate the adverse eff ects of any potential change in U.S. law that have certain extraterritorial eff ects on the regulated markets operated by the Euronext Market Subsidiaries. If there is no such controlling U.S. shareholder, the stichting becomes dormant and unable to exercise such powers. If a new U.S. shareholder were to gain control of the Company, the stichting would be automatically revived.
Up until 20 June 2014, the s tichting was active through ICE's shareholdership. Since the IPO , ICE sold its shareholdership, and there has been no controlling US shareholder. A t the Euronext College of Regulators' request, the Stichting has become dormant.
The rules set forth below apply to an acquisition of a direct or indirect interest in Euronext's market operators. These rules are in addition to shareholder reporting rules applicable to listed companies generally set out above.
• Under Dutch law, a declaration of no-objection of the Dutch Minister of Finance is required for any holding, acquisition or increase of a Qualifying Participation (defi ned as direct or indirect participation of at least 10% of the issued capital of the relevant entity or the power to exercise at least 10% of the voting rights) in an operator or holder of a regulated market in the Netherlands which has been granted a license to operate such market pursuant to Section 5: 26 of the Dutch Financial Supervision Act. The Dutch Minister of Finance has delegated its powers to grant a declaration of noobjection under Section 5: 32d of the Dutch Financial Supervision Act to the AFM except in cases where the acquisition of the Qualifying Participation involves a fundamental change to the shareholding structure of the relevant licensed operator or holder of a regulated market in the Netherlands. Euronext N.V. controls Euronext Amsterdam, which is the licensed holder and operator of a regulated market in the Netherlands, and have obtained a declaration of no-objection under Section 5: 32d referred to above. Therefore, any acquisition or holding increase of a direct or indirect interest in the Company that results in an indirect Qualifying Participation in Euronext Amsterdam, will trigger the requirement to obtain a declaration of no-objection of the AFM or, in case of a fundamental change in the shareholding structure, the Dutch Minister of Finance. Such declaration should be granted unless such holding, the acquisition or increase: (1) could or would lead to a formal or actual control structure that is lacking in transparency and would therefore constitute an impediment to the adequate supervision of the compliance by the market operator with the rules applicable to the operator of a regulated market; (2) could or would lead to an infl uence on the regulated market operator or eff ect on the exploited or managed regulated market that forms a threat to the interests which the Dutch Financial Supervision Act seeks to protect; or (3) could jeopardise the healthy and prudent operation of the regulated market concerned. Non-compliance with the requirement to obtain a declaration of no-objection is an economic off ense and may lead to criminal prosecution. In addition, if a person acquires or increases a Qualifying Participation without having obtained a declaration of no-objection, it will be obliged to cancel the transaction within a period to be set by the Dutch Minister of Finance or the AFM unless the person cures the off ense and obtains a declaration of no-objection. The Dutch Minister of Finance or the AFM may request the District Court in Amsterdam to annul any resolutions that have been passed in a general meeting of shareholders in which such person exercised its voting rights, if such resolution would not have been passed or would have been passed diff erently if such person would not have exercised its voting rights. The District Court will not annul the resolution if the relevant person obtains a declaration of no-objection prior to the decision of the court.
2
2
| 2.1 | Corporate governance | 32 |
|---|---|---|
| 2.2 | Management & control structure |
34 |
| 2.2.1 Risk management | 34 | |
| 2.2.2 Internal control – code of conduct | 35 | |
| 2.2.3 General information | 36 | |
| 2.2.4 Supervisory Board | 36 | |
| 2.2.5 Managing Board | 41 | |
| 2.3 | Report of the Supervisory Board |
45 |
| 2.3.1 Meeting | 45 | |
| 2.3.2 Supervisory Board Attendance Record | 45 | |
| 2.3.3 Supervisory Board activities | 45 | |
| 2.3.4 Board evaluation | 45 | |
| 2.3.5 Report Audit Committee | 45 | |
| 2.3.6 Report Remuneration Committee | 46 | |
| 2.3.7 Report Nomination and Governance | ||
| Committee | 46 | |
| 2.3.8 Financial statements | 46 |
| 2.4 | Remuneration report | 47 |
|---|---|---|
| 2.4.1 Remuneration policy | 47 | |
| 2.4.2 Remuneration of Managing Board members |
48 | |
| 2.4.3 Remuneration of Supervisory Board members |
49 | |
| 2.4.4 Remuneration chart and option scheme | 50 | |
| 2.4.5 Lock-up of Ordinary Shares | 51 | |
| 2.4.6 Employee Profi t Sharing and Incentive Plans |
51 | |
| 2.5 | Corporate social responsibility 52 | |
| 2.5.1 Stakeholders | 52 | |
| 2.5.2 Employees | 53 |
2.5.3 Community 54 2.5.4 Environment and Sustainability 55
The Dutch Corporate Governance Code ("the Code"), became eff ective on 1 January 2009 and fi nds its statutory basis in Book 2 of the Dutch Civil Code. The Code applies to Euronext as it has its registered offi ce in the Netherlands and its shares are listed on the regulated markets of Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris. A Dutch and an English version of the Code can be found at www. co mmissiecorporategovernance.nl
The Code defi nes a company as a long-term form of collaboration between the principal corporate bodies of a company. For Euronext, these corporate bodies include the Managing Board, the Supervisory Board and the General Meeting.
According to the Code, good corporate governance results in eff ective decision-making in a manner which enhances shareholder value and enables a company to maintain a culture of integrity, transparency and trust.
The Code is based on a "comply or explain" principle. Accordingly, companies are required to disclose the principles and best practices that deviate from the Code in their annual report and to explain the reason why .
Euronext acknowledges the importance of good corporate governance and endeavors to comply in general with the provisions of the Code. However, there are a limited number of best practice provisions that it currently does not comply with. The fact that Euronext is not compliant with a number of best practice provisions is related to the transition that Euronext is undergoing, from being a subsidiary in the NYSE Euronext and ICE groups to being a listed company. It is also related to the fact that Euronext is an international company uniquely supervised since its creation in 2000 by a College of international Regulators, supervising Euronext on a joint basis, which has required some specifi c features which may interfere with the specifi c provisions of the Dutch Code. Euronext is active in a number of European jurisdictions, each with diff erent laws, regulations, best practices, codes of conduct, regulatory guidelines and views.
Provisions of the Dutch Code regarding corporate law matters, that Euronext does not apply in 2014 because of its specifi c status as a newly listed entity, supervised by the Euronext College of Regulators:
Provisions of the Dutch Code regarding certain aspects of the remuneration policy of the Managing Board, that Euronext does not apply in 2014 because the newly created Remuneration Committee needed to complete their assessment of the benchmark of the Company's top managers'remuneration before being able to prepare a Remuneration policy:
Board member shall be eligible for severance pay not exceeding twice the annual salary"). Under Portuguese law severance pay is based on seniority. The Portuguese member of the Managing Board, Luís Laginha de Sousa, would be entitled to severance pay exceeding twice the annual salary.
• Euronext does not apply best practice provisions II.2.10 ("possibility for the Supervisory Board to adjust the value downwards or upwards of a Managing board director in some situations"), II.2.11 ("possibility for the Supervisory Board of a clawback of a Managing Board variable remuneration in case of incorrect fi nancial or other data"), and II.2.12 ("description in the Supervisory Board Remuneration Report – to be posted on the Company's website - of the remuneration policy for the past financial year, and overview of the remuneration policy planned for the next fi nancial year and subsequent years, with the description of how the chosen remuneration policy contributes to the achievement of the long-term objectives of the Company"). As stated above, Euronext was separated from the ICE group in June 2014, and the Supervisory Board's Remuneration Committee could only start working on the Remuneration policy, pending the defi nitive completion of the Reference Shareholders's directors' appointment (including the Remuneration Committee chairperson) at the AGM of mid-December 2014. The new remuneration policy decided by the Board Remuneration Committee will enable Euronext to be compliant with the Dutch Code provisions in the course of 2015.
Euronext does not apply best practice provision IV.3.1 ("meetings with analysts, presentations to analysts, presentations to investors and institutional investors and press conferences shall be announced in advance on the Company's website and by means of press releases, enabling all shareholders to follow these meetings and presentations in real time, for example by means of webcasting or telephone"): Euronext always ensures that all Shareholders and other parties are provided with equal and simultaneous information about matters that may infl uence the share price. All material developments are disclosed via press releases and all presentations used during analysts and investors meetings are available on Euronext website at the time the presentation starts. Euronext also provides real time webcast and conference call facilities for all its results presentations.
2
The objective of the enterprise risk management framework (ERM) is to create and preserve value for the Company's stakeholders. It is designed and operated to identify potential events that may aff ect the Company, manage the risk through control mechanisms, assess risk to be within the defi ned guidelines and to monitor to understand the evolution. Euronext seeks to embed the risk management philosophy into the Company culture, in order to make risk and opportunity management a regular and everyday process for employees. The Supervisory Board and Managing Board regard ERM as a key management process to steer Euronext and enable management to eff ectively deal with risks and opportunities.
The ERM framework and governance is designed to allow the M anaging Board and the Supervisory Board, as part of Euronext's business model, to identify and assess the Company's principal risks and enable strong decision making by informing the Supervisory Board and other key stakeholders of the key risks related to the execution of the strategy. The ERM also enables the Supervisory Board and Managing Board to maintain and attest to the eff ectiveness of the systems of internal control and risk management as set out in the Dutch Corporate Governance Code.
Governance Structure and related responsibilities for ERM process are as follows:
The objectives and principles for the ERM process are set forth in the Company's ERM Policy. The ERM process is based on best practices regarding the Internal Control and Enterprise Risk Management, including the Committee of Sponsoring Organisations of the Treadway Commission ("COSO") initiative. It uses a bottom-up and top-down process to enable better management and transparency of risks and opportunities. At the top, the Supervisory Board and Managing Board discuss major risks and opportunities, related risk responses and opportunity capture as well as the status of the ERM process, including signifi cant changes and planned improvements. The design of the ERM process seeks to ensure compliance with applicable laws and regulations with respect to internal control and risk management addressing both subjects in parallel.
Risk Appetite is the level and nature of risk the business is willing to accept in achieving its strategy and objectives overall and risk relating to particular business initiatives/deals or business as usual. Risk appetite sets the basis for the requirements for monitoring and reporting on risk. Overall risk appetite is recommended by the Managing Board to the Supervisory Board as part of setting and implementing strategic and operational objectives.
Risk appetite is considered at an operational level and strategic level with quantitative and qualitative components. These components are used during the assessment process to develop the residual risks and support what is escalated to the Managing Board and Supervisory Board.
Risk identification involves the identification of threats to the Company as well as causes of loss and potential disruptions. Risk can be both positive in nature (opportunity risks) or negative (hazard risks). Risks are composed of the following categories:
Risk Assessment is made in the event of an incident or a potential risk development and aims to quantify the risk in fi nancial terms where possible. This assessment takes into account mitigation measures currently in place such as business continuity measures or insurance policies. The overall Risk Assessment phase is carried out by the Risk Management Team ("RMT") in conjunction with Risk Coordinators ("RCs") based on data and information produced by and collected from the relevant areas via the periodic and ad hoc reporting or upon request of the RMT as necessary. Assessments are agreed with the b usiness a reas. Mitigations for each risk will be identifi ed, discussed and evaluated, and the residual risk will be noted quantifi ed and reported.
Risk Management determines and implements the most appropriate treatment to the identified risks. It encompasses the following: avoidance, reduction, transfer and acceptance. Organisational units and employees perform risk management and implement mitigating actions as required by the risk appetite and escalation process.
Risk Reporting – The Supervisory and Managing Boards and the Risk Committee Business Risk Group a BRG need to be informed in a timely and consistent manner about material risks, whether existing or potential, and about related risk management measures in order to take appropriate action. Regular r eports are issued to the above mentioned groups of the Company on a regular basis. Ad hoc r eports may be issued when a new risk or the development of an existing risk warrants escalation to the relevant committees of the Company.
Programme Development – Companies are operating in a volatile risk environment. Risk management capabilities are therefore critical and strategic. The Company seeks to deploy its ERM process effectively across the Group in order to mitigate risk and drive competitive advantage.
2014 was the fi rst year of the Company and Euronext achieved its objectives to have a Risk Management group operating and providing value in building the operational and strategic approach, reviewing key initiatives and embedding a risk culture within the Company. This will continue in 2015 as the programme grows in maturity, focusing on business process, key initiatives, communication and working with Human Resources to continue to build the culture. Euronext seeks to continuously evaluate and improve the operating eff ectiveness of the ERM process.
Internal Audit provides reliable, objective and reasonable assurance to Managing Board and Supervisory Board on the adequacy and eff ectiveness of the system of internal controls, the governance model and the risk management framework in place to manage risk within the risk appetite and achieve the Company's business objectives. As the third line of defence, the function has no operational responsibilities over the entities/processes it reviews. The independence of the internal audit function is achieved through the Head of Internal Audit reporting to the Chairman of the Audit Committee.
Euronext is strongly committed to conducting its business with integrity, excellence and responsibility and to adhering to high standards of ethical conduct. The role of Corporate Compliance is to establish and maintain a fi rst class compliance culture within the Company and to ensure that Euronext's business approach is in line with legal and regulatory requirements.
Corporate Compliance supports Euronext and its employees in complying with applicable laws and regulations and promotes ethical standards in accordance with good corporate governance. Compliance raises awareness among employees by articulating the responsibilities of the Company and its employees through policies and training and the monitoring of those policies and by providing a path for communication for employees. Compliance with applicable rules and principles and ethics is key to Euronext's success and it is the obligation of every employee to support this eff ort.
Euronext's Code of Conduct and Ethics implemented on 20 June 2014 (date of IPO) sets and reaffi rms Euronext's high standards of ethical conduct and reinforces its business ethics, policies and procedures. Compliance with the Code is required of all Board members (Managing Board, Supervisory Board and any other Board) and all employees including consultants, contractors and temporary employees. The Code which is supplemented by nine corporate policies govern without exception all business activities of the Company.
The Chief Risk and Compliance Offi cer is appointed by the Managing Board and reports both to the Chief Executive Offi cer and the Audit Committee of the Supervisory Board. This dual reporting ensures the necessary independence of Compliance activities. Compliance officers are located in countries where Euronext conducts its activities and are supported as necessary by local legal staff in order to benefi t from the local expertise and knowledge of the local business and environment.
Compliance processes are established as follows:
Guidelines and procedures are defi ned notably to ensure that antimoney laundering and sanctions, bribery and fraud and confl icts of interest concerns are managed and that business is always conducted in a fair manner. Staff training and awareness sessions are conducted regularly in all company locations to promote compliance and ethics standards.
The Company protects anyone who reports an alleged breach of laws or company policies in good faith and ensures that they shall in no way be put at a disadvantage by the Company as a result of the report.
Finally, given the dual positions of Euronext as a market operator and a listed issuer on the Euronext markets, Compliance has imposed strict personal dealing rules and a confl icts of interest procedure to ensure that neither the staff nor the Company itself could take undue benefi ts from this situation.
No information on family relationships between members of the Supervisory Board, members of the Managing Board and senior staff, as well as on convictions in relation to fraudulent off ences, bankruptcies, receiverships, liquidations or offi cial public incriminations with regard to these persons has been included in this registration document, as these matters are to the best knowledge of Euronext not applicable to these persons.
Further, to the best of Euronext's knowledge, the members of the Supervisory Board and the Managing Board had no potential confl icts of interest in 2014.
In accordance with article 5:25c(2)(c) of the Dutch Financial Supervision Act (Wet op het fi nancieel toezicht), the Managing board of Euronext hereby declares that, to the best of its knowledge, (i) the fi nancial statements prepared in accordance with IFRS as endorsed by the EU give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of Euronext and the enterprises included in the consolidation as a whole, and (ii) the Registration Document gives a true and fair view of the position on the balance sheet date, the course of events during the fi nancial year of Euronext and the enterprises included in the consolidation as a whole, together with a description of the principal risks that Euronext faces.
In accordance with best practice provision II.1.5 of the Dutch Corporate Governance Code, Euronext's Managing Board is of the opinion that, in respect of fi nancial reporting risks, the internal risk management and control system, as described in 4.2.1 "Risk management" and 4.2.2 "Internal control – code of conduct", (i) provides a reasonable level of assurance that the fi nancial reporting in this Registration Document does not contain any errors of material importance, and (ii) has worked properly since Euronext became an independent company on 20 June 2014.
The Managing Board has assessed the risk profi le and the design and operating eff ectiveness of the risk management and control systems; this was discussed with the Audit Committee of the Supervisory Board.
The Managing Board declares that, having taken all reasonable care to ensure that such is the case, the information contained in the Registration Document is, to the best of the Managing Board's knowledge, in accordance with the facts and contains no omission likely to aff ect its import.
T he Articles of Association of Euronext, historical information and relevant documentation for investors and shareholders may be viewed on Euronext's website in the Investor Relations section at www.euronext.com/en/investors.
Euronext has a two-tier governance structure with a Supervisory Board and a Managing Board. The governance arrangements of the Supervisory Board described in this section are based on, among other things, Dutch law, Euronext's Articles of Association and the Rules of Procedures for the Supervisory Board. These arrangements include additional provisions and modifi cations agreed with the Euronext College of Regulators designed to ensure the long-term stability and autonomy of Euronext and curb possible disproportionate levels of infl uence that large shareholders may have on it.
The Supervisory Board is responsible for the supervision of the activities of the Managing Board and the supervision of the general course of the business of Euronext. The Supervisory Board may on its own initiative provide the Managing Board with advice and may request any information from the Managing Board that it deems appropriate. In performing their duties, the members of the Supervisory Board must act in the interests of Euronext and those of its business. The Supervisory Board is collectively responsible for carrying out its duties.
Members of the Supervisory Board are appointed by the General Meeting (i) in accordance with a proposal of the Supervisory Board or (ii) from a binding nomination to be drawn up by the Supervisory Board, with due observance of the profile (profielschets) for the size and the composition of the Supervisory Board adopted by the Supervisory Board and reviewed annually. The profi le sets out the scope and composition of the Supervisory board, taking into account the nature of the business, its activities, and the desired expertise, experience, diversity and independence in matters of capital markets in general and in particular in the areas of finance, economics, human resources and organisation, information technology and data processing, legislation and regulation, legal matters and compliance.
The Articles of Association of Euronext provide that each member of the Supervisory Board is appointed for a maximum period of four years provided that unless such member of the Supervisory Board has resigned or is removed at an earlier date or unless otherwise specifi ed in the relevant proposal for appointment, his or her term of offi ce shall lapse on the day of the General Meeting, to be held after four years after his or her last appointment have lapsed. An appointment can be renewed for a term of up to four years at a time.
The General Meeting may suspend or dismiss a member of the Supervisory Board at all times. The Supervisory Board can make a proposal for the suspension or dismissal of a member of the Supervisory Board. If the suspension or dismissal occurs in accordance with a proposal thereto by the Supervisory Board, a resolution of the General Meeting for suspension or dismissal of a member of the Supervisory Board requires an absolute majority of the votes cast. However, such resolution of the General Meeting requires a majority of at least two-thirds of the votes cast representing more than one third of the outstanding and issued share capital, if the suspension or dismissal does not occur in accordance with a proposal by the Supervisory Board.
The Articles of Association provide that the Supervisory Board shall adopt resolutions by an absolute majority of the votes cast. Each member of the Supervisory Board has one vote. In the event of a tie of votes, the chairman of the Supervisory Board has a casting vote.
A member of the Supervisory Board may not participate in the deliberation and the decision-making process of the Supervisory Board if it concerns a subject in which this member of the Supervisory Board has a direct or indirect personal interest which confl icts with the interest of Euronext and its business enterprise. In such event, the other members of the Supervisory Board shall be authorised to adopt the resolution. If all members of the Supervisory Board have a confl ict of interest as indicated, the resolution shall nevertheless be adopted by the Supervisory Board, notwithstanding the confl ict of interests.
The Articles of Association provide that the number of members of the Supervisory Board will be determined by the Supervisory Board and will consist of a minimum of three members. Only natural persons can be members of the Supervisory Board. In the event of a vacancy, the Supervisory Board continues to be validly constituted by the remaining member or members of the Supervisory Board.
Following the incorporation of Euronext N.V. on 15 March 2014, Rijnhard van Tets, André Bergen, Arnoud de Pret, Manuel Ferreira da Silva, Jean-Marc Forneri, Jan-Michiel Hessels, Scott Hill, Philippe Oddo and Jeff rey Sprecher were appointed to the Supervisory Board for a fi rst term of four years. Jean-Marc Forneri, Scott Hill and Jeff rey Sprecher retired from the Supervisory Board on 10 July 2014, following Euronext's separation from the Intercontinental Exchange Group. At the Extraordinary General Meeting held on 19 December 2014, Dominique Aubernon, Koenraad Dom and Lieve Mostrey were appointed to the Supervisory Board as representatives of the Reference Shareholders.
Euronext has assessed that all appointments to the Supervisory Board in 2014 are in compliance with the requirements as included in the Dutch 'Wet bestuur en toezicht' regarding the maximum number of Supervisory Board positions.
Dominique Aubernon, Koenraad Dom and Lieve Mostrey took part in an induction programme offered by Euronext. The induction programme consisted of a series of meetings with key staff members, with whom the various aspects of Euronext business, clients and initiatives, governance and regulatory environment, fi nance and the risk and compliance programme at Euronext were discussed. The other members of the Supervisory Board were considered to be familiar with these items given the fact that they had been members of the Supervisory Board of Euronext's former parent company, and therefore no induction programme had been off ered to them.
The Supervisory Board consisted of nine members as at 31 December 2014 and was composed as follows:
Rijnhard van Tets chairs the Supervisory Board and chairs the Nomination and Governance Committee. He was appointed to the Supervisory Board of Euronext N.V. in 2003 and became chairman in 2007. He is also the chairman of the Supervisory Board of Euronext Amsterdam. He served as a director of NYSE Euronext from 2007 to 2013.
Mr van Tets served thirteen years on the managing board of ABN AMRO. He has extensive experience as a senior executive at European companies across a variety of sectors. He is currently a partner of Laaken Asset Management. He is Chairman of the Board of Petrofac Ltd and Chairman of the Supervisory Board of OBAM. Amongst other board appointments he was previously Chairman of the Supervisory Board of Wegener and a member of the supervisory board of Reliant Energy N.V. and of the supervisory board of Stichting Holland Casino. He was chairman of Equity Trust Holdings SARL and chair of the Investment Committee of SFB, one of the largest Dutch pension funds.
André Bergen is the vice-chair of the Supervisory Board and chairs the Audit Committee. He was appointed to the Supervisory Board of Euronext N.V. in 2011, and was as a director of NYSE Euronext from 2010 until 2013.
Mr Bergen was appointed as the chief executive officer of KBC Bank in 2003, before being appointed chief executive offi cer of KBC Group in 2006 and retiring in 2009. He also held various positions at Generale Bank (later Fortis Bank) from 1982 to 1999. He is a member of the board of Cofi nimmo S.A., a director of Recticel N.V. and Sapient Investment Managers and a former member of the board of the Flemish Employers Association. During his career, Mr Bergen has taught at diff erent universities in Belgium and abroad and is an economics graduate from the Catholic University of Leuven.
Dominique Aubernon is a member of the Supervisory Board and a member of the Nomination and Governance Committee. She was appointed to the Supervisory Board in December 2014.
Ms Aubernon is currently the Head of Strategic Advisory of BNP Paribas Group which focuses on defining and implementing the fi nancial policy. She serves as vice-chair of the Supervisory Board of Klépierre and she is a board member of BNP Paribas New Zealand LTD. Prior to her present position, she was CFO of BNP Paribas International Retail Services, a position she held from 2006 to 2008. Previously Ms Aubernon held several senior positions within BNP's and BNP Paribas' Structured Finance, beginning in 1988 when she took an active part in the creation of the Structured Capital Markets and Structured Leasing activities, a department that she headed fi rst in France, then in Europe, and fi nally worldwide. Her responsibility was then extended to Aircraft and Shipping fi nancing, as Global Head of Asset Financing, from 2002 to 2006. From 1984 to 1990, she was in charge of Origination and Syndication for French issuers within BNP Fixed Income. She joined BNP in 1980 and began her career as asset manager on money market funds. Ms Aubernon holds a BA in Mathematics and Statistics, and a MA in Corporate Finance and Sales Strategy.
Arnoud de Pret is a member of the Supervisory Board, a member of the Audit Committee and a member of the Nomination and Governance Committee. He was appointed to the Supervisory Board of Euronext N.V. in 2007. He also chairs the advisory board of Euronext Brussels.
From 1991 to 2000, Mr de Pret was a member of the executive committee of Umicore, serving as corporate vice-president fi nance, and then chief fi nancial offi cer. Throughout his career, he held a variety of fi nance positions, including chief fi nancial manager at UCB, treasurer at the Cockerill-Sambre steel company and corporate account manager at Morgan Guaranty Trust Company of New York. He currently sits on both the board and audit committee for UCB, Umicore, Intégrale (Caisse Commune) and Sibelco. Mr de Pret is a representative of the main shareholders of Anheuser-Busch InBev S.A. He trained as a commercial engineer at the University of Leuven.
Koenraad Dom is a member of the Supervisory Board and a member of the Audit Committee. He was appointed to the Supervisory Board in December 2014.
Mr Dom is a fi nance and risk professional with extensive experience in banking, fi nancial markets, energy and commodities. He has been a member of the Board of Directors and chairs the Audit Committee at Federal Holding & Investment Company (FHIC) since 2006. Before 2012, he was also Group Manager Commodity Risk at Nyrstar, and before 2007 Senior Risk Manager at EDF Luminus. Before that, he held several managing positions at Capco and Fortis AG Group. He started his career as a fi nancial analyst and broker-dealer at Delta Lloyd. Mr Dom holds three masters degrees (Commercial Engineer, European Aff airs and Risk Management) and an executive MBA with distinction.
Manuel Ferreira da Silva is a member of the Supervisory Board, a member of the Remuneration Committee and a member of the Nomination and Governance Committee. He was appointed to the Supervisory Board of Euronext N.V. in 2012.
Mr Ferreira da Silva has been an executive member of the board of directors of Banco BPI since 2001 and is the CEO of its wholly-owned investment bank. He is chairman of BPI Private Equity and a member of the board of directors of BPI Capital Africa and BPI Madeira. He is also a non-executive member of the Board of the SERRALVES Foundation, Museum of Contemporary Art. He was a member and, between 2012 and 2014, chairman of the representatives council of the University of Porto School of Economics and is a member of the advisory board of the Master in Finance of Católica Lisbon and of the board of PVCI. He was member of the board of the Lisbon and Porto Stock Exchanges between 2000 and 2001 and a member of the advisory board of the Portuguese Securities Market Commission (CMVM) between 2001 and 2005. Between 1980 and 1989, Mr Ferreira da Silva lectured at the University of Porto School of Economics and spent two years as an assistant director of the Navy's Centre of Operational Research. He graduated with a degree in Economics from the Universidade do Porto in 1980 and holds a MBA from the Nova School of Business and Economics (Lisbon, 1982).
Jan-Michiel Hessels is a member of the Supervisory Board and a member of the Remuneration Committee. He was appointed to the Supervisory Board of Euronext N.V. in 2000 and served as its chairman until 2007, when he left the Supervisory Board to become the chairman of the Board of Directors of NYSE Euronext. After the acquisition of NYSE Euronext by Intercontinental Exchange in 2013, he became a member of the board of directors of ICE (until 2014) and once more a member of the Supervisory Board of Euronext N.V.
Mr Hessels was the chief executive offi cer of Royal Vendex KBB from 1990 to 2000. He currently chairs Royal Boskalis Westminster N.V. He is also a member of the Supervisory Boards of Euronext Amsterdam and General Atlantic Coop. Mr Hessels has extensive experience as a board member. Over the past fi fteen years he served as chairman of the boards for Royal Philips Electronics N.V. He was also a member of the supervisory boards for a number of international companies, including Heineken N.V., Royal Vopak N.V., Laurus N.V., Barnes & Noble Inc., Yule Catto PLC, Dillard's Department Stores Inc. and Fortis N.V. and SC Johnson Inc. in the United States. Mr Hessels holds degrees from the University of Pennsylvania and University of Leiden.
Lieve Mostrey is a member of the Supervisory Board and chairs the Remuneration Committee. She was appointed to the Supervisory Board in December 2014.
Ms Mostrey joined Euroclear in 2010 as Executive Director and Chief Technology & Services Offi cer of the Euroclear group. She is a member of the Euroclear Group Management Committee and an Executive Director of the Board. She also chairs the boards of Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland and Euroclear Sweden, non-executive director at Euroclear Bank and member of the board of RealDolmen. Previously, Ms Mostrey was a member of the Executive Committee of BNP Paribas Fortis in Brussels, where she was responsible for IT technology, operations (including securities, payments, credit cards, mortgages, clients and accounts), property and purchasing. Ms Mostrey began her career in 1983 within the IT department of Generale Bank in Brussels, moving to Operations in 1997 and, upon its merger with Fortis in 2006, became country manager for Fortis Bank Belgium. She became Chief Operating Offi cer of Fortis Bank in 2008, which was acquired by BNP Paribas in 2009. She was also a Non-Executive Director of the Boards of Euroclear PLC and Euroclear S.A./N.V. between 2006 and May 2010. Having earned a degree in civil engineering from Katholieke Universiteit Leuven in 1983, Ms Mostrey completed a postgraduate degree in economics from Vrije Universiteit Brussel in 1988.
Philippe Oddo is a member of the Supervisory Board. He was appointed to the Supervisory Board of Euronext N.V. in 2007.
Mr Oddo is the founder of Oddo Asset Management and has been a general partner at Oddo & Cie since 1987. As the Head of Oddo & Cie, Mr Oddo has diversifi ed the bank's activities, particularly in private and investment banking. He has also overseen the bank's expansion in recent years, including the acquisitions of Delahaye Finances, Pinatton, Crédit Lyonnais Securities Europe, Banque d'Orsay and Banque Robeco. In 1998 he also founded Oddo Asset Management. Mr Oddo is the chairman of the supervisory board of Oddo Seydler Bank AG, a member of the supervisory boards of Fonds de Garantie des Dépôts and European Funds Administration S.A., vicepresident of Association Nationale des Sociétés par Actions (ANSA), vice-president of Association Syndicale des Moyennes Entreprises Patrimoniales (ASMEP) and a member of the board of International Fund Raising for Alzheimer Disease. Mr Oddo holds degrees from the University of Paris-Dauphine, the University of New York and the University of Cologne.
The table below contains information on the members of the Supervisory Board that has not been included above (as at 31 December 2014).
| Name | Age | Gender | Nationality | Profession | Member since | Independent/ non-independent |
End of current term |
|---|---|---|---|---|---|---|---|
| Rijnhard van Tets | 67 | Male | Dutch | Asset manager | 15/03/2014 | Independent | 2018 |
| André Bergen | 64 | Male | Belgian | Banker | 15/03/2014 | Independent | 2018 |
| Dominique Aubernon | 58 | Female | French | Banker | 19/12/2014 | Non-independent | 2018 |
| Arnoud de Pret | 70 | Male | Belgian | Consultant | 15/03/2014 | Independent | 2018 |
| Koenraad Dom | 46 | Male | Belgian | Consultant | 19/12/2014 | Non-independent | 2018 |
| Manuel Ferreira da Silva | 57 | Male | Portuguese | Banker | 15/03/2014 | Independent | 2018 |
| Jan-Michiel Hessels | 72 | Male | Dutch | Company Director | 15/03/2014 | Independent | 2018 |
| Lieve Mostrey | 54 | Female | Belgian | Civil Engineer | 19/12/2014 | Non-independent | 2018 |
| Philippe Oddo | 55 | Male | French | Banker | 15/03/2014 | Independent | 2018 |
Three members of the Supervisory Board, namely Dominique Aubernon, Koenraad Dom and Lieve Mostrey, were proposed by the Company's Reference Shareholders, who as a group hold more than a third of the Company's shares. Although this group of shareholders is not a legal entity, the Company regards these three members of the Supervisory Board as non-independent within the meaning of the Dutch Corporate Governance Code. The background of the presence of three non-independent members in Euronext's Supervisory Board is related to the wish of Euronext College of Regulators for Euronext to have a number of stable, long-term shareholders.
Dutch law requires large Dutch companies to pursue a policy of having at least 30% of the seats on both the Managing Board and the Supervisory Board held by men and at least 30% of those seats held by women. This rule is temporary and will cease to have eff ect on 1 January 2016. Euronext N.V. qualifi es as a large Dutch Company and currently does not meet these gender diversity targets with regard to the Supervisory Board, as only two of the nine members of the Supervisory Board are women. It should be noted, however, that with the appointment of two female Supervisory Board members in December 2014 and only one male Supervisory Board member, Euronext is moving towards meeting the criteria and will continue to aim to achieve an even more well-balanced allocation in the future.
During 2014, no Supervisory Board member acted as a delegated Supervisory Board member, nor was any Supervisory Board member involved in Euronext's management.
As far as Euronext is aware, there were no transactions in which there were confl icts of interest with the members of the Supervisory Board that were of material signifi cance to Euronext and/or to any of its subsidiaries during the 2014 fi nancial year.
Euronext's Articles of Association provide for an indemnity for each present or former member of the Managing Board and each present or former member of the Supervisory Board against all costs, charges, losses and liabilities incurred by them in the proper execution of their duties or the proper exercise of their powers in any such capacities in the Company including, without limitation, any liability incurred in defending proceedings in which judgment is given in their favour or in which they are acquitted, or which are otherwise disposed of without a fi nding or admission of material breach of duty on their part, other than cases of willful misconduct or gross negligence (opzet of grove nalatigheid).
The Supervisory Board is supported by Euronext N.V.'s Company secretary, René Geskes.
Euronext N.V.'s registered address serves as the business address for all members of the Supervisory Board, being Beursplein 5, 1012 JW, Amsterdam, The Netherlands.
In 2014, the Audit Committee consisted of André Bergen (Chairman), Arnoud de Pret and Scott Hill. The latter resigned on 10 July 2014 as ICE was no longer a controlling shareholder after Euronext's IPO. Koenraad Dom became a member of the Audit Committee upon his appointment to the Supervisory Board on 19 December 2014.The Audit Committees assists the Supervisory Board in supervising and monitoring the Managing Board by advising on matters such as the compliance by Euronext with applicable laws and regulations, Euronext's disclosure of fi nancial information, including its accounting principles, the recommendation for the appointment of Euronext's external auditor to the General Meeting, the recommendations from Euronext's internal auditor and external auditor, and the review of the internal risk management and control systems and IT and business continuity safeguards.
The roles and responsibilities of the Audit Committee as well as the composition and the manner in which it discharges its duties are set out in the charter of the Audit Committee included in the regulations of the Supervisory Board. The Audit Committee will meet as often as the chairman of the Audit Committee or a majority of the members of the Audit Committee deems necessary but in any event at least twice a year.
Rijnhard van Tets, Arnoud de Pret and Manuel Ferreira da Silva were appointed as members of the Nomination and Governance Committee on 11 December 2014. Dominique Aubernon joined them on 19 December 2014 upon her appointment to the Supervisory Board. The Committee is chaired by Rijnhard van Tets.
The responsibilities of the Nomination and Governance Committee relating to selection and appointment include recommending criteria and procedures to the Supervisory Board for the selection of candidates to the Managing Board and the Supervisory Board and its Committees, identifying and recommending to the Supervisory Board candidates eligible to serve on the Managing Board and the Supervisory Board and its Committees, establishing and overseeing self-assessment by the Managing Board and the Supervisory Board and its Committees, conducting timely succession planning for the CEO and the other positions of the Supervisory Board and the Managing Board and reviewing and evaluating the size, composition, function and duties of the Managing Board and the Supervisory Board, consistent with their respective needs.
The responsibilities of the Nomination and Governance Committee relating to governance include the supervision and evaluation of compliance with the Dutch Corporate Governance Code.
The roles and responsibilities of the Nomination and Governance Committee as well as the composition and the manner in which it discharges its duties are set out in the charter of the Nomination and Governance Committee included in the regulations of the Supervisory Board. The Nomination and Governance Committee will meet as often as necessary and whenever any of its members requests a meeting.
Manuel Ferreira da Silva and Jan-Michiel Hessels were appointed as members of the Remuneration Committee on 8 October 2014. Lieve Mostrey joined them on 19 December 2014 when she was appointed to the Supervisory Board. The Committee is chaired by Lieve Mostrey.
The responsibilities of the Remuneration Committee include analysing the possible outcomes of the variable remuneration components and how they may affect the remuneration of the members of the Managing Board, preparing proposals for the Supervisory Board concerning remuneration policies for the Managing Board to be adopted by the General Meeting, preparing proposals for the Supervisory Board concerning the terms of the service agreements and total compensation of the individual members of the Managing Board, preparing proposals for the Supervisory Board concerning the performance criteria and the application thereof for the Managing Board, preparing proposals for the Supervisory Board concerning the approval of any compensation plans in the form of share or options, reviewing the terms of employment and total compensation of employees directly reporting to the Managing Board and the total compensation of certain other specified employees, defined in consultation with the Managing Board, overseeing the total cost of the approved compensation programmes, preparing and publishing on an annual basis a report of its deliberations and fi ndings and appointing any consultant in respect of executive remuneration.
The roles and responsibilities of the Remuneration Committee as well as the composition and the manner in which it discharges its duties are set out in the charter of the Remuneration Committee included in the regulations of the Supervisory Board. The Remuneration Committee will meet as often as necessary and whenever any of its members requests a meeting.
The Managing Board is responsible for the day-to-day management of the operations of Euronext and is supervised by the Supervisory Board. As described in the Articles of Associations, the Managing Board is required to inform or seek approval fromthe Supervisory Board depending on the matter. In performing their duties, the members of the Managing Board must act in the interests of Euronext and those of its business. The Managing Board as a whole is authorised to represent Euronext.
As per the Articles of Association, the Managing Board consists of the Chief Executive Offi cer ("CEO") of the Euronext group, the Head of Markets and Global Sales, the CEOs of the four local exchanges and the Chief Operating Offi cer ("COO"). The members of the Managing Board are appointed by the General Meeting only in accordance with a proposal of the Supervisory Board or upon a binding nomination by the Supervisory Board. Prior to making a nomination, the proposed nomination must be submitted to the College of Regulators and the Dutch Ministry of Finance for approval.
The Managing Board shall adopt resolutions by an absolute majority of the votes cast knowing that confl icted members cannot participate and that the chairman of the Managing Board has a casting vote.
The following matters require the approval of the Supervisory Board:
a proposal to amend the Articles of Association;
a proposal to dissolve Euronext;
Additionally, pursuant to Dutch law, resolutions of the Managing Board involving a major change in Euronext's identity or its business require the prior approval of the General Meeting and the Supervisory Board, which in any case include:
The Rules of Procedures for the Managing Board provide that the Managing Board of a Euronext Market Subsidiary has the right to reject a resolution by the Managing Board if such resolution solely or principally has an impact on the exchange operated by such Euronext Market Subsidiary and such impact is material or of strategic importance for the Exchange operated by such Euronext Market Subsidiary. Each member of the Managing Board of such Euronext Market Subsidiary has the right to request that the item is placed on the agenda of the Supervisory Board of Euronext. The Supervisory Board shall then discuss the matter with the Managing Board of Euronext, and consider the arguments of the managing board of the Euronext Market Subsidiary, following which the Supervisory Board will take a fi nal and binding decision on the matter.
The table below lists the members of the Managing Board at 31 December 2014.
| Name | Age | Position | Appointed on | Term |
|---|---|---|---|---|
| Dominique Cerutti | 53 | Group CEO | 15 March 2014 | Indefi nite |
| Anthony Attia | 40 | CEO, Euronext Paris | 15 March 2014 | Indefi nite |
| Jos Dijsselhof | 49 | Group COO and Acting CEO, Euronext Amsterdam | 16 June 2014 | Indefi nite |
| Lee Hodgkinson | 42 | Head of Markets and Global Sales and CEO of Euronext London | 15 March 2014 | Indefi nite |
| Luís Laginha de Sousa | 49 | CEO, Euronext Lisbon | 15 March 2014 | Indefi nite |
| Vincent Van Dessel | 56 | CEO, Euronext Brussels | 15 March 2014 | Indefi nite |
Dominique Cerutti, Anthony Attia, Lee Hodgkinson, Luís Laginha de Sousa, Vincent Van Dessel and Cees Vermaas were appointed to the Managing Board on 15 March 2014, following the incorporation of Euronext.
Jos Dijsselhof was appointed to the Managing Board on 16 June 2014.
Cees Vermaas resigned from his positions within Euronext on 30 July 2014. Jos Dijsselhof replaced him as acting CEO of Euronext Amsterdam in anticipation of the appointment of a successor.
Euronext has assessed that all appointments to the Managing Board in 2014 are in compliance with the requirements as included in the Dutch 'Wet bestuur en toezicht' regarding the maximum number of Supervisory Board positions.
On 2 February 2015, Euronext announced its intention to have Maurice van Tilburg appointed as a member of the Managing Board and as the CEO of Euronext Amsterdam. Mr Van Tilburg was appointed as the CEO of Euronext Amsterdam on 13 February 2015. He has been with the company and its predecessors in various positions since 1995. Most recently he was Euronext's Head of Business Projects & Design, European Equity and Equity Derivatives Markets. He is also a member of the Amsterdam Economic Board, an advisory body to the city of Amsterdam. Further i nformation on Mr van Tilburg and on the main elements of his employment contract will be included in the agenda of Euronext's Annual General Meeting that will be held on 6 May 2015. Mr van Tilburg is not deemed to have any confl ict of interest with Euronext, nor is there any arrangement or understanding with a major shareholder, customer or supplier pursuant to which he was selected to be appointed to these positions.
Euronext's registered address serves as the business address for all members of the Managing Board, being Beursplein 5, 1012 JW, Amsterdam, The Netherlands.
Dominique Cerutti has been the CEO of Euronext and Chairman of its Managing Board since 2010. From 2010 to 2013, Mr Cerutti was also President and Deputy CEO of NYSE Euronext and member of its Board of Directors. As Global Head of Technology, he was also in charge of both IT and NYSE Technologies, the commercial technology branch of NYSE Euronext. For much of his career Mr Cerutti has worked in international roles covering large scale organisations. Before 2010, Mr Cerutti spent over 20 years at IBM in various roles including General Manager of IBM Europe and General Manager of the leading market services provider in Europe, IBM Global Services EMEA. He was also a member of IBM's Chairman and CEO senior leadership team. Before joining IBM in 1986, Mr Cerutti spent two years at Bouygues, a French civil engineering company, in Saudi Arabia. Mr Cerutti is a Board Member of the LCH.Clearnet Group. He holds an engineering degree from the École Spéciale des Travaux Publics, du Bâtiment de l'Industrie (ESTP Paris).
Anthony Attia has been the CEO of Euronext Paris since January 2014. With more than 17 years' experience at Euronext, Mr Attia has held a number of responsibilities including market organis ation, business strategy, mergers and integration, and trading system design. Mr Attia served as Chief of Staff to the President and Deputy CEO of NYSE Euronext from 2010 to 2013, based in New York. In 2008, following the merger between NYSE and Euronext, he was appointed Senior Vice President in charge of designing and deploying the Universal Trading Platform . In 2004, he served as Executive Director, Head of Operations for Euronext. He was responsible for market surveillance, the operational relationship with customers, and business development projects in Amsterdam, Brussels, Lisbon and Paris. In 2000 he was the Program Director for the Euronext integration, in charge of migrating the French, Belgian and Dutch exchanges to the Euronext Market Model and NSC trading system. Mr Attia joined Société des bourses françaises in 1997. Mr Attia is a board member of LCH.Clearnet S.A., EnterNext, and the French Capital Markets Association (Amafi ). He holds an Engineering degree in computer science, applied mathematics and fi nance from the Institut d'Informatique d'Entreprise and also studied at INSEAD.
Jos Dijsselhof has joined Euronext as Chief Operating Offi cer in 2014. Mr Dijsselhof joined from Australia and New Zealand Bank where he was General Manager Group Hubs based in Singapore. He was responsible for the off shore services for Banking Operations, Shared Services, Technology and Corporate Functions. Before that, in 2008, he joined The Royal Bank of Scotland ("RBS") as Head Group Operations Asia Pacifi c and managed the integration of ABN AMRO into RBS. Mr. Dijsselhof began his career at ABN AMRO in 1993. At ABN AMRO, he has managed Derivatives, Options Operations and was appointed Regional Head of Markets Operations EMEA in 2000. Subsequently he was promoted to Global Head of Market Operations in 2003 and became the Regional Head of Operations Asia Pacifi c in 2005. Mr Dijsselhof studied Computer Science and Business Administration and graduated from INSEAD's Advanced Management Program.
Lee Hodgkinson is the Head of Markets and Global Sales of Euronext and CEO of Euronext London. Mr Hodgkinson joined Euronext, when it was part of NYSE Euronext, in 2009 as CEO of SmartPool, the European dark pool joint venture with J.P. Morgan, HSBC and BNP Paribas. As a member of the executive committee of NYSE Euronext he led the sales and client coverage division in Europe and Asia for the LIFFE and Euronext businesses. Prior to holding these positions, he was CEO of SIX Swiss Exchange's blue-chip international equity business, SWX Europe (formerly known as virt-x). A member of the Management Board of SIX Swiss Exchange since 2003, he held various executive leadership roles in Zurich including head of the client and products division and head of market operations. Prior to this he spent two years as Head of Market Development at the Cayman Islands Stock Exchange. Mr Hodgkinson began his career with the Markets Division of the London Stock Exchange, where he worked for nine years and is an alumnus of Harvard Business School.
Luís Laginha de Sousa has been the CEO of Euronext Lisbon and Interbolsa since July 2010. He has joined the Company in 2005 as Chief Operating Offi cer for Euronext Lisbon. Between 2005 and 2010 he has also held Group responsibilities in the areas of Market Data and Indices/Market Data and Corporate News Distribution. Prior to Euronext, he served as Executive Member on the Board of Caixaweb SGPS, S.A. and as Board Member of several CGD Group companies (Portugal and Spain). He has held managerial roles at Portuguese and Multinational Companies in different Business sectors, and at ICEP (the Portuguese Trade, Tourism and Foreign Investment Agency). Mr Laginha completed the Corporate Finance Programme at London Business School (2004), has an MBA from Universidade Católica Portuguesa (1995) where he also graduated in Economics (1988). He is a lecturer at UCP School of Business and Economics in the courses of International Business (MSc) and Strategic Alliances.
Vincent Van Dessel has been the CEO of Euronext Brussels since September 2009. From 2003 to 2009, Mr Van Dessel was General Manager of Euronext Brussels. From January 2000 to June 2003, he was Chairman of the Market Authority of the Brussels Exchanges, responsible for members admission, listing, company information and the supervision of the markets. Upon the merger of the Amsterdam, Paris and Brussels exchanges into Euronext in September 2000, he became member of the Executive Committee of Euronext N.V. Group. He joined the Brussels Stock Exchange in 1992 as Director Markets and Listing and later became member of the managing board of the Brussels Exchanges. Mr Van Dessel started his career as a stockbroker in 1984. He has an MSc in Applied Economics from KU Leuven University and is also a guest lecturer at several universities, including the KU Leuven, UCL Mons and Paris Sorbonne.
Amaury Dauge has been the Chief Financial Offi cer of Euronext N.V. since January 2014, and is responsible for all aspects of fi nance, treasury and investor relations. He joined Euronext in 2001. He was Head of Euronext's Strategy and Chief of Staff to the CEO, and in this role he worked on a number of transactions, including Euronext's IPO in 2001, the acquisition of LIFFE and the merger with NYSE, where he led the integration on Euronext's side. After the merger of NYSE and Euronext, he became Chief Operating Offi cer of European Cash and Listing, in charge of the restructuring of the Business Unit, and of its various business development projects. From 2009 to 2013 he was Head of Corporate Planning and Analysis in New York, where he led the planning process, oversaw performance for the Group, and designed and implemented annual strategic plans to meet the fi rm's business objectives. Before joining Euronext, he worked as a senior consultant for Atos Origin in Paris, as an auditor for PricewaterhouseCoopers in Luxembourg, and as a credit analyst for BNP Paribas in Dubai. He earned an MBA from INSEAD, a B.A. from INSEEC business school in Paris and is a CIIA (Certifi ed International Investment Analyst – Euro zone CFA equivalent). He has been a member of the SFAF (French Society of Financial Analysts) since 2004.
Catherine Langlais is the Executive Legal Director and General Counsel of the Company. Catherine Langlais joined Euronext Paris' subsidiary Matif S.A. (the French Derivatives exchange) in 1990. Prior to joining Euronext, she had been working since 1977 as an in-house lawyer at Credit National, a French bank (now Natixis). Ms Langlais was involved in the creation of the Euronext group in 2000 and its subsequent listing in Paris in 2001. She was also involved in the merger of NYSE with Euronext in 2007, the acquisition of NYSE Euronext by ICE in 2013 and subsequent separation and IPO of Euronext in 2014.
Ms Langlais has been the Executive Director of Legal and Regulatory Affairs of the Euronext group since 2004, and was a member of the Management Committee of NYSE Euronext. Her present responsibilities include participating in strategy, development policy, and the supervision of all legal matters for the Euronext group. In addition, she coordinates and manages the regulatory and public aff airs tasks of the Euronext markets (encompassing Paris, Brussels, Amsterdam, Lisbon and London): rulebook preparation, discussions with the Euronext College of Regulators and approval of all regulatory matters. She also coordinates Euronext group's corporate social responsibility activities. She graduated from the Paris XI Sorbonne University in International Law and from the Paris IV-Sorbonne University in Anglo-American civilization and literature. Ms Langlais has been a Chevalier de la Légion d'Honneur since 2009.
Dutch law requires large Dutch companies to pursue a policy of having at least 30% of the seats on both the management board and the supervisory board held by men and at least 30% of those seats held by women. This rule is temporary and will cease to have eff ect on 1 January 2016. Euronext qualifi es as a large Dutch Company and currently does not meet these gender diversity targets with respect to the Managing Board, as all of its members are men. This is partly related to historical circumstances and partly to the sectors in which Euronext is active. Euronext will continue to promote gender diversity within its Managing Board by striving to increase the proportion of female members by taking into account all relevant selection criteria including, but not limited to, gender balance, with regard to future appointments.
Set out hereafter is a summary of the termination and severance arrangements included in the service agreements of the members of the Managing Board. The agreements follow applicable local practices and have no provisions that do not comply with any applicable local practice. Notice periods included in the service agreements of the members of the Managing Board to terminate the agreements vary depending on the jurisdiction where the agreement is entered into but do not exceed four months. In addition, severance payment arrangements of the members of the Managing Board also vary depending on the jurisdiction where the agreement is entered into but do not exceed two years base salary.
The agreement with Luís Laginha de Sousa can be terminated upon four months prior notice. The agreement with Vincent Van Dessel can be terminated upon two months prior notice. The agreements with Dominique Cerutti, Anthony Attia, Jos Dijsselhof and Lee Hodgkinson do not contain a notice period for termination of their contract and their contract can be terminated by observing a notice period in accordance with applicable labour law, which period may vary depending on the facts and circumstances at the time of termination of the contract. The agreements for Dominique Cerutti, Anthony Attia and Lee Hodgkinson contain a severance payment arrangement entitling them to a severance payment of two years' salary if the agreement is terminated without cause. The service agreements of Vincent Van Dessel, Luís Laginha de Sousa and Jos Dijsselhof do not include any severance payment arrangements. However, Vincent Van Dessel, Luís Laginha and Jos Dijsselhof may, pursuant to applicable labour law, be entitled to a payment upon termination of their contract which may vary depending on the facts and circumstances at the time of termination of the contract.
The Supervisory Board met eight times in 2014: there were four in-person meetings, two conference calls and two meetings by videoconference.
On average, 87% of the Supervisory Board members were present at these meetings.
Each Supervisory Board meeting was also attended by all or by most members of the Managing Board. In addition, several managers were invited to discuss specifi c items included on the Supervisory Board's agenda.
The Supervisory Board was informed and consulted by the Managing Board in all meetings on the course of business and the main risks attached to it, Euronext's fi nancial and operational performance and matters related to the Euronext's governance and strategy. In addition, the IPO of Euronext N.V. and the prospectus and regulatory processes were discussed in depth. The meeting of the Supervisory Board that was held on 19 November 2014 was entirely dedicated to Euronext's strategy.
During the meetings held in 2014, the Supervisory Board approved the quarterly and semi-annual statements, the semi-annual report, the budget for 2015, material contracts, the P rospectus for the IPO of Euronext in relation to its listing on Euronext Amsterdam, Euronext Brussels and Euronext Paris, the P rospectus in relation to the listing on Euronext Lisbon, the Code of Conduct, the Insider Trading policy, the Whistleblower policy, and the agendas of the General Meetings, including the nomination for appointments to the Supervisory Board and the Managing Board, the nomination of the external auditor, proposals regarding the amendment of the Articles of Association, proposals regarding the remuneration policy, the employee share ownership plan and the dividend policy, and proposals regarding Rules of Procedure, among other items.
All meetings of the Supervisory Board were prepared by the Chairman of the Managing Board in close co-operation with the Chairman of the Supervisory Board.
Euronext N.V. was incorporated on 15 March 2014. No evaluation of the Supervisory Board took place between that date and 31 December 2014. The fi rst annual evaluation of the Supervisory Board took place in February 2015. This evaluation was conducted through questionnaires, the results of which were compiled by the Corporate Secretary. This report on the outcome of the questionnaires was discussed initially by the Nomination and Governance Committee and subsequently by the Supervisory Board as a whole.
The topics included in the questionnaires covered, among other items, the interaction with the Managing Board, the Supervisory Board meetings, chairmanship, communications, decision making processes, succession and development planning, shareholder value, the composition of the Supervisory Board and the committee structure.
After discussions on the results of the questionnaires, the Supervisory Board concluded that both the Supervisory Board as a whole and its committees have performed well, taking into account that 2014/2015 was a transitional year and that there is still room for improvement. However, it was also a challenging year given the Demerger, the preparations for and the execution of the IPO, and the Supervisory Board is pleased about how this has been dealt with. More in depth conclusions are likely to be drawn from the evaluation to be held in 2016 .
The Audit Committee convened fi ve times in 2014. Before the IPO, the Audit Committee of Euronext, as a subsidiary of ICE, met three times. After the IPO the Audit Committee met twice . These meetings were regularly attended by, in addition to the members of the Audit Committee, the Chairman of the Supervisory Board, the CEO, members of the executive committee and the external auditors. When discussing certain items of the agenda and where appropriate, senior business managers, the Head of Risk and Compliance department, the General Counsel and the General Auditor were present.
In addition, the Audit Committee held regular individual discussions with – among others – the external auditors, the CFO, the Head of Risk and Compliance department, the General Counsel and the General Auditor. The Supervisory Board was regularly informed about the results of these discussions. The Chairman of the Audit Committee reported to the Supervisory Board about the activities of the Committee and about its meetings and discussions in the next following Supervisory Board meetings.
Apart from several recurring items such as the annual and quarterly fi gures, risk management, the investor base, the post IPO share price development, the appointment of the external auditor, the General Auditor's audit planning and the Group's budget, much attention was given to specifi c items around the separation of Euronext from ICE and the preparations of the IPO. On 6 May 2014, the Audit Committee also discussed the many aspects of the separation of Euronext from ICE (including the Service Level Agreements with ICE) and the IPO P rospectus. On 31 July 2014, the Audit Committee also discussed the revolving credit facility and several regulatory demands regarding the capital requirements. On 5 November 2014, items such as treasury matters, the third quarter results, an update on the Risk programme, risk profi le of the Company, the design and operating eff ectiveness of the risk management and control systems, the consolidated risk report and the audit plan of the external auditor were discussed.
remuneration of the top 20 managers of Euronext (forming the Executive Committee) is being benchmarked against those peers. The results of this benchmark and the eff ect on the current remuneration composition will be evaluated and implemented in 2015. The guiding principles of potential changes as a consequence of this benchmark will focus on ensuring total compensation is adequate to ensure high calibre senior management can be attracted, retained and motivated while aligning their reward to Company results.
Given the fact that it was only appointed in December 2014, the Nomination and Governance Committee did not meet in 2014.
After the IPO, a Remuneration Committee was formed. It held two meetings and several conference calls in 2014. The Committee focusses on the alignment of remuneration strategy with relevant peers and market practice. With an outside consultant specialised in that fi eld, a peer group analysis was conducted and the overall
The Managing Board has prepared the 2014 fi nancial statements and has discussed these with the Supervisory Board. The fi nancial statements will be submitted for adoption at the 2015 Annual General Meeting as part of the Registration Document.
The principles of Euronext's remuneration policy are to ensure adequate performance based rewards are paid to ensure alignment of management with its shareholders' short-term and long-term interests creating the ability for the Company to attract and retain high calibre staff at all levels.
Therefore Euronext's remuneration policy:
In determining the level and structure of the remuneration of the members of the Managing Board, the Remuneration Committee takes into account, among other things, the fi nancial and operational results as well as non-fi nancial indicators relevant to Euronext's long-term objectives. The Remuneration Committee has performed and will perform scenario analyses to assess that the outcomes of variable remuneration components appropriately refl ect performance and with due regard for the risks to which variable remuneration may expose the Company.
In determining the compensation of members of the Managing Board, the Supervisory Board has taken and will take into account the impact of the overall remuneration of the Managing Board on the pay diff erentials within the Company.
The remuneration of the members of the Managing Board consists of the following components:
a short-term variable component in the form of cash and equity;
a long-term variable component in the form of a long-term incentive policy (the "LTIP"); and
Euronext believes that it is crucial to provide shareholders with transparent and comprehensible information about its remuneration philosophy. The first source of information for shareholders is the Compensation Report. The information provided during the Company's analyst presentations, meetings with shareholders and during the annual general meeting of shareholders is the second most important source of information. It is also critical to explain to shareholders why a proper remuneration system has a positive impact on the Company and how it helps to align the interest of all stakeholders.
For instance, in some countries, listed companies already have to submit the remuneration of their executives (board of directors, executive committee and/or advisory board) to a binding shareholders say-on-pay vote at the annual general meeting of shareholders. In other countries strong recommendations by national or international corporate governance bodies (such as the International Corporate Governance Network) exist. Euronext is committed to implement best practice for say-on-pay, considering existing applicable legislation, planned legislation such as the EU shareholders rights directive, and recommendations in the jurisdictions in which it is active as guiding principles. Other best practices will be followed such as benchmarking against comparable institutions, defi ning measurable performance targets and balancing short-term and long-term remuneration components notably through an adequate cash-tostock ratio.
As of 1 January 2015, these principles will apply to all components of the remuneration of the Managing Board. The tables hereafter refl ect the current remuneration of the Managing Board and apply to 2014 only.
The remuneration of the Managing Board is composed of the following key elements:
| Element | Purpose | Commentary |
|---|---|---|
| Base salary | Reflects the responsibility and scope of the role taking into account seniority and experience |
Base salary is reviewed annually against the relevant market. |
| Variable salary | Reward annual financial and individual performance |
Target 150% of base salary for the CEO and 50% or 80% of base salary for other Managing Board members. |
| For the Managing Board, 50% of total variable salary is paid in equity. Equity awards vests in three years in three equal instalments. |
||
| The payment of the variable salary component is for 50% based on strict fi nancial performance criteria (such as EBITDA and costs reduction) and for 50% based on individual objectives. |
||
| The full variable salary percentage is payable if 100% of the relevant targets are met. If the relevant targets are met for 70% or less, no variable salary will be payable. If the relevant targets are met for more than 70%, a corresponding percentage of the variable salary will be payable. If the relevant targets are exceeded, up to 133% of the variable salary may be paid out. |
||
| LTIP | Incentivises performance over the longer term and aims to retain key employees |
Maximum 165% of base salary for the CEO, and ranging from 50% to 120% for other Managing Board members depending on role and seniority. LTIP awards vest after three years. The grant of LTIP awards will be determined on the rules set by the Remuneration Committee and are linked to performance criteria. |
| Pensions | Provides market competitive pension benefi ts. Applies only to the Netherlands |
Managing Board members who are based in the Netherlands are under an average earning pension scheme which complies with applicable Dutch legislation and is in line with Dutch market practice. |
Euronext's Supervisory Board establishes the individual remuneration of the members of the Managing Board within the framework of its remuneration policy as adopted by the General Meeting upon a recommendation by the Remuneration Committee.
The total remuneration for the members of the Managing Board, for the year 2014 amounts to €5,077,287 . This total remuneration amount consists of (i) an aggregate base salary of €2,569,064 , (ii) aggregate short-term incentive compensation of €2,508,223 based on the achievements against objective measureable criteria and (iii) aggregate amount to be contributed to pensions of €436,741 . For the Managing Board members in active service on 31 December 2014 these amounts are as described herewith:
| Name | Currency | Base Salary | Variable Salary (cash) |
Variable Salary (equity) |
Pension Contribution |
|---|---|---|---|---|---|
| Dominique Cerutti | EUR | 725,000 | 75% | 75% | |
| Anthony Attia | EUR | 300,000 | 40% | 40% | |
| Jos Dijsselhof(a) | EUR | 400,000 | 44% | 44% | 93,025 |
| Lee Hodgkinson | GBP(b) | 264,600 | 40% | 40% | |
| Luís Laginha de Sousa | EUR | 230,000 | 25% | 25% | |
| Vincent Van Dessel | EUR | 263,551 | 25% | 25% |
(a) Jos Dijsselhof was in active service for six months in 2014 as he joined on 1 July 2014. The amounts have been annualised.
(b) Lee Hodgkinson is based in the United Kingdom and is paid in GBP.
The fixed compensation components consist of base salary and pension contributions, if applicable. These components are linked to the overall job responsibilities of the individual Managing Board member and refl ect internal consistency.
The variable salary consists of an annual performance compensation component as a percentage of base salary. The percentages referred to above are target percentages of the annual base salary, which are only payable if all objectives are met. Performance criteria are set and reviewed on an annual basis by the Remuneration Committee and the Supervisory Board and are linked to quantitative fi nancial criteria and qualitative personal objectives both weighing for 50% of the overall achievable result. Of the variable salary, 50% is payable in equity which vests in three years in three equal instalments and 50% is payable in cash.
Reference is made to the 2014 fi nancial statements included in this annual report for an overview of remuneration paid to Euronext's Supervisory Board members.
The General Meeting held on 19 May 2014 has set the annual remuneration for the members of the Supervisory Board in accordance with the schedule below.
| Chairman of the Supervisory Board | €70,000 |
|---|---|
| Vice-chairman of the Supervisory Board | €60,000 |
| Member of the Supervisory Board | €55,000 |
| Chairman of the Audit Committee (in addition) | €10,000 |
| Member of the Audit Committee (in addition) | €6,000 |
| Chairman of the Nominating and Governance Committee (in addition) | €8,000 |
| Member of the Nominating and Governance Committee (in addition) | €6,000 |
| Chairman of the Remuneration Committee (in addition) | €10,000 |
| Member of the Remuneration Committee (in addition) | €6,000 |
The members of the Supervisory Board have been remunerated pro rata with eff ect from 19 May 2014. They did not receive compensation before that date in relation to these positions.
The gross amounts that were paid to members of the Supervisory Board after 19 May 2014 are as follows:
| Rijnhard van Tets | €43,246.58 |
|---|---|
| André Bergen | €43,246.57 |
| Arnoud de Pret | €37,686.30 |
| Manuel Ferreira da Silva | €33,979.45 |
| Jean-Marc Forneri | €7,986.30 |
| Jan-Michiel Hessels | €33,979.45 |
| Philippe Oddo | €33,979.45 |
| TOTAL | €234,104.10 |
The members of the Supervisory Board who were appointed on 19 December 2014 will receive their remuneration with regard to 2014 in 2015.
Before 19 May 2014, the members of the Supervisory Board received remuneration in relation to their membership of the Supervisory Board of Euronext N.V., which was renamed NYSE B.V. on 2 May 2014 and which was Euronext N.V.'s (until 2 May 2014: Euronext Group N.V.'s) parent company at the time. The amounts that have been paid to the members of the Supervisory Board by Euronext's former parent company are not included in this overview.
The Supervisory Board has six meetings per year and 40% of the remuneration of the members of the Supervisory Board is payable subject to attendance of Supervisory Board meetings.
One of the current members of the Supervisory Board, Lieve Mostrey, has waived remuneration. The Supervisory Board members who, until their retirement following Euronext's separation, were also executive directors or offi cers of Intercontinental Exchange Group, namely Scott Hill and Jeff rey Sprecher, had also waived remuneration.
Two of the members of the Supervisory Board, Rijnhard van Tets and Jan-Michiel Hessels, also receive remuneration in relation to their positions in the Supervisory Board of Euronext Amsterdam, one of Euronext's subsidiaries.
Euronext does not issue option or share plans or other incentive plans to the Supervisory Board. On 23 June 2014, R. van Tets purchased 5,000 shares of Euronext N.V.
Euronext has not granted any loans to members of the Supervisory Board.
Costs and expenses related to Supervisory Board membership may be reimbursed.
There are no service contracts which provide for benefits upon termination of employment with members of the Supervisory Board.
2
The annual conditional LTI awards are delivered based on the relative standing of Euronext's performance against the performance 4 direct competitors. The performance criteria used to determine the actual allotment at vesting date of conditionally granted LTI will be:
An overall underperformance in reference to the comparator group will lead to a discount on the conditional LTI at vesting date whereby a 20% negative deviation leads to a 50% reduction of conditionally granted LTI at vesting date. Over performance will lead to a multiplier whereby a 33.3% outperformance of the comparator group will lead to an increase of 100% in conditionally granted LTI at vesting date. This level of outperformance refl ects the absolute cap of the LTI allotment.
The main features of the LTI arrangements are the following:
The amount of LTI awards will be determined annually by the Supervisory Board depending on the contribution to the long term development of Euronext. In principle it is the intention:
| Position | On target annual conditional LTI as % of base salary |
Maximum LTI as % of base salary at vesting, all performance conditions overachieved by 33.3% |
|---|---|---|
| CEO | 100.00% | 200.00% |
| COO / Head of Global Markets & Sales / CFO | 75.00% | 150.00% |
| CEO France & Netherlands | 75.00% | 150.00% |
| CEO Belgium & Portugal | 50.00% | 100.00% |
In addition, on 2 February 2015, Euronext declared unvested unrestricted stock units held by M. Van Tilburg amounting to 5,102 shares.
Performance conditions for the short term incentive: these will be set by the Supervisory Board annually for the relevant year and shall include criteria concerning Euronext's fi nancial performance, quantitative criteria representing company performance and/or individual qualitative performance. For 2015 the performance criteria for the short term incentive will be based for:
20% on successful execution of certain initiatives in the strategic plan;
20% on fi nancing the real economy and developing and running stable local markets;
The targets that are set for the individual Managing Board members are challenging but realistic. All short term incentive objectives are supportive of the long term strategy of Euronext and aligned with shareholder interests.
An overall underperformance of the set objectives will lead to a discount of the STI payment whereby a 20% negative deviation leads to a 50% reduction of STI. Over performance will lead to a multiplier whereby a 20% outperformance of the set objectives will lead to an increase of 50% of STI. This level of outperformance refl ects the absolute cap of the STI.
| Position | On target annual STI as % of base salary | Maximum STI as % of base salary |
|---|---|---|
| CEO | 75.00% | 112.50% |
| COO / Head of Global Markets & Sales / CFO | 50.00% | 75.00% |
| CEO France & Netherlands | 50.00% | 75.00% |
| CEO Belgium & Portugal | 40.00% | 60.00% |
At the time of the IPO, each of the members of the Managing Board and the Supervisory Board agreed that for a period of twelve months they will not, without the prior written consent of the joint global coordinators of the IPO (acting on behalf of the underwriters): (A) directly or indirectly, off er, pledge, sell, contract to sell, sell or grant any option, right, warrant or contract to purchase, exercise any option to sell, purchase any option or contract to sell, or lend or otherwise transfer or dispose of any Ordinary Shares or other shares of the Company or any securities convertible into or exercisable or exchangeable for Ordinary Shares or other shares of the Company or request or demand that the Company file any registration statement under the Securities Act or any similar document with any other securities regulator, stock exchange or listing authority with respect to any of the foregoing; (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any Ordinary Shares or other shares of the Company, whether any such transaction is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise; (C) publicly announce such an intention to eff ect any such transaction; or (D) submit to the Company's shareholders or any other body of the Company a proposal to eff ect any of the foregoing. The foregoing shall not apply to: (i) any transfer of Ordinary Shares to any legal successors following death or incapacity; or (ii) any transfer of Ordinary Shares following the acceptance of a public takeover bid in respect of the Shares.
Euronext operates an LTIP scheme to ensure long-term alignment of senior and key employees with the fi nancial performance and stability of the Company and for retention purposes. Awards granted under the LTIP vest after three years.
Up to 3% of the currently issued and outstanding share capital of the Company can be granted to employees of the Company under the LTIP and the equity component of the variable salary of the members of the Managing Board by way of newly issued Ordinary Shares or from treasury stock. LTIP awards can be granted to the Managing Board, key managers and directors and high performers within Euronext. The pool of eligible candidates under the LTIP will be reviewed on an annual basis by the Remuneration Committee. The table below sets out the LTIP awards that have been granted to the members of the Managing Board at the date of the Off ering expressed as a percentage of the base salary.
| Name LTIP grant as a percentage of Base Salary Dominique Cerutti |
|
|---|---|
| Jos Dijsselhof | 120% |
| Lee Hodgkinson | 120% |
| Luís Laginha de Sousa | 50% |
| Vincent Van Dessel | 50% |
Members of the Managing Board are required to build up and maintain holdings of at least one year of their base salary in Ordinary Shares.
Concurrently with the Off ering, the Company off ered Ordinary Shares to all eligible employees, which Ordinary Shares are held through the French Fonds Commun de Placement d'Entreprise "Euronext Group" ("FCPE"). The number of units held by the members of the Managing Board in the FCPE are included in the table below.
| Name | Number of FCPE Units |
|---|---|
| Dominique Cerutti | 5,625 |
| Luís Laginha de Sousa | 2,500 |
| Anthony Attia | 1,250 |
| TOTAL | 9,375 |
2
Euronext considers Corporate Social Responsibility ("CSR") as an ongoing commitment towards all of its stakeholders. Although 2014 was a year of transition for the newly independent group , Euronext was mindful of corporate responsibility all along the year.
The core values that Euronext focused on in 2014 were integrity, innovation and transparency. These are notably reflected in the Company's governance.
Particular attention was shown to the design of a CSR management process during the second semester: the Group's Managing Board has overall responsibility for the CSR policy and an Executive director has been tasked with the coordination of the Group's CSR actions. The new CSR Group Committee, composed of two representatives for each of the fi ve locations and belonging to various departments across the group, has been created and tasked with the objective to identify the CSR actions to be proposed to the Managing Board. One of the Managing Board's directors sponsors the Committee's ongoing tasks.
During Euronext's first semester as an independent entity, the analysis of the Company's corporate responsibility encompasses the following four areas: Stakeholders, Employees, Communities, and Sustainability Awareness.
The corporate responsibility mission statement of Euronext covers the following:
The governance of Euronext reflects the highest standards of independence, oversight, and transparency. The Company applies strict principles and guidelines to its own governance practice and to the companies that list on its markets.
Euronext's two-tier governance is composed of a Supervisory and a Managing Board . The Supervisory Board's main task is the supervision of the Company's management. The functions of Chief Executive Offi cer ("CEO") (chairing the Managing Board) and Chairman (chairing the Supervisory Board) are separated. Newly recomposed at the moment of the IPO, by the end of 2014 the Supervisory Board included nine directors including two female directors. Six directors are independent, which corresponds to a ratio of 66% independent directors. Newly appointed directors meet with key managers from within the Company and receive appropriate training.
Executive compensation respects the Company's remuneration policy, ensuring adequate performance based rewards. For further details please see section "Remuneration Policy".
The Enterprise Risk Management framework also illustrates Euronext's commitment to CSR. Please see section 4.2.1 "Management Control structure".
Detailed information about Euronext's Governance can be found on the Corporate Governance page on Euronext's website as well as in sections "Corporate governance" and "Management & control structure" of this Registration Document .
Euronext has an ongoing dialogue with financial analysts, shareholders and investors. The Company focuses on communicating clearly and providing transparent explanations. Euronext has decided to publish full fi nancial statements on a quarterly basis. These results are commented twice a year in a physical meeting for analysts and investors (semi-annual and annual results), and twice a year through conference calls . In addition, Euronext participated in four conferences in 2014, conducted roadshows in six countries (England, France, Germany, Switzerland, t he Netherlands, the United States) and met with over 200 investors. Euronext is willing to continue to engage with its shareholders on a regular basis so as to enhance the knowledge of the Company and the understanding of its strategy.
Euronext continues to reinforce its business integrity by striving to improve the services it provides, making responsible business decisions, and actively managing the social and environmental impacts of its actions to help individuals, communities, businesses and economies progress and grow.
Euronext is a leading service provider of services for issuers, investors, intermediaries and data vendors. The product and sales teams, the issuer client coverage group, the market supervision team and the technology department provide competent care in the relationship management across all of the Group's customers.
At EnterNext, over 1,200 individuals meetings were held with a broad spectrum of listed and non-listed companies to promote fi nancial markets and accompany entrepreneurs in their development projects. To fulfi l its mission, EnterNext capitalis es on the local representations that have been set up in major French cities as well as in Lisbon, Brussels and Amsterdam. Pedagogy, education and proximity are core values which underpin EnterNext's strategic deployment. In keeping with this logic, EnterNext seeks to make its issuers aware of social responsibility issues. As an example, in 2014, newly listed issuers donated around €120,000 to charities.
Euronext's markets and sales teams held over 700 transaction client meetings in 2014, covering a vast array of topics, either bilaterally or on a group level, during which it consulted closely with trading customers to create products and services that meet their needs and requirements. Euronext has been particularly active with regard to new equity derivative and commodities product launches, in many cases receiving clients' public endorsement for the Company's development plans.
Euronext's goal is to drive excellence throughout its organisation and to support and positively infl uence its supply chain.
Euronext works with suppliers who share its own values and focused in 2014 on starting a review of its Requests for Proposals' processes. In 2015, the Company will complete this exercise with specific attention to the suppliers' environmental and social responsibility features, and will introduce a Suppliers' Code of Conduct which will be part of the selection criteria for suppliers.
Euronext promotes the values of integrity, communication and excellence among its employees. It fosters a culture of customer service, information sharing, innovation and growth within the management team and staff . The Group worked on the preparation of a global performance-based compensation in the second half of 2014 that includes equity ownership in the Company's share capital by a broad base of its employees to refl ect its shared, company-wide objectives, which covers achieving key fi nancial profi tability metrics, growth, innovation and a high level of customer service.
The group pays the utmost attention to Career and Talent Management as a way to give opportunity to all employees. For instance in 2014, a pilot program was held for high talented employees within the Markets and Global Services department, and seventeen employees across all Euronext locations participated in a four day training session, enabling them to take control of their career with the benefi t of receiving mentoring from senior executive management.
The compensation policy is fully aligned with performance based on a self-evaluation including a personal development plan, discussed during a meeting with managers. A new system will be put in place for 2015, using more granularity to ensure alignment between individual remuneration and the Group's achievements. Please see section "Remuneration Policy".
When development needs have been identifi ed by a department, the HR team provides consulting and assistance to management on appropriate learning and development solutions. Departmentspecifi c training is generally defi ned by local m anagement and HR.
Information sharing with the staff includes regular mini-conferences organised locally in each offi ce for local staff on ad hoc subjects, for example updates on European Regulation, product development, internal organisation of a business line, and c orporate responsibility.
The total number of employees as of 31 December 2014 was 760 .
Euronext's average employee is 42 years old, with 68% per cent in the 30-50 age bracket (30% in the 31-40 bracket, and 38% in the 41-50 bracket), 12% per cent under 30 years old and 20% per cent above 50 years old.
At 31 December 2014, the split of employee s by location is as follows:
Euronext's commitment to high ethical and legal standards of conduct remains a top priority, and the Group aims to be a model for the industry by supporting the highest ethical standards in its dealings with its colleagues, employees, business partners, customers and in its communities.
Euronext expects high standards of ethical behaviour from all its employees. The Group Code of Business conduct and Ethics applies to directors and all employees and Euronext is continuously educating its staff about their responsibilities and obligation, and closely monitors compliance. The Code of Conduct explains the Company's core values and basic ethical obligations in conducting business. In particular, it addresses the following themes:
For more information on the Code of Conduct please see section "Internal control – code of conduct".
The total number of employees as of 31 December 2014 was 760 , among which 236 f emale and 524 m ale employees. There is 31 % of female employees at Group level.
As the operator of several regulated markets and MTFs spread over Europe, Euronext has offi ces in Belgium, France, Portugal, the Netherlands, the UK and the US and a representative offi ce in Hong-Kong.
Euronext's employees represent forty-seven diff erent nationalities, refl ecting the diversity of its customer base.
The composition of the Supervisory Board and Managing Board also represent the blend of Euronext's cultures. At management level in particular, the Managing Board is composed of Executives from fi ve nationalities, and among the Executive Committee there are fi fteen male and four female Executive directors representing seven nationalities.
Euronext' s employees give time to volunteering initiatives .
In 2014 several initiatives were pursued locally, such as:
• in Amsterdam: Participation in two "Opkikker days" (family outings for people with a child with a long term illness). The Exchange E xperience at the exchange building had almost 3000 visitors from educational institutions in 2014, and Euronext staff explained the role of the exchange over 400 years , and its current role in the real economy; activities organis ed with JINC (a non-profi t organis ation which helps young people from low-income neighbourhoods to develop , personally, socially and economically). Amsterdam organis ed several sessions with pre-vocational/vocational secondary schools to help them plan and organis e their time and has enabled several fl ash-internships;
In 2015, the CSR Group Committee will identify a common theme across all locations in the area of fi nancial literacy which will be the major action for volunteers.
Euronext has a programme of Opening or Closing the markets with a Bell event ("Gong" in Amsterdam). Some of the se events gave visibility to international causes or charities – in particular to the following:
Recently, advisory and research firm Corporate Knights Capital published its third annual report on the ranking of the world´s stock exchanges in terms of disclosure of the performance of sustainability indicators. Euronext Amsterdam is ranked number two , Euronext Paris number four and Euronext Lisbon number six . This analysis explored the extent to which the world's publicly traded companies are disclosing the seven basic metrics: employee turnover, energy, greenhouse gas emissions, injury rate, payroll, water consumption and waste.
Euronext is committed to taking environmental impacts into account when conducting its business.
Euronext has become an organisation that is proactively improving its environmental credentials, particularly the management of its greenhouse gas emissions (GHG). The group's primary GHG arise from energy, waste and water in its offi ces and data centres, from staff travel, and indirectly from its supply chain.
The efficient management of resources is a crucial issue for businesses and, as a European company, Euronext needs to address this challenge in a way that is appropriate for each location. The Group rolls out water-saving initiatives such as motion sensors on taps and water saving toilet fl ushes. Motion detector lighting saves the necessary energy in meeting rooms, storages and sanitary rooms. Where possible, regular lamps are being replaced by LED and other energy saving lamps. Euronext aims to send as little waste as possible to the incinerators. T he Company separates waste at the source and works with secondary parties who specialise in sorting and recycling waste. In terms of mechanical installations, signifi cant savings were achieved by increasing the temperature in Euronext's data centres by 1°C. In addition, Euronext uses free air (natural air) for its air-conditioning systems when the outside temperature drops below 12°C. Thanks to the Group's building management system, technical installations are automatically switched off during the night and at week-ends. High effi ciency boilers provide buildings with the necessary heating during the winter season, and where possible thermal insulation is placed in the form of wall and roof insulation and double-glazed windows.
Euronext also decided it would relocate its Paris offi ce to new premises in the La Défense business centre in 2015 for a nine year lease. New offi ce Praetorium benefi ts from the following certifi cations: HEQ (High environmental quality), BREEAM (sustainable building design and construction) and VHEP (very high energetic performance). More specifi cally, Praetorium benefi ts from presence detectors to monitor external blinds, lighting and air conditioning, depending on the climate; it has triple glazed windows to optimise insulation and enable maximum natural heating, and possesses sensors to analyse air quality to ensure employees have access to a clean environment. Finally, the bee hive on the roof has 60,000 bees and contributes to a more sustainable environment.
Euronext d ata c entres have been at the forefront of technology and sustainability for many years. Euronext continues to run an aggressive strategy of virtualisation, making more effi cient use of the Group's assets and lowering its overall power consumption.
Euronext entered into a cooperation agreement with Vigeo in March 2013. Vigeo is the leading European expert in the assessment of companies and organisations with regard to their practices and performance on environmental, social and governance ("ESG") issues.
Seven indices exist (Euronext Vigeo World 120, Euronext Vigeo Europe 120, Euronext VigeoEurozone 120, Euronext Vigeo US 50, Euronext Vigeo France 20, Euronext Vigeo United Kingdom 20 and Euronext Vigeo Benelux 20), whose components are reviewed and updated twice a year. Two fi lters are applied to determine the new indices' constituents. Companies are excluded if:
Launched in 2008, the Low Carbon 100 Europe Index®measures the performance of Europe's 100 largest blue chips with the lowest CO2 emissions in their respective sectors or sub-sectors. Designed with the support from a group of international experts and in close partnership with Non-Governmental Organisations , the index is today an underlying for ETF products.
In November 2014, Pascal Canfi n – former French Deputy Minister for Development – was appointed Chairman of the Index Expert Committee. Pascal Canfi n is the lead advisor on international climate issues at the World Resources Institute (WRI), now contributing to preparations for COP 21, the 21st Conference of the Parties on Climate Change 2015. Mr Canfin's appointment underscores Euronext's commitment to off ering investors an increasingly relevant benchmark for portfolio management along with an underlying reference for a wide range of index products.
The Index Expert Committee's mission is to keep the methodology for selecting indexed companies cutting edge, making the Low Carbon 100 Europe Index an important resource to change investor practices and bring them gradually into line with a low-carbon economy, which in turn will help fi ght climate change more eff ectively.
In 2014, Euronext was the most active listing place for green bonds in Europe. Two iconic transactions illustrate this: the €2.5 billion GDF Suez green bond and the €1 billion AFD climate bond . Those two transactions obtained a rating from Euronext's partner Vigeo. By promoting green and climate bonds to issuers from various sectors and geographies, Euronext provides issuers with new sources of financing and promotes a sustainable growth strategy which encourages the dialogue between ESG and Socially Responsible Investment investors. These new financing sources will enable Euronext's issuers to address the energy and environmental challenges faced by society: meeting energy needs, ensuring security of supply, fi ghting climate change, and optimising natural resources.
By favouring the development of those transparency disclosures within its listed companies, Euronext is actively showing its support of sustainability indicators.
3
3
In compliance with Article 28 of EC regulation No. 809/2004, the following information is incorporated by reference in the Registration Document:
Required disclosures in the Report of the Managing Board appearing in the Statement of the Managing Board , the consolidated fi nancial statements are presented on pages F1 - F38 and the corresponding Auditors' Report is presented on page 179 of the 2014 Prospectus Document filed with the Autoriteit Financiële Markten on 12 September 2014.
Required disclosures in the Report of the Managing Board appearing in the Statement of the Managing Board , the consolidated fi nancial statements are presented on pages F1 - F38 and the corresponding Auditors' Report is presented on page 179 of the 2014 Prospectus Document filed with the Autoriteit Financiële Markten on 12 September 2014 .
The selected consolidated and combined fi nancial information set out below is derived from the audited consolidated and combined fi nancial statements for the fi nancial years ended 31 December 2014 and 2013 and should be read in conjunction with, and is qualifi ed by reference to, those fi nancial statements.
| Year ended | ||||
|---|---|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 | 31 December 2012 | |
| Revenue | ||||
| Listing | 61,737 | 53,282 | 60,967 | |
| Trading revenue | 212,013 | 187,166 | 201,974 | |
| of which | ||||
| • Cash trading | 165,565 | 138,428 | 140,307 | |
| • Derivatives trading | 46,448 | 48,738 | 61,667 | |
| Market data & indices | 93,348 | 83,980 | 86,545 | |
| Post-trade | 57,268 | 21,253 | 20,958 | |
| of which | ||||
| • Clearing | 35,979 | - | - | |
| • Custody and Settlement | 21,289 | 21,253 | 20,958 | |
| Market Solutions & Other revenue | 33,443 | 41,009 | 50,325 | |
| Other income | 645 | - | - | |
| TOTAL THIRD PARTY REVENUE AND OTHER INCOME | 458,454 | 386,690 | 420,769 | |
| Total ICE transitional revenue and other income | 34,044 | 94,982 | 74,341 | |
| TOTAL REVENUE AND OTHER INCOME | 492,498 | 481,672 | 495,110 | |
| Salaries and employee benefi ts | (123,991) | (132,720) | (125,683) | |
| Depreciation and amortisation | (16,644) | (19,924) | (21,766) | |
| Other operational expenses | (143,100) | (149,047) | (168,153) | |
| Operating profi t before exceptional items | 208,763 | 179,981 | 179,508 | |
| Exceptional items | (44,603) | (22,086) | (8,761) | |
| Operating profi t | 164,160 | 157,895 | 170,747 | |
| Net fi nancing income/(expense) | (6,452) | (424) | (690) | |
| Results from equity investments | 4,557 | (18,040) | 934 | |
| Profi t before income tax | 162,265 | 139,431 | 170,991 | |
| Income tax expense | (44,091) | (51,915) | (57,790) | |
| Profi t for the year | 118,174 | 87,516 | 113,201 |
| In thousands of euros | As at 31 December 2014 |
As at 31 December 2013 |
As at 31 December 2012 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 25,948 | 27,782 | 35,511 |
| Goodwill and other intangible assets | 321,266 | 323,916 | 330,927 |
| Deferred income tax assets | 9.712 | 21,951 | 28,994 |
| Equity investments | 113,596 | 48,075 | 94,789 |
| Post-employment benefi ts | - | - | 3,704 |
| Other receivables | 1,702 | 2,046 | 3,433 |
| TOTAL NON-CURRENT ASSETS | 472,224 | 423,770 | 497,358 |
| Current assets | |||
| Trade and other receivables | 105,825 | 121,268 | 131,920 |
| Income tax receivable | 22,375 | 1,180 | 14,206 |
| Related party loans | - | 268,778 | 178,237 |
| Derivative fi nancial instruments | - | 1,893 | 1,310 |
| Financial investments | 15,000 | - | - |
| Cash and cash equivalents | 241,639 | 80,827 | 13,560 |
| TOTAL CURRENT ASSETS | 384,839 | 473,946 | 339,233 |
| TOTAL ASSETS | 857,063 | 897,716 | 836,591 |
| Equity/Parent's net investment and liabilities | |||
| TOTAL EQUITY/PARENT'S NET INVESTMENT | 341,750 | 233,681 | 115,402 |
| Non-current liabilities | |||
| Borrowings | 248,369 | - | - |
| Related party borrowings | - | 40,000 | 40,000 |
| Deferred income tax liabilities | 483 | 530 | 341 |
| Post-employment benefi ts | 14,997 | 9,488 | 19,466 |
| Provisions | 32,418 | 5,246 | 3,039 |
| Other liabilities | 1,400 | 2,925 | 1,010 |
| TOTAL NON-CURRENT LIABILITIES | 297,667 | 58,189 | 63,856 |
| Current liabilities | |||
| Borrowings | 129 | - | - |
| Related party borrowings | - | 407,025 | 460,976 |
| Current income tax liabilities | 78,043 | 49,483 | 49,382 |
| Trade and other payables | 126,427 | 143,661 | 141,519 |
| Provisions | 13,047 | 5,677 | 5,456 |
| TOTAL CURRENT LIABILITIES | 217,646 | 605,846 | 657,333 |
| TOTAL EQUITY/PARENT'S NET INVESTMENT AND LIABILITIES | 857,063 | 897,716 | 836,591 |
| Year ended | ||||
|---|---|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 | 31 December 2012 | |
| Net cash provided by operating activities | 148,591 | 160,473 | 155,241 | |
| Net cash provided by/(used in) investing activities | 28 ,124 | 21,776 | (18,878) | |
| Net cash provided by/(used in) fi nancing activities | 39,863 | (115,075) | (153,441) | |
| Non-cash exchange gains/(losses) on cash and cash equivalents | 482 | 93 | 320 | |
| Net increase/(decrease) in cash and cash equivalents | 160,812 | 67,267 | (16,758) | |
| Cash and cash equivalents - Beginning of year | 80,827 | 13,560 | 30,318 | |
| Cash and cash equivalents - End of year | 241,639 | 80,827 | 13,560 |
The table below presents Euronext's EBITDA margin for the years ended 31 December 2014, 2013 and 2012. The Company defi nes EBITDA margin as operating profi t before exceptional items and depreciation and amortisation, divided by total revenue.
| Year ended | |||
|---|---|---|---|
| In thousands of euros (except for percentages) | 31 December 2014 | 31 December 2013 | 31 December 2012 |
| Operating profi t before exceptional items | 208,763 | 179,981 | 179,508 |
| Depreciation and amortisation | 16,644 | 19,924 | 21,766 |
| Operating profi t before exceptional items and | |||
| depreciation and amortisation | 225,407 | 199,905 | 201,274 |
| TOTAL REVENUE AND OTHER INCOME | 492,498 | 481,672 | 495,110 |
| EBITDA margin(a) | 46% | 42% | 41% |
(a) EBITDA margin is a non-IFRS measure and is not audited. EBITDA margin should not be considered as an alternative to, or more meaningful than, and should be read in conjunction with, operating profi t before exceptional items.
4
| 4.1 | Legal information on the Company |
62 |
|---|---|---|
| 4.1.1 General | 62 | |
| 4.1.2 Corporate Objects | 62 | |
| 4.2 | Share Capital | 62 |
| 4.2.1 Authorised and Issued Share Capital | 62 | |
| 4.2.2 Issue of Shares | 62 | |
| 4.2.3 Pre-emption Rights | 63 | |
| 4.2.4 Acquisition of Shares | ||
| in Euronext's Capital | 63 | |
| 4.2.5 Reduction of Share Capital | 63 | |
| 4.3 | Shareholder structure | 64 |
| 4.4 | Share classes and major shareholders |
64 |
| 4.4.1 Reference shareholders | 64 | |
| 4.4.2 Major Shareholdings | 67 | |
| 4.4.3 Intercontinental Exchange (ICE) Holding | 68 | |
| 4.5 | General meeting of shareholders and Voting Rights |
69 |
| 4.6 | Anti-takeover provisions | 70 |
|---|---|---|
| 4.7 | Obligations of Shareholders and Members of the Managing Board to Disclose Holdings |
70 |
| 4.8 | Short Positions | 71 |
| 4.9 | Market Abuse Regime | 72 |
| 4.10 Transparency Directive | 72 | |
| 4.11 Dutch Financial Reporting Supervision Act |
73 | |
| 4.12 Dividends and Other Distributions |
73 | |
| 4.13 Financial Calendar | 74 |
Euronext is a public company with limited liability (naamloze vennootschap) incorporated under the laws of the Netherlands and is domiciled in the Netherlands. The Company was incorporated in the Netherlands on 15 March 2014. Euronext's statutory seat (statutaire zetel) is in Amsterdam, the Netherlands, and its registered offi ce and principal place of business is at Beursplein 5, 1012 JW Amsterdam, the Netherlands. The Company is registered with the trade register of the Chamber of Commerce for Amsterdam, the Netherlands, under number 60234520, and the telephone number is +31 (0)20-5504444.
Euronext's corporate objects, as set out in article 3 of the Articles of Association, are to participate and to manage other enterprises and companies of which the objects are to set up, develop, hold and operate, directly or indirectly, one or more regulated and other markets or other facilities with regard to the listing of, the trading in, the post-trade processing of transactions in, and related services and process in, securities and derivatives, as well as to manage and fi nance subsidiaries, to enter into joint ventures with other enterprises and other companies engaged in one or more of the activities referred to above; to acquire, operate and dispose of industrial and intellectual property rights as well as real property; to provide security for the debts of the Company, its subsidiaries or any other legal person and to undertake all that is connected to the foregoing or in furtherance thereof.
Under the Articles of Association, Euronext's authorised share capital amounts to €200,000,001.60 and is divided into 125,000,000 Ordinary Shares, each with a nominal value of €1.60 and one priority share with a nominal value of €1.60. All of Euronext's shares have been created under Dutch law.
As of 31 December 2014. Euronext's issued and outstanding share capital amounts to €112,000,000 and is divided into 70,000,000 Ordinary Shares. The Priority Share is currently not outstanding. As of 31 December 2014, Euronext held 27,135 shares in its own share capital before settlement (23,436 shares after settlement) and custody of trades made on 30 and 31 December 2014. All shares that are issued and outstanding at the date of the Registration Document are fully paid up.
Euronext is subject to the provisions of the Dutch Financial Supervision Act and the Articles of Association with regard to the issue of shares following admission. The shares are in registered form and are only available in the form of an entry in Euronext's shareholders' register and not in certifi cated form.
Under its Articles of Association Euronext may issue shares, or grant rights to subscribe for shares, only pursuant to a resolution of the General Meeting upon proposal of the Supervisory Board or upon proposal of the Managing Board, which proposal has been approved by the Supervisory Board.
Euronext's Articles of Association provide that the General Meeting may designate the authority to issue shares or grant rights to subscribe for shares, to the Managing Board upon proposal of the Supervisory Board on a proposal of the Managing Board, which proposal has been approved by the Supervisory Board. Pursuant to the Dutch Civil Code and Euronext's Articles of Association, the period of designation may not exceed fi ve years. Such designation may be renewed by a resolution of the General Meeting for a subsequent period of up to fi ve years each time. Unless the resolution determines otherwise, the designation is irrevocable. At the designation, the number of shares which may be issued by the Managing Board must be determined.
On 27 May 2014, the General Meeting designated the Managing Board as the body authorised, subject to the approval of the Supervisory Board, to issue shares and to grant rights to subscribe for shares for a period of 18 months as of the date of listing of Euronext which took place on 20 June 2014. The designation is limited to up to 10% of the issued share capital outstanding at the time the General Meeting designated the Managing Board, of which 10% can be used for general purposes, including but not limited to the fi nancing of mergers and acquisitions as well as facilitating grants under the Company's employee remuneration and long term incentive plans, whereby no more than 2% of the issued Ordinary Shares outstanding at the time the General Meeting designated the Managing Board out of the aforementioned 10% will be issued for facilitating these plans.
No resolution of the General Meeting or the Managing Board is required for an issue of shares pursuant to the exercise of a previously granted right to subscribe for shares.
Dutch company law and Euronext's Articles of Association in most cases give shareholders pre-emption rights to subscribe on a pro rata basis for any issue of new shares or upon a grant of rights to subscribe for shares. Exceptions to these pre-emption rights include the issue of shares and the grant of rights to subscribe for shares (i) to Euronext's employees, (ii) in return for non-cash consideration, or (iii) the issue of shares to persons exercising a previously granted right to subscribe for shares.
A shareholder may exercise pre-emption rights during a period of two weeks from the date of the announcement of the issue or grant. The General Meeting or the Managing Board, if so designated by the General Meeting, may restrict the right or exclude shareholder preemption rights. A resolution by the General Meeting to designate the authority to exclude or limit pre-emption rights to the Managing Board requires a majority of at least two-thirds of the votes cast if less than 50% of Euronext's issued share capital is represented and can only be taken upon proposal of the Supervisory Board or upon proposal of the Managing Board, which proposal has been approved by the Supervisory Board. If the General Meeting has not designated this authority to the Managing Board, the General Meeting may itself vote to limit or exclude pre-emption rights and will also require a majority of at least two-thirds of the votes cast, if less than 50% of Euronext's issued share capital is represented at the General Meeting. In addition, on 27 May 2014, the General Meeting designated the Managing Board, with the approval of the Supervisory Board, as the authority to limit or exclude statutory pre-emption rights in relation to an issue of shares resolved by the Managing Board.
Euronext may acquire fully paid shares at any time for no consideration (om niet), or, subject to the following provisions of Dutch law and its Articles of Association, Euronext may acquire fully paid shares for consideration, namely if (i) its shareholders' equity, less the payment required to make the acquisition, does not fall below the sum of paid-in and called-up share capital and any statutory reserves, (ii) Euronext and its subsidiaries would thereafter not hold shares or hold a pledge over Euronext shares with an aggregate nominal value exceeding 50% of its issued share capital, and (iii) the Managing Board has been authorised by the General Meeting, with the prior approval of the Supervisory Board.
Authorisation from the General Meeting to acquire Euronext shares must specify the number and class of shares that may be acquired, the manner in which shares may be acquired and the price range within which shares may be acquired. Such authorisation will be valid for no more than 18 months. Any shares Euronext holds may not be voted or counted for voting quorum purposes.
Under the Facilities Agreement, Euronext's ability to acquire its shares is restricted, subject to certain exceptions. On 27 May 2014 the General Meeting authorised the Managing Board, with the approval of the Supervisory Board, to acquire shares for a period of 18 months after the date of authorisation. The number of Ordinary Shares to be acquired is limited to a maximum of 10% of the issued share capital outstanding at the time the General Meeting authorised the Managing Board. Resolutions by the Managing Board to acquire shares are subject to the approval of the Supervisory Board.
Under Euronext's Articles of Association, upon a proposal from the Supervisory Board, or upon proposal of the Managing Board, which has been approved by the Supervisory Board, the General Meeting may resolve to reduce Euronext's issued and outstanding share capital by cancelling its shares, or by amending Euronext's Articles of Association to reduce the nominal value of its shares. The decision to reduce Euronext's share capital requires a majority of at least twothirds of the votes cast if less than 50% of Euronext's issued share capital is present or represented at the General Meeting.
The s hareholding structure as of 31 December 2014 was as follows.
| Shareholders | Number of Shares | % of capital |
|---|---|---|
| Reference shareholders | 23,352,000 | 33.36% |
| Employees | 182,808 | 0.26% |
| Treasury Shares | 27,135(a) | 0.04% |
| Free Float | 46,438,057 | 66.33% |
| TOTAL | 70,000,000 | 100% |
(a) As communicated by Euronext's liquidity provider on 31 December 2014, excluding settlement and custody for trades on 30 and 31 December 2014.
Prior to the IPO, on 27 May 2014, a group of institutional investors (collectively, the "Reference Shareholders", and each a "Reference Shareholder") purchased an aggregate of 33.36% of the issued and outstanding Ordinary Shares from the ICE, the selling shareholder at the IPO, at €19.20 or a 4% discount to the Off er Price (€20.00).
This Group of Reference Shareholders is comprised of Novo Banco , an affiliate of Banco Espírito Santo, S.A., BNP Paribas S.A., BNP Paribas Fortis S.A./N.V., ABN AMRO Bank N.V. through its subsidiary ABN AMRO Participaties Fund I B.V., ASR Levensverzekering N.V. (a company of the ASR Nederland group), Caisse des Dépôts et Consignations, Bpifrance Participations, Euroclear S.A./N.V., Société Fédérale de Participations et d'Investissement/Federale Participatie – en Investeringsmaatschappij, Société Générale and BancoBPI Pension Fund represented by BPI Vida e Pensões – Companhia de Seguros, S.A.
| Individual Shareholding |
||
|---|---|---|
| Name of Reference Shareholder | Number of shares | (% of Capital) |
| BNP Paribas S.A. | 3,850,000 | 5.50% |
| BNP Paribas Fortis S.A./N.V. | 1,050,000 | 1.50% |
| ABN AMRO Bank N.V. through its subsidiary ABN AMRO Participaties Fund I B.V. | 1,148,000 | 1.64% |
| ASR Levensverzekering N.V. | 581,000 | 0.83% |
| Caisse des Dépôts et Consignations | 2,100,000 | 3.00% |
| Bpifrance Participations | 2,100,000 | 3.00% |
| Euroclear S.A./N.V. | 5,600,000 | 8.00% |
| Novo Banco B.A. | 875,000 | 1.25% |
| Société Fédérale de Participations et d'Investissement/ Federale Participatie – | ||
| en Investeringsmaatschappij | 3,150,000 | 4.50% |
| Société Générale | 2,100,000 | 3.00% |
| BancoBPI Pension Fund represented by BPI Vida e Pensões – Companhia de Seguros, S.A. | 798,000 | 1.14% |
| TOTAL SHAREHOLDING | 23,352,000 | 33.36% |
The Reference Shareholders have entered into a reference shareholders agreement (the "Reference Shareholders Agreement") governing the relationship among the Reference Shareholders.
Under the Reference Shareholders Agreement, each of the Reference Shareholders has agreed not to sell or otherwise transfer or dispose of any of the Ordinary Shares such Reference Shareholder acquires pursuant to the Share Purchase Agreement for a period of three years commencing on the date of pricing of the Off ering on 19 June 2014. This transfer restriction will not apply to any transfers to (i) affi liates of a Reference Shareholder, provided that the transferee agrees to be bound by this transfer restriction and the other terms and conditions of the Reference Shareholders Agreement and shall accede to the Reference Shareholders Agreement, (ii) another Reference Shareholder, provided that the Ordinary Shares transferred will continue to be subject to the transfer restriction and the other terms and conditions of the Reference Shareholders Agreement as if originally held by the acquiring Reference Shareholder, and (iii) a third party with the unanimous consent in writing of the Reference Shareholders (subject to the consent of the relevant regulator(s), such consent not to be unreasonably withheld and provided the third party shall accede to the Reference Shareholders Agreement, and further provided that no mandatory bid obligation is triggered by such transfer. In the case of transfers to an affi liate of a Reference Shareholder, such affi liate must re transfer the relevant Ordinary Shares to the original Reference Shareholder prior to ceasing to be an affiliate of such Reference Shareholder. In the case of proposed transfers to another Reference Shareholder, the other Reference Shareholders will have a right of fi rst refusal pro rata to their respective holdings, and such transfer may not result in any Reference Shareholder, together with its affiliates, holding one third or more of the aggregate shareholding of the Reference Shareholders. In addition, repo and securities lending transactions may be excluded from this restriction on the basis of guidelines to be agreed.
In the event of a tender off er announced or made by any person to acquire all or a portion of the Ordinary Shares, the Reference Shareholders will review and assess the merits of the proposed bid and adopt a common position. Subject to consulting with the Euronext College of Regulators, if the outcome of that procedure is that the Reference Shareholders decide to accept the off er, once made, the transfer restriction will not apply, except as provided to the contrary in any declaration of no-objection and subject to any and all other requirements and restrictions under applicable law and regulation, and with the understanding that no Reference Shareholder will be obliged to sell its Ordinary Shares regardless the common position taken.
Each of the Reference Shareholders has agreed not to enter into any transaction or do anything, and not to permit its affi liates to enter into any transaction or do anything, if such transaction or action would result in the Reference Shareholders or any of them becoming obligated to make a mandatory bid (verplicht openbaar bod) for the Ordinary Shares within the meaning of section 5: 70 of the Netherlands Wet op het fi nanciëel toezicht (Financial Supervision Act) implementing article 5 of Directive 2004/25/EC.
For so long as the aggregate shareholding of the Reference Shareholders amounts to at least 25% of the issued share capital of the Company, the Reference Shareholders, acting jointly, will have the right to one third of the Supervisory Board seats. Members of the Supervisory Board who are appointed upon a nomination by the Reference Shareholders are referred to as "Reference Shareholder Directors". If one third of the number of members of the Supervisory Board is not a round number, the next higher integral number shall apply. The Supervisory Board undertakes to include the name of the person nominated by the Reference Shareholders in its binding nomination to the shareholders meeting of Euronext, unless the Supervisory Board objects against the nomination if it reasonably believes that the nominee may not fulfi l the suitability and integrity criteria under applicable Dutch law, and always subject to any applicable regulatory assessments, approvals and requirements.
The Reference Shareholder Directors have been appointed by the Extraordinary General meeting of the shareholders that was held in Amsterdam on 19 December 2014 each for a term of four years, provided that his or her term of offi ce shall lapse immediately after the day of the fi rst general meeting of Euronext N.V. to be held in 2018. However if the Reference Shareholders Agreement is terminated earlier, his or her term of offi ce shall lapse immediately after the day of the fi rst general meeting of Euronext N.V. to be held after the date of termination of the Reference Shareholders Agreement.
Each Reference Shareholder has appointed one representative and one alternate duly authorized to represent and act for and in the name of the relevant Reference Shareholder and any and all of its affi liates for all purposes of the Reference Shareholders Agreement, who shall be the contact person vis-à-vis the other Reference Shareholders and the Company. The representatives of all Reference Shareholders constitute the Committee of Representatives which decides on all matters requiring a joint decision of the Reference Shareholders. The decisions of the Committee of Representatives shall be binding upon all Reference Shareholders.
Depending on the decision concerned, the decisions of the Committee of Representatives shall be adopted by absolute majority of the votes cast or by qualifi ed majority of two thirds of the votes cast, as indicated below. Each Reference Shareholder will have such number of votes equal to the aggregate number of Ordinary Shares held by the Reference Shareholder and its affi liates, provided that no Reference Shareholder shall at any time have one-third or more of the votes within the Committee of Representatives regardless of the number of Ordinary Shares held.
In all instances where the Reference Shareholders Agreement calls for joint decision making of the Reference Shareholders in the General Meeting, each Reference Shareholder will exercise, and will cause any of its affi liates to exercise, its voting rights in such shareholders' meeting in accordance with the decision of the Committee of Representatives on the relevant subject.
The Reference Shareholders agree to vote in accordance with the decision of the Committee of Representatives on any proposed shareholders' resolutions.
The following resolutions require a qualifi ed majority of two thirds of the votes cast:
any issuance of securities other than Ordinary Shares, to the extent these give exposure to Ordinary Shares, including but not limited to hybrids and covered bonds;
any proposal to appoint, suspend or remove any member of the Supervisory Board (including but not limited to any Reference Shareholders Director);
For the following resolutions, the adoption is by absolute majority of the votes cast:
In the Netherlands, the European rules on takeover bids are in force and implemented in the Dutch Financial Supervision Act. In accordance with section 5: 70 of the Dutch Financial Supervision Act, any person who, alone or in concert with others, acquires predominant control (30% of the voting rights) in a listed public company with limited liability established in the Netherlands, is obligated to make a public takeover bid for all the listed shares of the listed public company with limited liability. A party is exempted from the mandatory bid rules, inter alia, if that party has acquired predominant control in the company concerned before an IPO.
The Reference Shareholders Agreement and the Share Purchase Agreement are in place to ensure that the Reference Shareholders are acting in compliance with the relevant guidelines. Under the Reference Shareholders Agreement, the Reference Shareholder that will act as coordinator shall actively monitor the obligation of all Reference Shareholders not to enter into any transaction or do anything, nor to permit its affi liates to enter into any transaction or do anything, if such transaction or action would result in the Reference Shareholder or any of the becoming obligated to make a mandatory bid for the Ordinary Shares.
The Reference Shareholders Agreement and all restrictions and requirements thereunder or pursuant thereto shall terminate upon the earlier of (i) expiry of the Restricted Period, unless extended by written agreement signed by all Reference Shareholders, subject to any regulatory declarations of no objection or regulatory approvals, (ii) the receipt of a written confi rmation of all relevant competent regulatory authorities that from their respective regulatory perspectives the transfer restriction described above under "Share Transfer Restriction" is no longer required, unless extended by written agreement by all Reference Shareholders ultimately four weeks after receipt of such confi rmation, (iii) the Company becoming bankrupt or being granted a (provisional) suspension of payment, and (iv) at any time after the Restricted Period, the aggregate shareholding of the Reference Shareholders becoming less than 25% of the issued share capital of the Company unless increased to at least 25% again within 30 days after such event.
In connection with the Reference Shareholders Agreement, the Company and the Reference Shareholders (through Euroclear S.A./N.V. as their coordinator) have entered into a letter agreement (the "Letter Agreement") dated 4 June 2014. Pursuant to the Letter Agreement, the Company agreed (i) to take all appropriate action within its power to implement the appointment of the members of the Supervisory Board that will be nominated by the Reference Shareholders; (ii) to give reasonable prior notice to the Reference Shareholders, or if required, to all shareholders, in the event of issuance of Ordinary Shares pursuant to the designation of the Managing Board as the authorized body to issue Ordinary Shares by the General Meeting, as granted on 27 May 2014, in relation to payment in Ordinary Shares in case of merger or acquisition transactions and (iii) not to use the designation of the Managing Board granted by the General Meeting on 27 May 2014 to buy back existing Ordinary Shares if such a buy back could trigger an obligation for the Reference Shareholders to make a mandatory bid for the Ordinary Shares.
In 2014 the following crossings of thresholds were declared:
On top of the Reference Shareholders who own jointly 33.36% and whose individual holdings are disclosed above and according to the AFM any substantial holding and gross short positions in issuing institutions and shares with special controlling rights have to be notifi ed.
An issuing institution is: a public limited company (naamloze vennootschap) incorporated under Dutch law whose (depositary receipts for) shares are admitted to trading on a regulated market in the Netherlands or in another Member State of the European Union or an EEA State, or a legal entity incorporated under the law of a state that is not an EU Member State and whose (depositary receipts for) shares are admitted to trading on a regulated market in the Netherlands.
As soon as the substantial holding or short position equals or exceeds 3% of the issued capital, the holder should report this. Subsequently, they should notify the AFM again when their substantial holding or short position consequently reaches, exceeds or falls below a threshold. This can be caused by the acquisition or disposal of shares by the shareholder or because the issued capital of the issuing institution is increased or decreased. Thresholds are: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% en 95%.
The duty to notify applies to legal entities as well as natural persons.
| Date | Shareholder having crossed the threshold | Crossing of threshold in capital and voting rights |
Type | Nb of shares | % of voting rights |
|---|---|---|---|---|---|
| 20/06/2014 | Société Générale S.A. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | Société Fédérale de Participations et d'Investissement (SFPI) (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | ABN AMRO Group N.V. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | Banco Esperito Santo S.A. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 03/08/2014 | Banco Esperito Santo S.A. (RSH) | 30% | Decrease | 23,352,000 | 33.36% |
| 03/08/2014 | Novo Banco B.A. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | Euroclear S.A./N.V. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | BNP Paribas S.A. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | Caisse des Dépôts et Consignations (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | BPI Vide e Pensoes Companhia de Seguros S.A. (RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | ASR Nederland N.V.(RSH) | 30% | Increase | 23,352,000 | 33.36% |
| 20/06/2014 | Intercontinental Exchange Inc. | 75% | Decrease | 46,648,000 | 66.64% |
| 24/06/2014 | Intercontinental Exchange Inc. | 10% | Decrease | 4,399,749 | 6.29% |
| 11/12/2014 | Intercontinental Exchange Inc. | 3% | Decrease | - | 0.00% |
| 22/07/2014 | M&G Investment Management Limited | 3% | Increase | 2,350,057 | 3.36% |
| 23/06/2014 | Aviva plc | 3% | Increase | 2,272,590 | 3.25% |
| 25/06/2014 | York Capital Management Global Advisors LLC | 3% | Increase | 2,113,000 | 3.02% |
As of the date of the Registration Document, the Shareholders of the Company that hold 3% or more in the capital of the Company are as follows:
| Shareholder | Nb of shares | % of voting rights |
|---|---|---|
| Reference Shareholders | 23,352,000 | 33.36% |
| Société Générale S.A. | ||
| Société Fédérale de Participations et d'Investissement (SFPI) | ||
| ABN AMRO Group N.V. | ||
| Novo Banco B.A. | ||
| Euroclear S.A./N.V. | ||
| BNP Paribas S.A. | ||
| Caisse des Dépots et Consignations | ||
| BPI Vide e Pensoes Companhia de Seguros S.A. | ||
| ASR Nederland N.V. | ||
| UBS Group AG | 3,211,680 | 4.59% |
| M&G Investment Management Limited | 2,350,057 | 3.36% |
| Aviva plc | 2,272,590 | 3.25% |
| York Capital Management Global Advisors LLC | 2,113,000 | 3.02% |
From 24 June 2014 to the Registration Document, none of Euronext's shareholders hold 10% or more in the capital of the Company.
within thirty calendar days after the fi rst trading date. ICE entered into a lock-up agreement for its remaining stake that was due to expire on 21 December 2014.
Until the IPO, ICE owned 100% of the issued and outstanding share capital and voting rights of Euronext. Following the sale of 33.36% of the capital to the Group of Reference Shareholders prior to the IPO, ICE continued to own up to 6.02% of Euronext N.V. Ordinary Shares as the over-allotment option granted to the Joint Global Coordinators at the time of the IPO for stabilisation purposes was not exercised
On 8 December 2014, ICE announced that it had received a waiver of the lock-up agreement and that it had sold all of its remaining stake by way of an accelerated book-building to institutional investors.
Following this sale, ICE no longer holds, to the Company's knowledge, any of Euronext's share capital and voting rights.
The Annual General Meeting must be held within six months after the end of each fi nancial year. An Extraordinary General Meeting may be convened, whenever Euronext's interests so require, by the Managing Board or the Supervisory Board. Shareholders representing alone or in aggregate at least one-tenth of Euronext's issued and outstanding share capital may, pursuant to the Dutch Civil Code, request that a General Meeting be convened. Within three months of it becoming apparent to the Managing Board that Euronext's equity has decreased to an amount equal to or lower than one-half of the paid-in and calledup capital, a General Meeting will be held to discuss any requisite measures.
Euronext will give notice of each General Meeting by publication on its website and in any other manner that Euronext may be required to follow in order to comply with and the applicable requirements of regulations pursuant to the listing of its shares on Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris. The notice convening any General Meeting must include, among other items, an agenda indicating the place and date of the meeting, the items for discussion and voting, the proceedings for registration including the registration date, as well as any proposals for the agenda. Pursuant to Dutch law, shareholders holding at least 3% of Euronext's issued and outstanding share capital have a right to request the Managing Board and the Supervisory Board to include items on the agenda of the General Meeting. The Managing Board and the Supervisory Board must agree to these requests, provided that (i) the request was made in writing and motivated, and (ii) the request was received by the chairman of the Managing Board or the chairman of the Supervisory Board at least 60 days prior to the date of the General Meeting.
The Managing Board must give notice of a General Meeting, by at least such number of days prior to the day of the meeting as required by Dutch law, which is currently forty-two days.
Each Shareholder (as well as other persons with voting rights or meeting rights) may attend the General Meeting, to address the General Meeting and, in so far as they have such right, to exercise voting rights pro rata to its shareholding, either in person or by proxy. Shareholders may exercise these rights, if they are the holders of shares on the registration date which is currently the 28th day before the day of the meeting, and they or their proxy have notifi ed Euronext of their intention to attend the meeting in writing at the address and by the date specifi ed in the notice of the meeting.
The Managing Board may decide that persons entitled to attend General Meetings and vote there may, within a period prior to the General Meeting to be set by the Managing Board, which period cannot start prior to the registration date, cast their vote electronically or by post in a manner to be decided by the Managing Board. Votes cast in accordance with the previous sentence are equal to votes cast at the meeting.
Each Shareholder may cast one vote for each Ordinary Share held. Members of the Managing Board and the Supervisory Board may attend a General Meeting in which they have an advisory role. The voting rights attached to shares are suspended as long as such shares are held by Euronext. The rights of the holders of Ordinary Shares that were off ered and sold in the Off ering rank pari passu with each other and with all other holders of the Ordinary Shares, including the Reference Shareholders, with respect to voting rights and distributions. Euronext has no intention of changing the rights of Shareholders.
Resolutions of the General Meeting are taken by an absolute majority, except where Dutch law or Euronext's Articles of Association provide for a qualifi ed majority or unanimity.
Four General Meetings were held in 2014. Three of these were held before Euronext became a listed company. In these meetings decisions were taken on Euronext's name, capital and articles of association, on a number of matters relating to the Initial Public Off ering, on the employee share ownership plan, on the designation of the authority to issue shares or grant rights to subscribe for shares, on the appointment of Jos Dijsselhof to the Managing Board, on the remuneration of the Supervisory Board, on the remuneration policy, on the dividend policy, on the grant of a call option to Stichting Euronext and on the appointment of the external auditor, among other items. In the Extraordinary General Meeting held on 19 December 2014 decisions were taken to draw up and publish the annual accounts and the annual report of Euronext only in the English language and to appoint Dominique Aubernon, Koenraad Dom and Lieve Mostrey as members of the Supervisory Board.
Euronext currently does not have any anti-takeover provisions.
Shareholders may be subject to notifi cation obligations under the Dutch Financial Supervision Act. Pursuant to chapter 5.3 of the Dutch Financial Supervision Act, any person who, directly or indirectly, acquires or disposes of an actual or potential capital interest and/ or voting rights in the Company must immediately give written notice to the AFM of such acquisition or disposal by means of a standard form if, as a result of such acquisition or disposal, the percentage of capital interest and/or voting rights held by such person reaches, exceeds or falls below the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. In addition, any person whose capital interest or voting rights reaches, exceeds or falls below a threshold due to a change in Euronext's outstanding share capital, or in votes that can be cast on the shares as notifi ed to the AFM by the Company, should notify the AFM no later than the fourth trading day after the AFM has published Euronext's notifi cation of the change in its outstanding share capital.
Each person holding an interest in Euronext's share capital or voting rights of 3% or more at the time of admission of Euronext's shares to trading must immediately notify the AFM. Furthermore, every holder of 3% or more of the Company's share capital or voting rights whose interest at 31 December at midnight diff ers from a previous notifi cation to the AFM must notify the AFM within four weeks.
For the purpose of calculating the percentage of capital interest or voting rights, the following interests must be taken into account: (i) shares and/or voting rights directly held (or acquired or disposed of) by any person, (ii) shares and/or voting rights held (or acquired or disposed of) by such person's subsidiaries or by a third party for such person's account or by a third party with whom such person has concluded an oral or written voting agreement, (iii) voting rights acquired pursuant to an agreement providing for a temporary transfer of voting rights in consideration for a payment, and (iv) shares and/ or voting rights which such person, or any controlled entity or third party referred to above, may acquire pursuant to any option or other right to acquire shares and/or the attached voting rights.
Special rules apply to the attribution of shares and/or voting rights that are part of the property of a partnership or other form of joint ownership. A holder of a pledge or right of usufruct in respect of shares can also be subject to notifi cation obligations, if such person has, or can acquire, the right to vote on the shares. The acquisition of (conditional) voting rights by a pledgee or benefi cial owner may also trigger notifi cation obligations as if the pledgee or benefi cial owner were the legal holder of the shares and/or voting rights. Under the Dutch Financial Supervision Act, Euronext was required to fi le a report with the AFM promptly after the date of listing its shares setting out its issued and outstanding share capital and voting rights. Thereafter, Euronext is required to notify the AFM promptly of any change of 1% or more in its issued and outstanding share capital or voting rights since the previous notifi cation. The AFM must be notifi ed of other changes in Euronext's issued and outstanding share capital or voting rights within eight days after the end of the quarter in which the change occurred. The AFM will publish all Euronext's notifi cations of its issued and outstanding share capital and voting rights in a public register. If a person's capital interest and/or voting rights reach, exceed or fall below the above-mentioned thresholds as a result of a change in Euronext's issued and outstanding share capital or voting rights, such person is required to make a notifi cation not later than on the fourth trading day after the AFM has published Euronext's notifi cation as described above.
Furthermore, each member of the Managing Board, the Supervisory Board and certain other persons who, inter alia, have (co-)managerial responsibilities in respect of the Company, as well as certain persons closely associated with any such members or other persons, must immediately give written notice to the AFM by means of a standard form of all shares and voting rights in Euronext held by him or her at the time of admission of Euronext's shares to listing and thereafter of any change in his or her holding of shares and voting rights in Euronext.
Each person holding a net short position amounting to 0.2% or more of the issued share capital of a Dutch listed company must report it to the AFM. Each subsequent increase of this position by 0.1% above 0.2% will also have to be reported. Each net short position equal to 0.5% of the issued share capital of a Dutch-listed company and any subsequent increase of that position by 0.1% will be made public via the AFM short selling register. To calculate whether a natural person or legal person has a net short position, their short positions and long positions must be set off . A short transaction in a share can only be contracted if a reasonable case can be made that the shares sold can actually be delivered, which requires confi rmation of a third party that the shares have been located. There is also an obligation to notify the AFM of gross short positions. The notifi cation thresholds are the same as apply in respect of the notifi cation of actual or potential capital interests in the capital and/or voting rights, as described above.
The AFM keeps a public register of all notifi cation made pursuant to these disclosure obligations and publishes any notifi cation received. In 2014 the following crossing of thresholds were declared:
| Date | Shareholder having crossed the threshold |
Crossing of threshold in capital and voting rights |
Type | Nb of shares | % of voting rights |
Comment |
|---|---|---|---|---|---|---|
| 20/06/2014 | Goldman Sachs Group Inc. | 3% | Increase | 3,092,604 | 4.42% | Short |
| 27/06/2014 | Goldman Sachs Group Inc. | 3% | Decrease | 1,057,599 | 1.51% | Short |
| 27/06/2014 | UBS AG | 3% | Increase | 2,477,474 | 3.54% | |
| 2,457,474 | 3.51% | Short | ||||
| 29/07/2014 | UBS AG | 5% | Increase | 3,585,651 | 5.12% | |
| 3,540,951 | 5.06% | Short | ||||
| 28/11/2014 | UBS AG | 3% | Decrease | - | 0.00% | |
| - | 0.00% | Short | ||||
| 28/11/2014 | UBS Group AG | 5% | Increase | 3,986,422 | 5.69% | |
| 3,817,875 | 5.45% | Short | ||||
| 04/12/2014 | UBS Group AG | 5% | Decrease Short | 3,986,422 | 5.69% | |
| 3,464,189 | 4.95% | Short | ||||
| 09/12/2014 | UBS Group AG | 5% | Increase Short | 3,986,422 | 5.69% | |
| 3,683,605 | 5.26% | Short | ||||
| 11/12/2014 | UBS Group AG | 5% | Decrease Short | 3,986,422 | 5.69% | |
| 3,499,077 | 5.00% | Short | ||||
| 19/12/2014 | UBS Group AG | 5% | Decrease | 3,211,680 | 4.59% | |
| 3,499,077 | 5.00% | Short | ||||
The Dutch Financial Supervision Act implementing the EU Market Abuse Directive 2003/6/EC and related Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, provides for specifi c rules that intend to prevent market abuse, such as the prohibitions on insider trading, divulging inside information and tipping, and market manipulation (the "EU Market Abuse Rules"). Euronext is subject to the EU Market Abuse Rules as implemented in the Dutch Financial Supervision Act, and non-compliance with these rules may lead to criminal fi nes, administrative fi nes, imprisonment or other sanctions.
The EU Market Abuse Rules on market manipulation may restrict Euronext's ability to buy back its shares. In certain circumstances, investors in Euronext can also be subject to the EU Market Abuse Rules. Pursuant to the Dutch Financial Supervision Act, members of the Euronext Managing Board and any other person who has (co) managerial responsibilities in respect of Euronext or who has the authority to make decisions aff ecting Euronext's future developments and business prospects and who may have regular access to inside information relating, directly or indirectly, to Euronext must notify the AFM of all transactions with respect to the shares or in fi nancial instruments the value of which is (co)determined by the value of the shares, conducted for its own account.
In addition, certain persons closely associated with members of Euronext's Managing Board or any of the other persons as described above and designated by the Dutch Financial Supervision Act Decree on Market Abuse (Besluit Marktmisbruik Wft), or the Decree, must also notify the AFM of any transactions conducted for their own account relating to the shares or in fi nancial instruments the value of which is (co)determined by the value of the shares. The Decree determines the following categories of persons: (i) the spouse or any partner considered by national law as equivalent to the spouse, (ii) dependent children, (iii) other relatives who have shared the same household for at least one year at the relevant transaction date and (iv) any legal person, trust or partnership whose, among other things, managerial responsibilities are discharged by a person referred to under (i), (ii) or (iii) above or by the relevant member of the Managing Board or other person with any authority in respect of Euronext as described above. These notifi cations must be made no later than on the fi fth business day following the transaction date and by means of a standard form. The notifi cation may be postponed until the moment that the value of the transactions performed for that person's own account, together with the transactions carried out by the persons closely associated with that person, reaches or exceeds an amount of €5,000 in the calendar year in question.
The AFM keeps a public register of all notifi cations under the Dutch Financial Supervision Act. Third parties can request to be notifi ed automatically by e-mail of changes to the public register. Pursuant to the Dutch Financial Supervision Act, Euronext will maintain a list of its insiders and adopt an internal code of conduct relating to the possession of and transactions by members of its Managing Board and employees in Euronext shares or in fi nancial instruments of which the value is (co)determined by the value of the shares. Euronext's internal code of conduct has been published on its website on https://www.euronext.com/en/investors/corporate-governance.
After the admission of its shares to listing on Euronext Amsterdam, Euronext Brussels and Euronext Paris on 20 June 2014, and on Euronext Lisbon on 17 September 2014, Euronext became a public limited liability company (naamloze vennootschap) incorporated and existing under the laws of the Netherlands. The Netherlands is Euronext's home member state for the purposes of Directive 2004/109/EC (as amended by Directive 2013/50/EU, the "Transparency Directive") as a consequence of which it is subject to the Dutch Financial Supervision Act in respect of certain on-going transparency and disclosure obligations upon admission to listing and trading of its shares on Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris.
The Dutch Financial Reporting Supervision Act (Wet toezicht fi nanciële verslaggeving) (the "FRSA") applies to fi nancial years starting from 1 January 2006. On the basis of the FRSA, the AFM supervises the application of fi nancial reporting standards by, among others, companies whose corporate seat is in the Netherlands and whose securities are listed on a Dutch Regulated Market or Multilateral Trading Facility or foreign stock exchange. Pursuant to the FRSA, the AFM has an independent right to (i) request an explanation from Euronext regarding its application of the applicable fi nancial reporting standards and (ii) recommend to Euronext the making available of further explanations. If Euronext does not comply with such a request or recommendation, the AFM may request that the Enterprise Chamber order Euronext to (i) make available further explanations as recommended by the AFM, (ii) provide an explanation of the way it has applied the applicable fi nancial reporting standards to its fi nancial reports or (iii) prepare Euronext's fi nancial reports in accordance with the Enterprise Chamber's instructions.
Euronext may make distributions to its shareholders only insofar as its shareholders' equity exceeds the sum of the paid-in and calledup share capital plus the reserves as required to be maintained by Dutch law or by its Articles of Association. Under Euronext's Articles of Association, the Managing Board decides which part of any profi t will be reserved.
Euronext's dividend policy is to achieve a dividend pay-out ratio of approximately 50% of net income, upon the approval of the Annual general Meeting, and as long as the Company is in position to pay this dividend while meeting all its various duties and obligations. More specifi cally, the Facilities Agreement restricts Euronext's ability to make any dividend, share redemption or any other distributions, save for (i) distributions of an amount of up to 50% of the net income of the Company in any fi nancial year; (ii) following the repayment of €125.0 million of the term loan facility, the redemption or repurchase of shares or any other distribution provided that following any such redemption, repurchase or distribution as the case may be, the leverage ratio as defi ned in the Facilities Agreement is less than 1.5x; and (iii) at any time, repurchase of shares for the needs of the Employee Off ering and employee shareholding and management incentive programs that Euronext may implement from time to time, which may be off ered for free or at a discount (iv) repurchase shares in accordance with liquidity or market making programmes.
Euronext may make a distribution of dividends to its shareholders only after the adoption of Euronext's statutory annual accounts demonstrating that such distribution is legally permitted. The profi t, as this appears from the adopted annual accounts, shall be at the free disposal of the General Meeting, provided that the General Meeting may only resolve on any reservation of the profi ts or the distribution of any profi ts pursuant to and in accordance with a proposal thereto of the Supervisory Board or a proposal of the Managing Board, which has been approved by the Supervisory Board. Resolutions of the General Meeting with regard to a distribution at the expense of the reserves shall require the approval of the Managing Board and the Supervisory Board.
The Managing Board is permitted to resolve to make interim distributions to Euronext shareholders, subject to approval of the Supervisory Board. The General Meeting may also resolve to make interim distributions to Euronext shareholders, pursuant to and in accordance with a proposal thereto by the Managing Board, which has been approved by the Supervisory Board.
The Managing Board may decide that, subject to approval of the Supervisory Board, a distribution on shares shall not be made in cash or not entirely made in cash but other than in cash, including but not limited in the form of shares in the Company or decide that shareholders shall be given the option to receive a distribution either in cash or other than in cash. The Managing Board shall, subject to approval of the Supervisory Board, determine the conditions under which such option can be given to Euronext's shareholders.
Shareholders are entitled to share the profit pro rata to their shareholding. Claims to dividends and other distributions not made within fi ve years from the date that such dividends or distributions became payable will lapse, and any such amounts will be considered to have been forfeited to Euronext (verjaring).
| First Quarter 2015 Results | 6 May 2015 |
|---|---|
| Annual General Meeting | 6 May 2015 |
| Second Quarter and First Half 2015 results | 30 July 2015 |
| 2015 Third Quarter Results | 5 November 2015 |
5
5
| 5.1.1 Defi nitions | 76 |
|---|---|
| 5.1.2 Establishment of Euronext | |
| as an Independent, | |
| Publicly Traded Company | 76 |
| 5.1.3 Sources of Revenues | 77 |
| 5.1.4 Components of Expenses | 79 |
| 5.1.5 Key Factors Aff ecting Businesses | |
| and Results of Operations | 79 |
| 5.1.6 Goodwill | 80 |
| 5.1.7 Financial and trading position | 80 |
| 5.1.8 Results of Operations | 81 |
| 5.1.9 Cash Flow | 89 |
| 5.1.10 Facilities Agreement | 89 |
| 5.1.11 Contractual Obligations | 91 |
| 5.1.12 Off -Balance Sheet Arrangements | 92 |
| 5.1.13 Quantitative and Qualitative | |
| Disclosures about Market Risk | 92 |
| 5.1.14 Signifi cant Accounting Policies | 94 |
| 5.1.15 Critical Accounting Estimates | |
| and Judgments | 94 |
| 5.2 | Relationships & related party transactions |
95 |
|---|---|---|
| 5.2.1 Services Agreements and Related Arrangements between Euronext |
||
| and ICE | 95 | |
| 5.2.2 Intellectual Property | 97 | |
| 5.3 | Legal proceedings | 99 |
| 5.3.1 TOM | 99 | |
| 5.3.2 AMF Investigation | 99 | |
| 5.3.3 Proprietary Traders | ||
| (négociateurs pour compte propre) | 99 | |
| 5.3.4 Euronext Amsterdam Pension Fund | 100 | |
| 5.3.5 SunGard | 100 | |
| 5.4 | Insurance | 101 |
| 5.5 | Liquidity and Capital | |
| Resources | 102 | |
| 5.5.1 Liquidity | 102 | |
| 5.5.2 Regulatory Capital Requirements | 102 | |
| 5.6 | Tangible fi xed assets | 103 |
| 5.6.1 Principal Properties | 103 |
The following review relates to Euronext historical fi nancial condition and results of operations for the years ended 31 December, 2013 and 2014. This "Operating and Financial Review" is based on the audited fi nancial statements for the years ended 31 December 2013 and 2014, which are included in this Registration Document and should be read in conjunction with "General description of the Company" and "Financial Statements". Prospective investors should read the entire Registration Document and not just rely on the information set out below. The fi nancial information included in this "Operating and Financial Review" has been extracted from the audited consolidated and combined fi nancial statements.
The following discussion of Euronext results of operations and fi nancial condition contains forward-looking statements. Euronext actual results could diff er materially from those that are discussed in these forwardlooking statements. Factors that could cause or contribute to such diff erences include those discussed below and elsewhere in this Registration Document, particularly under "Risk Factors".
Euronext is a pan-European exchange group, off ering a diverse range of products and services and combining transparent and effi cient equity, fi xed income securities and derivatives markets in Paris, Amsterdam, Brussels, Lisbon and London. Euronext businesses comprise: listing, cash trading, derivatives trading, Market Data and Indices, post-trade and Market Solutions & Other.
Euronext management reviews the performance of the business, and makes decisions on allocation of resources, only on a company-wide basis. Therefore, Euronext has one reportable segment.
Euronext has been operating as an independent, publicly traded company since 20 June 2014. From April 2007 through November 2013 Euronext businesses were integrated with the other businesses of NYSE Euronext, and from November 2013 to June 2014, Euronext businesses were part of ICE as a result of ICE's acquisition of NYSE Euronext on 13 November 2013.
The following defi ned terms are used in this Operating and Financial Review:
"Legacy Euronext" means the historical operations of the former Euronext N.V. (existing prior to 15 March 2014, "Old Euronext") and its subsidiaries, including LIFFE.
"Parent" means NYSE Euronext, through 13 November 2013, and ICE, from 13 November 2013.
The legal entities of the Group have been owned by Euronext N.V. since the date that the internal reorganisation was finalised in March 2014. The Consolidated Financial Statements as of and for fi nancial years ended 31 December 2014 and the Combined Financial Statements as of and for fi nancial year ended 31 December 2013 have been prepared by combining all individual legal entities into one reporting entity, as described further in Note 1 to the consolidated fi nancial statements (see "Financial Statements"). All transactions and balances between consolidated entities have been eliminated on consolidation. All transactions and balances with Parent entities are refl ected as related party transactions and balances.
In March 2014, in connection with the separation of Euronext from ICE, the transfer pricing agreements described below were terminated and replaced by transitional and long-term SLAs providing for a specific identification of each individual service rendered to or received from ICE. Each individual service is priced separately, generally on a fi xed fee basis, based on actual usage or mutually agreed service level. These SLAs do not provide for the allocation of actual cost incurred, plus overheads and mark-up, in proportion to revenues.
The historical transfer pricing agreements were amended as of 1 January 2014 in order to provide for pricing consistent with the SLAs implemented in March 2014. Accordingly, the recharges to and from the Parent are made on a consistent basis throughout the rest of the year 2014. Services rendered to ICE primarily include the IT support to LIFFE, which terminated at the end of 2014, as well as various ancillary services.
Services received from ICE under the SLAs include the use of data centre infrastructure, corporate information systems and web support, as well as certain market data, market operations, internal audit and other services. With the exception of data centre infrastructure, the services received from ICE are transitional.
Euronext will continue to benefi t from a perpetual license to use the Euronext UTP technology on a royalty-free basis.
For a detailed overview of revenue generated and expense incurred from the Parent since 1 January 2014, please refer to Note 16 to the consolidated fi nancial statements for the year ended 2014 included in this Registration Document in "Financial Statements" .
As described above, the Group did not operate as a stand-alone entity prior to the IPO. Euronext 's 2013 combined fi nancial statements include allocations of shared costs made in accordance with transfer pricing agreements between the legal entities. The 2013 combined fi nancial statements do not purport to refl ect what Euronext combined results of operations, fi nancial position and cash fl ows would have been had the Group operated as a stand-alone publicly-traded entity, rather than as a part of the NYSE Euronext group and ICE, during the periods presented. As a result, the combined fi nancial statements are not necessarily indicative of Euronext future performance as a separate entity.
Euronext believes the combined fi nancial statements as of and for fi nancial year ended 31 December 2013 are meaningful to investors because they present the historical fi nancial condition and results of operations of the businesses comprising the Group, and therefore are relevant to an understanding of the historical development of the businesses comprising the Group. In addition, by presenting for each period the breakdown of revenue between related party revenue, which is anticipated to be non-recurring after the year ending 31 December 2014, and third party revenue, Euronext believes the combined fi nancial statements are relevant in assessing what the revenue would have been had the Group been a stand-alone entity for the periods presented.
There are limitations inherent in the preparation of all combined fi nancial statements due to the fact that Euronext business was previously part of a larger group. The basis of preparation included in Note 1 to the consolidated fi nancial statements provides a detailed description of the treatment of historical transactions.
As noted above, the 2013 combined fi nancial statements refl ect allocations of shared support costs as recognised on a historical basis in the accounting records of the Legacy Euronext subsidiaries in accordance with existing transfer pricing agreements between the legal entities. These transfer pricing agreements provide for (i) the sharing of costs of certain global functions, including corporate management and software development, between Legacy Euronext entities and the U.S. operations of the Parent and (ii) allocation of shared IT infrastructure, corporate support and other mutualised costs among the Legacy Euronext exchange entities, including LIFFE. The most important historic cost allocations were:
Costs of global functions incurred by the Parent include global corporate management and web support. Costs of global functions incurred by Euronext entities include certain global management positions and shared support services. Costs of global functions have historically been allocated in proportion to revenues and the resulting cross-charges with the Parent have been recorded in the accounts of the individual legal entities within the Group in accordance with the transfer pricing agreements. These historical cross-charges resulted in net expense of €4.3 million recorded in the combined fi nancial statements for the year ended 31 December 2013. Euronext does not expect a signifi cant increase in costs relating to the establishment of corporate functions in connection with becoming a stand-alone public company.
At separation, Euronext retained all shared internal IT resources that supported both the Group's and LIFFE's derivative exchange businesses. In accordance with the transfer pricing agreement, the derivatives IT costs have been recharged to the Legacy Euronext exchange entities, including LIFFE, on the basis of allocated costs, including overhead costs, plus a 10% mark-up. The allocation between the local exchange entities was made in proportion to their respective derivatives trading revenue. Accordingly, the historical recharge to LIFFE of allocated IT costs plus mark-up is refl ected as related party revenue in the combined fi nancial statements in the amounts of €93.3 million for the year ended 31 December 2013.
T his related party revenue is materially aff ected by the Service Level Agreements ("SLAs") that became eff ective upon the Separation. The relevant SLA provides for a reduction in the IT service once LIFFE has completed its migration to another technology platform. Substantially all of this related party revenue is therefore non-recurring.
The derivatives businesses of Legacy Euronext historically were managed on a Europe-wide basis with a high level of cross-border integration. In accordance with a profi t split agreement ("PSA"), the derivatives operating expenses historically were allocated to the local exchange entities, including LIFFE, in proportion to their respective derivatives revenues. Diff erences between actual cost incurred and allocated costs pursuant to the PSA have resulted in "retrocessions" between exchange entities. These historical PSA retrocessions between LIFFE and the Group are recorded within operating expense in the combined fi nancial statements in the amounts of €13.6 million for the year ended 31 December 2013.
For a detailed overview of revenue generated and expense incurred from the Parent prior to 1 January 2014, please refer to Note 16 to the combined fi nancial statements included in this Registration Document.
Admission fees comprise fees paid by companies to list and admit to trading equity and debt securities on Euronext markets and corporate activity and other fees, which consist primarily of fees charged for centralising securities in connection with new listings and tender off ers and delisting fees. In addition, companies whose securities are listed or admitted to trading on Euronext markets pay annual fees.
Euronext has adopted a common set of admission and annual fees for the Euronext and Alternext markets. Companies having equity securities listed or admitted to trading on Euronext or Alternext markets are subject to the following types of fees:
Euronext distinguishes domestic issuers and non-domestic issuers that have their primary or single listing on its markets from nondomestic multi-listed issuers. Non-domestic multi-listed issuers primarily use Euronext markets to increase visibility, and the fees charged to this category of issuers have lower caps and lower fl at fees. In order to facilitate access to capital markets for small- and medium-sized enterprises, which Euronext defi nes as companies with a market capitalisation below €1 billion ("SMEs"), and in conjunction with the launch of EnterNext in June 2013, Euronext has reduced fees for the fi rst admission of SMEs on Euronext and Alternext and for those SMEs that transfer from a Euronext markets to another Euronext markets until the end of 2015.
Admission fees for debt securities, issued both on a stand-alone basis or under a note programme, are based on the maturity and principal amount admitted to trading, and, in respect of long-term debt (maturity over one year), number of years to maturity. Euronext off ers lower admission fees for issuers that access the debt capital markets frequently and for issuers qualifying as SMEs.
The admission fees described above also apply to the EasyNext markets operated by Euronext Brussels and Euronext Lisbon. The admission fees for the Marché Libre of Euronext Paris and Euronext Brussels follow the same principles as the admission fees for Euronext and Alternext markets. Issuers quoted on the Marché Libre pay a fl at annual fee.
Euronext offers centralis ation services for orders in connection with a public off er, a public tender off er or a sales facility, in respect of securities admitted or to be admitted to any Euronext markets whether regulated or not.
A common set of admission and annual fees apply to ETPs. Issuers of ETPs listed and/or admitted to trading on Euronext markets are subject to the following types of fees:
• fund issuers are charged a one-time admission fee and a fl at annual fee per listed open-end investment fund. A monthly service fee is also charged per fund traded on the net asset value trading facility. A fl at delisting fee is charged per open-end investment fund.
Revenues from Euronext cash trading and derivatives trading businesses consist of transaction-based fees for executing trades on Euronext cash markets and derivatives markets. These transaction fees are charged per executed order and based on value traded in cash equities and are charged per lot in derivatives. Trading volume in equity products is primarily driven by price volatility in equity markets and indices. The level of trading activity for all products is also infl uenced by market conditions and other factors.
Derivative trading revenues received from transactions conducted on Euronext markets are variable, based on the volume and value of traded contracts, and recognised when executed. The principal types of derivative contracts traded are equity and index products and commodities products.
The Group charges data vendors on a per-user basis for the access to its real-time data and Enterprise licenc es are charged for access to historic and reference data products and proprietary market data information services. The Group also collects periodic license fees from vendors for the right to distribute the Group data to third parties. These fees are recognised on a monthly basis as services are rendered.
Euronext operates Interbolsa, the Portuguese national CSD, and receive fees mainly with respect to the settlement of trades/ instructions and the custody of securities registered/deposited in the centralised securities systems, namely the securities traded in Portugal. Euronext also receives a share of clearing income based on treasury services and the number of cleared derivatives trades cleared through LCH.Clearnet, in exchange for which Euronext pays LCH.Clearnet a fi xed fee plus a variable fee based on derivatives trading volume.
Market Solutions & Other revenue includes software license fees and IT services provided to third-party market operators and connection services and data centre co-location services provided to market participants. Licenc e fees for software that does not need signifi cant customis ation recognised upon delivery or acceptance by the client. Fees for software customisation and implementation services are recognised either on a time and materials basis or under the percentage completion method, depending upon the nature of the contract. When standard UTP software requires significant customisation and implementation work both software license and professional services fees are recognised together on a percentage of completion basis. The stage of completion is measured based on the number of man days incurred to date as a percentage of total estimated number of man days to complete. Software maintenance fees, managed services fees, connection and subscription fees, and annual license fees are recognised ratably over the life of the agreement.
Euronext's operating expenses include salaries and employee benefits, depreciation and amortisation, and other operational expenses, which include systems and communications, professional services, accommodation, PSA retrocession, and other expenses.
Salaries and employee benefi ts expenses include employee salaries, incentive compensation (including stock-based compensation) and related benefi ts expenses, including pension and medical charges.
Depreciation and amortisation expenses consist of costs from depreciating fixed assets (including computer hardware and capitalised software) and amortising intangible assets over their estimated useful lives.
Systems and communications expenses include costs for development, operation and maintenance of trading, regulatory and administrative systems; investments in system capacity, reliability and security; and cost of network connectivity between customers and data centres, as well as connectivity to various other market centres. Systems and communications expenses also include fees paid to third-party providers of networks and information technology resources, including fees for consulting, research and development services, software rental costs and licenses, hardware rental and related fees paid to third-party maintenance providers.
Professional services expenses include consulting charges related to various technological and operational initiatives as well as legal and audit fees.
Accommodation expenses include costs of leasing the properties used by the Group, as well as utilities, maintenance and security costs to maintain the properties used by the Group.
Other expenses include marketing, taxes, insurance, travel, professional membership fees, UTP software sublicensing fees paid to the Parent, corporate management recharges from the Parent, and other expenses.
The economic and business environment in which Euronext operates directly aff ects Euronext's results of operations. The results have been and will continue to be aff ected by many factors, including the factors set out below. Euronext continues to focus its strategy to broaden and diversify its revenue streams, as well as on its company-wide expense reduction initiatives in order to mitigate these uncertainties.
A large proportion of Euronext's business is transaction-based. For the year ended 31 December 2014, Euronext derived 46% of its third party revenue from its cash trading and derivatives trading businesses. Accordingly, fl uctuations in the trading volumes directly aff ect Euronext revenues. During any period, the level of trading activity in Euronext markets is signifi cantly infl uenced by factors such as general market conditions, market volatility, competition, regulatory changes, capital maintenance requirements, market share and the pace of industry consolidation.
A reduction in trading activity could make Euronext's markets less attractive to market participants as a source of liquidity, which in turn could further discourage existing and potential market participants and thus accelerate a decline in the level of trading activity in these markets. Because Euronext's cost structure is largely fi xed, if the trading volumes and the resulting transaction fee revenues decline, Euronext may not be able to adjust its cost structure to counteract the associated decline in revenues, which would adversely aff ect its net income. Euronext's largely fi xed cost structure also provides operational leverage, such that an increase in its trading volumes and the resulting transaction fee revenues would have a positive eff ect on its margins.
Euronext as a newly established stand-alone company has identifi ed various ways to streamline its processes and enhance its operational effi ciency. As such Euronext has thus identifi ed the potential for pretax operating optimisation and net effi ciencies of approximately €60 million by the end of H1 2015 and of €80 million by the end of 2016 on a run-rate basis, ie taking into account the full-year impact of any cost saving measure to be undertaken before the end of this period. These effi ciencies can be classifi ed in three buckets, generating each a third of the total expected amount:
Expenses incurred to realize the effi ciencies described above are classifi ed as "Exceptional items" in the Income statement, for a total of €45 million in 2014. Further reference is made to note 8 in the Financial statements.
On 14 October 2013, Euronext entered into the Derivatives Clearing Agreement with LCH.Clearnet in respect of the clearing of trades on its continental Europe derivatives markets. Under the terms of the Derivatives Clearing Agreement, eff ective starting 1 April 2014, Euronext has agreed with LCH.Clearnet to share revenues. Euronext receives a share of clearing income based on treasury services and the number of cleared derivatives trades cleared through LCH. Clearnet, in exchange for which Euronext pays LCH.Clearnet a fi xed fee plus a variable fee based on derivatives trading volume. Subject to certain conditions and exceptions, the term of the Derivatives Clearing Agreement is through 31 December 2018, after which date the agreement will renew automatically until terminated by either party upon written notice. Our estimated derivatives clearing revenue would have been €46 million and the associated clearing expense would have been €27 million for the year ended 31 December 2013, had the contract been in place for 12 months. For the year ended 31 December 2014 those revenues are €36 million and the associated expense is €20 million over a period of 9 months.
As part of its cost reduction programme, Euronext decided not to renew the lease contract (ending 31 August 2015) for its head offi ce building ("Cambon") in r ue Cambon, Paris. New premises are located in the La Défense business centre. The 9-year lease contract for this offi ce building ("Praetorium") was signed on 21 November 2014 and will be eff ective as per 1 May 2015.
Goodwill recorded at the Legacy Euronext level and attributable to the Continental Europe businesses of Legacy Euronext has been recorded in the combined fi nancial statements. It includes the entire goodwill that arose from the acquisition of the Amsterdam and Brussels stock exchanges in 2000 and the Lisbon stock exchange in 2002. It also includes an allocation of the goodwill that arose from the acquisition of Atos Euronext Market Solutions ("AEMS"), Euronext's preferred IT service provider, in 2008. Atos Euronext Market Solutions was acquired to obtain full control over the IT function supporting the Legacy Euronext exchanges and, accordingly, the related goodwill was allocated to the Group's exchanges and to LIFFE in proportion to their respective fair values. Conversely, the goodwill attributable to the acquisition of LIFFE and the portion of AEMS goodwill allocated to LIFFE have both been excluded from these consolidated fi nancial statements. In addition, the goodwill recorded in these consolidated fi nancial statements does not include any allocation of the goodwill that arose from the acquisition of Legacy Euronext by NYSE Group, Inc. in April 2007 or from the acquisition of NYSE Euronext by ICE in November 2013.
Other than as decribed below, there has been no signifi cant change in Euronext's fi nancial or trading position since 1 January 2015.
Historically LIFFE was the tenant of the operating lease for the Cannon Bridge House ("CBH") facility, based in London, which includes a disaster recovery Centre used by both the Group and LIFFE, and offi ce space, primarily used by LIFFE. The Financial Statements for the year ended 31 December 2013 refl ect the Group's share of the costs of using the disaster recovery Centre . On 19 May 2014, in connection with the Separation, (i) the CBH operating lease was reassigned from LIFFE to the Group who, as new tenant, became obliged to make rental payments until the expiration of the non-cancellable term of the lease in 2017; and (ii) a short-term subleasing agreement was put in place between the Group and LIFFE. This subleasing was terminated by the end of 2014, as LIFFE completed the relocation of its corporate offi ces and its migration to another IT platform ( see Note 16).
With respect to the office space component of the contract, the unavoidable costs of the operating lease until 2017 are in excess of expected subleasing benefi ts to be received from ICE in the short term and from third parties in subsequent periods. The resulting onerous lease liability assumed from the Parent, which is estimated to be approximately €21.9 million, has been recorded in the second quarter of 2014 with a corresponding reduction to Shareholders' equity.
The Group decided in Q4 2014 to relocate its disaster recovery Centre to new premises, eff ectively vacating this area of CBH by the end of 2015. This increased the unavoidable cost of the lease contract and increased the onerous lease liability over expected future benefi ts by €10.8 million. The increase has been recorded as an exceptional expense in Q4 2014 (see Note 8).
The Group is working on an alternative scenario to decrease the liability.
On 6 May 2014, Euronext entered into a €500.0 million facilities agreement .
The full amount of the €250.0 million term loan facility was drawn on 20 June 2014 to refi nance a €250.0 million short-term promissory note due to ICE incurred on 29 April 2014 in exchange for €250.0 million in cash.
In the fi rst quarter of 2015, the Group intends to repay €140 million as an early prepayment of the term loan and simultaneously increase the revolving credit facility to €390 million. For more details, please refer to "Facilities Agreement" .
On April 30, 2014, the Parent contributed to the Group a 2.75% ownership interest into Euroclear plc, an unlisted company involved in the settlement of securities transaction and related banking services. The fair value of the investment was €63 million. The Euroclear shares have been recorded as a non-current equity investments. Due to a share buy back from Euroclear the direct investment in Euroclear increased from 2.75% to 3.12%. Based on the new information available as of 31 December 2014, management determined that the fair value could be reliable measured as of 31 December 2014. As a result, management recorded a fair value adjustment through Other Comprehensive Income of €3.7 million. The fair value of the investment is €66.8 million.
The table below sets forth Euronext's results of operations for the years ended 31 December 2014 and 2013.
| Year ended | |||
|---|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 | |
| Third party revenue and other income | 458,454 | 386,690 | |
| ICE transitional revenue and other income | 34,044 | 94,982 | |
| TOTAL REVENUE AND OTHER INCOME | 492,498 | 481,672 | |
| Salaries and employee benefi ts | (123,991) | (132,720) | |
| Depreciation and amortisation | (16,644) | (19,924) | |
| Other operational expenses | (143,100) | (149,047) | |
| Operating profi t before exceptional items | 208,763 | 179,981 | |
| Exceptional items | (44,603) | (22,086) | |
| Operating profi t | 164,160 | 157,895 | |
| Net fi nancing income/(expense) | (6,452) | (424) | |
| Results from equity investments | 4,557 | (18,040) | |
| Profi t before income tax | 162,265 | 139,431 | |
| Income tax expense | (44,091) | (51,915) | |
| Profi t for the year | 118,174 | 87,516 |
Euronext's total revenue for the year ended 31 December 2014 was €492.5 million, compared to €481.7 million for the year ended 31 December 2013, an increase of €10.8 million or 2%. Euronext total revenue comprises revenue from third parties and related party revenue from Parent entities.
Third party revenue. The table below sets forth Euronext's third party revenue for the years ended 31 December 2014 and 2013.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Listing | 61,737 | 53,282 |
| Trading revenue | 212,013 | 187,166 |
| of which | ||
| • Cash trading | 165,565 | 138,428 |
| • Derivatives trading | 46,448 | 48,738 |
| Market data & indices | 93,348 | 83,980 |
| Post-trade | 57,268 | 21,253 |
| of which | ||
| • Clearing | 35,979 | - |
| • Custody and Settlement | 21,289 | 21,253 |
| Market Solutions & Other revenue | 33,443 | 41,009 |
| Other income | 645 | - |
| TOTAL THIRD PARTY REVENUE AND OTHER INCOME | 458,454 | 386,690 |
Euronext third party revenue for the year ended 31 December 2014 was €458.5 million, compared to €386.7 million for the year ended 31 December 2013, an increase of €71.7 million or 19%.
For the year ended 31 December 2014:
Listing revenues were €61.7 million in 2014, an increase of 15.8% compared to the €53.3 million achieved in 2013. This strong performance was driven by healthy IPO and secondary market activity. 50 new listings took place in 2014 (versus 36 in 2013), of which 35 IPOs (versus 21 in 2013), and a total of €10.8 billion of capital raised, compared to €3.1 billion in 2013.
The cash trading business achieved a strong full-year performance with revenues of €165.6 million, an increase of 19.7% compared to €138.4 million in 2013. This performance results from strong trading volumes, up 17.6% compared to 2013, combined with successful yield management and a stable market share. Our domestic market share in a highly competitive environment was 64.2% for the full year.
The ETF segment was particularly dynamic this year with volumes up 24% compared to 2013.
Derivatives trading revenue decreased by 4.5% in 2014 compared to 2013, amounting to €46.5 million (compared to €48.7 million in 2013). This is due to the dampening eff ects of lower volatility in the second and in the third quarters of the year and to competition in the Dutch segment of the individual equity options business.
For the full year commodity products achieved a strong performance, with an increase in volumes traded of 25% compared to 2013.
Market data & indices revenue, which now account for 20% of our revenues, posted an 11% increase in 2014 revenues compared to 2013: €93.3 million versus €84 million.
This growth was due to a strong client take up of the Continental Derivatives data packages, delayed data agreements and a record number of licensed products on Euronext indices which rose by 40% to over 5,600.
The fi nancial benefi ts of the derivatives clearing agreement with LCH. Clearnet came into force on 1 April 2014. To facilitate the comparison, Euronext has decided to provide adjusted fi gures for 2013, estimating the impact this contract would have had, had it been in place from Q2 2013 onwards.
For the full year of 2014 Euronext recorded clearing revenues of €36 million, (full year 2013 adjusted: €33.8 million, or 2013 reported: €0.0 million).
As explained above, this increase compared to the adjusted number for 2013 results from the favourable impact of the derivatives product mix.
Full year revenues for Interbolsa in Portugal in 2014 amounted to €21.3 million, fl at compared to 2013.
Revenues from market solutions decreased in 2014 compared to 2013 (from €41 million to €33.5 million), as expected in the middle of the adaptation period to refocus the strategy of commercial technology and due to the change in accounting principles outlined above.
Four Euronext UTP deals were signed in 2014, the highest annual number since the launch of the platform.
In 2014 ICE transitional revenue & other income amounted to €34.0 million, whilst it was €95.0 million for the full year of 2013.
This revenue refl ects (i) the IT support services provided to Liff e for the operation of its derivatives exchanges in the UK and in the US and its foreseen migration onto the ICE platform; (ii) the invoicing of Cannon Bridge House (started as of 19 May 2014) and (iii) ancillary services. This should not be compared to the revenues booked last year as, until 1 January 2014, the fi nancial statements were combined fi nancial statements and included recharge of shared costs made in accordance with the historical transfer pricing agreement between the legal entities which has been terminated and replaced by SLAs for providing services to ICE. These SLAs are priced separately for each service rendered in accordance with market prices.
The table below sets forth Euronext operating expenses for the years ended 31 December 2014 and 2013.
| Year Ended | ||
|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 |
| Salaries and employee benefi ts | (123,991) | (132,720) |
| Depreciation and amortisation | (16,644) | (19,924) |
| Other operational expenses | (143,100) | (149,047) |
| TOTAL OPERATING EXPENSES | (283,735) | (301,691) |
Euronext operating expenses for the year ended 31 December 2014 were €283.7 million, compared to €301.7 million for the year ended 31 December 2013, a decrease of €18.0 million or 6%.The 2014 expenses include 9 months of Clearing contract, which is not comparable with 2013 : the adjusted 2013 expenses with 9 months of Clearing contract amount to €321.5 million. Euronext delivered robust cost discipline in 2014 and expenses were down by €37.8 million versus adjusted 2013 expenses. Euronext operating expenses comprise salaries and employee benefi ts, depreciation and amortisation, and other operational expenses.
to €132.7 million at the end of December 13 YTD. This decrease is mainly attributable to a decrease in the IT headcount, a reduction LTIP expenses as a result of the early vesting of RSU/LTIP due to the ICE acquisition and to a decrease in bonus including social charges.
Depreciation and Amortisation decreased by €-3.3 million, or -16%, to €16.6 million at the end of December 14 YTD, compared to €19.9 million at the end of December 13 YTD. This decrease is mainly attributable to the end of the amortization of the historic UTP licenc e, as it was fully amortis ed.
Salaries and Employee Benefits decreased by €-8.7 million, or -7%, to €124.0 million at the end of December 14 YTD, compared
The table below sets forth Euronext's other operational expenses for the years ended 31 December 2014 and 2013:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Systems and communications | (22,201) | (26,286) |
| Professional services | (51,376) | (59,307) |
| Clearing expenses | (20,263) | - |
| Accommodation | (25,653) | (17,677) |
| PSA retrocession | - | (13,631) |
| Other expenses | (23,607) | (32,146) |
| TOTAL | (143,100) | (149,047) |
System and Communication decreased by €-4.1 million, or -15%, to €22.2 million at the end of December 2014, compared to €26.3 million at the end of December 2013. This decrease is mainly attributable to the replacements of former intercompany expenses by SLAs with ICE and to lower level of telecom costs.
Professional Services decreased by €-7.9 million, or -13%, to €51.4 million at the end of December 2014, compared to €59.3 million at the end of December 2013. This decrease is mainly attributable to the reduction in the number of IT consultants, the replacement of former intercompany expenses by SLAs with ICE Group, and to the transfer of CBH to Euronext in May 2014 (prior to that transfer, part of these costs were recharged to Euronext in the line Professional Services).
Clearing expenses were €20.3 million at the end of December 2014. These expenses relate to the new Clearing agreement that started in April 2014 (full year adjusted: €19.8 million or 2013 reported: €0 million).
Accommodation increased by €+8.0 million, or +45%, to €25.7 million at the end of December 2014, compared to €17.7 million at the end of December 2013. This increase is mainly attributable to the transfer of CBH to Euronext in May 2014.
The line Other Expenses includes Transfer Pricing expenses in 2013 for €4.3 million:
Euronext operating profi t before exceptional items for the year ended 31 December 2014 was €208.8 million, compared to €180.0 million for the year ended 31 December 2013, an increase of €28.8 million.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Initial public offering costs | (2,878) | (674) |
| Restruction costs | (44,090 ) | (3,628) |
| Share plan vesting acceleration/settlement | (2,803) | (12,707) |
| Exceptional income | 5,574 | - |
| Pension plan amendment/settlement | - | (4,380) |
| Grant claw back | - | (697) |
| Other | (406) | - |
| TOTAL | (44,603) | (22,086) |
In 2014, exceptional items include:
other exceptional expenses, mainly related to the lease termination of the Evere Building in Brussels . See Note 26.
€2.8 million of expenses for the acceleration of vesting and settlement of share-based plans, of which €2.3 million was related to the accelerated vesting of LTIP 2013. In addition a €0.5 million discount on Employee shares plan related to the IPO was recognised in the second quarter of 2014 and recorded as exceptional expense.
Euronext operating profi t for the year ended 31 December 2014 was €164.2 million, compared to €157.9 million for the year ended 31 December 2013, an increase of €6.3 million or 4%.
Euronext's net fi nancing income for the year ended 31 December 2014 was a net expense of €6.5 million, compared to a net expense of €0.4 million for the year ended 31 December 2013, an increase in net expense of €6.0 million. The table below sets forth Euronext's net fi nancing income for the years ended 31 December 2014 and 2013.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Interest income | 407 | 1,012 |
| Interest expense | (2,381) | (1,611) |
| Gain/(loss) on disposal of treasury investments | 89 | 179 |
| Net foreign exchange (loss)/gain | (4,567) | (4) |
| NET FINANCING INCOME/(EXPENSE) | (6,452) | (424) |
Euronext results from equity investments, which increased from net loss of €18.0 million for the year ended 31 December 2013 to a net income of €4.6 million for the year ended 31 December 2014, is explained by the received dividend from Euroclear and Sicovam.
Euronext profi t before income tax for the year ended 31 December 2014 was €162.3 million, compared to €139.4 million for the year ended 31 December 2013, an increase of €22.8 million or 16%.
Euronext's income tax expense for the year ended 31 December 2014 was €44.1 million, compared to €51.9 million for the year ended 31 December 2013, a decrease of €7.8 million or 15%. Euronext eff ective tax rate was 27% for the year ended 31 December 2014 compared to 37% for the year ended 31 December 2013.
The domestic tax rates have not significantly changed in 2014. The decrease in effective tax rate from 37% for the year ended 31 December 2013 to 27% for the year ended 31 December 2014 is primarily attributable to the items discussed below.
Euronext reported profi t for the year ended 31 December 2014 was €118.2 million, compared to €87.5 million for the year ended 31 December 2013, an increase of €30.7 million or 35%.
The table below sets forth Euronext results of operations for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | ||
|---|---|---|
| In thousands of euros | 2013 | 2012 |
| Third party revenue | 386,690 | 420,769 |
| Related party revenue | 94,982 | 74,341 |
| TOTAL REVENUE | 481,672 | 495,110 |
| Salaries and employee benefi ts | (132,720) | (125,683) |
| Depreciation and amortisation | (19,924) | (21,766) |
| Other operational expenses | (149,047) | (168,153) |
| Operating profit before exceptional items | 179,981 | 179,508 |
| Exceptional items | (22,086) | (8,761) |
| Operating profit | 157,895 | 170,747 |
| Net fi nancing income / (expense) | (424) | (690) |
| Results from equity investments | (18,040) | 934 |
| Profit before income tax | 139,431 | 170,991 |
| Income tax expense | (51,915) | (57,790) |
| PROFIT FOR THE YEAR | 87,516 | 113,201 |
Euronext total revenue for the year ended 31 December 2013 was €481.7 million, compared to €495.1 million for the year ended 31 December 2012, a decrease of €13.4 million or 3%. Euronext total revenue comprises revenue from third parties and related party revenue from Parent entities.
Third party revenue. The table below sets forth Euronext third party revenue for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | |||
|---|---|---|---|
| In thousands of euros | 2013 | 2012 | |
| Listing | 53,282 | 60,967 | |
| Trading revenue | 187,166 | 201,974 | |
| of which: | |||
| • Cash trading | 138,428 | 140,307 | |
| • Derivatives trading | 48,738 | 61,667 | |
| Market data & indices | 83,980 | 86,545 | |
| Post-trade | 21,253 | 20,958 | |
| Market Solutions & Other | 41,009 | 50,325 | |
| TOTAL THIRD PARTY REVENUE | 386,690 | 420,769 |
Euronext third party revenue for the year ended 31 December 2013 was €386.7 million, compared to €420.8 million for the year ended 31 December 2012, a decrease of €34.1 million or 8%. This decrease was largely attributable to lower revenue from derivatives trading due to lower trading volumes and lower average fee per lot, as well as lower revenue from Market Solutions & Other and listing.
For the year ended 31 December 2013:
Derivatives trading revenue decreased by 21% compared to the year ended 31 December 2012, principally as a result of lower trading volumes, which were 12% lower than the prior year, and a 10% lower average fee per lot. The decrease in derivatives trading volumes was largely attributable to macroeconomic conditions in Europe, as well as the implementation of the French FTT. Volumes in equity options trading, which constitute approximately half of total derivatives trading volume, decreased by 16% compared to the prior year, primarily as a result of a loss in market share. The decrease in the average fee per lot was mainly driven by fee changes for equity options products (20% lower average fee per lot compared to the prior year);
Market data & indices revenue decreased by 3% compared to the year ended 31 December 2012, principally as a result of a decrease in the number of real-time end user terminals, partially off set by the introduction of fees for non-display use and index constituents and weights information;
For the year ended 31 December 2013, 58.1% of Euronext third party revenue was generated from its businesses in France, 26.7% from the Netherlands, 8.6% from Portugal, 5.8% from Belgium and 0.8% from the United Kingdom. For the year ended 31 December 2012, 60.4% of Euronext third party revenue was generated from its businesses in France, 25.8% from the Netherlands, 8.3% from Portugal, 4.9% from Belgium and 0.6% from the United Kingdom. Trading, listing and market data revenue is attributed to the country in which the exchange is domiciled. Other revenue is attributed to the billing entity.
Related party revenue. Related party revenue primarily consists of IT services rendered to NYSE Euronext group companies and historically billed by Euronext entities in accordance with transfer pricing agreements. These agreements are "cost plus" arrangements providing for the recharge of allocated costs, including overhead costs, plus a mark-up of 10%. As at the effective date of the Separation, these transfer pricing agreements were replaced by transitional SLAs, which are expected to be terminated as soon as LIFFE has completed its migration to the ICE technology platform, which Euronext anticipates to occur by the end of 2014. Consequently, Euronext expects that substantially all related party revenue will be non-recurring.
The underlying costs, used as a basis to generate the related party revenue are primarily allocated fi xed costs arising from mutualised resources, rather than directly attributable costs. Consequently, Euronext does not expect these costs to be representative of the costs that will be eliminated when the LIFFE IT services are terminated. As at 31 December 2013, Euronext has already announced a restructuring of its London-based IT operations, which are primarily supporting the LIFFE exchange and the Euronext derivatives trading business.
The table below sets forth Euronext related party revenue for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | ||
|---|---|---|
| In thousands of euros | 2013 | 2012 |
| IT operations and maintenance services – LIFFE UK | 87,913 | 61,872 |
| IT operations and maintenance services – LIFFE US | 5,363 | 7,285 |
| R&D services | 1,706 | 5,184 |
| TOTAL RELATED PARTY REVENUE | 94,982 | 74,341 |
Euronext related party revenue for the year ended 31 December 2013 was €95.0 million , compared to €74.3 million for the year ended 31 December 2012, an increase of €20.6 million or 28%.
The bulk of related party revenue derives from IT support services provided to NYSE Euronext for the operation of the LIFFE derivatives exchange. The allocation between LIFFE and Euronext's own derivatives business was made in proportion to their respective derivatives trading revenue. Accordingly, LIFFE absorbed 87% and 83% of the cost-plus recharge in the years ended 31 December 2013 and 2012, respectively. The increase in related party revenue for the year ended 31 December 2013 compared to the prior year was largely attributable to a €26.0 million increase in IT operations and maintenance services provided to LIFFE UK, which principally related to project workload undertaken in the year ended 31 December 2013 to support the derivatives trading business.
The remainder of related party revenue derives from the recharge of UTP research and development costs to the U.S. operations of NYSE Euronext in proportion to their contributions to NYSE Euronext consolidated revenue, in accordance with the global research and development cost sharing agreement.
The table below sets forth Euronext operating expenses for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | |||
|---|---|---|---|
| In thousands of euros | 2013 | 2012 | |
| Salaries and employee benefi ts | (132,720) | (125,683) | |
| Depreciation and amortisation | (19,924) | (21,766) | |
| Other operational expenses | (149,047) | (168,153) | |
| TOTAL OPERATING EXPENSES | (301,691) | (315,602) |
Euronext operating expenses for the year ended 31 December 2013 were €301.7 million , compared to €315.6 million for the year ended 31 December 2012, a decrease of €13.9 million or 4%. Euronext operating expenses comprise salaries and employee benefits, depreciation and amortisation, and other operational expenses.
Salaries and employee benefits. Salaries and employee benefits increased by €7.0 million , or 6%, to €132.7 million for the year ended 31 December 2013, compared to €125.7 million for the year ended 31 December 2012. This increase was attributable to higher bonus payments, including social charges, due to improved fi nancial results of NYSE Euronext, as well as annual payroll increase and higher tax provisions compared to the prior year.
Depreciation and amortisation. Depreciation and amortisation decreased by €1.8 million , or 8%, to €19.9 million for the year ended 31 December 2013, compared to €21.8 million for the year ended 31 December 2012. This decrease refl ects a €1.1 million , or 13%, year-over-year decrease in depreciation of tangible fi xed assets and a €0.8 million , or 6%, year-over-year decrease in amortisation of intangible fi xed assets. This decrease relates to the natural asset roll-off given the level of investment in prior years.
Other operational expenses. The table below sets forth Euronext other operational expenses for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | ||
|---|---|---|
| In thousands of euros | 2013 | 2012 |
| Systems and communications | (26,286) | (27,671) |
| Professional services | (59,307) | (62,772) |
| Accommodation | (17,677) | (17,561) |
| PSA retrocession | (13,631) | (10,825) |
| Other expenses | (32,146) | (49,324) |
| TOTAL OTHER OPERATIONAL EXPENSES | (149,047) | (168,153) |
Euronext other operational expenses for the year ended 31 December 2013 were €149.0 million , compared to €168.2 million for the year ended 31 December 2012, a decrease of €19.1 million or 11%. This decrease was principally attributable to a €17.2 million decrease in other expenses, principally relating a one-off retrocession on UTP licencing fees paid to the Parent in the prior year in the amount of €8.2 million , as well as a decrease in regulatory and membership fees compared to the prior year. In addition, professional services expenses decreased by €3.5 million , which was principally related to a reduction in IT contracting. These decreases were partially off set by an increase in PSA retrocession expense.
Euronext operating profit before exceptional items for the year ended 31 December 2013 was largely unchanged at €180.0 million , compared to €179.5 million for the year ended 31 December 2012, an increase of €0.5 million . This result refl ected Euronext lower total revenues off set by lower operating expenses in the year ended 31 December 2013 compared to the year ended 31 December 2012, as discussed above.
In 2013, exceptional items include:
€12.7 million expenses for the acceleration of vesting and settlement of NYSE Euronext share-based plans, which occurred in connection with the acquisition of NYSE Euronext by ICE and is comprised €5.1 million for non-cash share-based expenses and €7.6 million for related social security contributions and other taxes,
A net €4.4 million related to the Dutch pension plan, including a €0.8 million gain on the settlement of the Dutch defi ned benefi t plan and a €5.2 million one-time contribution to the new plan,
Euronext operating profi t for the year ended 31 December 2013 was €157.9 million , compared to €170.7 million for the year ended 31 December 2012, a decrease of €12.9 million or 8%.
Euronext net fi nancing income for the year ended 31 December 2013 was a net expense of €0.4 million , compared to a net expense of €0.7 million for the year ended 31 December 2012, a decrease in net expense of €0.3 million . The table below sets forth Euronext net fi nancing income for the years ended 31 December 2013 and 2012.
| Year Ended 31 December | ||
|---|---|---|
| In thousands of euros | 2013 | 2012 |
| Interest income | 1,012 | 1,800 |
| Interest expense | (1,611) | (2,250) |
| Gain / (loss) on disposal of available-for-sale fi nancial assets | 179 | 954 |
| Net foreign exchange loss | (4) | (1,194) |
| Net fi nancing income / (expense) | (424) | (690) |
Euronext results from equity investments, which decreased from net income of €0.9 million for the year ended 31 December 2012 to a net loss of €18.0 million for the year ended 31 December 2013, primarily refl ects an impairment charge of €27.2 million relating to Euronext equity investment in Sicovam Holding SA, which holds 13.06% of Euroclear plc. This charge was partially off set by a gain of €7.9 million on the partial disposal of Euronext equity investment in LCH.Clearnet Group and €1.2 million of dividends received.
Euronext profi t before income tax for the year ended 31 December 2013 was €139.4 million , compared to €171.0 million for the year ended 31 December 2012, a decrease of €31.6 million or 18%.
Euronext income tax expense for the year ended 31 December 2013 was €51.9 million , compared to €57.8 million for the year ended 31 December 2012, a decrease of €5.9 million or 10%. Euronext eff ective tax rate was 37.2% for the year ended 31 December 2013 compared to 33.8% for the year ended 31 December 2012. The increase in the eff ective tax rate was primarily caused by a nondeductible impairment recorded on Sicovam, off set by a decrease relating to various other non-deductible items and a decrease of 2.7% in the weighted average statutory tax rate.
Euronext reported profit for the year ended 31 December 2013 was €87.5 million , compared to €113.2 million for the year ended 31 December 2012, a decrease of €25.7 million or 23%.
The table below summarises Euronext consolidated cash fl ow for the years ended 31 December 2014, 2013 and 2012.
| Year Ended | |||
|---|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 | 31 December 2012 |
| Net cash provided by operating activities | 148,591 | 160,473 | 155,241 |
| Net cash provided by/(used in) investing activities | (28,124 ) | 21,776 | (18,878) |
| Net cash used in fi nancing activities | 39,863 | (115,075) | (153,441) |
| Non cash exchange gains on cash and cash equivalents | 482 | 93 | 320 |
| Net increase/(decrease) in cash and cash equivalents | 160,812 | 67,267 | (16,758) |
Net cash provided by operating activities was €148.6 million in the year ended 31 December 2014, compared to €160.5 million in the year ended 31 December 2013, a decrease of €11.9 million. This decrease principally reflects, amongst others, a €26.0 million increase in income tax paid compared to the prior year. This is partly mitigated by a €20.4 million positive variance of changes in working capital in the year ended 31 December 2014 compared to the prior year.
Net cash provided by operating activities was €160.5 million in the year ended 31 December 2013, compared to €155.2 million in the year ended 31 December 2012, an increase of €5.2 million . This increase principally refl ects, among other factors, a €27.2 million positive adjustment to profi t before income tax for impairment losses recognised in the year ended 31 December 2013 and a €25.0 million decrease in income tax paid compared to the prior year. These factors off set the lower profi t before income tax and a €7.9 million negative adjustment to profi t before income tax for a gain on the disposal of equity investments recognised in the year ended 31 December 2013 and a €4.8 million negative adjustment to profi t before income tax for changes in working capital in the year ended 31 December 2013 compared to a positive adjustment of €3.0 million in the prior year.
Net cash used in investing activities was €28 .1 million in the year ended 31 December 2014, compared to net cash provided by investing activities of €21.8 million in the year ended 31 December 2013, a decrease in net cash outfl ow of €49 .9 million. This decrease principally refl ects, among other factors, a €27.8 million cash infl ow from proceeds from the partial disposal of the LCH.Clearnet equity investment in 2013 as well as higher cash outfl ows for purchase of property, plant and equipment, net purchase of short-term investments and purchase of intangible assets.
Net cash provided by investing activities was €21.8 million in the year ended 31 December 2013, compared to net cash used in investing activities of €18.9 million in the year ended 31 December 2012, an increase in net cash infl ow of €40.7 million . This increase principally refl ects, among other factors, a €27.8 million cash infl ow from proceeds from the partial disposal of the LCH.Clearnet equity investment in 2013, as well as lower cash outfl ows for purchase of property, plant and equipment, net purchase of short-term investments and purchase of intangible assets.
Net cash provided by fi nancing activities was €39.9 million in the year ended 31 December 2014, compared to net cash used of €115.1 million in the year ended 31 December 2013, an increase of €154.9 million. This increase includes the net proceeds from borrowings of €247.9 million. In addition, it refl ects a change in net transfers to/from the Parent from a net distribution outfl ow of €29.9 million in the prior year to a net distribution outfl ow of €92 million in the year ended 31 December 2014. The change in net distribution outfl ow to the Parent is primarily caused by a share capital redemption made by Group entities to Parent entities. This was partially off set by movements in short-term cash pooling loans and borrowings with the Parent, which represented a net payment of €137.9 million in the year ended 31 December 2014, compared to net receipt of €144.9 million in the prior year.
Net cash used in financing activities was €115.1 million in the year ended 31 December 2013, compared to €153.4 million in the year ended 31 December 2012, a decrease of €38.4 million . This decrease refl ects a change in net transfers to/from the Parent from a net distribution outfl ow of €475.2 million in the prior year to a net contribution infl ow of €29.9 million in the year ended 31 December 2013, primarily caused by a reduction in dividend distributions and share capital redemptions made by Group entities to Parent entities. This was partially off set by movements in short-term cash pooling loans and borrowings with the Parent, which represented a net payment of €144.9 million in the year ended 31 December 2013, compared to net receipt of €321.8 million in the prior year.
On 6 May 2014, Euronext entered into a €500 million facilities agreement with BNP Paribas S.A. and ING Bank N.V. as active bookrunners and mandated lead arrangers (the "Facilities Agreement"). The Facilities Agreement provides for a €250 million term loan facility and a €250 million revolving credit facility.
Euronext drew the full amount of the €250.0 million term loan facility on 20 June 2014.
The Facilities Agreement will terminate three years following the date of the Facilities Agreement, subject to an option to extend the term by 12 months on two occasions. Euronext will be able to voluntarily cancel facilities in whole or part or prepay amounts it borrows under the facilities.
The Facilities Agreement includes a mandatory prepayment provision, which requires the net proceeds raised from any debt capital markets issuance (including convertible instruments) by the Company or any of its subsidiaries guaranteed by the Company be used to prepay and permanently reduce the term loan facility under the Facilities Agreement by a certain percentage (determined on a sliding scale based on the leverage ratio as defi ned in the Facilities Agreement on the testing date immediately preceding the relevant issuance). Any amount prepaid under the term loan facility may not be redrawn.
The term loan facility will bear interest at a rate equal to EURIBOR plus an initial margin of 0.80%, and borrowings under the revolving credit facility will bear interest at a rate equal to EURIBOR plus an initial margin of 0.50%. The applicable base margin rates for both facilities are subject to adjustment based on Euronext leverage ratio (as defi ned in the Facilities Agreement) in respect of the rolling 12 month period ending on 31 December and 30 June in each year. The table below sets out the range of ratios and the related margin percentage per annum for each facility.
| Leverage Ratio In % p.a. |
Term Loan Facility Margin |
Revolving Credit Facility Margin |
|---|---|---|
| Greater than or equal to 2.0: 1 | 1.05 | 0.75 |
| Greater than or equal to 1.5: 1 and less than 2.0: 1 | 0.90 | 0.60 |
| Greater than or equal to 1.0: 1 and less than 1.5: 1 | 0.80 | 0.50 |
| Less than 1.0: 1 | 0.70 | 0.40 |
For each 12-month extension of the term of the Facilities Agreement, an extension fee of 0.05% of the full amount of the extended facilities is payable to those lenders that consent to extend at the time each extension is consented to. For the revolving credit facility, a utilisation fee accrues on a daily basis at the following applicable rate per annum to be applied on the amount drawn:
There are also customary commitment fees at a rate per annum equal to 35% of the then applicable margin for the relevant facility on each lender's available commitment under the relevant facility during its availability period.
The facilities will be immediately cancelled and all outstanding loans will become immediately due and payable if any person (or persons acting in concert) other than ICE and/or one or more of the Reference Shareholders acquires benefi cial ownership of more than 30% of the issued and outstanding shares in the Company .
The Facilities Agreement contains a number of additional undertakings and covenants that, among other things, restrict, subject to certain exceptions, Euronext ability to:
Euronext is permitted, among other things, to dispose of assets in the ordinary course of trading on arm's length terms for full market value without restriction, and otherwise where the aggregate fair market value of the assets disposed of does not exceed 5% of Euronext consolidated total assets in any fi nancial year. No restrictions on investments in acquisitions and joint ventures apply if Euronext leverage ratio as defi ned in the Facilities Agreement would not be greater than 2.0x, in each case calculated on a pro forma basis taking into account the impact of such acquisition or joint venture.
In addition, Euronext is required to maintain compliance with a maximum leverage ratio. The maximum leverage ratio measures Euronext total gross debt to EBITDA (as such terms are defi ned in the Facilities Agreement). Euronext is required to maintain a leverage ratio of no more than 2.5x.
The Facilities Agreement contains customary events of default, in each case with customary and appropriate grace periods and thresholds, including, but not limited to:
The table below summarises Euronext debt, future minimum payment lease obligations under non-cancellable operating leases and capital expenditure commitments as at 31 December 2014.
| Payments Due by Year | |||||
|---|---|---|---|---|---|
| In thousands of euros | Total | 2015 | 2016-2019 | Thereafter | Notes |
| Debt (principal and accrued interest obligations) | 248,498.00 | 129.00 | 248,369.00 | - | Note 30.1 - Liquidity risk |
| Debt (future interest obligations) | 3,924.00 | 1,820.00 | 2,104.00 | ||
| Operating leases – minimum payments | 38,896.00 | 8,582.00 | 16,300.00 | 14,014.00 | Note 32.2 - Non-cancellable operating leases |
| Capital expenditure commitments | 3,907.00 | 807.00 | 2,620.00 | 480.00 | Note 32.1 - Capital Commitments |
| 295,225.00 | 11,338.00 | 269,393.00 | 14,494.00 |
Euronext capital expenditures were €13.9 million and €7.4 million for the years ended 31 December 2014 and 2013, respectively. Euronext capital expenditures in both years were principally related to hardware and capitalised software development costs. To a lesser extent, capital expenditures were also incurred to perform improvements in the facilities used by the Group.
Euronext capital expenditure requirements depend on many factors, including the rate of its trading volume growth, strategic plans and acquisitions, required technology initiatives, regulatory requirements, the timing and introduction of new products and enhancements to existing products, the geographic mix of Euronext business, and the continuing market acceptance of its electronic platform.
For the year ending 31 December 2014, Euronext has made operational capital expenditures as well as incurred capitalised software development costs. These expenditures were aimed at enhancing Euronext technology and supporting the continued expansion of Euronext businesses. Euronext has launched in 2014 a program to separate the UK and continental Europe derivatives products. They were both originally traded using the UTP—Derivative application suite. As part of this program Euronext have simplifi ed the architecture, eliminated overlap and redundancies of application by migrating all derivatives applications to similar applications the Company was using to operate its cash markets. In addition, Euronext is decommissioning legacy and obsolete infrastructure and replacing it by a modular and fl exible architecture approach. The program will be completed in Q1 2015. In 2014, Euronext spent approximately €5.4 million on hardware and investments in properties and €8.6 million on development eff orts and acquisition of third party licenses. Euronext funded this investment with cash from operations and availability under its bank credit facilities.
Euronext is not a party to any off -balance sheet arrangements that have, or are reasonably likely to have, a current or future material eff ect on Euronext fi nancial condition, results of operations, liquidity, capital expenditure or capital resources, other than the €250 million revolving credit facility under the Facilities Agreement and the commitments described in Note 32 to the consolidated fi nancial statements.
As a result of Euronext operating and fi nancing activities, Euronext is exposed to market risks such as interest rate risk, currency risk and credit risk. Euronext has implemented policies and procedures designed to measure, manage, monitor and report risk exposures, which are regularly reviewed by the appropriate management and supervisory bodies. The Group's central treasury is charged with identifying risk exposures and monitoring and managing such risks on a daily basis. To the extent necessary and permitted by local regulation, the Group's subsidiaries centralise their cash investments, report their risks and hedge their exposures in coordination with the Group's central treasury team. Euronext performs sensitivity analyses to determine the eff ects that may result from market risk exposures. Euronext uses derivative instruments solely to hedge fi nancial risks related to its fi nancial position or risks that are otherwise incurred in the normal course of its commercial activities. Euronext does not use derivative instruments for speculative purposes.
Substantially all signifi cant interest-bearing fi nancial assets and liabilities of the Group are either based on fl oating rates or based on fi xed rates with an interest term of less than one year. Euronext exposure to interest rate risk primarily arises from its fl oating rate borrowings under the Facilities Agreement. Euronext drew the full amount of the €250.0 million term loan facility on 20 June 2014 and no further changes occurred since June 2014.
A 0.5% increase/decrease in the Euribor 3-month or 6-month interest rates, to which Euronext borrowings under the Facilities Agreement are indexed, would result in an increase/decrease of its annual interest expense by €40,000 based on the net cash as of 31 December 2014.
The discussion below describes the liquidity risk to which the Group was exposed as at 31 December 2014, as reported in Note 30 to the consolidated fi nancial statements included in this Registration Document.
The Group would be exposed to liquidity risk in the case where its short-term liabilities become, at any date, higher than its cash, cash equivalents, short-term fi nancial investments and available bank facilities in the case where the Group is not able to refi nance this liquidity defi cit, for example, through new banking lines.
Cash, cash equivalents and short term fi nancial investments are managed as a global treasury portfolio invested into non-speculative financial instruments, readily convertible to cash, such as bank balances, money market funds, overnight deposits, term deposits and other money market instruments, thus ensuring a very high liquidity of the fi nancial assets. Euronext's policy is to ensure that cash, cash equivalents and available bank facilities allow the Group to repay its short term fi nancial liabilities, even disregarding incoming cash fl ows generated by operational activities, excluding the related party loans granted by the Group to its Parent.
The net position of the current fi nancial assets and current fi nancial liabilities, excluding working capital items, as of 31 December 2014, is described in the table below:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Cash, cash equivalents and short term fi nancial investments | 241,639 | 80,827 |
| Available credit facilities | 250,000 | 200,000 |
| Financial debt (excluding related party loans to/from Parent) | (248,498) | - |
| NET POSITION | 243,141 | 280,827 |
As of 31 December 2013, the Group had a €200.0 million loan facility granted by the Parent available for drawdown and maturing in June 2015. This loan facility was early terminated in June 2014 following the IPO. On May 6, 2014, the Group entered into a syndicated bank loan facilities agreement ("the Bank facilities"), with BNP Paribas and ING Bank N.V. as Lead Arrangers, providing for a €250.0 million term loan facility and a €250.0 million revolving loan facility, both maturing or expiring in three years, with two extensions for one year.
| Maturity between | ||||
|---|---|---|---|---|
| In thousands of euros | Maturity < 1 year | 1 and 5 years | Maturity > 5 years | Total |
| 2014 | ||||
| Related party borrowings | - | - | - | - |
| Trade and other payables | 126,427 | - | - | 126,427 |
| Borrowings | 129 | 248,369 | - | 248,498 |
| 2013 | ||||
| Related party borrowings | 407,025 | 40,000 | - | 447,025 |
| Trade and other payables | 143,661 | - | - | 143,661 |
| Borrowings | - | - | - | - |
A portion of Euronext assets, liabilities, income and expenses is recorded in pound sterling. Therefore, Euronext is exposed to a currency risk. When the pound sterling decreases in value against the euro, the contribution of equity, being the balance of assets and liabilities, and income in pound sterling, once translated into euros, in the combined fi nancial statements decreases.
The assets and liabilities of subsidiaries with functional currencies other than the euro at the end of the reporting periods are summarised as follows:
| In thousands | 2014 | 2013 |
|---|---|---|
| Assets | £ 68,551 | £ 26,451 |
| Liabilities | £ (38,757) | £ (24,914) |
| Net currency position | £ 29,794 | £ 1,537 |
| Impact on combined net parent investment of 10% decrease in the currency exchange rate | € (3,837) | € (185) |
Most operating revenue and expenses in the various subsidiaries of the Group are denominated in the functional currency of each relevant subsidiary. The Group's consolidated income statement is exposed to foreign currency risk arising from receivables and payables denominated in currencies diff erent from the functional currency of the related entity. As of 31 December 2014, a decrease of 10% of the GBP would result in a material impact on the foreign exchange gain or loss.
Euronext is exposed to credit risk in the event of a counterparty's default. Euronext exposure to credit risk primarily arises from the investment of cash equivalents and short term fi nancial investments. Euronext limits its exposure to credit risk by rigorously selecting the counterparties with which it executes agreements. Credit risk is monitored by using exposure limits depending on ratings assigned by rating agencies as well as the nature and maturity of transactions. Investments of cash and cash equivalents in bank current accounts and money market instruments, such as short term fixed and fl oating rate interest deposits, are strictly restricted by rules aimed at reducing credit risk:
In addition to the intrinsic creditworthiness of counterparties, the Group's policies also prescribe the diversifi cation of counterparties (banks, fi nancial institutions, funds) so as to avoid a concentration of risk. Derivatives are negotiated with leading high-grade banks.
In addition, Euronext is exposed to credit risk with its customers on trade receivables. Most customers of the Group are leading fi nancial institutions that are highly rated.
Euronext consolidated financial statements included in this Registration Document has been prepared and presented in accordance with IFRS.
In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. All assumptions, expectations and forecasts used as a basis for certain estimates within Euronext fi nancial statements represent good faith assessments of its future performance for which Euronext management believes there is a reasonable basis. These estimates and assumptions represent Euronext view at the times they are made, and only then. They involve risks, uncertainties and other factors that could cause Euronext actual future results, performance and achievements to differ materially from those estimated or forecasted. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision aff ects only that period or in the period of the revision and future periods if the revision aff ects both current and future periods. The estimates and assumptions that may have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are described below. Euronext has discussed the development and selection of these critical accounting policies and estimates with its independent auditors.
Signifi cant judgments made in the preparation of the consolidated fi nancial statements include the following:
Goodwill represents the excess of the consideration paid in a business combination over the Group's share in the fair value of the net identifi able assets and liabilities of the acquired business at the date of acquisition. Goodwill is not amortised but is tested at least annually for impairment, or whenever an event or change in circumstances indicate a potential impairment.
For the purpose of impairment testing, goodwill arising in a business combination is allocated to the cash-generating units ("CGUs") or groups of CGUs that are expected to benefi t from the synergies of the combination. Each CGU or CGU group to which goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. Goodwill is monitored and tested at the Group level, which represents a single operating segment.
The carrying value of a CGU group is compared to its recoverable amount, which is derived from the discounted future free cash fl ows of the CGU group. Cash fl ow projections are based on budget and business plan approved by management and covering a 5-year period. Cash fl ows beyond the business plan period are extrapolated using a perpetual growth rate.
The key assumptions used and the related sensitivity analysis are described in Note 13 to Euronext consolidated fi nancial statements included in this Registration Document.
Due to the inherent complexities arising from the nature of the Group's business, and from conducting business and being taxed in a substantial number of jurisdictions, signifi cant judgments and estimates are required to be made for income taxes. The Group computes income tax expense for each of the jurisdictions in which it operates. However, actual amounts of income tax due only become fi nal upon fi ling and acceptance of the tax return by relevant authorities, which may not occur for several years subsequent to issuance of the consolidated fi nancial statements.
The estimation of income taxes also includes evaluating the recoverability of deferred income tax assets based on an assessment of the ability to use the underlying future tax deductions against future taxable income before they expire. This assessment is based upon existing tax laws and estimates of future taxable income. To the extent estimates diff er from the fi nal tax return, earnings may be aff ected in a subsequent period.
The Group operates in various countries with local tax regulations. New tax legislation being issued in certain territories as well as transactions that the Group enters into regularly result in potential tax exposures. The calculation of our tax liabilities involves uncertainties in the application of complex tax laws. Our estimate for the potential outcome of any uncertain tax position is highly judgmental. However we believe that we have adequately provided for uncertain tax positions. Settlement of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations, fi nancial condition and cash fl ows. The Group recognises a liability for uncertain tax positions when it's probable that an outfl ow of economic recourses will occur. Measurement of the liability for uncertain tax positions is based on management's best estimate of the amount of tax benefi t/cost that will be realized upon settlement.
The Group holds investments in unlisted equity securities, which are carried at fair value on the balance sheet. The valuation methodology and key assumptions are described in Note 15 to Euronext consolidated financial statements included in this Registration Document.
In connection with the Separation of Euronext from ICE, Euronext and ICE entered into a series of services agreements and related agreements ("SLAs") to ensure that Euronext and ICE (including LIFFE) can continue to operate their respective businesses. Principally, there are three key agreements for the provision of core services by ICE to Euronext ("ICE Core Services"). Further, there are ancillary services provided by ICE to Euronext (the "ICE Ancillary Services") and Euronext also provides certain ancillary services in return ("Euronext Ancillary Services") (together, "Ancillary Services").
The provision of the ICE Core Services is covered by the following:
Amongst other things, the ICE Ancillary Services cover market data services and market operations, communication services to Euronext offi ces and IT services in the United States; and the Euronext Ancillary Services cover fi nance, market data services and market operations. Both Euronext and ICE may engage third parties to provide certain services covered by the SLAs. Euronext and ICE cooperate if Euronext and ICE identify from time to time any additional services or transfers of any rights or assets as may be required to ensure that both Euronext and ICE can continue to operate the respective business in much the same way prior to the separation of LIFFE from the Euronext group of businesses.
The SLAs for the ICE Core Services have been granted a declaration of non-objection by the Euronext College of Regulators. In relation to the Data Centre Services Agreement and Colocation Agreement, which are longer term agreements, there are detailed change management, incident management and exit management procedures, which are typical arrangements within services agreements in the fi nancial services sector. With the exception of the Connectivity Agreement and the SFTI hosting agreement, all other service agreements as described further in this section are transitional in nature.
The SLAs became operative on or about 1 April 2014. Some SLAs are transitional in nature and are scheduled to continue for a specifi ed initial term until Euronext develops its own independent capabilities or when ICE no longer requires such services from Euronext, either because of the completion of the migration of contracts traded on LIFFE to ICE Futures Europe or otherwise. This varies with the types of services to be provided.
Euronext pays ICE mutually agreed-upon fees for the ICE Data Centre Services and Ancillary Services, and ICE pays Euronext mutually agreed-upon fees for the Euronext Ancillary Services during the period for which services are performed under the agreements. ICE also pays Euronext a commission on the revenue it earns from the colocation and connectivity services provided to its customers. If the term of the agreements were to be extended beyond the duration provided for in the agreements (including any extension period), such fees may be renegotiated. For the year ended 2014 Euronext recognised expenses of €23.8 million and revenue of €38.1 million. The fees charged by and to ICE varied from quarter to quarter. Euronext believes that the terms of the SLAs, including the fees charged, are reasonable and refl ect arm's length arrangements. However, these payments made to and from ICE are not necessarily indicative of, and it is not practical for Euronext to estimate, the level of expenses that Euronext might incur in procuring these services from alternative sources.
Under the SLAs, the performance of a service does not subject the service provider to any liability whatsoever except to the extent that such failure directly results from the negligence or wilful default or fraud of the service provider (or its subsidiaries). Liability is also excluded where the failure to perform a service is caused or exacerbated by any negligent failure or delay on the part of the recipient of the service whether it be Euronext or ICE. Under the agreements providing for a service supplied between Euronext and ICE, the service provider of each service is indemnifi ed by the recipient against all third-party claims relating to provision or receipt of the services, except where the claim is directly caused by the service provider's negligence or wilful default or fraud. In respect of SLAs which are longer term in nature, there is an additional limitation that the liability shall not exceed 12 months of fees per annum.
ICE provides data centre services to Euronext from the Basildon site. Specifi cally, ICE houses the data centre equipment in the Data Centre and provides sub-services, such as power, access, physical security, environment, fire protection, connectivity, monitoring, support, remote hands, installation, receiving and warehouse space.
The agreement will subsist for an initial term of fi ve years, with automatic renewal for a further fi ve-year period, unless notice of termination is provided by either party at least 12 months before expiry of the initial term but no earlier than 24 months before the end of the initial term. ICE will guarantee to continue providing the services for a further two-year period from the date on which notice of non-renewal is received. Accordingly, the minimum period for this service is fi ve years.
ICE provides co-location services directly to Euronext members on terms that are no worse than the terms on which ICE currently provides equivalent co-location services to its members. As the service is provided to members, there is no services agreement between ICE and Euronext but rather a commitment and payment of commission to Euronext by ICE for the right to provide the services.
This agreement will remain in force for a period of fi ve years unless terminated earlier with mutual agreement. ICE will commit not to increase the pricing, nor reduce the service or performance levels of colocation for the initial two-year period to ensure that Euronext customers receive colocation services at an equal (or better) standard to that currently provided by Euronext without any adverse price impact. Euronext is free to build its own colocation facility after the end of this two-year period if it wishes to do so, and in that case ICE will have the right to terminate the agreement on six months' notice.
ICE pays to Euronext commission in respect of the fees received under the colocation contracts as follows: 35% of the colocation hosting fee; 35% of any LCN fees; and 100% of any subscription fees (for specifi c Euronext exchanges).
Euronext's customers are connected to the SFTI network either via an SFTI managed connection, a direct connection, or a thirdparty connection. ICE provides application services, including logical connections to the relevant Euronext products between the subscriber and host infrastructure. ICE agrees to provide the SFTI services to Euronext customers on terms (including pricing, service, and performance) that, in the aggregate, are no worse than the standard terms on which ICE provides equivalent connectivity services to its customers.
This agreement will remain in force for fi ve years unless terminated earlier with mutual agreement. This agreement contains substantially the same terms as the colocation agreement, including a general commitment not to raise fees or reduce services for two years. Euronext receives a commission based on 50% of the revenue earned from the access/subscription fees to Euronext markets via SFTI.
The Group's Cannon Bridge House includes a disaster recovery centre used by both the Group and LIFFE, and offi ce space, primarily used by LIFFE. The Group's consolidated fi nancial statements included in the "Financial Statements" section in the Registration Document refl ect the Group's share of the costs of using the disaster recovery centre. On 19 May 2014, in connection with the Separation, (i) the Cannon Bridge House operating lease was assigned from LIFFE to the Group which, as the new tenant, became responsible for the rental payments until the expiration of the non-cancellable term of the lease in 2017; and (ii) a short-term sublease arrangement was put in place between the Group and LIFFE. This sublease arrangement terminated on 19 December 2014. Furthermore, in December 2014 it was decided that Euronext's disaster recovery site would be transferred out of Cannon Bridge House in the course of 2015 and into another facility based in continental Europe.
With respect to the office space component of the contract, the unavoidable costs of the operating lease until 2017 are in excess of expected subleasing benefi ts to be received from ICE in the short term and from third parties in subsequent periods. The resulting onerous lease liability assumed from the Parent, which is estimated to be approximately €21.9 million, has been recorded in the second quarter of 2014 with a corresponding reduction to Shareholders' equity. The Group is working on an alternative scenario to decrease the liability.
The Group decided in Q4 2014 to relocate its disaster recovery center to new premises, eff ectively vacating this area of CBH by the end of 2015. This increased the unavoidable cost of the lease contract and increased the onerous lease liability over expected future benefi ts by €10.8 million. The increase has been recorded as an exceptional expense in Q4 2014 (see Note 8).
In addition to the above, the other SLAs cover the following ancillary services:
Other ancillary agreements, amongst other things, cover the provision of historical trading data as required by Euronext in relation to continental derivatives products to be provided by ICE on request.
The following SLAs were in place up to end 2014 and covered the following services:
Euronext provides data centre hosting and housing of equipment to ICE for its SFTI access centre requirements in Amsterdam. This SFTI hosting agreement for Amsterdam access centre is a long-term arrangement (ie not an SLA) with a rolling two-year term.
Euronext and ICE entered into a deed of separation dealing with the conduct of various matters between the parties following the IPO. The principal terms of the deed of separation are as follows:
The key licenc ing arrangement is in respect of the UTP and related trading technology as set out in the UTP and Trading Technology Licence Deed. In addition, there are other licences granted in respect of the use of equity indices and related trademarks, the UTP trademark, certain website code and certain patent applications.
The intellectual property in the UTP and other trading technology, including core software and technology ("Core Items") and related support items ("Support Items") that are currently being used for the continental Euronext market is licensed by ICE (through NYSE Arca, LLC) to Euronext (through Euronext IP CV) for the operation of the Euronext trading platforms.
Under the licence agreement, Euronext has been granted a perpetual, irrevocable, worldwide, non-exclusive, royalty-free and fully paid-up licence in respect of the use, modifi cation and maintenance of the Core Items for any purpose and in respect of the use, modifi cation and maintenance of the Support Items for the sole purpose of enabling the use of the Core Items. The licence includes any improvements or enhancements to the Core Items and the Support Items that are made before the IPO on 20 June 2014. Euronext has owned improvements or enhancements that it will have made to the Core Items and the Support Items after the IPO, and Euronext and ICE are not obliged to share their respective improvements or enhancements after the IPO.
Euronext may sub-licence its rights, including through multiple tiers of sub-licences. However, for a period of two years from the IPO, neither Euronext nor ICE is entitled to permit a defi ned list of exchange operators or owners of registered swap execution facilities or their affi liates to use UTP (though this will not aff ect any licences that were already in place as at 13 November 2013). The restricted list includes any of Nasdaq OMX, CME Group, Inc., BM&F Bovespa, London Stock Exchange Group Plc, Singapore Exchange Limited, Hong Kong Stock Exchange, Deutsche Börse Group, BATS Global Markets, Inc., Direct Edge, or Chi-X Global Holdings LLC; any person that acquires all or substantially all of the business of any of these entities; any person that at the time of the assignment or licence operates a registered swap execution facility; and any affi liate of any such persons.
There are no circumstances in which the licence may be terminated by ICE.
Except where there is a breach of warranty by the indemnified parties, Euronext will indemnify NYSE Arca and its affi liates within ICE for all liability incurred under a third-party claim in connection with use of the UTP by Euronext or any of its sub-licensees after the IPO.
In the event of any infringement of the licensed rights, ICE will have the right to determine what enforcement action to take. ICE will off er Euronext the right to participate in any action it takes. If ICE does not take any enforcement action, Euronext will have the sole right to determine what enforcement action to take. If Euronext or any sublicensee of Euronext is sued for infringement, ICE will provide all such information and assistance as Euronext may reasonably require.
Under the licence agreement, LIFFE is granted a worldwide and nonexclusive licence in relation to the trademarks and associated logos for the indices generated by the Euronext Regulated Markets. The licence permits the use of these trademarks and associated logos in connection with the marketing, listing and trading of any tradable contract. However, until 1 January 2016, the licensed use is limited to LIFFE's current tradeable contracts for listings on Bclear and only in respect of equity indices for AEX, BEL 20, CAC 40, and PSI 20. This limitation will terminate early where a third-party infrastructure provider acquires control of any Euronext company, or is granted a licence by Euronext company to use any of the trademarks for any of the indices generated by the Euronext Regulated Markets. Subject to appropriate limitations, LIFFE may sub-license the rights to ICE.
For its use of the licensed trademarks and associated logos, LIFFE pays the greater of (i) €0.05 per traded contract and (ii) 15% of the exchange and clearing fees on the traded contracts. If LIFFE elects before 1 January 2016 to pay an additional sum of €40 million, then LIFFE's obligation to make any further royalty payments will cease and Euronext will no longer have any rights of termination under the licence agreement.
LIFFE will indemnify Euronext and its affi liates for all liability incurred under a third-party claim in connection with ICE's use of the licensed trademarks, other than where the third-party claim is for trademark infringement.
The licence agreement recognises that the parties may need to renegotiate the terms where Euronext is required, by a change in the law, to grant licences at market rates and on a non-discriminatory basis albeit such renegotiation shall take due account for the fact that ICE has already provided value for the use of the equity indices as part of the acquisition of NYSE Euronext by ICE. Subject to LIFFE's election to pay €40 million (as described above), Euronext may terminate the licence agreement for a material breach by ICE that remains unremedied.
Under this agreement, Euronext is granted a perpetual, irrevocable, worldwide, non-exclusive, royalty-free and fully paid-up licence to use and sub-license the name "Euronext UTP" in connection with its use of the UTP technology. The licence is not supported by any warranties from ICE. There are no circumstances in which the licence may be terminated by ICE.
To the extent that ICE wishes to use the name "UTP" in connection with its version of the UTP technology, ICE has agreed that it will use the name "NYSE UTP".
Also under this agreement, Euronext and ICE have permitted each other's groups to have until 1 June 2015 to cease current uses of each other's trademarks.
Also under this agreement, Euronext is granted a perpetual, irrevocable, worldwide, non-exclusive, royalty free and fully paidup licence for use and modify the proprietary software code that is used by ICE to manage Euronext's websites as part of the ancillary digital services provided by ICE. Euronext may only use the software code for its internal business purposes. It may only sub-license use of the software code to its group companies and to external service companies that are supporting Euronext's websites. There are no circumstances in which the license may be terminated by ICE.
Also under this agreement, Euronext is granted a perpetual, irrevocable, worldwide, non-exclusive, royalty-free and fully paidup licence to use for its internal business purposes certain patent applications relating to exchange for physicals and relating to auctioning mechanisms for dark order block trading. Euronext may grant sub-licences to its group companies. Euronext may also grant sub-licences to third parties that have been licensed to use the Core Items under the UTP and Trading Technology Licence Deed, but may not charge for this sub-licensing of the patent applications. There are no circumstances in which the licence may be terminated by ICE.
The Group is involved in a number of legal proceedings that have arisen in the ordinary course of its business. Other than as discussed below, management does not expect these pending or threatening legal proceedings to have a signifi cant eff ect on the Group's fi nancial position or profi tability. The outcome of legal proceedings, however, can be extremely diffi cult to predict and the fi nal outcome may be materially diff erent from management 's expectations.
TOM B.V. ("TOM"), a Dutch MTF operator, introduced new options for which the product name and option symbols included the AEX trademarks. These options were off ered via BinckBank N.V., with TOM Broker B.V. acting as smart order router. The TOM options form a competing product for NYSE LIFFE options, which were no longer off ered via Binckbank.
Euronext claimed that TOM and BinckBank are in violation of Euronext's intellectual property rights and mislead investors and therefore preliminary proceedings were brought before the District Court of The Hague.
On 8 July 2013, the Preliminary Judge of the District Court recognised on an interim basis that the AEX and its related symbols are valid trademarks of Euronext that cannot be copied by third parties. TOM and BinckBank were ordered to cease their infringing activities, as well as to announce on their websites that they have infringed the trademark rights of Euronext and that no NYSE LIFFE options are traded on TOM.
Other claims of Euronext, including that TOM's claimed benefi ts with regard to TOM Broker's Smart Execution are misleading and that the other options contracts caused general confusion, were not reviewed by the Court during the preliminary proceedings because of a lack of urgent interest, but they were referred to the pending proceedings on the merits. Euronext has extended its claims to include database infringement alleging that relevant parts of its database are copied by TOM on a daily basis.
The hearing before the District Court of The Hague in the proceedings on the merits took place on 4 July 2014 and the date for verdict has been set to H1 2015.
Euronext may enter into discussions regarding the settlement of these proceedings and may enter into settlement agreements if it believes settlement is in its best interest.
In connection with an investigation by the AMF of the trading pattern of a member fi rm using algorithmic trading strategies, the AMF notifi ed Euronext Paris on 25 July 2013 that the exemption from certain fees granted in a non-public way to the trading fi rm under investigation may have been a violation of the General Regulations of the AMF by Euronext Paris in its capacity as a market operator. Euronext Paris has contested the position of the AMF. Management believes the conduct at issue is consistent with market practice.
The proceedings are on going, and management intends to vigorously defend the Group's position with regard to this matter. The possible sanctions against Euronext Paris could potentially range from a public warning to a €10 million fi ne. Euronext Paris, as a market operator, is not eligible to settle this case.
Fifty-four individual proprietary traders licenc ed to operate on the futures market of Euronext Paris (MATIF) commenced legal proceedings against Euronext before the Paris Commercial Court in November 2005. The plaintiff s allege that Euronext committed several breaches to their contract and claim that they have suff ered an alleged prejudice amounting to a total amount of €90.5 million.
The Paris Commercial Court dismissed the claim in January 2008 and no damages were awarded to the plaintiffs. The individual proprietary traders appealed the decision before the Paris Court of Appeals. On 14 January 2011, the Paris Court of Appeals rendered an interlocutory decision ("décision avant dire droit") to order the appointment of two experts. The experts issued a technical report in March 2014 to the Paris Court of Appeals on the facts alleged by the claimants and to estimate the potential damages incurred by them in the event that the Paris Court of Appeals fi nds that Euronext is liable. The higher range of the conditional assessment of the theoretical loss that could have been suff ered by the proprietary traders should the Court decide that Euronext is liable has been estimated, by the Experts, to €6.69 million.
Management believes that the actions of the appellants are not supported and has not booked any provision in connection with this case.
Approximately 120 retired and/or former Euronext Amsterdam employees, united in an association, served summons on Euronext Amsterdam on 3 April 2014. The claim arose in connection with the termination by Euronext Amsterdam of its pension agreement with the pension fund Mercurius ("PMA") and the transfer of pension entitlements to Delta Lloyd Asset Management ("Delta Lloyd"). The retired and/or former employees have been informed by PMA that the transfer of their entitlements to Delta Lloyd will result in a nominal pension entitlement without indexation in the future. The association claims that Euronext Amsterdam should guarantee the same pension entitlements of the retired Euronext Amsterdam employees under the same or similar conditions as those in the agreement between Euronext Amsterdam and PMA. The amount will need to be calculated by an actuary. Court proceedings are ongoing and management believes the claim is not supported.
After Euronext Amsterdam fi led a statement of defence on 27 June 2014, on 11 July 2014 the Subdistrict (Kanton) Division of the Court of Amsterdam granted the retired and former employees Euronext Amsterdam a term in order to fi le a rejoinder. Both parties have fi led all documents and statements and a public hearing (pleadings on request of the retired and/or former Euronext Amsterdam employees) is expected before the end of June 2015.
On 19 September 2008, Euronext Paris, along with the other shareholders (the "Sellers") of GL Trade, a French société anonyme, sold their shares in GL Trade to SunGard Data Systems, Inc. ("SunGard"). At the time of the sale, Trading Technologies International, Inc. was asserting various patent infringement claims against GL Trade, among others, before the United States District Court for the Northern District of Illinois. The Sellers therefore undertook to indemnify SunGard for the legal fees and expenses incurred by SunGard in the defense of those claims as well as any monetary penalty for which SunGard is found liable. Euronext's indemnifi cation liability is capped at a maximum of €24 million. To date, Euronext has been called upon to indemnify SunGard only for legal fees and expenses incurred in the defense of the claims for a total amount of approximately \$2.1 million.
The two cases brought against SunGard are still pending before the United States District Court for the Northern District of Illinois. Both cases are still in the pretrial stages. On November 18, 2014, the US District Court, Northern District of Illinois issued an opinion and order in connection with the fi rst case, in which the Court granted in part and denied in part GL Trade's motion for summary judgment that certain accused products do not infringe the patents-in-suit, and denied Trading Technologies International's cross-motion for summary judgment that those accused products meet a particular limitation (the "static limitation") of the asserted claims.
In light of the opinion of the US District Court referred to above and other developments, this litigation may be resolved through settlement.
Euronext maintains a comprehensive insurance programme with the assistance of an insurance broker allowing Euronext to make an assessment of its risks, take out the proper insurance policies and deal with insurance management as smoothly as possible.
The main characteristics of the insurance programme are the following:
The main risks covered by Euronext's insurance programme are the following:
the conduct of exchange activities. Additional coverage is provided for claims arising from IT failures of security breaches caused by cyberattacks or unauthorised access or use of computer systems, failure to protect personal data or unauthorised disclosure of confi dential corporate information. Losses resulting directly from dishonest or fraudulent acts committed by third parties are also covered;
In addition to the insurance programme, risk management and business continuity plan policy and procedures are implemented in a complementary manner. Euronext believes that its existing insurance coverage, including the amounts of coverage and the conditions, provides reasonable protection, taking into account the costs for the insurance coverage and the potential risks to business operations.
Euronext's financial policy seeks to finance the growth of the business, remunerate shareholders and ensure fi nancial fl exibility, while maintaining strong creditworthiness and liquidity.
Euronext primary sources of liquidity are cash fl ows from operating activities, current assets and existing bank facilities. Euronext principal liquidity requirements are for working capital, capital expenditures and general corporate use.
Euronext business is highly dependent upon the levels of activity in its exchanges, and in particular upon the volume of fi nancial instruments traded, the number of shares outstanding of listed issuers, the number of new listings, the number of traders in the market and similar factors. Euronext has no direct control over these activities, which have historically resulted in volatility. While Euronext activities are not subject to signifi cant seasonal trends, cash fl ows vary from month to month due to Euronext billing and collection eff orts (most notably the annual billings for listed companies during fi rst quarter).
Euronext business has historically generated signifi cant cash fl ow from operating activities to meet its cash requirements as well as to distribute dividends and make share premium repayments. Euronext expects future cash fl ow from operating activities to be suffi cient to fund its capital expenditures, distribute dividends as well as pay its debts as they become due. In addition, Euronext has access to a €250 million revolving credit facility. Please see "Facilities Agreement".
The fi nancial resources ultimo 2014 can be summaris ed as follows:
| In thousands of euros | Financial resources |
|---|---|
| Cash & cash equivalent | 256,600 |
| Revolving credit facility | 250,000 |
| TOTAL FINANCIAL RESOURCES | 506,600 |
Euronext N.V. is subject to minimum regulatory capital requirements defi ned by the AFM, under which Euronext is required:
In addition, Euronext is required to obtain the prior approval of the AFM in the following circumstances:
Euronext is also required to ensure that, in the event of a possible insolvency of Euronext N.V., the local exchanges can continue to function operationally.
The AFM can impose further regulatory capital requirements on us, to the extent necessary to comply with the requirements in respect of regulated markets, after consultation with the foreign regulatory authorities involved.
In addition, each of the Group's subsidiaries that is an operator of a regulated market and subsidiaries that are investment fi rms are subject to regulatory capital requirements relating to their general financial soundness, which includes certain minimum capital requirements.
The main tangible fi xed assets of the Group consist of the following categories:
Euronext's headquarters are located in Amsterdam, the Netherlands at Beursplein 5 and in Paris, France at 39, rue Cambon. Euronext's registered offi ce is located at Beursplein 5, 1012 JW Amsterdam, the Netherlands.
| Lease | ||||
|---|---|---|---|---|
| Location | Owned/Leased | Commencement | Lease Expiration | Approximate Size |
| Beursplein 5, Amsterdam, Netherlands | Owned | N/A | N/A | 130,500 sq. ft. |
| Gyroscoopweg 62, Amsterdam, Netherlands | Leased | 2007 | 2015 | 5,597 sq. ft. |
| 39, rue Cambon, Paris, France(a) | Leased | 2006 | 2015 | 145,500 sq. ft. |
| La Défense Business Center – Praetorium building, Paris, France | Leased | 2015 | 2024 | 106,100 sq. ft. |
| 1 Cousin Lane, London, United Kingdom | Leased | 1992 (last renewed in 2007) |
2017(a) | 91,000 sq. ft. |
| 2015 (early | ||||
| 1 Place de la Bourse/Beursplein Brussels, Belgium | Leased | 2012 | termination) | 16,150 sq. ft. |
| Rue du Marquis 1, 1000 Brussels, Belgium | Leased | 2014 | 2030 | 8,880 sq. ft. |
| Av. Schiphol 6, 1141 Evere, Belgium | Owned | N/A | N/A | 86,111 sq. ft. |
| 196 Avenida da Liberdade, Lisbon, Portugal | Leased | 2005 | 2015 | 13,000 sq. ft. |
| Avenida da Boavista, No 3433, Porto, Portugal (2nd and 3rd fl oors) | Leased | 2011 | Renewable annually | 11,607 sq. ft. |
| Renewable up to the fi rst three years |
||||
| Avenida da Boavista, No 3433, Porto, Portugal (4th fl oor) | Leased | 2014 | and then annually | 2,188 sq.ft |
| 24 Adelaide Street, Belfast, United Kingdom | (a) | 2010 | (b) | 57,000 sq. ft. |
(a) Reference is made to foot Note 2 in the Group's fi nancial statements, which provides an update on the lease contracts for Rue Cambon and Cousin Lane properties.
(b) Belfast Operations – Belfast staff provide development, test, project management, information security, infrastructure and operations support to Euronext. Following the Separation, the lease in respect of the Belfast premises remain with ICE. Euronext has entered into a sublease agreement with ICE in order to continue possession of these premises.
| 6.1 | Consolidated Income Statement |
106 |
|---|---|---|
| 6.2 | Consolidated Statement of Comprehensive Income |
107 |
| 6.3 | Consolidated Balance Sheet | 108 |
| 6.4 | Consolidated Statement of Cash Flows |
109 |
| 6.5 | Consolidated Statement of Changes in Parent's Net Investment and Shareholders' Equity |
110 |
| 6.6 | Notes to the Consolidated Financial Statements |
112 |
| 6.7 | Euronext N.V. Company Financial Statements for the year ended 31 December 2014 |
151 |
|---|---|---|
| 6.7.1 Company Income Statement | 151 | |
| 6.7.2 Company Balance Sheet | 152 | |
| 6.8 | Notes to Euronext N.V. Financial Statements |
153 |
| 6.9 | Other information | 165 |
| 6.9.1 Financial statements | ||
| and profit allocation | 165 | |
| 6.9.2 Auditor information | 165 | |
| Year ended | ||||
|---|---|---|---|---|
| In thousands of euros (except per share data) | Note | 31 December 2014 | 31 December 2013 | |
| Third party revenue and other income | 4 | 458,454 | 386,690 | |
| ICE transitional revenue and other income | 4 | 34,044 | 94,982 | |
| TOTAL REVENUE AND OTHER INCOME | 492,498 | 481,672 | ||
| Salaries and employee benefi ts | 5 | (123,991) | (132,720) | |
| Depreciation and amortisation | 6 | (16,644) | (19,924) | |
| Other operational expenses | 7 | (143,100) | (149,047) | |
| Operating profi t before exceptional items | 208,763 | 179,981 | ||
| Exceptional items | 8 | (44,603) | (22,086) | |
| Operating profi t | 164,160 | 157,895 | ||
| Net fi nancing income/(expense) | 9 | (6,452) | (424) | |
| Results from equity investments | 10 | 4,557 | (18,040) | |
| Profi t before income tax | 162,265 | 139,431 | ||
| Income tax expense | 11 | (44,091) | (51,915) | |
| Profi t for the year | 118,174 | 87,516 | ||
| Profi t attributable to: | ||||
| • Owners of the parent | 118,174 | 87,516 | ||
| • Non-controlling interests | - | - | ||
| Basic earnings per share | 22 | 1.69 | 1.25 | |
| Diluted earnings per share | 22 | 1.69 | 1.25 |
The notes on pages 112 to 149 are an integral part of these Consolidated Financial Statements.
| Year ended | ||||
|---|---|---|---|---|
| In thousands of euros | 31 December 2014 | 31 December 2013 | ||
| Profi t for the year | 118,174 | 87,516 | ||
| Other comprehensive income for the year | ||||
| Items that will be subsequently reclassifi ed to profi t or loss: | ||||
| • Currency translation diff erences | 6,516 | (3,190) | ||
| • Change in value of available-for-sale fi nancial assets | 3,892 | 451 | ||
| • Income tax impact change in value of available-for-sale fi nancial assets | (916) | (17) | ||
| Items that will not be reclassifi ed to profi t or loss: | ||||
| • Remeasurements of post-employment benefi t obligations | (8,605) | (3,590) | ||
| • Income tax impact post employment benefit obligations | (210) | 966 | ||
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 118,851 | 82,136 | ||
| Profi t attributable to: | ||||
| • Owners of the parent | 118,851 | 82,136 | ||
| • Non-controlling interests | - | - |
The notes on pages 112 to 149 are an integral part of these Consolidated Financial Statements.
6
| As at | As at | ||
|---|---|---|---|
| In thousands of euros | Note | 31 December 2014 | 31 December 2013 |
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 12 | 25,948 | 27,782 |
| Goodwill and other intangible assets | 13 | 321,266 | 323,916 |
| Deferred income tax assets | 14 | 9,712 | 21,951 |
| Equity investments | 15 | 113,596 | 48,075 |
| Other receivables | 1,702 | 2,046 | |
| TOTAL NON-CURRENT ASSETS | 472,224 | 423,770 | |
| Current assets | |||
| Trade and other receivables | 17 | 105,825 | 121,268 |
| Income tax receivable | 22,375 | 1,180 | |
| Related party loans | 16 | - | 268,778 |
| Derivative fi nancial instruments | 18 | - | 1,893 |
| Financial investments | 19 | 15,000 | - |
| Cash and cash equivalents | 20 | 241,639 | 80,827 |
| TOTAL CURRENT ASSETS | 384,839 | 473,946 | |
| TOTAL ASSETS | 857,063 | 897,716 | |
| Equity/Parent's net investment and liabilities | |||
| Equity/Parent's net investment | |||
| Issued capital | 21 | 112,000 | - |
| Share premium | 116,560 | - | |
| Reserve own shares | (541) | - | |
| Retained earnings | 114,163 | - | |
| Parent's net investment | - | 234,790 | |
| Other comprehensive income (loss) | (432) | (1,109) | |
| TOTAL EQUITY/PARENT'S NET INVESTMENT | 341,750 | 233,681 | |
| Non-current liabilities | |||
| Borrowings | 24 | 248,369 | - |
| Related party borrowings | 16 | - | 40,000 |
| Deferred income tax liabilities | 14 | 483 | 530 |
| Post-employment benefi ts | 25 | 14,997 | 9,488 |
| Provisions | 26 | 32,418 | 5,246 |
| Other liabilities | 1,400 | 2,925 | |
| TOTAL NON-CURRENT LIABILITIES | 297,667 | 58,189 | |
| Current liabilities | |||
| Borrowings | 24 | 129 | - |
| Related party borrowings | 16 | - | 407,025 |
| Current income tax liabilities | 78,043 | 49,483 | |
| Trade and other payables | 27 | 126,427 | 143,661 |
| Provisions | 26 | 13,047 | 5,677 |
| TOTAL CURRENT LIABILITIES | 217,646 | 605,846 | |
| TOTAL EQUITY/PARENT'S NET INVESTMENT AND LIABILITIES | 857,063 | 897,716 |
The notes on pages 112 to 14 9 are an integral part of these Consolidated Financial Statements.
| Year ended | |||
|---|---|---|---|
| In thousands of euros | Note | 31 December 2014 | 31 December 2013 |
| Profi t before income tax | 162,265 | 139,431 | |
| Adjustments for: | |||
| • Depreciation and amortisation | 6 | 16,644 | 19,924 |
| • Share based payments(a) | 3,876 | 10,718 | |
| • Impairment losses | - | 27,200 | |
| • Gain on disposal of equity investments | 10 | - | (7,944) |
| • Other non-cash items | - | (305) | |
| • Changes in working capital and provisions | 15,586 | (4,818) | |
| Income tax paid | (49,780) | (23,733) | |
| Net cash provided by operating activities | 148,591 | 160,473 | |
| Cash fl ow from investing activities | |||
| Proceeds from disposal of equity investment | - | 27,804 | |
| Net purchase of short-term investments | (15,000 ) | (298) | |
| Purchase of property, plant and equipment | (5,302) | (1,898) | |
| Purchase of intangible assets | (8,551) | (4,051) | |
| Proceeds from sale of property, plant and equipment and intangible assets | 729 | 219 | |
| Net cash provided by/(used in) investing activities | (28,124 ) | 21,776 | |
| Cash fl ow from fi nancing activities | |||
| Proceeds from borrowings, net of transaction fees | 247,903 | - | |
| Net interest paid | (1,532) | - | |
| Settlement of Derivative Financial Instrument | 1,534 | - | |
| Share Capital repayment | (161,500) | - | |
| Acquisition own shares | (541) | - | |
| Transfers (to)/ from Parent, net(b) | 91,947 | 29,865 | |
| Net change in short-term loans due to/from Parent | (137,948) | (144,940) | |
| Net cash provided by/(used in) fi nancing activities | 39,863 | (115,075) | |
| Non-cash exchange gains/(losses) on cash and cash equivalents | 482 | 93 | |
| Net increase/(decrease) in cash and cash equivalents | 160,812 | 67,267 | |
| Cash and cash equivalents – Beginning of year | 80,827 | 13,560 | |
| CASH AND CASH EQUIVALENTS – END OF YEAR | 241,639 | 80,827 |
(a) Share-based payment expenses recognised in the income statement for shares granted to directors and selected employees in 2014 for the year amounted to €3.9 million, which included €1.1 million of regular share-based compensation (see Note 5), €2.3 million for vesting acceleration and €0.5 million for discount on Employee shares plan, the latter two recorded as exceptional items (see Note 8).
(b) Total contributions to- and from Parent of €147.4 million as included in the Statement of Changes in Net Parent Investment and Shareholders' Equity, includes several elements that have been settled through equity and as a consequence are not refl ected in the cash fl ows from Financing activities. These elements include settlement of a Related Party loan, the contribution of Euroclear shares and the recognition of Onerous contract provision for the Cannon Bridge House lease contract as explained in Note 2.
The notes on pages 112 to 14 9 are an integral part of these Consolidated Financial Statements.
| Other Comprehensive Income | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of euros | Issued capital |
Share premium |
Reserve own shares |
Retained Earnings |
Parent's net investment |
Retirement benefi t obligation related items |
Currency translation reserve |
Change in value of available for-sale fi nancial assets |
Total other comprehensive income |
Total equity |
| Balance as at 31 December 2012 |
- | - | - | - | 127,613 | (17,002) | 4,791 | - | (12,211) | 115,402 |
| Profi t for the year | - | - | - | - | 87,516 | - | - | - | - | 87,516 |
| Other comprehensive income for the year |
- | - | - | - | - | (2,624) | (3,190) | 434 | (5,380) | (5,380) |
| Total comprehensive income for the year |
- | - | - | - | 87,516 | (2,624) | (3,190) | 434 | (5,380) | 82,136 |
| Reclassification due to pension plan settlement |
- | - | - | - | (16,482) | 16,482 | - | - | 16,482 | - |
| Share based payments | - | - | - | - | 10,718 | - | - | - | - | 10,718 |
| Contributions from Parent |
- | - | - | - | 25,425 | - | - | - | - | 25,425 |
| Balance as at 31 December 2013 |
- | - | - | - | 234,790 | (3,144) | 1,601 | 434 | (1,109) | 233,681 |
| Profi t for the year | - | - | - | 110,543 | 7,631 | - | - | - | - | 118,174 |
| Other comprehensive income for the year |
- | - | - | - | - | (8,815) | 6,516 | 2,976 | 677 | 677 |
| Total comprehensive income for the year |
- | - | - | 110,543 | 7,631 | (8,815) | 6,516 | 2,976 | 677 | 118,851 |
| Share based payments | - | - | - | 3,620 | 258 | - | - | - | - | 3,878 |
| Contributions from Parent |
- | 38,618 | - | - | 108,763 | - | - | - | - | 147,381 |
| Share Capital repayments (Note 2) |
- | (161,500) | - | - | - | - | - | - | - (161,500) | |
| Acquisition of own shares | - | - | (541) | - | - | - | - | - | - | (541) |
| Issuance of common stock and formation of Group |
112,000 | 239,442 | - | - | (351,442) | - | - | - | - | - |
| BALANCE AS AT 31 DECEMBER 2014 |
112,000 | 116,560 | (541) | 114,163 | - | (11,959) | 8,117 | 3,410 | (432) | 341,750 |
The notes on pages 112 to 14 9 are an integral part of these Consolidated Financial Statements.
| NOTE 1 | BASIS OF PREPARATION | 112 |
|---|---|---|
| NOTE 2 | SIGNIFICANT EVENTS AND TRANSACTIONS |
114 |
| NOTE 3 | SIGNIFICANT ACCOUNTING POLICIES AND JUDGMENTS |
116 |
| NOTE 4 | REVENUE AND OTHER INCOME | 122 |
| NOTE 5 | SALARIES AND EMPLOYEE BENEFITS | 123 |
| NOTE 6 | DEPRECIATION AND AMORTIZATION | 123 |
| NOTE 7 | OTHER OPERATIONAL EXPENSES | 123 |
| NOTE 8 | EXCEPTIONAL ITEMS | 124 |
| NOTE 9 | NET FINANCING INCOME/(EXPENSE) | 125 |
| NOTE 10 | RESULTS FROM EQUITY INVESTMENTS | 125 |
| NOTE 11 | INCOME TAX EXPENSE | 126 |
| NOTE 12 | PROPERTY, PLANT AND EQUIPMENT | 127 |
| NOTE 13 | GOODWILL AND OTHER INTANGIBLE ASSETS |
128 |
| NOTE 14 | DEFERRED INCOME TAX | 129 |
| NOTE 15 | EQUITY INVESTMENTS | 130 |
| NOTE 16 | RELATED PARTIES | 131 |
| NOTE 17 | TRADE AND OTHER RECEIVABLES | 133 |
| NOTE 18 | DERIVATIVES FINANCIAL INSTRUMENTS 133 | |
|---|---|---|
| NOTE 19 | FINANCIAL INVESTMENTS | 133 |
| NOTE 20 | CASH AND CASH EQUIVALENTS | 134 |
| NOTE 21 | SHAREHOLDERS' EQUITY | 134 |
| NOTE 22 | EARNINGS PER SHARE | 135 |
| NOTE 23 | SHARE-BASED PAYMENTS | 135 |
| NOTE 24 | BORROWINGS | 136 |
| NOTE 25 | POST-EMPLOYMENT BENEFITS | 137 |
| NOTE 26 | PROVISIONS | 141 |
| NOTE 27 | TRADE AND OTHER PAYABLES | 142 |
| NOTE 28 | GEOGRAPHICAL INFORMATION | 142 |
| NOTE 29 | FINANCIAL INSTRUMENTS | 143 |
| NOTE 30 | FINANCIAL RISK MANAGEMENT | 144 |
| NOTE 31 | CONTINGENCIES | 147 |
| NOTE 32 | COMMITMENTS | 148 |
| NOTE 33 | GROUP COMPANIES | 149 |
| NOTE 34 | EVENTS AFTER THE REPORTING PERIOD 149 |
NOTE 1 BASIS OF PREPARATION
Euronext N.V. and its subsidiaries historically operated the Paris, Amsterdam, Brussels and Lisbon securities and derivatives exchanges, as well as the London LIFFE derivatives exchange ("LIFFE"). In April 2007, Euronext N.V. was acquired by NYSE Group, Inc., and NYSE Euronext was formed to hold both Euronext N.V. and NYSE Group, Inc. On 13 November 2013, NYSE Euronext was acquired by Intercontinental Exchange, Inc. ("ICE"). In these Consolidated Financial Statements, NYSE Euronext through 13 November 2013, and ICE from 13 November 2013, are referred herein as the "Parent". On 13 November 2013, ICE confi rmed its intent to spin-off the Euronext Continental Europe operations into a publicly traded company ("the Separation").
To eff ectuate the Separation, ICE completed an internal reorganisation ("the Demerger") whereby it contributed the Euronext Continental Europe operations to a newly formed legal entity, domiciled in the Netherlands, which was subsequently renamed Euronext N.V. ("the Group" or "the Company"). Accordingly, the legal entities contributed to the Group are legally owned and managed by the Group since March 2014 (see Note 33). The historical operations of Euronext N.V. and its subsidiaries, including LIFFE, through the date of the Demerger, are referred to as "Legacy Euronext".
Euronext N.V. is a public limited liability company incorporated and domiciled at Beursplein 5, 1012 JW Amsterdam in the Netherlands and is listed at all Euronext local markets i.e. Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris. These consolidated Financial Statement were authorized for issu ance by Euronext N.V.'s supervisory Board on Ma rch 19, 2015.
The Group operates securities and derivatives exchanges in Continental Europe. It offers a full range of exchange services including security listings, cash and derivatives trading, and market data dissemination. It combines the Paris, Amsterdam, Brussels and Lisbon exchanges in a highly integrated, cross-border organisation. The Group has also a securities exchange in London.
The Group's in-house IT function supports its exchange operations. In addition, in 2014 the Group provided software licenses as well as IT development, operation and maintenance services to third-party exchanges, as well as to the LIFFE derivatives exchange, a former related party. The LIFFE IT services were discontinued at the end of 2014, and the Group has been taking certain restructuring actions aff ecting its IT function (see Note 8).
The legal entities of the Group have been owned by Euronext N.V. since the date that the internal reorganisation was fi nalised in March 2014. These Consolidated Financial Statements as of and for fi nancial years ended 31 December 2014 and the Combined Financial Statements as of and for fi nancial year ended 31 December 2013 have been prepared by combining all individual legal entities into one reporting entity. The list of individual legal entities included within these Consolidated Financial Statements, which together form the Group is provided in Note 33. All transactions and balances between consolidated entities have been eliminated on consolidation. All transactions and balances with Parent entities are refl ected as related party transactions and balances. From the IPO on 20 June 2014, the transactions with ICE do not qualify as "related party transactions" under IAS24, consequently the related party Note refl ects the transactions with ICE up to 20 June 2014.
Because the separate legal entities that comprise the Group were not held by a single legal entity prior to the Demerger, 'Parent's net investment' is shown in lieu of 'Shareholders' equity' prior to the Demerger in these Consolidated Financial Statements.
The scope of the combination includes Legacy Euronext, with the exception of (i) the London LIFFE derivatives exchange, and (ii) certain technology businesses, including SFTI (connectivity services), Superfeed (data aggregation services), co-location services provided to customers of LIFFE, and services provided to third-party exchanges based on the LIFFE Connect technology. The scope of the combination primarily includes (i) the Continental Europe Cash and Derivatives exchange entities (Amsterdam, Brussels, Lisbon and Paris), (ii) the Euronext London Cash exchange, (iii) the Portuguese national Central Securities Depository, (iv) the Information Technology ("IT") services entities supporting all Legacy Euronext exchanges, including both the Group's and LIFFE's exchanges, and providing also market solution services to third parties, including datacenter colocation services provided to customers of the Group's exchanges, and other technology services provided to third-party exchanges, and (v) the Intellectual Property ("IP") entities owning the rights to use the technology necessary to run the Legacy Euronext's exchanges.
As part of the Demerger agreement, certain technology service businesses of Legacy Euronext, which will be retained by ICE (as described above), were historically not included in separate legal entities. The corresponding revenue, expenses, including allocated internal IT and corporate support costs, and related assets and liabilities of these technology service businesses have been excluded from these Consolidated Financial Statements.
These Consolidated Financial Statements include all the assets, liabilities, revenue and expenses specifically attributable to the Group as well as allocations of indirect costs and expenses related to the operations of the Group, as further explained below. These Consolidated Financial Statements exclude the purchase price allocation adjustments made by Parent in connection with the acquisition of Legacy Euronext by NYSE Group, Inc. in 2007 and in connection with the acquisition of NYSE Euronext by ICE in 2013.
The Group operates as a stand-alone entity from 20 June 2014. These Consolidated Financial Statements include allocations of shared costs, as described further below, made in accordance with transfer pricing agreements between the legal entities for the year 2013. These Consolidated Financial Statements do not purport to refl ect what the Group's combined results of operations, fi nancial position and cash fl ows may have been had the Group operated as a separate entity apart from NYSE Euronext and ICE during the periods presented before the IPO. As a result, these Consolidated Financial Statements are not indicative of the Group's past or future performance as a separate entity.
The Group has prepared these Consolidated Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").
The following significant changes were made to the basis of preparation for the year ended 31 December 2014, compared to the basis used for the fi scal year ended 31 December 2013.
In March 2014, the Demerger was consummated and the Continental Europe operations of Legacy Euronext were contributed to a newly incorporated entity domiciled in the Netherlands, which was subsequently renamed Euronext N.V. ("the Group" or "the Company"), in exchange for the issuance of 70.0 million shares of common stock. As of 31 March 2014, all legal entities comprising the Group business are legally owned by Euronext N.V.
The contribution of the Legacy Euronext Continental Europe business into the Company has been accounted for as an internal reorganization. Accordingly, the assets, liabilities and results of operations of the Legacy Euronext Continental Europe operations are presented for all periods based on the carrying values recognized in the fi nancial statements of the Group immediately prior to the Demerger. The Parent's net investment has been converted into share capital and share premium, as described in Note 21.
The financial statements of the Group for periods prior to the Demerger refl ect the combination of the legal entities which have been contributed to Euronext N.V. at the date of the Demerger; the fi nancial statements of the group for the periods after the Demerger refl ect the consolidation of Euronext N.V. and its subsidiaries.
Euronext N.V. was a fully-owned subsidiary of ICE until the initial public offering (IPO) of the ordinary shares of the Company on 20 June 2014 ("the Separation"). From 20 June 2014 onwards, the transactions with ICE do not qualify as "related party transactions" under IAS24. To continue to recognize separately in the income statement the services rendered to ICE that are transitional and accordingly not expected to be recurring beyond 2014, the description of the revenue line has been changed from "Related party revenue" to "ICE transitional Revenue and other income".
Historically, the Group did not operate as a standalone entity but as part of a larger group controlled by NYSE Euronext until 13 November 2013 and by ICE, since then up to 20 June 2014. Until 1 January 2014, the fi nancial statements include allocations of shared costs made in accordance with the historical transfer pricing agreements between the legal entities. These historical transfer pricing agreements provided for the allocation of (i) global shared costs, including global corporate management, global support functions and global UTP software development costs, which were allocated between Legacy Euronext and the US operations of the Parent, and (ii) European shared costs, including IT infrastructure, data center facilities, corporate support and other costs of operating the Legacy Euronext Derivatives business, which were allocated among the European entities of Legacy Euronext. These global and European shared costs, including overheads and mark-up, were generally allocated in proportion to revenues. Management believes these historical cost allocations were made on a reasonable basis. However, since the Group did not operate as a standalone entity, the combined fi nancial information for the comparative year ended 31 December 2013 is not necessarily indicative of what the Group's results of operations, cash fl ows and fi nancial position would have been had the Group operated as a standalone entity apart from NYSE Euronext and ICE during that period.
In March 2014, upon consummation of the Demerger, the transfer pricing agreements have been terminated and replaced by transitional and long-term Service Level Agreements ("SLAs") providing for a specific identification of each individual service rendered to or received from ICE. Each individual service is priced separately, generally on a fi xed fee basis, based on actual usage or mutually agreed service level. These SLAs do not provide for the allocation of actual cost incurred, plus overheads and mark-up, in proportion to revenues.
The historical transfer pricing agreements have been amended as of 1 January 2014 in order to provide for pricing consistent with the SLAs implemented in March 2014. Accordingly, the recharges to and from the Parent are made on a consistent basis throughout the year ended 31 December 2014.
Services rendered to ICE primarily include the IT support to LIFFE, which has been terminated by the end of 2014, as LIFFE has completed its migration to the ICE IT platform, as well as various ancillary services. All such services are transitional and, accordingly, the transitional revenue is not expected to be recurring beyond 2014.
Services received from ICE include the use of data center infrastructure, corporate information systems and web support, as well as certain market data, market operations, risk, internal audit, regulation and other services. With the exception of data center infrastructure, the services received from ICE are expected to be transitional.
The Group will continue to benefi t from a perpetual license to use the UTP technology on a royalty-free basis. However, the Group will no longer share with ICE the costs and benefi ts of subsequent UTP developments.
In connection with the Separation of the Group from ICE and the IPO, the following other transactions have occurred during the year.
distributions above 50% of net income, investments, and other transactions. The Bank Facilities also require compliance with a total debt to EBITDA ratio.
(iii) achieving a positive regulatory equity (defi ned as consolidated shareholders' equity less consolidated intangible assets including goodwill and equity investments) by 31 December 2017, and maintaining such positive regulatory equity from the date this is achieved and thereafter. The Group is also subject to certain qualitative requirements regarding its capital structure. The AFM can impose further regulatory capital requirements on the Group. These regulatory capital requirements, which are applicable on a consolidated basis, are in addition to those applicable on an individual basis to certain regulated entities of the Group. Since 31 March 2014, none of the Group entities are subject to regulation applicable to credit institutions.
On 14 October 2013, the Group entered into a new clearing agreement with LCH.Clearnet in respect of the clearing of trades on our continental Europe derivatives markets (the "Derivatives Clearing Agreement"). Under the terms of the Derivatives Clearing Agreement, eff ective starting 1 April 2014, Euronext has agreed with LCH.Clearnet to share revenues and receives clearing fee revenues based on the number of trades on these markets cleared through LCH.Clearnet, in exchange for which Euronext has agreed to pay LCH. Clearnet a fi xed fee plus a variable fee based on revenues. Derivatives clearing revenue amounts to €36.0 million and derivatives expenses to €20.3 million from the 1 April 2014 onwards (see Notes 4 and 7). The defi nition of the accounting treatment of this agreement requires signifi cant management judgment for the valuation and weighting of the indicators leading the principal versus agent accounting analysis. According to the management analysis (i) the clearing fees received are classifi ed as post trade revenues, and (ii) the fi xed and variable fees paid to LCH. Clearnet are recognized as other operational expenses.
On 25 August 2014 Euronext have granted 315.110 RSU's with a cliff vesting after 3 years. The total IFRS 2 expense at the vesting date in 2017 is estimated €4.9 million.
As part of its cost reduction program, Euronext decided to not renew the lease contract (ending 31 August 2015) for its head offi ce building ("Cambon") in Rue Cambon, Paris. New premises were located in the La Defense business centre. The 9-year lease contract for this offi ce building ("Praetorium") was signed on 21 November 2014 and will be eff ective as per 1 May 2015. Euronext is incurring rent and associated accommodation cost for Praetorium, starting 1 December 2014, but it is expected that Euronext will move its staff only at end of May 2015. Euronext continues to incur rent and associated accommodation cost for Cambon after its staff has moved out, until August 2015. The lease contract for Cambon after exiting the building is considered onerous, and the present obligation should be recognised and measured as a provision at the moment the obligation arises. The impact of the onerous contract amounting to €2.3 million together with the €0.2 million of service costs of the real estate services have been qualifi ed as exceptional expense (see Note 8).
Euronext has commitment to return the Cambon building to the landlord in a specifi ed condition at the end of the lease contract, according to the lease agreement. The total amount needed for dilapidation at the end of the contract is estimated at €2.5 million. A provision for dilapidation has been set up over the period of the lease contract and amounted to €1.2 million at the end of 2013. An additional €1.3 million has been recognised in accommodation expenses at end of 2014.
To facilitate reconstruction work and preparation of the move, Praetorium was made available by the landlord from the lease signature date onward. The landlord grants a €4.0 million incentive to Euronext with the signing of the lease. Euronext will record for the total costs of the lease contract, net of €4.0 million incentive, over the period the building is made available up to the end of the lease contract – 9-years (lease contract) and 5 months (1 December 2014 up to 1 May 2015). As the costs for Praetorium rent between 1 December 2014 and 1 May 2015 is additional one-off costs incurred for restructuring, these expenses are qualified as exceptional expense. Consequently this generated 1 month (€0.3 million) of Praetorium rent expenses in exceptional items (see Note 8).
The principal accounting policies applied in the preparation of these fi nancial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated. In addition, the accounting judgments made in connection with the new clearing agreement are mentioned in Note 2.
These Financial Statements are prepared on a historical cost basis, except for fi nancial instruments recorded at fair value or stated otherwise.
The scope of consolidation is defi ned in Note 1. These Financial Statements include the accounts of all subsidiaries in which entities in the Group have a controlling fi nancial interest.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. Intergroup transactions, balances and unrealised gains and losses on transactions between companies within the Group are eliminated upon consolidiation unless they provide evidence of impairment.
Associates are entities over which the Group has the ability to exercise significant influence, but does not control. Generally, signifi cant infl uence is presumed to exist when the Group holds 20% to 50% of the voting rights in an entity. Joint-ventures are entities over which the Group, together with another party or several other parties, has joint control. Investments in associates and joint-ventures are accounted for using the equity-method of accounting.
Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. The excess of the consideration transferred over the fair value of the Group's share of the identifi able net assets acquired is recorded as goodwill. To the extent applicable, any noncontrolling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree are added to consideration transferred for purposes of calculating goodwill.
Segments are reported in a manner consistent with how the business is operated and reviewed by the chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments. The chief operating decision maker of the Group is the Management Board. The organisation of the Group refl ects the high level of mutualisation of resources across geographies and product lines. Operating results are monitored on a group-wide basis and, accordingly, the Group represents one operating segment and one reportable segment. Operating results reported to the Management Board are prepared on a measurement basis consistent with the reported Consolidated Income Statement.
The functional currency of each Group entity is the currency of the primary economic environment in which the entity operates. Foreign currency transactions are converted into the functional currency using the rate ruling at the date of the transaction. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year-end rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement. Exceptions to this are where the monetary items form part of the net investment in a foreign operation or are designated as hedges of a net investment, in which case the exchange diff erences are recognised in Other Comprehensive Income.
These Financial Statements are presented in euros, which is the Group's presentation currency. The results and fi nancial position of Group entities that have a functional currency diff erent from the presentation currency are converted into the presentation currency as follows:
All resulting exchange differences are recognised as currency translation adjustments within Other Comprehensive Income.
Property, plant and equipment is carried at historical cost, less accumulated depreciation and any impairment loss. The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs. All repairs and maintenance costs are charged to expense as incurred.
Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the assets, except land and construction in process assets, which are not depreciated. The estimated useful lives, which are reviewed annually and adjusted if appropriate, used by the Group in all reporting periods presented are as follows:
| Buildings | 5 to 40 years |
|---|---|
| IT equipment | 2 to 3 years |
| Other equipment | 5 to 12 years |
| Fixtures and fi ttings | 4 to 10 years |
Goodwill represents the excess of the consideration paid in a business combination over the Group's share in the fair value of the net identifi able assets and liabilities of the acquired business at the date of acquisition. Goodwill is not amortised but is tested at least annually for impairment, or whenever an event or change in circumstances indicate a potential impairment.
For the purpose of impairment testing, goodwill arising in a business combination is allocated to the cash-generating units ("CGUs") or groups of CGUs that are expected to benefi t from the synergies of the combination. Each CGU or CGU Group to which goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. The Group's goodwill is monitored at the operating segment level.
The carrying value of a CGU Group is compared to its recoverable amount, which is the higher of its value in use and its fair value less costs of disposal. Impairment losses on goodwill are not subsequently reversed. Value in use is derived from the discounted future free cash fl ows of the CGU Group. Fair value less costs of
Note 3.7.3 – Other intangible assets
disposal is based on discounted cash fl ows and market multiples applied to forecasted earnings. Cash fl ow projections are based on budget and business plan approved by management and covering a 2-year period. Cash fl ows beyond the business plan period are extrapolated using a perpetual growth rate. Key assumptions used in goodwill impairment test are described in Note 13.
Software development costs are capitalised only from the date when all of the following conditions are met:
Capitalised software development costs are amortised on a straightline basis over their useful lives, generally from 2 to 5 years. Other development expenditures that do not meet these criteria, as well as software maintenance and minor enhancements, are expensed as incurred.
Other intangible assets, which are acquired by the Group, are stated at cost less accumulated amortisation and impairment losses. The estimated useful lives are as follows:
| Purchased software and licenc e | 2-5 years |
|---|---|
| Customer relationships | 8-10 years |
Assets that are subject to amortisation are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Assets that have an indefi nite useful life are not subject to amortisation and are tested at least annually for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. For purposes of assessing impairment, assets are grouped into Cash Generating Units ("CGUs"). A CGU is the smallest identifi able group of assets that generates cash infl ows that are largely independent from other groups of assets. Non-fi nancial assets, other than goodwill, that were previously impaired are reviewed for possible reversal of the impairment at each reporting date.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value at each balance sheet date. The method of recognising the resulting gain or loss depends on whether or not the derivative is designated as a hedging instrument for accounting purpose, and if so the nature of the item being hedged. In order to qualify for hedge accounting, a transaction must also meet strict criteria as regards to documentation, eff ectiveness, probability of occurrence and reliability of measurement. To date, the Group did not elect to apply hedge accounting and, accordingly, gains and losses on remeasurement of derivatives instruments are systematically recognised in the income statement, within fi nancial income and expense.
Upon initial recognition, the Group classifi es its fi nancial assets in one of the following categories:
Financial assets at fair value through profi t or loss include fi nancial assets held for trading purposes and are initially recognised at fair value and any subsequent changes in fair value are recognised directly in the income statement. This category also includes derivatives financial instruments that are not designated as accounting hedges although they are used to hedge economic risks.
Other fi nancial assets are classifi ed as Available-for-Sale ("AFS") and are remeasured at fair value at each balance sheet date. Unrealised gains and losses resulting from changes in fair value are recognised in Other Comprehensive Income and are recycled in the income statement upon impairment or disposal. AFS fi nancial assets include long-term equity investments in companies over which the Group does not have control, joint control or signifi cant infl uence. If the fair value of an unlisted equity instrument is not reliably measurable, the investment is held at cost less impairment. Interests and dividends are recognised in the income statement. If a decline in fair value below cost has occurred and has become other than temporary, an impairment is recognised in the income statement.
The Group assesses at the end of each reporting period whether there is objective evidence that a fi nancial asset is impaired. A fi nancial asset is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset ("loss event") and that the loss event (or events) has an impact on the estimated future cash fl ows of the fi nancial asset.
Loans and receivables are non-derivative fi nancial assets/liabilities with fi xed or determinable payments that are not quoted in an active market. They are measured at amortised cost, less impairment. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classifi ed as non-current assets. Loans and receivables include: related party loans, trade and other receivables, cash and cash equivalents in the balance sheet.
Trade receivables are amounts due from customers for services performed in the ordinary course of business. Trade receivables are recognised initially at their fair value and subsequently measured at amortised cost using the eff ective interest method, less impairment.
Cash and cash equivalents comprise cash at banks, highly liquid investments with original maturities of three months or less and investments in money market funds that are readily convertible to known amounts of cash and are subject to insignifi cant risk of changes in value. Further term deposits with maturities longer than three months are also classifi ed as cash equivalents if the term deposits meet the following criteria (i) the term deposit is considered to be held to meet short-term cash needs, (ii) withdrawal can be made either at any time, free of any penalty, or no later than at the end of the initial three month period, with no penalty, (iii) the interest received from the term deposit is equal to or above what the market expected to pay and (iv) all these foregoing conditions must be clear, accepted and met at the subscription date.
Borrowings are initially recorded at the fair value of proceeds received, net of transaction costs. Subsequently, these liabilities are carried at amortised cost, and interest is charged to the Income Statements over the period of the borrowings using the eff ective interest method. Accordingly, any diff erence between the proceeds received, net of transaction costs, and the redemption value is recognised in the Income Statements over the period of the borrowings using the eff ective interest rate method.
The Group operates defi ned benefi t and defi ned contribution pension schemes. When the Group pays fi xed contributions to a pension fund or pension insurance plan and the Group has no legal or constructive obligation to make further contributions if the fund's assets are insuffi cient to pay all pension benefi ts, the plan is considered to be a defi ned contribution plan. In that case, contributions are recognised as employee expense when they become due.
For the defi ned benefi t schemes, the net asset or liability recognised on the balance sheet comprises the diff erence between the present value of the defi ned benefi t pension obligation and the fair value of plan assets. A net asset is recognised only to the extent the Group has the right to eff ectively benefi t from the plan surplus. The service cost, representing benefi ts accruing to employees in the period, and the net interest income or expense arising from the net defi ned benefi t asset or liability are recorded within operating expenses in the Income Statements. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions or differences between actual and expected returns on assets are recognised in equity as a component of Other Comprehensive Income. The impact of a plan amendment, curtailment or settlement is recognised immediately when it arises in the Income Statements.
Certain employees of the Group participate in the Parent's and Euronext's stock-based compensation plans. Awards granted by the Parent and Euronext under the plans are restricted stock units ("RSUs"). As the responsibility for the settlement of the awards lies with the Parent and Euronext, not with the Subsidiaries, they are treated as equity-settled awards in these Financial Statements.
The stock-based compensation refl ected in the Income Statements relates to the RSUs granted by the Parent and Euronext to the Group's employees. The equity instruments granted do not vest until the employee completes a specifi ed period of service, typically three years. The grant-date fair value of the RSUs is recognised as compensation expense over the required vesting period. When awards have graded-vesting features (i.e., vest in several installments), each installment is treated as a separate grant.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outfl ow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions primarily comprise employee termination payments. Provisions are not recognised for future operating losses, unless there is an onerous contract. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax risk-free discount rate. The increase in the provision due to passage of time is recognised as interest expense.
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefi ts expected to be received under it. The unavoidable costs under a contract refl ect the least net cost of exiting from the contract, which is the lower of the cost of fulfi lling it and any compensation or penalties arising from failure to fulfi l it.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the eff ective interest method.
The income tax expense for the fi scal year is comprised of current and deferred income tax. Income tax expense is recognised in the Income Statements, except to the extent that it relates to items recognised in other comprehensive income or directly in Parent's net investment. In this case, the income tax impact is also recognised in other comprehensive income or directly in Parent's net investment.
The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. The Group recognises liabilities for uncertain tax positions when it is more likely than not that an outfl ow will occur to settle the position. The liabilities are measured based upon management's estimation of the expected settlement of the matter. Estimated liabilities for uncertain tax positions, along with estimates of interest and penalties, are presented within income taxes payable on the Balance Sheet and are included in current income tax expense in the Income Statement.
Deferred income tax is recognised on temporary diff erences arising between the tax basis of assets and liabilities and their carrying amounts in these Financial Statements. However, deferred income tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction aff ects neither accounting nor taxable profi t or loss. Deferred income tax is determined using tax rates that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profi t will be available against which the temporary diff erences or tax losses can be utilised.
Deferred income tax is provided on temporary diff erences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary diff erence is controlled by the Group and it is probable that the temporary diff erence will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are off set when there is a legally enforceable right to off set current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on the same taxable entity.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, rebates, VAT and other sales related taxes.
Listing fees primarily consist of original listing fees paid by issuers to list securities on the various cash markets (admission fees), subsequent admission fees for other corporate actions (such as admission of additional securities) and annual fees paid
by companies whose fi nancial instruments are listed on the cash markets. Admission fees are recognised at the time of admission to trading. Annual listing fees are recognised on a pro rata basis over the annual service period.
The Group earns cash trading fees for customer orders of equity securities, debt securities and other cash instruments on the Group's cash markets. The Group earns derivative trading fees for the execution of trades of derivative contracts on the Group's derivative markets. Cash and Derivative trading fees are recognised when the trade transaction is completed.
The Group charges data vendors on a per-user basis for the access to its real-time and proprietary market data information services. The Group also collects periodic license fees from vendors for the right to distribute the Group data to third parties. These fees are recognised on a monthly basis as services are rendered.
Post-trade revenue primarily include Clearing, settlement and custody fees. Clearing fees are recognized when the clearing of the trading transaction is completed. Settlement fees are recognised when the settlement of the trading transaction is completed. Custody fees are recognised as the service is performed.
Market Solutions a nd o ther revenue include software license and IT services provided to third-party market operators, connection services and data center colocation services provided to market participants, and other revenue. Software licenc e revenue is recognised upon delivery and acceptance when the software does not require signifi cant customisation or modifi cation. Implementation and consulting services are recognised either on a time-and material basis or under the percentage of completion method, depending upon the nature of the contract. When software requires signifi cant modification or customisation, fees from software license and professional services are recognised altogether on a percentageof-completion basis. The stage of completion is measured based on the number of mandays incurred to date as a percentage of total estimated number of mandays to complete. Software maintenance fees, connection and subscription service fees, and annual licenc e fees are recognised ratably over the life of the agreement.
Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards to the lessee. When the Group is the lessee in a fi nance lease, the underlying asset is recognised in the balance sheet at the inception of the lease, at its fair value or at the present value of minimum lease payments, whichever is lower. The corresponding liability to the lessor is included within borrowings. Payments made under operating leases are recognised in the Income Statement on a straight-line basis over the term of the lease.
Exceptional income and expense are identifi ed based on their size, nature or incidence and are disclosed separately in the Income Statements in order to provide further understanding the fi nancial performance of the Group. It includes clearly identifi able income and expense items which are infrequent and unusual by their size or by their nature.
The following standards and interpretations have been adopted by the Group for the fi rst time for the fi nancial year beginning on or after 1 January 2014.
IFRS 10, "Consolidated Financial Statements", sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. This change did not have a material impact on the consolidated fi nancial statements.
IFRS 11, "Joint Arrangements", requires accounting for Joint Ventures under the equity-method and to recognise the investor's interest in the revenue, expenses, assets and liabilities of a Joint Operation. This change did not have a material impact on the consolidated fi nancial statements.
IFRS 12, "Disclosure of Interests in Other Entities", defines the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special-purpose vehicles and other off -balance sheet vehicles. This change did not have a material impact on the consolidated fi nancial statements.
Amendment to IAS 36, "Impairment of Assets". This amendment removed the requirement to disclose the recoverable amount of a CGU that contains signifi cant goodwill when no impairment charge has been recognised during the period. The Group already early adopted this amendment for the reporting period ended 31 December 2013. See Note 13 for the impact on the fi nancial statements.
Other standards, amendments and interpretations which are eff ective for the fi nancial year beginning on 1 January 2014 are not material to the Group.
A number of new standards and amendments to standards, amendments and interpretations are eff ective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated fi nancial statements, set out below.
IFRS 9, "Financial instruments". This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of fi nancial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. The Group is yet to assess IFRS 9's full impact.
IFRS 15, "Revenue from contracts with customers", is a converged standard from IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in fi nancial statements globally. The Group is assessing the impact of IFRS 15.
IFRIC 21, "Levies". This interpretation is on IAS 37, "Provisions, contingent liabilities and contingent assets" IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event) The interpretation clarifi es that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The Group assessed the possible impact of IFRIC 21, and this change is not expected to have a material impact on the consolidated fi nancial statements.
There are no other IFRS's or IFRIC interpretations that are not yet eff ective that would be expected to have a material impact on the group.
In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may diff er from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision aff ects only that period or in the period of the revision and future periods if the revision aff ects both current and future periods.
Signifi cant judgments made in the preparation of these Consolidated Financial Statements include the following.
The signifi cant management judgments related to costs allocations, and the impact on Related Party revenue and expenses, are explained in Notes 1 and 16.
In addition, the following key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.
The Group performs goodwill impairment reviews in accordance with the accounting policy described above in Note 3. The recoverable amount of a CGU Group is determined based on a discounted cash fl ow approach, which requires the use of estimates. The key assumptions used and the related sensitivity analysis are described in Note 13.
Due to the inherent complexities arising from the nature of the Group's business, and from conducting business and being taxed in a substantial number of jurisdictions, signifi cant judgments and estimates are required to be made for income taxes. The Group computes income tax expense for each of the jurisdictions in which it operates. However, actual amounts of income tax due only become fi nal upon fi ling and acceptance of the tax return by relevant authorities, which may not occur for several years subsequent to issuance of these Consolidated Financial Statements.
The estimation of income taxes also includes evaluating the recoverability of deferred income tax assets based on an assessment of the ability to use the underlying future tax deductions against future taxable income before they expire. This assessment is based upon existing tax laws and estimates of future taxable income. To the extent estimates diff er from the fi nal tax return, earnings may be aff ected in a subsequent period.
The Group operates in various countries with local tax regulations. New tax legislation being issued in certain territories as well as transactions that the Group enters into regularly result in potential tax exposures. The calculation of our tax liabilities involves uncertainties in the application of complex tax laws. Our estimate for the potential outcome of any uncertain tax position is highly judgmental. However we believe that we have adequately provided for uncertain tax positions. Settlement of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations, fi nancial condition and cash fl ows. The Group recognises a liability for uncertain tax positions when it's probable that an outfl ow of economic recourses will occur. Measurement of the liability for uncertain tax positions is based on management's best estimate of the amount of tax benefi t/cost that will be realized upon settlement.
The Group holds investments in unlisted equity securities which are carried at fair value in the balance sheet. The valuation methodology and key assumptions are described in Note 15.
6
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Listing | 61,737 | 53,282 |
| Trading revenue | 212,013 | 187,166 |
| of which | ||
| • Cash trading | 165,565 | 138,428 |
| • Derivatives trading | 46,448 | 48,738 |
| Market data & indices | 93,348 | 83,980 |
| Post-trade | 57,268 | 21,253 |
| of which | ||
| • Clearing (Note 2) | 35,979 | - |
| • Custody and Settlement | 21,289 | 21,253 |
| Market Solutions & Other revenue | 33,443 | 41,009 |
| Other income | 645 | - |
| TOTAL THIRD PARTY REVENUE AND OTHER INCOME | 458,454 | 386,690 |
At 31 December 2014 and 2013, there were no customers that individually exceeded 10% of the Group's revenue.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| IT operations and maintenance services – LIFFE | 22,503 | 93,276 |
| UTP R&D services | - | 1,706 |
| CBH Sublease rent – LIFFE | 8,460 | - |
| Other ancillary services | 3,081 | - |
| TOTAL ICE TRANSITIONAL REVENUE AND OTHER INCOME | 34,044 | 94,982 |
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Salaries and other short term benefi ts | (88,578) | (90,641) |
| Social security contributions | (33,184) | (33,327) |
| Share-based payment costs | (1,073) | (5,576) |
| Pension cost – defi ned benefi t plans | (1,156) | (3,176) |
| TOTAL | (123,991) | (132,720) |
At the end of the year, the number of employees, based on full-time equivalents, was 729. Social security contributions contain €4.4 million of expenses related to defi ned contribution pension plans in 2014 (2013: €3.4 million).
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Depreciation of tangible fi xed assets | (7,669) | (7,559) |
| Amortisation of intangible fi xed assets | (8,975) | (12,365) |
| TOTAL | (16,644) | (19,924) |
The amortisation of the historic UTP licenc e value ended in April 2014 as it was fully amortised.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Systems and communications | (22,201) | (26,286) |
| Professional services | (51,376) | (59,307) |
| Clearing expenses (Note 2) | (20,263) | - |
| Accommodation | (25,653) | (17,677) |
| PSA retrocession (Note 16) | - | (13,631) |
| Other expenses(a) | (23,607) | (32,146) |
| TOTAL | (143,100) | (149,047) |
(a) Other expenses include marketing, taxes, insurance, travel, professional membership fees, corporate management recharges from the Parent (see Note 16), and other expenses.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Initial public off ering costs | (2,878) | (674) |
| Restructuring costs | (44,090 ) | (3,628) |
| Share plan vesting acceleration/settlement | (2,803) | (12,707) |
| Exceptional income | 5,574 | - |
| Pension plan amendment/settlement | - | (4,380) |
| Grant claw back | - | (697) |
| Other | (406 ) | - |
| TOTAL | (44,603) | (22,086) |
In 2014, exceptional items include:
• €5.6 million of exceptional income, including a €3.2 million release of social tax provision and a €1.0 million refund of organic tax, both in France. In the Netherlands, a €0.5 million one-off legal claim was released and in connection with the liquidation of the Amsterdam Pension fund 'Mercurius' a €0.9 million refund has been recorded as exceptional income;
In 2013, exceptional items include:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Interest income | 407 | 1,012 |
| Interest expense | (2,381) | (1,611) |
| Gain/(loss) on disposal of treasury investments | 89 | 179 |
| Net foreign exchange (loss)/gain(a) | (4,567) | (4) |
| NET FINANCING INCOME/(EXPENSE) | (6,452) | (424) |
(a) Diff erence noted between 2014 and 2013 which is mainly due to i) realized foreign-exchange loss of €1.7 million on current accounts held in foreign currency and closed during the 2014 year within Euronext Paris, and ii) unrealized foreign-exchange losses of €1.7 million on current accounts in GBP and USD held by Euronext Paris.
The following table provides the results of long-term equity investments classifi ed as AFS fi nancial assets (see Note 3).
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Dividend income | 4,557 | 1,216 |
| Impairment of Sicovam | - | (27,200) |
| Gain on partial disposal of LCH.Clearnet | - | 7,944 |
| RESULTS FROM EQUITY INVESTMENTS | 4,557 | (18,040) |
More information on the impairment of Sicovam and the gain on partial disposal of LCH.Clearnet in 2013 is disclosed in Note 15. In 2014 dividend income was received from Euroclear and Sicovam. In 2013 dividend income relates to Sicovam.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Current tax expense | (29,633) | (44,202) |
| Deferred tax expense | (14,458) | (7,713) |
| TOTAL INCOME TAX EXPENSE | (44,091) | (51,915) |
The actual tax charge incurred on the Group's profi t before income tax diff ers from the theoretical amount that would arise using the weighted average tax rates applicable to profi t before income tax of the combined entities as follows.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Profi t before income tax | 162,265 | 139,431 |
| Income tax calculated at domestic tax rates applicable to profi ts in the respective countries | (32,171) | (31,109 ) |
| Tax eff ects of: | ||
| Impairment of fi nancial assets(a) | - | (10,336) |
| Impairment of deferred tax assets(b) | (16,923) | |
| (De) recognition tax losses | 4,535 | - |
| Non-deductible expenses(c) | (4,508) | (9,467 ) |
| Other tax exempt income | 1,975 | 1,354 |
| Over/(under) provided in prior years(d) | 6,731 | (3,056) |
| Other(e) | (3,730) | 699 |
| TOTAL INCOME TAX EXPENSE | (44,091) | (51,915) |
The domestic tax rates have not signifi cantly changed in 2014. The decrease in eff ective tax rate from 37% for the year ended 31 December 2013 to 27% for the year ended 31 December 2014 is primarily attributable to items that were included in full in the income tax expense for the year ended 31 December 2014, as discussed below :
(a) The impairment of the fi nancial assets in 2013 relates to the impairment of Sicovam in Euronext Paris S.A.
| In thousands of euros | Land & Buildings | Other(a) | Total |
|---|---|---|---|
| As at 31 December 2012 | |||
| Cost | 32,606 | 116,402 | 149,008 |
| Accumulated depreciation and impairment | (18,432) | (95,065) | (113,497) |
| Net book amount | 14,174 | 21,337 | 35,511 |
| As at 1 January 2013 net book amount | 14,174 | 21,337 | 35,511 |
| Exchange diff erences | - | (561) | (561) |
| Additions | - | 1,900 | 1,900 |
| Disposals & other | - | (1,509) | (1,509) |
| Depreciation charge (Note 6) | (1,202) | (6,357) | (7,559) |
| As at 31 December 2013 net book amount | 12,972 | 14,810 | 27,782 |
| As at 31 December 2013 | |||
| Cost | 32,606 | 115,614 | 148,220 |
| Accumulated depreciation and impairment | (19,634) | (100,804) | (120,438) |
| Net book amount | 12,972 | 14,810 | 27,782 |
| AS AT 1 JANUARY 2014 NET BOOK AMOUNT | 12,972 | 14,810 | 27,782 |
| Exchange diff erences | - | 565 | 565 |
| Additions | - | 5,302 | 5,302 |
| Disposals | - | (1,026) | (1,026) |
| Transfers | - | 994 | 994 |
| Depreciation charge (Note 6) | (460) | (7,209) | (7,669) |
| AS AT 31 DECEMBER 2014 NET BOOK AMOUNT | 12,512 | 13,436 | 25,948 |
| AS AT 31 DECEMBER 2014 | |||
| Cost | 32,389 | 91,269 | 123,658 |
| Accumulated depreciation and impairment | (19,877) | (77,833) | (97,710) |
| Net book amount | 12,512 | 13,436 | 25,948 |
(a) Other property, plant and equipment includes building fi xtures and fi ttings as well as IT and other equipment.
The Company does not hold assets under fi nance leases.
| Internally | ||||
|---|---|---|---|---|
| In thousands of euros | Goodwill | developed software |
Other(a) | Total |
| As at 31 December 2012 | ||||
| Cost | 354,759 | 89,878 | 142,553 | 587,190 |
| Accumulated amortisation and impairment | (53,341) | (75,338) | (127,584) | (256,263) |
| Net book amount | 301,418 | 14,540 | 14,969 | 330,927 |
| As at 1 January 2013 net book amount | 301,418 | 14,540 | 14,969 | 330,927 |
| Exchange diff erences | - | (81) | (34) | (115) |
| Additions | - | 568 | 4,901 | 5,469 |
| Amortisation charge (Note 6) | - | (8,554) | (3,811) | (12,365) |
| As at 31 December 2013 net book amount | 301,418 | 6,473 | 16,025 | 323,916 |
| As at 31 December 2013 | ||||
| Cost | 354,759 | 90,267 | 146,415 | 591,441 |
| Accumulated amortisation and impairment | (53,341) | (83,794) | (130,390) | (267,525) |
| Net book amount | 301,418 | 6,473 | 16,025 | 323,916 |
| AS AT 1 JANUARY 2014 NET BOOK AMOUNT | 301,418 | 6,473 | 16,025 | 323,916 |
| Exchange diff erences | - | 5 | 123 | 128 |
| Additions | - | 862 | 7,689 | 8,551 |
| Disposals | - | - | (1,360) | (1,360) |
| Transfers | - | 1,051 | (2,045) | (994) |
| Amortisation charge (Note 6) | - | (4,114) | (4,861) | (8,975) |
| AS AT 31 DECEMBER 2014 NET BOOK AMOUNT | 301,418 | 4,277 | 15,571 | 321,266 |
| AS AT 31 DECEMBER 2014 | ||||
| Cost | 354,759 | 42,275 | 48,645 | 445,679 |
| Accumulated amortisation and impairment | (53,341) | (37,998) | (33,074) | (124,413) |
| Net book amount | 301,418 | 4,277 | 15,571 | 321,266 |
(a) Other intangible assets primarily include purchased software, licenc es and acquired customer relationships.
Goodwill is monitored and tested for impairment at Group-level, which represents a single operating segment (see Note 3). The recoverable value of the Group's operating segment is based on its fair value less cost of disposal, applying a discounted cash fl ow approach, and corroborated by observation of Company's market capitalization. The fair value measurement uses signifi cant unobservable inputs and is therefore categorised as a Level 3 measurement under IFRS 13.
Cash fl ow projections are derived from the 2-years business plan prepared by management (2015-16). Key assumptions used by management include third party revenue growth, which factors future volumes of European equity markets, the Group's market share, average fee per transaction, and the expected impact of new product initiatives. These assumptions are based on past experience, market research and management expectation of market developments. They include an expected recovery in European equity markets, consistent with industry reports. Other key assumptions include the expected termination of the ICE transitional revenue derived from the IT support to LIFFE (see Note 16) and the impact of certain cost saving initiatives.
For the impairment test performed as of 31 December 2014, revenues have been extrapolated using a growth rate of 5% for the period 2015-19, and using a perpetual growth rate of 0% after 2019.
The discount rate is a weighted-average cost of capital determined from observable market data, applying a beta factor and a leverage ratio consistent with a group of comparable listed companies in the exchange industry. The post-tax discount rate applied was 9.3% (consistent with prior impairment tests, 9.3% in 2013).
For the impairment test performed as of 31 December 2013, cash flows beyond the 3-year period have been extrapolated using a perpetual growth rate of 2%, which was not higher than the economic growth and infl ation rate for the countries in which the Group operates.
The annual impairment testing performed at each year-end did not result in any instance where the carrying value of the operating segment exceeded its recoverable amount.
Recoverable value is sensitive to key assumptions. As of 31 December 2014, a reduction to 0% per year of third party revenue growth during the 5-year forecast, a reduction to -1% per year of perpetual growth rate, a reduction by 50% of expected cost savings, or an increase by 1% per year in discount rate, which management believes are individually reasonably possible changes to key assumptions, would not result in a goodwill impairment. Possible correlations between each of these parameters were not considered.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Deferred income tax assets(a) | 9,712 | 21,951 |
| Deferred income tax liabilities(a) | (483) | (530) |
| TOTAL NET DEFERRED TAX ASSETS (LIABILITIES) | 9,229 | 21,421 |
(a) As shown in the Balance sheet, after off setting deferred tax assets and liabilities related to the same taxable entity.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Deferred tax assets/(liabilities): | ||
| Property, plant and equipment | 2,728 | 534 |
| Intangible assets(a) | (1,417) | 13,950 |
| Investments | (1,277) | (995) |
| Provisions and employee benefi ts | 8,910 | 5,974 |
| Other | 223 | 886 |
| Loss carried forward | 62 | 1,072 |
| Deferred tax assets (net) | 9,229 | 21,421 |
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Balance at beginning of the year | 21,421 | 28,653 |
| Recognised in combined income statement | (14,458) | (7,713) |
| Reclassifi cations and other movements | 2,234 | (377) |
| Exchange diff erence | 242 | (91) |
| Charge related to other comprehensive income | (210) | 949 |
| Balance at end of the year | 9,229 | 21,421 |
(a) Mainly relates to de-recognition of deferred tax assets of certain sublicense agreements within IP entities (see also Note 11 paragraph b).
As of 31 December 2014, the group did not recognize deferred income tax assets of €3.6 million (2013: nil) in respect to losses that can be carried forward against future taxable income.
The total amount of the net deferred tax asset is expected to be recovered or settled after more than twelve months.
6
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Euroclear | 66,830 | - |
| Sicovam | 29,008 | 28,781 |
| LCH.Clearnet | 17,557 | 17,557 |
| Other | 201 | 1,737 |
| TOTAL | 113,596 | 48,075 |
Equity investments primarily include long-term investments in unlisted equity securities, which are classified as AFS financial assets. The valuation technique used to measure fair value of such investments is based on observation of recent transactions on investee's equity shares, application of market multiples to earnings and present value of dividend fl ows in perpetuity. The classifi cation of the measurement within the fair value hierarchy is presented in Note 29.2.
On 30 April 2014, the Parent contributed to the Group a 2.75% ownership interest into Euroclear plc, an unlisted company involved in the settlement of securities transaction and related banking services. The fair value of the investment was €63 million. The Euroclear shares have been recorded as a non-current equity investments. Due to a share buy back from Euroclear the direct investment in Euroclear increased from 2.75% to 3.12%. Based on the new information available as of 31 December 2014, management determined that the fair value could be reliable measured as of 31 December 2014. As a result, management recorded a fair value adjustment through Other Comprehensive Income of €3.7 million.
The Group holds a 9.60% ownership interest in Sicovam HoldingS.A., resulting in an indirect 1.43% interest in Euroclear plc, a securities settlement and custody business. The common stock of Sicovam HoldingS.A. and Euroclear plc are not listed. In 2013 and 2014, the investee released information on its equity share transaction prices and invited its shareholders to participate in a share repurchase auction. Based on the new information available as of 31 December 2014, management determined that the fair value could be reliable measured as of 31 December 2014. As a result, management recorded a fair value adjustment through Other Comprehensive Income of €0.2 million. In 2013, management recorded an impairment charge of €27.2 million (see Note 10).
As of 31, December 2014, the Group holds a 2.31% ownership in LCH. Clearnet Group Limited plc ("LCH") (2013: 2.31%). LCH is a multi-asset international clearing house managing and mitigating counterparty risks in market transactions. In 2013, the London Stock Exchange Group acquired a controlling interest in LCH. In connection with this transaction, the Group recorded a €7.9 million gain on the partial disposal of its investment (see Note 10).
From the IPO on 20 June 2014, the transactions with ICE do not qualify as "related party transactions" under IAS24, consequently the related party note refl ects the transactions with ICE up to 20 June 2014.
Note 16.1.1 – Revenue and operating expenses from Parent
| In thousands of euros | 2014 | 2013 | Reference |
|---|---|---|---|
| IT revenue sharing – SFTI, Co-location | 1,262 | - | (a) |
| TOTAL MARKET SOLUTIONS & OTHER | 1,262 | - | |
| IT operations and maintenance services – LIFFE | 12,067 | 93,276 | (b) |
| UTP R&D services | - | 1,706 | (c) |
| CBH Sublease rent – LIFFE | 1,377 | - | (d) |
| Other ancillary services | 1,835 | - | (e) |
| TOTAL ICE TRANSITIONAL REVENUE AND OTHER INCOME* | 15,279 | 94,982 | |
| TOTAL RELATED PARTY REVENUE | 16,541 | 94,982 | |
| PSA retrocession | - | (13,631) | (f) |
| Data center | (5,622) | (15,563) | (g) |
| UTP R&D services | - | (455) | (i) |
| Corporate, operations and other IT support | (6,425) | (14,913) | (h) |
| TOTAL RELATED PARTY OPERATING EXPENSES | (12,047) | (44,562) |
* The subtotal of ICE transitional revenues refl ects the related party position at IPO date of 20 June 2014 and is therefore not reconciling to the ICE transitional revenues position in Note 4.
Details of revenue and operating expenses from the Parent are as follows:
agreement. Pursuant to this agreement, global UTP software development costs are shared in proportion to revenues. In 2014, the Group does no longer share costs and benefi ts of UTP development costs with the Parent;
entities for the difference, in order to generate consistent operating margin rate across entities (within each business unit). The application of the PSA mechanism within the Derivatives business unit of Legacy Euronext has resulted in certain reallocation of operating expenses between the Group and LIFFE. Since 1 January 2014, the PSA agreement is no longer eff ective and is replaced by the recharge of specifi cally identifi ed services, described in (e) above and (g) below;
(g) reflects the recharge by the Parent of the cost of using the London-based data center and disaster recovery facilities. During the year ended 31 December 2013, the data center recharge was based on actual cost incurred plus mark up of 7% and was allocated between the Group and certain IT service businesses retained by ICE in proportion to revenues. During the year ended 31 December 2014, the data center recharge is based on a fi xed fee per cabinet used and therefore refl ects the actual utilization of the infrastructure by the Group. The disaster recovery centre is based in the CBH building. The disaster recovery facility has been charged by the Parent until 19 May 2014, date of the CBH lease transfer to the Group;
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Year-end balances | ||
| Related party loans – current | - | 268,778 |
| Related party borrowings – non current | - | (40,000) |
| Related party borrowings – current | - | (407,025) |
| NET (BORROWING)/LENDING POSITION WITH PARENT | - | (178,247) |
| 2014 | 2013 | |
|---|---|---|
| Income and expenses | ||
| Related party interest income | 119 | 505 |
| Related party interest expense | (235) | (1,535) |
| NET INTEREST (EXPENSE)/INCOME FROM PARENT | (116) | (1,030) |
During the quarter ended 31 March 2014, substantially all short-term related party loans and borrowings were settled in cash with Parent entities. The non-current related party borrowing of €40 million was equity-settled in connection with the Demerger, resulting in an increase of Parent net investment and Shareholders' equity.
On 29 April 2014, the Company received €250 million in cash from the Parent in exchange for a short-term promissory note. This promissory note was repaid at the IPO date from the proceeds of the bank facility.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Year-end balances | ||
| Related party trade and other receivables | - | 39,627 |
| Related party trade and other payables | - | (33,289) |
From the IPO on 20 June 2014, the transactions with ICE do not qualify as "related party transactions" under IAS 24, consequently the trade balances with ICE are not disclosed as related party as at 31 December 2014.
The Company's Supervisory and Management Board members are considered to be its key management. The compensation expense recognised for key management is as follows:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Short term benefi ts | (4,351 ) | (4,293) |
| Share-based payment costs(a) | (1,434) | (5,098) |
| Post-employment benefi ts | (184) | (177) |
| TOTAL BENEFITS | (5,969 ) | (9,568) |
(a) Share based payments costs are recognized in accordance with IFRS 2.
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Trade receivables | 64,358 | 60,365 |
| Less provision for impairment of trade receivables | (1,760) | (2,994) |
| Trade receivables net | 62,598 | 57,371 |
| Related party receivables | - | 39,627 |
| Tax receivables (excluding income tax) | 19,737 | 14,114 |
| Prepayments and invoices to establish | 22,537 | 9,503 |
| Other receivables and accrued income | 953 | 653 |
| TOTAL | 105,825 | 121,268 |
As of 31 December 2014, the total amount of trade receivables that were past due but not impaired was €23.4 million (2013: €16.8 million) of which €4.1 million (2013: €1.8 million) was overdue by more than three months.
The movement in the provision for impaired trade receivables in 2014 refl ects usages of €1.9 million (2013: €6.6 million) and accruals of €0.7 million (2013: (€0.8) million) recorded during the year.
The 2014 increase in Prepayments and invoices to establish is due to the increased invoicing related to Listings, Cash Trading, Clearing and ICE transitional revenue SLA's.
Management considers the fair value of the trade and other receivables to approximate their carrying value. The carrying value represents the Group's maximum exposure to credit risk.
| 2014 | 2013 | |||
|---|---|---|---|---|
| In thousands of euros | Asset | Liability | Asset | Liability |
| Forward foreign exchange contract | - | - | 1,893 | - |
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Deposits > 3 months | 15,000 | - |
| TOTAL | 15,000 | - |
Cash and cash equivalents consist of the following:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Cash and bank balances | 81,837 | 78,786 |
| Short term investments | 159,802 | 2,041 |
| TOTAL | 241,639 | 80,827 |
NOTE 21 SHAREHOLDERS' EQUITY
The separate legal entities that comprise the Group were not held by a single legal entity prior to the Demerger and, consequently, Parent's net investment was shown in lieu of Shareholders' equity in these fi nancial statements. Parent's net investment represents the cumulative net investment by the Parent in the combined entities forming the Group through the date of the Demerger.
As described in Note 1, the Company issued 70,000,000 Ordinary Shares in connection with the Demerger. Upon the completion of the Demerger, the Parent's net investment was converted into Shareholders' equity. The Parent's net investment was converted as follows:
As of 31 December 2014, the Company has 125,000,000 authorised ordinary shares and 70,000,000 issued and outstanding ordinary shares each with a nominal value of €1.60 per share. The fully paid ordinary shares carry one vote per share and rights to dividends, if declared. The Group's ability to declare dividends is limited to distributable reserves as defi ned by Dutch law. The Company also has one priority share authorized (with a nominal value of €1.60) and no priority share outstanding.
The movement in the reserve of €0.5 million during the reporting period relates to the transactions in Euronext N.V. shares conducted by the liquidity provider on behalf of the Group under the liquidity contract established.
The liquidity Agreement (the "Agreement") has been established in accordance with applicable rules, in particular the Regulation (EC) 2273/2003 of the European Commission of 22 December 2003 implementing the directive 2003/6/EC of the European Parliament and Council as regards exemptions for buyback programs and stabilization of fi nancial instruments, the provisions of article 2:95 of the Book II of Dutch civil code, the provisions of the general regulation of the French Autorité des Marchés Financiers (the "AMF"), the decision of the AMF dated 21 March 2011 updating the Accepted Market Practice n° 2011-07 on liquidity agreements, the Code of Conduct issued by the French Association française des marchés fi nanciers (AMAFI) on 8 March 2011 and approved by the AMF by its aforementioned decision dated 21 March 2011 (the "AMAFI Code") and as the case maybe the relevant Dutch rules applicable to liquidity agreements in particular the regulation on Accepted Market Practices WFT (Regeling gebruikelijke marktpraktijken WFT) dated 4 May 2011 and section 2.6 of the Book II – General Rules for the Euronext Amsterdam Stock Market (the "Dutch Rules").
As at 31 December 2014 Euronext N.V. holds 23.436 shares under the p rogramme with a cost of €0.5 million.
The movement schedule for the reporting year is as follows:
| Transaction date | Buy Euronext N.V. shares |
Sell Euronext N.V. shares |
Average share price |
Total value transaction including commissions |
|---|---|---|---|---|
| As at 1 January 2014 | - | |||
| Purchases December | 99,350 | €24.23 | 2,407,707 | |
| Sales December | 75,914 | €24.59 | (1,866,810) | |
| Total buy/sell | 99,350 | 75,914 | 540,897 | |
| TOTAL AS AT 31 DECEMBER 2014 | 23,436 |
Retained earnings are not freely available for distribution for an amount of €19.6 million relating to legal reserves. This addition to legal reserves is included in the proposed profi t appropriation. See Note 46.
Earnings per share are computed by dividing profi t attributable to the shareholders of the Company by the weighted average number of shares outstanding for the period. The earnings per share for the periods prior to the Demerger were computed as if the shares issued at Demerger were outstanding for all periods before the IPO. The number of shares used for the year ended 31 December 2014 was 69,998,908 and 31 December 2013 was 70,000,000, which is the number of shares issued in connection with the Demerger.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the share plan is determined the number of shares that could have been acquired at fair value (determined as the average quarterly market price of Euronext's shares) based on the fair value (measured in accordance with IFRS 2) of any services to be supplied to Euronext in the future under the share plan. The number of shares used for the diluted earnings per share for the year ended 31 December 2014 were 70,101,114.
NOTE 23 SHARE-BASED PAYMENTS
Directors and certain employees of the Group benefited from Restricted Stock Units ("RSUs") granted by Euronext N.V. Each LTIP 2014 represents the right to receive one share of the Euronext's common stock. LTIP RSUs generally cliff -vest after 3 years (LTIP RSUs), subject to continued employment. These equity awards are measured by reference to the grant-date market price of Euronext common share and compensation are recognised over the three year vesting period.
Movements in the number of shares granted as awards is as follows:
Number of Euronext shares
| As at 31 December 2013 | - |
|---|---|
| Granted | 315,110 |
| Vested | - |
| Cancelled | - |
| AS AT 31 DECEMBER 2014 | 315,110 |
Fair value per share at the measurement date: €17.30
Euronext has taken into consideration the fact that the employees will not receive dividends during the vesting period of 3 years. The fair value has been adjusted taking into account the fi nancials loss for the participants to not receive the payment of the dividends during the vesting period.
Directors and certain employees of the Group benefited from Restricted Stock Units ("RSUs") granted by NYSE Euronext. Each RSU represents the right to receive one share of the NYSE Euronext's common stock. RSUs generally vest over 3 years, either in three equal annual installments (standard RSUs) or cliff -vest after 3 years (LTIP RSUs), subject to continued employment. These equity awards are measured by reference to the grant-date market price of NYSE Euronext common share and compensation are recognised over the three year vesting period.
Due to the acquisition of NYSE Euronext by ICE, the standard RSU 2013, 2012 and 2011 plans and the LTIP RSU 2012 and 2011 plans vested in full at the acquisition date (13 November 2013). The 2013 LTIP RSUs converted to ICE RSUs and remained subject to the original terms of the award including the 3-year cliff vesting provision. The impact of the vesting acceleration and conversions has been recorded as award modifi cations in 2013. Due to the IPO of Euronext N.V. the 2013 LTIP RSUs vested in full at the IPO date (20 June 2014).
Movements in the number of shares granted as awards is as follows:
| Number of NYSE Euronext shares |
Number of ICE shares | |
|---|---|---|
| As at 31 December 2012 | 795,648 | - |
| Granted | 217,299 | - |
| Vested | (823,219) | - |
| Cancelled | (47,767) | - |
| Conversion into ICE awards | (141,961) | 32,274 |
| As at 31 December 2013 | - | 32,274 |
| Granted | - | - |
| Vested | - | (32,274) |
| Cancelled | - | - |
| AS AT 31 DECEMBER 2014 | - | - |
Weighted average fair value per share for grant during fi scal year 2013: €26.06.
Share-based payment expenses recognised in the income statement for shares granted for all plans to directors and selected employees in 2014 amounted to €3.8 million, which included €2.3 million for vesting acceleration recorded as an exceptional item (2013: €10.7 million) (see Note 5 and Note 8).
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Non-current | ||
| Bond | 248,369 | - |
| TOTAL | 248,369 | - |
| Current | ||
| Bond (accrued interest) | 129 | - |
| TOTAL | 129 | - |
On 6 May 2014, the Group entered into a syndicated bank loan facilities agreement ("the Bank Facilities"), with BNP Paribas and ING Bank N.V. as Lead Arrangers, providing for a (i) a €250 million term loan facility and (ii) a €250 million revolving loan facility. The Facilities Agreement will terminate three years following the date of the Facilities Agreement, subject to an option to extend the term by 12 months on two occasions. The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable Margin, EURIBOR, and Mandatory cost, if any. The margin is 0.8% per annum in relation to the term loan facility and 0.5% per annum in relation to the revolving loan facility, subject to adjustment by reference to the Leverage Ratio . The Group drew down the term loan on the IPO date in order to refi nance the short-term promissory note due to the Parent. The transaction costs €2 million have been capitalised and amortized over the facility expected life, three years. Resulting in a net non-current borrowing of €248 million as of 31 December 2014. The Bank Facilities include certain covenants and restrictions, applicable to disposal of assets beyond certain thresholds, grant of security interests, incurrence of fi nancial indebtedness, share redemptions, dividend distributions above 50% of net income, investments, and other transactions. The Bank Facilities also require compliance with a total debt to EBITDA ratio of 2.5 to which the Group complies in 2014.
The fair value of the Term Loan approximates its carrying value.
The group operates defi ned benefi t pension plans for its employees, with the most signifi cant plans being in France and Portugal. The group's plans are funded by contributions from the employees and the relevant Group entities, taking into account applicable government regulations and the recommendations of independent, qualifi ed actuaries. The majority of plans have plan assets held in trusts, foundations or similar entities, governed by local regulations and practice in each country. The assets for these plans are generally held in separate trustee administered funds. The benefi ts provided to employees under these plans are based primarily on years of service and compensation levels.
On 31 December 2013 the Dutch defi ned benefi t plan was settled and replaced by a new defi ned benefi t plan whereby the obligation for future benefits has been transferred to a pension insurance company, with an annual premium being paid directly to the insurer. Therefore, the Company has treated the transfer as a settlement of the Company's former defi ned benefi t plan. The transfer resulted in an €0.8 million settlement gain (See Note 8).
At the transfer date, the Company has not retained any direct or indirect legal or constructive obligation to pay post-employment benefits relating to employee service in current, prior or future periods when they fall due or to pay further amounts if the insurer does not pay all future employee benefits relating to employee service in the current and prior periods. As such, from the date of transfer onwards, the Company has accounted for the plan as a defi ned contribution plan, as provided for under IAS 19R.
In addition, upon inception of the defined contribution plan, the Group committed to make a lump sum contribution of €5.2 million to the insurance company for future pension benefi t indexation. This payment obligation is fi xed and not contingent upon future service, and the Group assumes no actuarial risk associated with pension indexation. This lump sum contribution was also recorded as an exceptional expense in 2013 (see Note 8).
The French plans relate almost completely to retirement indemnities. French law stipulates that employees are paid retirement indemnities in form of lump sums on the basis of the length of service at the retirement date and the amount is prescribed by collective bargaining agreements.
6
The movement in the defi ned obligation over the years presented is as follows:
| In thousands of euros | Present value of obligation |
Fair value of plan assets |
Total | Impact of minimum funding requirement/ asset ceiling |
Total |
|---|---|---|---|---|---|
| As at 31 December 2012 | 160,008 | (149,946) | 10,062 | 5,700 | 15,762 |
| • (Income)/expense: | |||||
| Current service cost | 2,692 | - | 2,692 | - | 2,692 |
| Interest expense/(income) | 5,851 | (5,587) | 264 | 220 | 484 |
| Gain on settlement | (783) | - | (783) | - | (783) |
| 7,760 | (5,587) | 2,173 | 220 | 2,393 | |
| • Remeasurements: | |||||
| Return on plan assets, excluding amounts included in interest expense/(income) |
- | 5,161 | 5,161 | - | 5,161 |
| (Gain)/loss from change in demographic assumptions | 943 | - | 943 | - | 943 |
| (Gain)/loss from change in fi nancial assumptions | 5,382 | - | 5,382 | - | 5,382 |
| Experience (gains)/losses | (1,976) | - | (1,976) | - | (1,976) |
| Change in asset ceiling, excluding amounts included in interest expense |
- | - | - | (5,920) | (5,920) |
| 4,349 | 5,161 | 9,510 | (5,920) | 3,590 | |
| • Payments: | |||||
| Employer contributions | (635) | (11,622) | (12,257) | - | (12,257) |
| Plan participant contributions | 45 | (45) | - | - | - |
| Settlement payments from plan | (141,417) | 141,417 | - | - | - |
| Benefi t payments | (5,061) | 5,061 | - | - | - |
| As at 31 December 2013 | 25,049 | (15,561) | 9,488 | 0 | 9,488 |
| • (Income)/expense: | |||||
| Current service cost | 839 | - | 839 | - | 839 |
| Interest expense/(income) | 846 | (576) | 270 | - | 270 |
| 1,685 | (576) | 1,109 | 0 | 1,109 | |
| • Remeasurements: | |||||
| Return on plan assets, excluding amounts included in interest expense/(income) |
- | 68 | 68 | - | 68 |
| (Gain)/loss from change in demographic assumptions | (547) | - | (547) | - | (547) |
| (Gain)/loss from change in fi nancial assumptions | 9,681 | - | 9,681 | - | 9,681 |
| Experience (gains)/losses | (595) | - | (595) | - | (595) |
| 8,539 | 68 | 8,607 | 0 | 8,607 | |
| • Payments: | |||||
| Employer contributions | (394) | (2,526) | (2,920) | - | (2,920) |
| Transfer Jubilee to NC Provision | (1,287) | - | (1,287) | - | (1,287) |
| Benefi t payments | (87) | 87 | - | - | - |
| AS AT 31 DECEMBER 2014 | 33,505 | (18,508) | 14,997 | 0 | 14,997 |
The defi ned benefi t obligation and plan assets are composed by country as follows:
| 2014 | |||||
|---|---|---|---|---|---|
| In thousands of euros | Belgium | Portugal | France | Netherlands | Total |
| Present value of obligation | 484 | 23,017 | 10,004 | - | 33,505 |
| Fair value of plan assets | - | (15,379) | (3,129) | - | (18,508) |
| TOTAL | 484 | 7,638 | 6,875 | - | 14,997 |
| Impact of minimum funding requirement/asset ceiling | - | - | - | - | - |
| TOTAL | 484 | 7,638 | 6,875 | - | 14,997 |
| 2013 | |||||
|---|---|---|---|---|---|
| In thousands of euros | Belgium | Portugal | France | Netherlands | Total |
| Present value of obligation | 822 | 15,392 | 8,410 | 428 | 25,052 |
| Fair value of plan assets | - | (12,560) | (3,004) | - | (15,564) |
| TOTAL | 822 | 2,832 | 5,406 | 428 | 9,488 |
| Impact of minimum funding requirement/asset ceiling | - | - | - | - | - |
| TOTAL | 822 | 2,832 | 5,406 | 428 | 9,488 |
The signifi cant actuarial assumptions were as follows:
| 2014 | ||||
|---|---|---|---|---|
| Belgium | Portugal | France | Netherlands | |
| Discount rate | 0.3% | 2.0% | 1.9% | N/A |
| Salary growth rate | 0.0% | 2.0% | 3.0% | N/A |
| Pension growth rate | 0.0% | 2.0% | 0.0% | N/A |
| 2013 | |||||
|---|---|---|---|---|---|
| Belgium | Portugal | France | Netherlands | ||
| Discount rate | 1.1% | 3.8% | 3.5% | 2.8% | |
| Salary growth rate | 0.0% | 2.0% | 3.0% | 3.5% | |
| Pension growth rate | 0.0% | 2.0% | 0.0% | 0.0% |
The group derives the discount rate used to determine the defi ned benefi t obligation from yields on high quality corporate bonds of the duration corresponding to the liabilities.
As of 31 December 2014, the sensitivity of the defi ned benefi t obligation to changes in the weighted principal assumptions were:
| Impact on defi ned benefi t obligation | |||||
|---|---|---|---|---|---|
| Change in assumption |
Increase in assumption |
Decrease in assumption |
|||
| Discount rate | 0.50% | -5.0% | 5.3% | ||
| Salary growth rate | 0.50% | 2.7% | -5.2% | ||
| Pension growth rate | 0.25% | 2.0% | -2.0% |
| 2014 | 2013 | ||||
|---|---|---|---|---|---|
| Plan assets | Fair value of plan assets In thousands of euros |
Fair value of plan assets In % |
Fair value of plan assets In thousands of euros |
Fair value of plan assets In % |
|
| Equity securities | 2,130 | 11.5% | 2,121 | 13.6% | |
| Debt securities | 10,568 | 57.1% | 8,744 | 56.2% | |
| Property | 622 | 3.4% | 720 | 4.6% | |
| Investment funds | 31 | 0.1% | 63 | 0.4% | |
| Cash | 5,159 | 27.9% | 3,913 | 25.2% | |
| TOTAL | 18,510 | 100% | 15,561 | 100% |
The maturity of expected benefi t payments over the next ten years is as follows:
| As at 31 December 2014 | Less than a year | Between 1-2 year | Between 2-5 years | Between 5-10 years | Total |
|---|---|---|---|---|---|
| Pension benefi ts | 464 | 392 | 912 | 3,694 | 5,462 |
The weighted average duration of the defi ned benefi t obligation for retirement plans is 21 years at 31 December 2014.
For 2015, the expected obligations contributions are approximately €0.9 million.
| Cannon Bridge |
Legal | Plan | ||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of euros | Restructuring | House | Building | Jubilee | claims | Agents | Others | Total |
| Changes in provisions | ||||||||
| As at 1 January 2013 | 4,057 | - | 745 | - | 552 | 2,655 | 486 | 8,495 |
| Additional provisions charged | ||||||||
| to combined income statement | 3,649 | - | 989 | - | 14 | - | 3,871 | 8,523 |
| Unused amounts reversed | (30) | - | - | - | (200) | - | (12) | (242) |
| Used during the year | (4,471) | - | - | - | (3) | (749) | (638) | (5,861) |
| Exchange differences | 15 | - | - | - | - | - | (7) | 8 |
| As at 31 December 2013 | 3,220 | 0 | 1,734 | 0 | 363 | 1,906 | 3,700 | 10,923 |
| Composition of provisions | ||||||||
| Current | 3,220 | - | 1,734 | - | - | - | 723 | 5,677 |
| Non Current | - | - | - | - | 363 | 1,906 | 2,977 | 5,246 |
| TOTAL | 3,220 | 0 | 1,734 | 0 | 363 | 1,906 | 3,700 | 10,923 |
| AS AT 1 JANUARY 2014 | 3,220 | - | 1,734 | - | 363 | 1,906 | 3,700 | 10,923 |
| Additional provisions charged to combined income statement |
5,015 | 31,929 | 2,456 | 1,765 | - | - | 1,888 | 43,053 |
| Unused amounts reversed | (6) | - | (189) | - | - | - | (2,076) | (2,271) |
| Used during the year | (6,501) | - | (697) | (184) | (2) | (315) | - | (7,699) |
| Other | (268) | - | - | 1,286 | - | - | (724) | 294 |
| Exchange differences | 244 | 879 | 42 | - | - | - | - | 1,165 |
| AS AT 31 DECEMBER 2014 | 1,704 | 32,808 | 3,346 | 2,867 | 361 | 1,591 | 2,788 | 45,465 |
| Composition of provisions | ||||||||
| Current | 1,704 | 7,997 | 3,346 | - | - | - | - | 13,047 |
| Non Current | - | 24,811 | - | 2,867 | 361 | 1,591 | 2,788 | 32,418 |
| TOTAL | 1,704 | 32,808 | 3,346 | 2,867 | 361 | 1,591 | 2,788 | 45,465 |
Restructuring provision decreased with €6.5 million due to payment to leavers. Severance for which the contracts have been signed are included in Employees' entitlements and other payables (see Note 27).
Cannon Bridge House onerous provision was formed in Q2 2014 for €21.9 million, when the operational lease was reassigned from LIFFE to the Group. In Q4 2014 the Group decided to re-allocate its disaster recovery center at the end of 2015 from Cannon Bridge House, resulting in an increase of the provision of €10.8 million (see Note 2).
The building provision increased due to dilapidation for Evere building in Brussels (€0.9 million) and Rue Cambon offi ce in Paris (€1.4 million). The provision for Canada Square offi ce in London had been used (€0.7 million) and the lease has ended. Evere building and Rue Cambon offi ce will be returned to their landlords in 2015 (see Note 2).
The Jubilee provision increased with €1.8 million mainly due to change in plan conditions in France. The Jubilee provisions were transferred in 2014 from Post-employment Benefi ts to Non-Current provisions in the line Other (€1.3 million).
The provision for Plan Agents relates to a retirement allowance for retired stockbrokers in Belgium, which is determined using actuarial assumptions. No cash outfl ows are expected for 2015.
The balance as of December 2014 is mainly related to a provision created in relation with the SFTI activity (€1.9 million) and the provision for social tax 2013 was partially released (€2.0 million).
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Trade payables | 32,114 | 33,394 |
| Amounts due to related parties | - | 33,289 |
| Social security and other taxes (excluding income tax) | 28,525 | 24,998 |
| Employees' entitlements and other payables(a) | 56,015 | 45,933 |
| Other | 9,773 | 6,047 |
| TOTAL | 126,427 | 143,661 |
(a) Amounts include salaries payable, bonus accruals, severance (signed contracts) and vacation accruals.
The carrying values of current trade and other payables are reasonable approximations of their fair values. These balances do not bear interest.
| United | ||||||
|---|---|---|---|---|---|---|
| In thousands of euros | France | Netherlands | Kingdom | Belgium | Portugal | Total |
| 2014 | ||||||
| Third party revenue(a) | 267,623 | 124,230 | 3,245 | 25,084 | 38,272 | 458,454 |
| ICE Transitional revenue and other income(b) | 23,096 | 1,260 | 9,688 | - | - | 34,044 |
| Property, plant and equipment | 3,394 | 13,693 | 7,225 | 957 | 679 | 25,948 |
| Intangible assets other than Goodwill(c) | 5,927 | 11,596 | 1,415 | - | 910 | 19,848 |
| 2013 | ||||||
| Third party revenue(a) | 224,787 | 103,316 | 2,985 | 22,292 | 33,310 | 386,690 |
| ICE Transitional revenue and other income(b) | 94,982 | - | - | - | - | 94,982 |
| Property, plant and equipment | 2,235 | 14,577 | 8,869 | 1,258 | 843 | 27,782 |
| Intangible assets other than Goodwill(c) | 9,033 | 8,372 | 4,865 | - | 228 | 22,498 |
(a) Trading, listing and market data revenue is attributed to the country where the exchange is domiciled. Other revenue is attributed to the billing entity.
(b) Related party revenue is billed by a French entity, however the majority of the related operations are based in the UK.
(c) Goodwill is monitored at the Group level and is therefore not allocated by country.
| 2014 | |||||
|---|---|---|---|---|---|
| In thousands of euros | Loans and receivables |
Available for sale | Asset at FVTPL | Total | |
| Assets | |||||
| Related party loans | - | - | - | - | |
| Available for sale fi nancial assets | - | 113,596 | - | 113,596 | |
| Derivative fi nancial instruments | - | - | - | - | |
| Financial instruments | 15,000 | 15,000 | |||
| Trade and other receivables excluding prepayments | 83,288 | - | - | 83,288 | |
| Cash and cash equivalents | 241,639 | - | - | 241,639 | |
| TOTAL | 339,927 | 113,596 | - | 453,523 | |
| Liabilities | |||||
| Bank borrowings | 248,369 | - | - | 248,369 | |
| Related party borrowings | - | - | - | - | |
| Derivative fi nancial instruments | - | - | - | - | |
| Trade and other payables | 126,427 | - | - | 126,427 | |
| TOTAL | 374,796 | - | - | 374,796 |
| 2013 | ||||||
|---|---|---|---|---|---|---|
| In thousands of euros | Loans and receivables |
Available for sale | Asset at FVTPL | Total | ||
| Assets | ||||||
| Related party loans | 268,778 | - | - | 268,778 | ||
| Available for sale fi nancial assets | - | 48,075 | - | 48,075 | ||
| Derivative fi nancial instruments | - | - | 1,893 | 1,893 | ||
| Trade and other receivables excluding prepayments | 111,765 | - | - | 111,765 | ||
| Cash and cash equivalents | 80,827 | - | - | 80,827 | ||
| TOTAL | 461,370 | 48,075 | 1,893 | 511,338 | ||
| Liabilities | ||||||
| Related party borrowings | 447,025 | - | - | 447,025 | ||
| Derivative fi nancial instruments | - | - | - | - | ||
| Trade and other payables | 143,661 | - | - | 143,661 | ||
| TOTAL | 590,686 | - | - | 590,686 |
The table below analyses fi nancial instrument carried at fair value, by valuation method. The diff erent levels have been defi ned as follows:
| In thousands of euros | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| AS AT 31 DECEMBER 2014 | |||
| Equity investments | - | - | 113,596 |
| Derivatives fi nancial instruments - Assets | - | - | - |
| As at 31 December 2013 | |||
| Equity investments | - | - | 48,075 |
| Derivatives fi nancial instruments – Assets | - | 1,893 | - |
The fair value of the equity investments was estimated by applying a combination of valuation methodologies and recent transactions. Key assumptions are a long term growth rate of 1.8%, cost of equity of 11% and a discount for lack of marketability.
The fair value hierarchy of Sicovam has been corrected for December 2013 to take into account the signifi cant range of the transaction prices observed.
The fair values or trade and other receivables and payables approximate their carrying amounts.
As a result of its operating and fi nancing activities, the Group is exposed to market risks such as interest rate risk, currency risk and credit risk. The Group has implemented policies and procedures designed to measure, manage, monitor and report risk exposures, which are regularly reviewed by the appropriate management and supervisory bodies. The Group's central treasury team is charged with identifying risk exposures and monitoring and managing such risks on a daily basis. To the extent necessary and permitted by local regulation, the Group's subsidiaries centralise their cash investments, report their risks and hedge their exposures in coordination with the Group's central treasury team. The Group performs sensitivity analyses to determine the eff ects that may result from market risk exposures. The Group uses derivative instruments solely to hedge financial risks related to its financial position or risks that are otherwise incurred in the normal course of its commercial activities. The Group does not use derivative instruments for speculative purposes.
The Group would be exposed to a liquidity risk in the case where its short term liabilities become, at any date, higher than its cash, cash equivalents, short term fi nancial investments and available bank facilities and in the case where the Group is not able to refi nance this liquidity defi cit, for example, through new banking lines.
Cash, cash equivalents and short term fi nancial investments are managed as a global treasury portfolio invested into non-speculative financial instruments, readily convertible to cash, such as bank balances, money market funds, overnight deposits, term deposits and other money market instruments, thus ensuring a very high liquidity of the fi nancial assets. The Group's policy is to ensure that cash, cash equivalents and available bank facilities allow the Group to repay its fi nancial liabilities at all maturities, even disregarding incoming cash fl ows generated by operational activities, excluding the related party loans granted by the Group to its Parent.
The net position of the current fi nancial assets and current fi nancial liabilities, excluding working capital items, as of 31 December 2014, is described in the table below:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| Cash, cash equivalents and short term fi nancial investments | 241,639 | 80,827 |
| Available credit facilities | 250,000 | 200,000 |
| Financial debt (excluding related party loans to/from Parent) | (248,498) | - |
| NET POSITION | 243,141 | 280,827 |
As of 31 December 2013, the Group had a €200.0 million loan facility granted by the Parent available for drawdown and maturing in June 2015. This loan facility was early terminated in June 2014 following the IPO. On 6 May 2014, the Group entered into a syndicated bank loan facilities agreement ("the Bank facilities"), with BNP Paribas and ING Bank N.V. as Lead Arrangers, providing for a €250.0 million term loan facility and a €250.0 million revolving loan facility, both maturing or expiring in three years, with two extensions for one year.
| Maturity between | ||||
|---|---|---|---|---|
| In thousands of euros | Maturity < 1 year | 1 and 5 years | Maturity > 5 years | Total |
| 2014 | ||||
| Related party borrowings | - | - | - | - |
| Trade and other payables | 126,427 | - | - | 126,427 |
| Borrowings | 129 | 248,369 | - | 248,498 |
| 2013 | ||||
| Related party borrowings | 407,025 | 40,000 | - | 447,025 |
| Trade and other payables | 143,661 | - | - | 143,661 |
| Borrowings | - | - | - | - |
Substantially all signifi cant interest-bearing fi nancial assets and liabilities of the Group are either based on fl oating rates or based on fi xed rates with an interest term of less than one year. As a result, the Group is not exposed to fair value risk aff ecting fi xed-rate fi nancial assets and liabilities.
As at 31 December, the interest rate exposure of the Company was as follows:
| Currency | Position in Euros | Positions in Pound Sterling | ||
|---|---|---|---|---|
| Type of rate and maturity In thousands of euros |
Floating rate (or fi xed rate with maturity < 1 year) |
Floating rate (or fi xed rate with maturity > 1 year) |
Floating rate (or fi xed rate with maturity < 1 year) |
Floating rate (or fi xed rate with maturity > 1 year) |
| 2014 | ||||
| Interest bearing fi nancial assets(a) | 199,477 | - | 57,162 | - |
| Interest bearing fi nancial liabilities(b) | (129) | (248,369) | - | - |
| Net position before hedging | 199,348 | (248,369) | 57,162 | - |
| Hedging impact(c) | - | - | - | - |
| Net position after hedging | 199,348 | (248,369) | 57,162 | - |
| 2013 | ||||
| Interest bearing fi nancial assets(a) | 343,912 | - | 7,577 | - |
| Interest bearing fi nancial liabilities(b) | (278,768) | - | (168,257) | - |
| Net position before hedging | 65,144 | - | (160,680) | - |
| Hedging impact(c) | (228,790) | - | 228,790 | - |
| Net position after hedging | (163,646) | - | 68,110 | - |
(a) Includes cash and cash equivalent and related party loans.
(b) Includes related party borrowings.
(c) As at 31 December 2013, the Group had £192 million (€228 million) of £/€ foreign exchange contracts outstanding with a maturity less than 3 months.
The Group is exposed to cash-fl ow risk arising from net fl oating-rate positions. The Group was a net borrower in euros at 31 December 2014 and 2013. The sensitivity of net interest expense to a parallel shift in the interest curves is that a 0.5% increase/decrease of the rate would have resulted in an increase/decrease of the net interest expense of €0.25 million based on the positions at 31 December 2014 (2013: €0.8 million). The Group was a net lender in pound sterling at 31 December 2014 and 2013. The sensitivity of net interest income to a parallel shift in the interest curves is that a 0.5% increase/decrease of the rate would have resulted in an increase/decrease of the net interest income of €0.3 million based on the positions at 31 December 2014 (2013: €0.3 million).
The Group's net assets are exposed to the foreign currency risk arising from the translation of assets and liabilities of subsidiaries with functional currencies other than the euro. The following table summarises the assets and liabilities recorded in GBP functional currency, and the related impact of a 10% decrease in the currency exchange rate on balance sheet:
| In thousands | 2014 | 2013 |
|---|---|---|
| Assets | £ 68,551 | £ 26,451 |
| Liabilities | £ (38,757) | £ (24,914) |
| Net currency position | £ 29,794 | £ 1,537 |
| Impact on combined net parent investment of 10% decrease in the currency exchange rate | € (3,837) | € (185) |
Most operating revenue and expenses in the various subsidiaries of the Group are denominated in the functional currency of each relevant subsidiary. The Group's consolidated income statement is exposed to foreign currency risk arising from receivables and payables denominated in currencies diff erent from the functional currency of the related entity. As of 31 December 2014, a decrease of 10% of the GBP would result in a material impact on the foreign exchange gain or loss.
The Group is exposed to credit risk in the event of a counterparty's default. The Group's exposure to credit risk primarily arises from the investment of cash equivalents and short term fi nancial investments. The Group limits its exposure to credit risk by rigorously selecting the counterparties with which it executes agreements. Credit risk is monitored by using exposure limits depending on ratings assigned by rating agencies as well as the nature and maturity of transactions. Investments of cash and cash equivalents in bank current accounts and money market instruments, such as short term fixed and floating rate interest deposits, are strictly restricted by rules aimed at reducing credit risk: maturity of deposits is lower than six months, counterparties' credit ratings are permanently monitored and individual counterparty limits are reviewed on a regular basis. In addition to the intrinsic creditworthiness of counterparties, the Group's policies also prescribe the diversifi cation of counterparties (banks, fi nancial institutions, funds) so as to avoid a concentration of risk. Derivatives are negotiated with leading high-grade banks.
In addition, the Group is exposed to credit risk with its customers on trade receivables. Most customers of the Group are leading fi nancial institutions that are highly rated.
The Group's investment in publicly-traded equity securities was insignifi cant in 2014 and 2013.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to comply with regulatory requirements and to maintain an optimal capital structure to reduce the cost of capital and provide return to shareholders.
Certain entities of the Group are regulated as exchanges or as Central Securities Depository ("CSD") and are subject to certain statutory regulatory requirements based on their local statutory fi nancial statements. Euronext Amsterdam is subject to a minimum statutory capital requirement of €730 thousand, shall have a regulatory capital in the amount of 50% of the fi xed costs of Euronext Amsterdam during the preceding fi nancial year and in addition the cash & cash equivalents shall be higher than the required minimum regulatory capital to operate as an exchange in The Netherlands. Euronext Paris shall maintain statutory regulatory equity at no less than 50% of its yearly expenses and a solvency ratio on operational risks at no less than 8%. Euronext Lisbon S.A. and Interbolsa shall maintain minimum statutory share capital of €3.0 million and €2.75 million, respectively, and shall maintain minimum statutory equity of €6.0 million and €5.5 million, respectively. Smartpool is subject to a minimum statutory regulatory equity requirements of £0.63 million. Euronext London Ltd should maintain an of eligible fi nancial resource being suffi cient for the performance of the functions of the exchange, to a minimum statutory regulatory of £4.3 million is set to be suffi cient. As at 31 December 2014 and 2013, the regulated entities of the Group were compliant with these statutory regulatory requirements.
As per banking regulation, Euronext Paris was subject to maintaining a solvency ratio no less than 8% and other prudential rules. Until March 2014, Euronext Paris was compliant with banking rules. Since March 2014, Euronext Paris no longer has a bank status.
The Group is involved in a number of legal proceedings that have arisen in the ordinary course of Euronext's business. Other than as discussed below, management does not expect these pending or threatening legal proceedings to have a signifi cant eff ect on the Group's fi nancial position or profi tability. The outcome of legal proceedings, however, can be extremely diffi cult to predict and the fi nal outcome may be materially diff erent from managements' expectation.
In connection with an investigation by the AMF of the trading pattern of a member fi rm using algorithmic trading strategies, the AMF notifi ed Euronext Paris on 25 July 2013 that the exemption from certain fees granted in a non-public way to the trading fi rm under investigation may have been a violation of the General Regulations of the AMF by Euronext Paris in its capacity as a market operator. Euronext Paris has contested the position of the AMF. Management believes the conduct at issue is consistent with market practice.
The proceedings are on-going, and management intends to vigorously defend the Group's position with regard to this matter. The possible sanctions against Euronext Paris could potentially range from a public warning to a €10 million fi ne. Euronext Paris, as a market operator, is not eligible to settle this case. No provision has been booked in connection with this case.
Fifty-four individual proprietary traders licensed to operate on the futures market of Euronext Paris (MATIF) commenced legal proceedings against Euronext before the Paris Commercial Court in November 2005. The plaintiff s allege that Euronext committed several breaches to their contract and claim that they have suff ered an alleged prejudice amounting to a total amount of €90.5 million.
The Paris Commercial Court dismissed the claim in January 2008 and no damages were awarded to the plaintiffs. The individual proprietary traders appealed the decision before the Paris Court of Appeals. On 14 January 2011, the Paris Court of Appeals rendered an interlocutory decision ("décision avant dire droit") to order the appointment of two experts. The experts issued a technical report in March 2014 to the Paris Court of Appeals on the facts alleged by the claimants and to estimate the potential damages incurred by them in the event that the Paris Court of Appeals fi nds that Euronext is liable. The higher range of the conditional assessment of the theoretical loss that could have been suff ered by the proprietary traders should the Court decide that Euronext is liable has been estimated, by the Experts, to €6.69 million.
Management believes that the actions of the appellants are not supported and has not booked any provision in connection with this case.
Alter Nego is a proprietary trading fi rm that claimed that it suff ered from a diff erence of treatment by Euronext Paris compared to other proprietary traders because it did not pay the same amount of trading fees. Alter Nego initiated legal proceedings before the Paris Commercial Court. In January 2011, the Paris Commercial Court ruled that Euronext Paris had not abused its dominant position or breached its obligation of information but had breached its obligation of equal treatment. Alter Nego appealed the decision before the Paris Court of Appeals, which dismissed the appeal on 20 June 2013 and overturned the judgement rendered in fi rst instance by deciding that Euronext Paris had not breached its obligation of neutrality and equal treatment. Alter Nego has appealed the decision before the Cour de cassation (the French Supreme Court for civil and criminal matters).
On 3 March 2015, the Cour de Cassation rejected the appeal lodged by Alter Nego.
Approximately 120 retired and/or former Euronext Amsterdam employees, united in an association, served summons on Euronext Amsterdam on 3 April 2014. The claim arose in connection with the termination by Euronext Amsterdam of its pension agreement with the pension fund Mercurius ("PMA") and the transfer of pension entitlements to Delta Lloyd Asset Management ("Delta Lloyd"). The retired and/or former employees have been informed by PMA that the transfer of their entitlements to Delta Lloyd will result in a nominal pension entitlement without indexation in the future. The association claims that Euronext Amsterdam should guarantee the same pension entitlements of the retired Euronext Amsterdam employees under the same or similar conditions as those in the agreement between Euronext Amsterdam and PMA. The amount will need to be calculated by an actuary. Court proceedings are ongoing and management believes the claim is not supported. Both parties have fi led all documents and statements and a public hearing (pleadings on request of the retired and/or former Euronext Amsterdam employees) is expected before the end of June 2015.
On 19 September 2008, Euronext Paris, along with the other shareholders (the "Sellers") of GL Trade, a French société anonyme, sold their shares in GL Trade to SunGard Data Systems, Inc. ("SunGard"). At the time of the sale, Trading Technologies International, Inc. was asserting various patent infringement claims against GL Trade, among others, before the United States District Court for the Northern District of Illinois. The Sellers therefore undertook to indemnify SunGard for the legal fees and expenses incurred by SunGard in the defense of those claims as well as any monetary penalty for which SunGard is found liable. Euronext's indemnifi cation liability is capped at a maximum of €24 million. To date, Euronext been called upon to indemnify SunGard only for certain of its legal fees and expenses incurred in the defense of the claims .
The two cases brought against SunGard are still pending before the United States District Court for the Northern District of Illinois. Both cases are still in the pretrial stages and no provision has been recorded. On 18 November 2014, the US District Court, Northern District of Illinois issued an opinion and order in connection with the fi rst case, in which the Court granted in part and denied in part GL Trade's motion for summary judgment that certain accused products do not infringe the patents-in-suit, and denied Trading Technologies International's cross-motion for summary judgment that those accused products meet a particular limitation (the "static limitation") of the asserted claims.
In light of the opinion of the US District Court referred to above and other developments, this litigation may be resolved through settlement.
As of 31 December, capital expenditures contracted but not yet incurred were as follows:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| No later than one year | 807 | 329 |
| Later than 1 year and no later than 5 years | 2,620 | 88 |
| Later than 5 years | 480 | - |
| TOTAL | 3,907 | 417 |
As of 31 December, minimum lease payments due under non-cancellable operating leases were as follows:
| In thousands of euros | 2014 | 2013 |
|---|---|---|
| No later than one year | 8,582 | 11,508 |
| Later than 1 year and no later than 5 years | 16,300 | 7,776 |
| Later than 5 years | 14,014 | 402 |
| TOTAL | 38,896 | 19,686 |
Expenses in 2014 for operating leases were €16.7 million (2013: €12.2 million).
Euronext N.V. is a guarantor for the obligations of LIFFE related to one non-cancellable lease agreement. The future aggregate minimum lease payments due under this agreement are €22.3 million (until expiration of the non-cancellable portion of the term in December 2017). On 19 May 2014, in connection with the Separation, this lease agreement was reassigned from LIFFE to the Group (see Note 2).
In Portugal, the Group acts as a National Central Securities Depositary.
As at 31 December 2014, the value of securities kept in custody by Interbolsa amounted to €298 billion (2013: €330 billion, which included securities kept in custody by CIK) based on the market value of shares and the nominal value of bonds.
The procedures of these National Central Securities Depositaries are focused on safeguarding the assets in custody. The settlement risks are mitigated by early warning systems for non-settlement, and buyin and auction procedures in case certain thresholds are surpassed.
The following table provides an overview of the Group's subsidiaries.
| Ownership | |||
|---|---|---|---|
| Subsidiaries | Domicile | 2014 | 2013* |
| EGIP Limited Partner B.V.(a) | The Netherlands | 100.00% | 0.00% |
| Enternext S.A.(b) | France | 100.00% | 100.00% |
| Euronext Amsterdam N.V. | The Netherlands | 100.00% | 100.00% |
| Euronext Brussels S.A./N.V. | Belgium | 100.00% | 100.00% |
| Euronext France (Holding) SAS | France | 100.00% | 100.00% |
| Euronext Group IP BV(a) | The Netherlands | 100.00% | 0.00% |
| Euronext Hong Kong Limited (a) | Hong Kong | 100.00% | 0.00% |
| Euronext IP C.V. | The Netherlands | 100.00% | 100.00% |
| Euronext IP France SAS(c) | France | 0.00% | 100.00% |
| Euronext IP Holding SAS(c) | France | 0.00% | 100.00% |
| Euronext IP Netherlands B.V.(d) | The Netherlands | 0.00% | 100.00% |
| Euronext IP UK SP(d) | United Kingdom | 0.00% | 100.00% |
| Euronext Lisbon S.A.(e) | Portugal | 100.00% | 100.00% |
| Euronext London Ltd.(b) | United Kingdom | 100.00% | 100.00% |
| Euronext Paris S.A. | France | 100.00% | 100.00% |
| Euronext Real Estate S.A./N.V. | Belgium | 100.00% | 100.00% |
| Euronext Technologies Holding SAS | France | 100.00% | 100.00% |
| Euronext Technologies IPR Ltd. | United Kingdom | 100.00% | 100.00% |
| Euronext Technologies Ltd. | United Kingdom | 100.00% | 100.00% |
| Euronext Technologies SAS | France | 100.00% | 100.00% |
| Interbolsa S.A.(f) | Portugal | 100.00% | 100.00% |
| Euronext Qatar LLC | Qatar | 100.00% | 100.00% |
| Smartpool Ltd. | United Kingdom | 100.00% | 100.00% |
| Smartpool Trading Ltd. | United Kingdom | 100.00% | 100.00% |
| Stichting Euronext Foundation(g) | The Netherlands | 0.00% | 0.00% |
* Reflects the scope of combination see Note 1.
(a) The group incorporated EGIP Limited Partner BV, Euronext Group IP BV and Euronext Honk Kong Limite d in 2014 as new entities and has retained full ownership interests.
(b) The Group formed EnterNext S.A. and Euronext UK Markets Limited in 2013 as new entities and has retained full ownership interests. Euronext UK Markets Limited became Euronext London Limited in 2014.
(c) Euronext IP France SAS was merged with Euronext IP Holding SAS on 31 August 2014. Euronext IP Holding SAS was liquidated on 24 October 2014.
(d) Euronext IP Netherlands B.V. and Euronext IP UK SP were liquidated on 30 December 2014 and 31 December 2014, respectively.
(e) Legal name of Euronext Lisbon S.A. is Euronext Lisbon - Sociedade Gestora de Regulamentados, S.A.
(f) Legal name of Interbolsa S.A. is Interbolsa - Sociedade Gestora de Sistemas de Liquidaçao e de Sistemas Centralizados de Valores Mobiliários, SA.
(g) Stichting Euronext Foundation is not owned by the group but included in the scope of consolidation.
On 20 February 2015, Euronext N.V. entered into the amended and extended facility agreement. Based on this agreement, eff ectively on 23 March 2015 the undrawn Revolving Credit Facility will be increased with €140 million to €390 million and €140 million will be repaid as an early redemption of the €250 million term loan.
| NOTE 35 | BASIS OF PREPARATION | 153 | NOTE 42 | TRADE AND OTHER PAYABLES | 156 |
|---|---|---|---|---|---|
| NOTE 36 | INVESTMENTS IN CONSOLIDATED SUBSIDIARIES AND NON-CURRENT RELATED PARTY LOANS |
154 | NOTE 43 | MANAGING BOARD AND SUPERVISORY BOARD REMUNERATION |
157 |
| NOTE 37 | EQUITY INVESTMENTS | 154 | NOTE 44 | AUDIT FEES | 158 |
| NOTE 38 | TRADE AND OTHER RECEIVABLES | 155 | NOTE 45 | COMMITMENTS AND CONTINGENCIES NOT INCLUDED IN THE BALANCE SHEET 158 |
|
| NOTE 39 | SHAREHOLDERS' EQUITY | 155 | NOTE 46 | OTHER INFORMATION | 159 |
| NOTE 40 | BORROWINGS | 156 | NOTE 47 | INDEPENDENT AUDITOR'S REPORT | 159 |
| NOTE 41 | RELATED PARTY BORROWINGS | 156 | NOTE 48 | EVENTS AFTER THE REPORTING PERIOD 164 |
| In thousands of euros | Period ended 31 December 2014 |
|---|---|
| Share of profi t of investments after tax | 69,305 |
| Other income and expense after tax | 48,869 |
| PROFIT FOR THE YEAR | 118,174 |
The notes on pages 152 –164 are an integral part of these Company Financial Statements.
6
(Before appropriation of profi t.)
| In thousands of euros | Note | As at 31 December 2014 |
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Investment in consolidated subsidiaries | 36 | 645, 893 |
| Equity investments | 37 | 66, 830 |
| Related party loans | 36 | 860, 000 |
| TOTAL NON-CURRENT ASSETS | 1, 572, 723 | |
| Current assets | ||
| Trade and other receivables | 38 | 16, 633 |
| Related party loans | 7, 001 | |
| Cash and cash equivalents | 2, 400 | |
| TOTAL CURRENT ASSETS | 26, 034 | |
| TOTAL ASSETS | 1, 598, 757 | |
| Equity and liabilities | ||
| Equity | ||
| Issued capital | 39 | 112, 000 |
| Share premium | 107, 562 | |
| Reserve own shares | (541) | |
| Retained earnings | (4, 725) | |
| Profi t for the year | 118, 174 | |
| Other | 9, 280 | |
| TOTAL EQUITY | 341, 750 | |
| Non-current liabilities | ||
| Borrowings | 40 | 248, 369 |
| TOTAL NON-CURRENT LIABILITIES | 248, 369 | |
| Current liabilities | ||
| Borrowings | 40 | 129 |
| Related party borrowings | 41 | 970, 330 |
| Current income tax liabilities | 1, 977 | |
| Trade and other payables | 42 | 36,164 |
| Bank overdraft | 38 | |
| TOTAL CURRENT LIABILITIES | 1, 008, 638 | |
| TOTAL EQUITY AND LIABILITIES | 1, 598, 757 | |
| Check | 0 |
The notes on pages 152 –164 are an integral part of these Company Financial Statements.
The Company fi nancial statements of Euronext N.V. (hereafter: the Company) have been prepared in accordance with Part 9, Book 2 of the Dutch Civil Code. In accordance with sub 8 of article 362, Book 2 of the Dutch Civil Code, the Company's fi nancial statements are prepared based on the accounting principles of recognition, measurement and determination of profi t, as applied in the consolidated fi nancial statements. These principles also include the classification and presentation of fi nancial instruments, being equity instruments or fi nancial liabilities.
As the fi nancial data of the Company are included in the consolidated fi nancial statements, the income statement in the Company fi nancial statements are presented in its condensed form (in accordance with article 402, Book 2 of the Dutch Civil Code).
In case no other policies are mentioned, refer to the accounting policies as described in the accounting policies in the consolidated financial statements of this Annual report. For an appropriate interpretation, the Company financial statements of Euronext N.V. should be read in conjunction with the consolidated fi nancial statements.
Euronext N.V. was incorporated on 15 March 2014 through a legal demerger executed with retroactive fi nancial eff ect for 1 January 2014.
In March 2014, the Demerger was consummated and the Continental Europe operations of "Legacy Euronext" (the historical operations of Euronext N.V. and its subsidiaries, including LIFFE, through the date of the Demerger) were contributed to a newly incorporated entity domiciled in the Netherlands, which was subsequently renamed Euronext N.V., in exchange for the issuance of 70.0 million shares of common stock. As of 31 March 2014, all legal entities comprising the Company's business are legally owned by Euronext N.V.
The contribution of the Legacy Euronext Continental Europe business into the Company has been accounted for as an internal reorganization. Accordingly, the assets, liabilities and results of operations of the Legacy Euronext Continental Europe operations are presented based on the carrying values recognized in the fi nancial statements of Intercontinental Exchange, Inc immediately prior to the Demerger. The carrying values of the subsidiaries were presented at historical costprice and are now presented at net asset value.
The total contribution in share capital and share premium of the Legacy Euronext Continental Europe business into the Company is described in Note 39.
Investments in consolidated subsidiaries are presented at net asset value. Net asset value is based on the measurement of assets, provisions and liabilities and determination of profi t based on the principles applied in the consolidated fi nancial statements.
If the valuation of an consolidated subsidiary based on the net asset value is negative, it will be stated at nil. If and insofar the Company can be held fully or partially liable for the debts of the consolidated subsidiary, or has the fi rm intention of enabling the consolidated subsidiary to settle its debts, a provision is recognized for this. In determining the value of consolidated subsidiaries with a negative equity, any non-current loans, issued to the consolidated subsidiary, that should be seen as part the net investment are taken into account. Non-current loans are considered to be part of the net investment if these loans are not expected to be settled in the near future nor planned to be settled in the near future.
| Investment in consolidated |
Loans to consolidated |
||
|---|---|---|---|
| In thousands of euros | subsidiaries | subsidiaries | Total |
| NET BOOK OF CONSOLIDATED SUBSIDIARIES AS AT 1 JANUARY 2014 | (471, 531) | 1, 945, 000 | 1, 473, 469 |
| Investments | 9, 951 | - | 9, 951 |
| Conversion loan into equity | 1, 085, 000 | (1, 085, 000) | - |
| Exchange diff erences | 6, 532 | - | 6, 532 |
| Share-based payments, subsidiaries | 3, 878 | - | 3, 878 |
| Acturial gains/ losses IAS 19 | (8, 815) | - | (8, 815) |
| Revaluation Sicovam | 227 | - | 227 |
| Share of profi t of investments | 69, 305 | - | 69, 305 |
| Dividend received | (26, 414) | - | (26, 414) |
| Negative capital contribution Cannon Bridge House | (21, 131) | - | (21, 131) |
| Other | (1, 108) | - | (1, 108) |
| TOTAL MOVEMENTS IN BOOK VALUE | 1, 117, 424 | (1, 085, 000) | 32, 424 |
| AS AT 31 DECEMBER 2014 | |||
| Net book amount | 645, 893 | 860, 000 | 1, 505, 893 |
Euronext N.V. has acquired the direct ownership of Enternext S.A. and Euronext Technologies Holding S.A.S. from Euronext France (Holding) S.A.S. as at 19 December 2014.The acquisition was largely done by redemption of the loan with €277 million. As at 19 December 2014, Euronext N.V. converted €808 million euro of the subordinated loan into equity of Euronext France (Holding) S.A.S.
For further information to the Contribution Cannon Bridge House, please see Note 2 of the Consolidated Financial Statements.
At incorporation date of 15 March 2014, the combined net book value of the investment in and the loans to consolidated subsidiaries amounted to €1,471.5 million. The net loss from investments in 2014 prior to incorporation date amounted to €3.6 million.
As at 31 December 2014, Euronext France (Holding) S.A.S. had the following loans granted from Euronext N.V. :
After redemption and conversion of the deeply subordinated loan issued 19 December 2007, see above, the original amount of €1,545 million was reduced to €460 million. Maturity 31 May 2068. Interest receivable amounts to Euribor for the Interest period plus 3.40%, capped and fl oored . Redemption of the loan see above.
Senior notes of €400 million loan issued 19 December 2007. Maturity 31 December 2017. Interest receivable amounts to Euribor for the Interest period plus 1.46%.
The deeply subordinated loan of €460 million is identifi ed as an increase in the net investments in consolidated subsidiaries.
The equity investment of €66.8 million represent the direct investments in Euroclear plc . For additional information see Note 15 of the consolidated fi nancial statements.
| In thousands of euros | As at 31 December 2014 |
|---|---|
| Trade receivables | 14,302 |
| Less provision for impairment of trade receivables | (50) |
| Trade receivables net | 14,252 |
| Related party receivables | 844 |
| Tax receivables (excluding income tax) | 1,325 |
| Prepayments and invoices to establish | 113 |
| Other receivables and accrued income | 99 |
| TOTAL | 16,633 |
The fair value of the receivables approximates the book value, due to their short-term character.
As of 31 December 2014, the total amount of trade receivables that were past due but not impaired was €3.6 million of which €1.2 million was overdue more than three months.
The movements in shareholder's equity are as follows:
| Legal reserves | ||||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of euros | Issued capital |
Share premium |
Reserve for own shares |
Retained earnings |
Profi t current year |
Revaluation Euroclear reserve |
Reserve for translation diff erences |
Total |
| EQUITY ADJUSTED FOR EQUITY MOVEMENTS PRIOR INCORPORATION AND SUBSEQUENT LEGAL DEMERGER AT 1 JANUARY 2014 |
112, 000 | 230, 444 | - | - | - | - | - | 342, 444 |
| Share based payments | - | - | - | 3, 878 | - | - | - | 3, 878 |
| Contribution from Parent | - | 38, 618 | - | - | - | - | - | 38, 618 |
| Net result for the period | - | - | - | - | 118, 174 | - | - | 118, 174 |
| Exchange rate diff erences | - | - | - | - | - | - | 6, 532 | 6, 532 |
| Share capital repayment | - | (161, 500) | - | - | - | - | - | (161, 500) |
| Revaluation subsidiaries | - | - | - | (8, 603) | - | - | - | (8, 603) |
| Other revaluation | - | - | - | - | - | 2, 748 | - | 2, 748 |
| Purchase of shares | - | - | (541) | - | - | - | - | (541) |
| AS AT 31 DECEMBER 2014 | 112, 000 | 107, 562 | (541) | (4, 725) | 118, 174 | 2, 748 | 6, 532 | 341, 750 |
At incorporation date of 15 March 2014, the equity amounted to €351.4 million. The profit in 2014 prior to incorporation date, amounted to €7.6 million.
For further information to the shareholder's equity, please see Note 21 of the Consolidated Financial Statements.
The movements in the shareholder's equity are before the proposed profi t appropriation (see Note 46). The proposed profi t appropriation included the addition to legal reserve (€19.6 million), addition to retained earnings (€39.8 million) and dividend (€58.8 million).
Revaluation of AFS equity instruments and reserve for translation diff erences prior the incorporation and subsequent legal demerger are not part of the legal reserve and are included in the share premium at 1 January 2014.
The revaluation reserve is maintained for the revaluation for the available for sale fi nancial instruments, net of tax. This reserve is a non-distributable legal reserve.
The reserve for translation differences concerns all exchange rate diff erences arising from the translation of the net investment in foreign entities and the related goodwill. This reserve is a nondistributable legal reserve.
For additional information on the Borrowings positions, a reference is made to Note 24 to the Consolidated Financial Statements.
| In thousands of euros | As at 31 December 2014 |
|---|---|
| Current | |
| Euronext Paris S.A. | 860,000 |
| Euronext Technologies Holding S.A.S. | 84,686 |
| Euronext Amsterdam N.V. | 25,000 |
| Interest payable on intercompany loan | 644 |
| TOTAL | 970,330 |
The fair value of the related party loans payable approximate their carrying values.
The €860.0 million loan payable to Euronext Paris S.A. has no maturity and is repayable at lender's or borrower's request upon 48 hours notice. The interest is EONIA OIS plus 0.125% payable annually on two loans and EONIA OIS plus 0.225% payable annually on one loan. The sensitivity of the related party loan payables to changes in the EONIA interest rate is that a 0.5% increase/decrease of the interest rate will results in an increase/decrease of the interest income by €4.3 million.
The €84.7 million loan payable to Euronext Technologies Holdings S.A.S. has no maturity and is repayable at lender's or borrower's request upon 48 hours notice. The interest is Euribor 3 months plus 0.125% payable annually on two loans. The sensitivity of the related party loan payables to changes in the Euribor interest rate is that a 0.5% increase/decrease of the interest rate will results in an increase/decrease of the interest income by €0.4 million.
The €25.0 million loan payable to Euronext Amsterdam N.V. has no maturity and is repayable at lender's or borrower's request upon 48 hours notice. The interest is EONIA plus 0.125% payable annually on one loan. The sensitivity of the related party loan payables to changes in the EONIA interest rate is that a 0.5% increase/decrease of the interest rate will results in an increase/decrease of the interest income by €0.1 million.
| In thousands of euros | As at 31 December 2014 |
|---|---|
| Trade payables | 1,417 |
| Amounts due to related parties | 34,364 |
| Social security and other taxes (excluding income tax) | 198 |
| Other | 185 |
| TOTAL | 36,164 |
The carrying values of current trade and other payables are reasonable approximations of their fair values. These balances do not bear interest.
| 2014 | |||||||
|---|---|---|---|---|---|---|---|
| In thousands of euros | Fixed Benefi ts | Variable Benefi ts | Share-based payment costs (a) |
Post-employment benefi ts |
Total Benefi ts | ||
| Dominique Cerutti | 771 | 669 | 826 | - | 2, 266 | ||
| Anthony Attia | 326 | 126 | 138 | - | 590 | ||
| Jos Dijsselhof | 234 | 299 | 42 | 29 | 604 | ||
| Lee Hodgkinson | 331 | 177 | 247 | 33 | 788 | ||
| Luis Laginha de Sousa | 282 | 37 | 63 | 35 | 417 | ||
| Vincent van Dessel | 273 | 62 | 65 | 26 | 425 | ||
| Cees Vermaas | 365 | 164 | 53 | 61 | 644 | ||
| TOTAL | 2, 582 | 1, 534 | 1, 434 | 184 | 5, 734 |
(a) Share based payments costs are recognized in accordance with IFRS 2.
The company has not granted any loans, advanced payments and guarantees to the members of the Managing Board and Supervisory Board.
The variable benefi ts consists of an annual performance compensation component as a percentage of base salary. Performance criteria are set and reviewed on an annual basis by the Remuneration Committee and the Supervisory Board and are linked to quantitative fi nancial criteria and qualitative personal objectives both weighing for 50% of the overall achievable result. Of the variable salary, 50% is payable in equity which vest in three years in three equal instalments and 50% is payable in cash.
| In number of RSU | Year of Granting | Outstanding as at 1 January 2014 |
Granted | Forfeited | Vested | Outstanding as at 31 December 2014 |
|---|---|---|---|---|---|---|
| Dominique Cerutti | 2014 | - | 61,224 | - | - | 61,224 |
| Anthony Attia | 2014 | - | 18,367 | - | - | 18,367 |
| Jos Dijsselhof | 2014 | - | 24,490 | - | - | 24,490 |
| Lee Hodgkinson | 2014 | - | 19,765 | - | - | 19,765 |
| Luís Laginha de Sousa | 2014 | - | 5,867 | - | - | 5,867 |
| Vincent van Dessel | 2014 | - | 6,723 | - | - | 6,723 |
| Cees Vermaas | 2014 | - | - | - | - | - |
| In number of RSU | Year of Granting | Outstanding as at 1 January 2014 |
Granted | Forfeited | Vested | Outstanding as at 31 December 2014 |
|---|---|---|---|---|---|---|
| Dominique Cerutti | 2013 | 8,720 | - | - | (8,720) | - |
| Anthony Attia | 2013 | 1,290 | - | - | (1,290) | - |
| Jos Dijsselhof | - | - | - | - | - | |
| Lee Hodgkinson | 2013 | 2,583 | - | - | (2,583) | - |
| Luís Laginha de Sousa | 2013 | 645 | - | - | (645) | - |
| Vincent van Dessel | 2013 | 645 | - | - | (645) | - |
| Cees Vermaas | 2013 | 645 | - | - | (645) | - |
For further disclosure related to the share plans, a reference is made to Note 23 of the consolidated fi nancial statements. The Company aims to meet its obligations by virtue of the share plans by purchasing treasury shares.
| In thousands of euros | 2014 |
|---|---|
| Rijnhard van Tets | 43 |
| Andre Bergen | 43 |
| Dominique Aubernon | - |
| Arnoud de Pret | 38 |
| Koenraad Dom | - |
| Manuel Ferreira de Silva | 34 |
| Jean-Marc Forneri | 8 |
| Jan-Michel Hessels | 34 |
| Scott Hill | - |
| L ieve Mostrey | - |
| Philippe Oddo | 34 |
| Jeff rey Sprecher | - |
| TOTAL | 234 |
Following the incorporation of Euronext N.V. on 15 March 2014, Rijnhard van Tets, André Bergen, Arnoud de Pret, Manuel Ferreira da Silva, Jean-Marc Forneri, Jan-Michiel Hessels, Scott Hill, Philippe Oddo and Jeff rey Sprecher were appointed to the Supervisory Board for a fi rst term of four years.
Jean-Marc Forneri, Scott Hill and Jeff rey Sprecher retired from the Supervisory Board on 10 July 2014, following Euronext's separation from the Intercontinental Exchange Group.
At the Extraordinary General Meeting held on 19 December 2014, Dominique Aubernon, Koenraad Dom and Lieve Mostrey were appointed to the Supervisory Board.
| In thousands of euros | 2014 |
|---|---|
| Audit of fi nancial statements | 2,300 |
| Tax services | 5 |
| Other non-audit services | 21 |
| TOTAL | 2,326 |
The fees listed above relate to the procedures applied to the Company and its consolidated group entities by accounting fi rms and external auditors as referred to in article 1 of the Dutch Accounting Firms Oversight Act (Wet toezicht accountantsorganisaties ).
The Company is the head of a fi scal unity with Euronext Amsterdam, EGIP Limited Partner B.V. and Euronext Group IP B.V. Under the standard conditions, the members of the tax group are jointly and severally liable for any taxes payable by the fi scal unity.
The fi nancial statements of Euronext N.V., Euronext Amsterdam N.V., EGIP Limited Partner B.V. and Euronext Group IP B.V. recognize a tax liability based on their taxable profi t.
The company participates in a number of guarantees within the Group, the Company act in the guarantor for certain liabilities of its subsidiary up to an amount of €49 .6 million. It should be noted that the Group consistently waives guarantee fees for intergroup guarantees, meaning these transactions are not at arm's length.
Article 28.2 of the Articles of Association states that from the profi ts, as they appear from the adopted annual accounts, fi rst, in the event that the priority share has been issued and is held by a party other than the Company, a dividend of ten per cent (10%) of the par value of the priority share will be paid to the holder of the priority share. The profi ts which remain after application of the fi rst sentence of this article 28.2 shall be at the free disposal of the General Meeting, provided that there shall be no further distribution on the priority share, and provided that the General Meeting may only resolve on any reservation or distribution of profi ts pursuant to and in accordance with a proposal thereto of the Supervisory Board or a proposal of the Managing Board, which proposal has been approved by the Supervisory Board.
The management board proposes to appropriate the profi t of €118.2 million as follows:
| In thousands of euros | 2014 |
|---|---|
| Addition to legal reserves | 19,612 |
| Addition to retained earnings | 39,782 |
| At the disposal of the Annual General Meeting of Shareholders (Dividend) | 58,780 |
| TOTAL | 118,174 |
A dividend in respect of the year ended 31 December 2014 of €0.84 per share, amounting to a total dividend of €59 million, representing a 50% pay-out ratio of net profi t, is to be proposed at the annual general meeting on 6 May 2015. These fi nancial statements do not refl ect the dividend payable.
NOTE 47 INDEPENDENT AUDITOR'S REPORT
In our opinion:
We have audited the fi nancial statements 2014 of Euronext N.V., Amsterdam ('the company'). The fi nancial statements include the consolidated fi nancial statements and the company fi nancial statements.
The consolidated fi nancial statements comprise:
The company fi nancial statements comprise:
The fi nancial reporting framework that has been applied in the preparation of the fi nancial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated fi nancial statements and Part 9 of Book 2 of the Dutch Civil Code for the company fi nancial statements.
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the "Our responsibilities for the audit of the fi nancial statements" section of our report.
We are independent of Euronext N.V. in accordance with the "Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten" (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the "Verordening gedrags- en beroepsregels accountants" (VGBA).
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.
We designed our audit by determining materiality and assessing the risks of material misstatement in the fi nancial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of signifi cant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that may represent a risk of material misstatement due to fraud.
| Materiality | |
|---|---|
| Materiality | • Overall materiality: € 10,300,000 which represents 5% of profi t before tax adjusted for exceptional items |
| Audit scope | |
| Audit scope | • We conducted audit work in all of the company's locations. |
| Key audit matters | |
| Keys audit | • The company is in a transformation process |
| matters | • Fair value measurement of fi nancial investments |
| • Accounting for tax liabilities |
The scope of our audit is infl uenced by the application of materiality. Our audit opinion aims on providing reasonable assurance about whether the fi nancial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of the fi nancial statements.
We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures and to evaluate the eff ect of identifi ed misstatements on our opinion.
Based on our professional judgement, we determined materiality for the fi nancial statements as a whole as follows:
| Overall group materiality | € 10,300,000 |
|---|---|
| How we determined it | 5% of profi t before tax. |
| Rationale for benchmark applied |
Profi t before tax has been adjusted for separately non-recurring disclosed items, which are detailed in note [8] of the fi nancial statements. Adjusting for these exceptional items increases normalised profi t before tax with € 45 million. We consider this adjusted benchmark appropriate for a profi t oriented company as it refl ects Euronext N.V.'s normalized profi t before tax from continuing operations, which is a key business driver and a focus of shareholders. This benchmark is considered generally accepted auditing practice, and is appropriate based on our analysis of stakeholders. |
We also take misstatements and/or possible misstatements into account that, in our judgment, are material for qualitative reasons.
We agreed with the supervisory board that we would report to them misstatements identifi ed during our audit above € 480.000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Euronext N.V. is head of a group of entities. The fi nancial information of this group is included in the consolidated fi nancial statements of Euronext N.V.
Considering our ultimate responsibility for the opinion on the company's consolidated fi nancial statements we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the group to ensure that we performed enough work to be able to give an opinion on the fi nancial statements as a whole. Determining factors are the geographic structure of the group, the signifi cance and/or risk profi le of group entities or activities, the accounting processes and controls, and the industry in which the group operates. On this basis, we selected group entities for which an audit or review of fi nancial information or specifi c balances was considered necessary.
The group's accounting process is structured around a local fi nance function in each of the countries in which the group operates which are supported by a shared service center located in Amsterdam. The local fi nance functions report to the head offi ce fi nance team through an integrated consolidation system. We have performed, based on signifi cance and/or risk characteristics, a full scope audit on the fi nancial information of the operating units in Paris, Amsterdam, Brussels, and Lisbon, the holding entities in Paris and Amsterdam and the entities in Paris and the UK that hold a signifi cant part of the technology in the group. We used component auditors from other PwC network fi rms who are familiar with the local laws and regulations in each of the territories to perform this audit work. We applied a central approach on the processes and controls that are centralized in the shared service center which are audited by PwC Netherlands. The results thereof have been shared with the local component teams.
In March 2014, the Company entered into a Service Level Agreement with ICE, the former shareholder of the Company, for the IT services of key fi nancial applications provided to the group. Audit work has been performed on the IT General Controls by the independent auditor of ICE who has prepared a report in the context of ISAE 3402 'Assurance Reports on Controls at a Service Organization'. We needed to place reliance on the work performed by the independent auditor of ICE given the importance of those controls for our audit. We assessed the objectivity and competence of the independent auditor of ICE, obtained and reviewed the assurance reports that include the scope and results of the assurance procedures performed and concluded that, subject to some additional testing we had to do ourselves on complementary user entity controls for these applications due to limitations in scoping of the independent auditor of ICE, we could rely on the assurance report issued by the independent auditor or ICE.
The group consolidation, fi nancial statement disclosures and items that inherently are complex or have signifi cant estimation uncertainty are also audited by the group engagement team at the head offi ce. These include the exceptional items, goodwill impairment analyses, fair value accounting on equity investments, review of uncertain tax provisions and accounting for share based payments transactions.
The audit work was to a large extent done by the group engagement team itself without relying on component auditors. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those functions to be able to conclude whether suffi cient appropriate audit evidence had been obtained as a basis for our opinion on the group fi nancial statements as a whole.
By performing the procedures above at components, combined with additional procedures at group level, we have obtained suffi cient and appropriate audit evidence regarding the fi nancial information of the group to provide a basis for our opinion on the consolidated fi nancial statements.
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in the audit of the fi nancial statements. We have communicated the key audit matters to the supervisory board, but they are not a comprehensive refl ection of all matters that were identifi ed by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.
The key audit matters were addressed in the context of our audit of the fi nancial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters.
| Key audit matter | How our audit addressed the matter |
|---|---|
| The company is in a transformation process | |
| On November 13, 2013, Euronext N.V. (as part of the NYSE Euronext Group) was acquired by IntercontinentalExchange ("ICE"). Following the acquisition, ICE spun-off the Continental European exchanges of NYSE Euronext into a publicly traded company on 20 June 2014. Resulting from this IPO, the Company is currently in a transformation phase and engaged in a number of strategic initiatives which impacted our audit as follows: |
|
| Changes in laws and regulations The Company is a newly incorporated public company under the laws of The Netherlands having its corporate head offi ce and management team located mainly in France. |
We have focused on the company's compliance with Dutch disclosure requirements relating to the corporate governance code and other reporting requirements in accordance with Part 9 of Book 2 of the Dutch Civil Code as we considered this to be an increased risk given this is the fi rst year the company needs to comply to Dutch laws and regulations for listed companies. |
| Changes in the Company's control environment The IPO and subsequent restructuring resulted in signifi cant changes in the company's internal control environment. Responsibilities for certain key processes and related key controls formerly resided with management in the US. After the spin-off such responsibilities and controls were transferred to management in Europe. On several key management positions changes took place with new people taking on responsibilities. Also thresholds used in the Company's controls had to come down because of the size of the company decreasing after the spin-off . |
In areas where these changes took place we have identifi ed an increased risk and expanded our procedures to specifi cally address these risks taking into account management's mitigating actions. We shared our observations with the company's Supervisory Board and Audit Committee. |
| Fair value measurement of fi nancial investments | |
| Euronext owns as of December 31, 2014 a direct interest of 3.12% in Euroclear plc plus an indirect 1.43% interest in Euroclear plc through a 9.6% ownership interest in Sicovam Holding SA. The interest in Euroclear plc is classifi ed as an available-for-sale fi nancial asset with remeasurement to fair value through Other Comprehensive Income. The determination of the fair value is highly dependent on signifi cant estimates as shares are not traded on an active market. Management has prepared a valuation to support the fair values taking into account the information from a share repurchase auction that took place during 2014 for the Euroclear investment as well as a dividend discounted method and a capitalization method. |
We have assessed management's valuation and challenged the key assumption using our valuation specialists to independently develop expectations for the key assumptions driving management's analysis in particular on the use of the comparables for the valuations techniques, the weight of each valuation techniques retained and the discount of marketability. We concur with the position management has taken. Refer to note 29.2 for more information on the valuation of the Euroclear plc investment. |
| Accounting for tax liabilities | |
| The Company operates in various countries with local tax regulations. New tax legislation being issued in certain territories as well as transactions that the Company enters into regularly result in uncertainties regarding the tax position where the highest exposure to these uncertain tax positions are in France. The assessment of these uncertain tax positions is signifi cant to our audit as the |
Our audit response to this was to use our tax specialists to understand and test the inputs to management's tax position, to challenge management's judgements in relation to their interpretation of tax laws and confi rm key income or expense amounts to evaluate and audit the valuation of the uncertain tax positions within the Group. We concur with the position |
management has taken.
assessment process is complex and judgmental.
The management board is responsible for:
As part of the preparation of the fi nancial statements, the management board is responsible for assessing the company's ability to continue as a going concern. Based on the fi nancial reporting frameworks mentioned, the management board should prepare the fi nancial statements using the going concern basis of accounting unless the management board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The management board should disclose events and circumstances that may cast signifi cant doubt on the company's ability to continue as a going concern in the fi nancial statements.
The supervisory board is responsible for overseeing the company's fi nancial reporting process.
Our responsibility is to plan and perform an audit engagement to obtain suffi cient and appropriate audit evidence to provide a basis for our opinion. Our audit has been performed with a high but not absolute level of assurance which makes it possible that we did not detect all frauds or errors.
A more detailed description of our responsibilities is set out in the appendix to our report.
Pursuant to the legal requirements of Part 9 of Book 2 of the Dutch Civil Code (concerning our obligation to report about the management board report and other information):
We have no defi ciencies to report as a result of our examination whether the management board report as included in the Registration Document on pages 1 to 104, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required by Part 9 of Book 2 of the Dutch Civil Code has been annexed.
We report that the management board report as included in the Registration Document on pages 1 to 104 to the extent we can assess, is consistent with the fi nancial statements.
We were appointed as auditors of Euronext N.V. on 19 May 2014 following the passing of a resolution by the shareholders at the annual meeting, being the fi rst year that we are the auditors of the Company.
Amsterdam, 19 March 2015 PricewaterhouseCoopers Accountants N.V. P.C. Dams RA
6
In addition to what is included in our auditor's report we have further set out in this appendix our responsibilities for the audit of the fi nancial statements and explained what an audit involves.
We have exercised professional judgment and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the fi nancial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among others of:
We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.
We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the supervisory board, we determine those matters that were of most signifi cance in the audit of the fi nancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
On 20 February 2015, Euronext N.V. entered into the amended and extended Facilities Agreement. Based on this agreement, eff ectively on 23 March 2015, the undrawn Revolving Credit Facility is increased with €140 million to €390 million and €140 million will be repaid as an early redemption of the €250 million term loan.
Euronext may make distributions to its shareholders only insofar as its shareholders' equity exceeds the sum of the paid-in and calledup share capital plus the reserves as required to be maintained by Dutch law or by Euronext Articles of Association. Under Euronext Articles of Association, the Managing Board decides which part of any profi t will be reserved.
Euronext may make a distribution of dividends to its shareholders only after the adoption of its statutory annual accounts demonstrating that such distribution is legally permitted. The profi t, as this appears from the adopted annual accounts, shall be at the free disposal of the General Meeting, provided that the General Meeting may only resolve on any reservation of the profi ts or the distribution of any profi ts pursuant to and in accordance with a proposal thereto of the Supervisory Board or a proposal of the Managing Board, which has been approved by the Supervisory Board. Resolutions of the General Meeting with regard to a distribution at the expense of the reserves shall require the approval of the Managing Board and the Supervisory Board.
The Managing Board is permitted to resolve to make interim distributions to Euronext shareholders, subject to approval of the Supervisory Board. The General Meeting may also resolve to make interim distributions to Euronext shareholders, pursuant to and in accordance with a proposal thereto by the Managing Board, which has been approved by the Supervisory Board.
The Managing Board may decide that, subject to approval of the Supervisory Board, a distribution on shares shall not be made in cash or not entirely made in cash but other than in cash, including but not limited in the form of shares in the Company or decide that shareholders shall be given the option to receive a distribution either in cash or other than in cash. The Managing Board shall, subject to approval of the Supervisory Board, determine the conditions under which such option can be given to the shareholders.
Shareholders are entitled to share the profit pro rata to their shareholding. Claims to dividends and other distributions not made within fi ve years from the date that such dividends or distributions became payable will lapse, and any such amounts will be considered to have been forfeited to us (verjaring).
PricewaterhouseCoopers Audit S.A., independent registered public accounting firm with their address at 63, rue de Villiers, 92208 Neuilly-sur-Seine Cedex, France, have audited and rendered an unqualifi ed auditor's report on the combined fi nancial statements of Euronext N.V. as of and for the years ended 31 December 2013, 2012 and have given, and not withdrawn, their written consent to the inclusion of their reports in relation thereto herein in the form and context in which they are included.
PricewaterhouseCoopers Audit S.A. is a member of the Compagnie régionale des commissaires aux comptes de Versailles.
Glossary G
| ACPR | The French Prudential Supervision and Resolution Authority (Autorité de Contrôle Prudentiel et de Résolution) |
|---|---|
| AFM | Stichting Autoriteit Financiële Markten, the Netherlands Authority for the Financial Markets |
| Alternext | Multilateral trading facilities operated by the Company in Paris, Brussels and Lisbon. |
| AMF | French Authority for the Financial Markets (Autorité des Marchés Financiers) |
| Articles of Association | The articles of association (statuten) of the Company |
| CAGR | Compounded annual growth rate |
| Cash Clearing Agreement | The Cash Clearing Agreement entered into between and certain of its affi liates, LCH.Clearnet S.A. and LCH.Clearnet Group Limited on 22 January 2013 |
| CCPs | Central counterparties |
| CEO | Chief Executive Offi cer |
| CMVM | Comissão do Mercado de Valores Mobiliários, the Portuguese Securities Markets Commission |
| Company | Euronext N.V. and its consolidated subsidiaries, unless otherwise indicated |
| Compliance Department | The compliance department of Euronext N.V. |
| COO | Chief Operating Offi cer |
| Core Items | The intellectual property in the UTP and other trading technology, including core software and technology |
| CSD | Central Securities Depositories |
| CSD Regulation | EU regulation on securities settlement and central securities depositories (to be published on the Offi cial Journal of the European Union) |
| Derivatives Clearing Agreement | The Derivatives Clearing Agreement entered into between Euronext and certain of its affi liates and LCH.Clearnet S.A. and LCH.Clearnet Group Limited on 14 October 2013. The revenue sharing agreement became eff ective as of 1 April 2014 |
| Dutch Corporate Governance Code The Dutch corporate governance code | |
| Dutch Financial Supervision Act | The Dutch Financial Supervision Act (Wet op het Financieel Toezicht) and the rules promulgated thereunder |
| Dutch Financial Supervision Act Decree on Market Abuse |
Decree on Market Abuse pursuant to the Dutch Financial Supervision act (Besluit Marktmisbruik Wft) |
| EEA | European Economic Area |
| EMEA | Europe, Middle East and Africa |
| EMIR | The EU Regulation on OTC derivative transactions, central counterparties and trade repositories (Regulation 648/2012) |
| Enterprise Chamber | The Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer van het Gerechtshof te Amsterdam) |
| ESMA | European Securities and Markets Authority |
| ETFs | Exchange traded funds |
| ETPs | Exchange traded products |
| EU | European Union |
| EU Market Abuse Rules | The EU Market Abuse Directive 2003/6/EC and related Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, providing for specifi c rules that intend to prevent market abuse, such as the prohibitions on insider trading, divulging inside information and tipping, and market manipulation, and the implementation thereof in the Dutch Financial Supervision Act |
| € | The lawful currency of the Member states of the European Union that have adopted it |
| Euroclear | Euroclear Bank S.A./N.V. |
| Euronext | Euronext N.V. and its consolidated subsidiaries, unless otherwise indicated |
| Euronext Amsterdam | The regulated market of the Company in Amsterdam |
| Euronext Brussels | The regulated market of the Company in Brussels |
| Euronext College of Regulators | The parties to a Memorandum of Understanding between the competent authorities regarding the co-ordinated regulation and supervision of the European regulated markets operated by Euronext being the FCA, the AMF, the AFM, the FSMA and the CMVM |
| Euronext Lisbon | The regulated market of the Company in Lisbon |
|---|---|
| Euronext London | The regulated market of the Company in London |
| Euronext Market Operator | Each operator of a regulated market, namely, Euronext Paris, Euronext Brussels S.A./N.V. Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A., Euronext London and Euronext Amsterdam |
| Euronext Market Subsidiary | (A) each and any of (1) Euronext Paris, (2) Euronext Amsterdam, (3) Euronext Brussels S.A./N.V., (4) Euronext Lisbon S.A., (5) Euronext London and (6) any other Subsidiary of the Company operating a Regulated Market, and (B) any other Subsidiary that is subject to regulatory supervision controlled, directly or indirectly, by any of the entities listed in sub-paragraph (A), including without limitation Interbolsa S.A. |
| Euronext Paris | The regulated market of the Company in Paris |
| Euronext Rulebooks | The Euronext Rulebook containing the rules applicable to the Euronext Market Operators (Rulebook I) and the various non-harmonised Euronext Rulebooks containing local exchange-specifi c rules (Rulebook II) |
| Exchange Licence | (A) each declaration of no-objection or approval granted by or on behalf of the College of European Regulators to the Company in relation to the operation or holding of one or more Regulated Markets and/or the operation of one or more multilateral trading facilities by the Company or any of the Euronext Market Subsidiaries, (B) each licence granted by or on behalf of the Minister of Finance of the Netherlands to the Company in relation to the operation or holding of one or more Regulated Markets, as well as (C) each declaration of no-objection granted by or on behalf of the Minister of Finance of the Netherlands to any person holding a qualifying participation in the Company and/or any of its Euronext Market Subsidiaries in the Netherlands within the meaning of section 1 of the Act, in each case such licence, approval or declaration of no-objection (i) as granted pursuant to the Act or other applicable law implementing Directive 2004/39/EC or the relevant memorandum of understanding constituting the College of European Regulators and (ii) as in force and as amended at the relevant time |
| Facilities Agreement | The €500 million facilities agreement with BNP Paribas S.A. and ING Bank N.V. as mandated lead arrangers. The Facilities Agreement provides for a €250 million term loan facility and a €250 million revolving credit facility |
| FCA | The UK Financial Conduct Authority |
| FCPE Euronext Group | Fonds Commun de Placement d'Entreprise "Euronext Group" |
| Financial Services Action Plan | Plan of the European Union to create a single market for fi nancial services |
| Financial Services and Markets Authority |
The Belgian Financial Services and Markets Authority |
| FRSA | The Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving) |
| FSMA | Belgian Authority for the Financial Markets (Financial Services and Markets Authority) |
| FTEs | Full-time employee equivalents |
| FTT | The fi nancial transaction tax proposed by the European Union |
| GDP | Gross domestic product |
| General Meeting | The general meeting of shareholders (algemene vergadering van aandeelhouders) of Euronext N.V. |
| GOA | The further amended and restated governance and option agreement, to which ICE, the stichting and the Company are parties |
| Group | The Company and its consolidated subsidiaries |
| ICE | Intercontinental Exchange, Inc. (formerly named Intercontinental Exchange Group, Inc.), together with its consolidated subsidiaries |
| ICE Core Services | Transitional core services provided by ICE to Euronext |
| IFRS | International Financial Reporting Standards as adopted by the European Union |
| IPO | Initial public off ering |
| IT | Information technology |
| Interbolsa | The CSD in Portugal for the Portuguese market |
| LCH.Clearnet | Banque Centrale de Compensation S.A., trading as LCH.Clearnet |
| LCH.Clearnet Agreements | The Cash Clearing Agreement and the Derivatives Clearing Agreement |
| LIFFE | LIFFE Administration and Management |
| MAD | The EU Market Abuse Directive (2003/6/EC) |
G
| Glossary | ||
|---|---|---|
| G |
| Managing Board | The Managing Board (bestuur) of Euronext N.V. |
|---|---|
| Managing Board Procedures | The rules of procedure for the Managing Board |
| MAR | EU Regulation on insider dealing and market manipulation (to be published on the Offi cial Journal of the European Union) |
| MiFID | The EU Markets in Financial Instruments Directive (2004/39/EC) |
| MiFID II | The revised EU Directive on MiFID (published on the Offi ciel Journal of the European Union on 12 June 2014) |
| MiFID II legislation or MiFID II legislative package |
MiFID II and MiFIR |
| MiFIR | EU Regulation on Markets in Financial Instruments (published on the Offi cial Journal of the European Union on 12 June 2014) |
| MTFs | Multilateral trading facilities designated under MiFID and MiFID II |
| NYSE Euronext | The Parent through 13 November 2013 |
| Off ering | The off ering of Ordinary Shares as that took place on 20 June 2014 |
| Ordinary Shares | Issued and outstanding ordinary shares in the share capital of the Company |
| OTC | Over-the-counter |
| OTF | Organised trading facility designated under MiFID II |
| Parent | NYSE Euronext, through 13 November 2013, and ICE, from 13 November 2013 until 20 June 2014 |
| Prospectus Directive | Directive 2003/71/EC of the European Union, and any amendments thereto, including Directive 2010/73/EU |
| Qualifying Participation | Direct or indirect interest of 10% or more of the share capital or voting rights |
| Reference Shareholders | A group of institutional investors comprised of Avistar SGPS, S.A., an affi liate of Banco Espírito Santo, S.A., BNP Paribas S.A., BNP Paribas Fortis S.A./N.V., ABN AMRO Bank N.V. through its subsidiary ABN AMRO Participaties Fund I B.V., ASR Levensverzekering N.V. (a company of the ASR Nederland group), Caisse des Dépôts et Consignations, Bpifrance Participations, Euroclear S.A./N.V., Société Fédérale de Participations et d'Investissement/Federale Participatie- en Investeringsmaatschappij, Société Générale and BancoBPI Pension Fund represented by BPI Vida e Pensões – Companhia de Seguros, S.A. |
| Regulated Market | A multi-lateral system or trading venue designated to be a "regulated market" under MiFID and MiFID II |
| RIE | Recognised Investment Exchange |
| SEC | The U.S. Securities and Exchange Commission |
| Securities Act | The U.S. Securities Act of 1933, as amended |
| Selling Shareholder | ICE Europe Parent Ltd |
| Separation | Establishment of Euronext as an independent, publicly traded company by means of an initial public off ering |
| SFTI | Secure Financial Transactions Infrastructure |
| Shareholder | Any shareholder of the Company at any time |
| Share Purchase Agreement | The sale and purchase agreement of Ordinary Shares in Euronext N.V. entered into between ICE, the Selling Shareholder and the Reference Shareholders dated 27 May 2014 |
| Single Order Book | Single Order Book for Euronext Paris, Euronext Amsterdam, Euronext Brussels and Euronext UK Markets which unites trading, clearing and settlement across the exchanges in France, Belgium, the Netherlands and the United Kingdom, which results in one single trading line for all listed securities, including those listed currently on more than one Euronext markets for which the Single Order Book executes trades on the designated market of reference |
| SLAs | Transitional services agreements and related agreements |
| SMEs | Small and medium enterprises |
| Subsidiary | Has the meaning as referred to in section 2:24a of the Dutch Civil Code |
| Supervisory Board | The Supervisory Board of Euronext N.V. |
| Support Items | Related support items to the Core Items |
| Transparency Directive | The EU Transparency Directive 2004/109/EC, as amended by Directive 2013/50/EU with respect to transparency and disclosure obligations |
| UK FSMA | UK Financial Services and Markets Act 2000 |
Glossary
G
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