6. FINANCIAL STATEMENTS 6.3. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6.3.1. Notes to the consolidated income statement 6.3.1.1. Other income Included in “Other” are various types of miscellaneous income such as events, disposal of assets and trademark royalties received. Also included is a deferred transaction amount received in 2003 related to the sale of IT connections in 2001 of €1.8 million. 6.3.1.2. Salaries and employee benefits (*)In 2004, 164 FTE's in SBY Clearing will either be transferred or recharged to LCH.Clearnet. The split in FTE's per activity is as follows(*): (*)Due to the new organisation structure per business unit, effective since 1st March 2003, a similar split in the comparative number of FTE's for 2002 is not available. (**)In 2004 these FTE's will either be transferred or recharged to LCH.Clearnet. 6.3.1.3. Depreciation 6.3.1.4. IT expenses IT-invoices received from AtosEuronext SBF in the reporting period amounted to €167.0 million (2002: €173.8 million), of which €15.2 million were capitalised (2002: 21.2 million) and €151.8 million were charged to the income statement (2002: 152.6 million). 6.3.1.5. Office, telecom and consultancy Included in “Other office, telecom and consultancy” are advisory fees charged in relation with special projects. 6.3.1.6. Accommodation 6.3.1.7. Marketing 6.3.1.8. Other expenses The allowance of provisions, other than personnel, is included under the heading “Other”. 6.3.1.9. Goodwill amortisation Since its acquisition in 2002 the activities in Lisbon have been the subject of integration with those of other Group entities and in some cases activities have been divested. In the light thereof, management has performed an analysis of the conditions that were considered at the time of acquisition in comparison with the current budget and activities. The value in use is based on discounted cash-flows, at a rate of 9.5%. The business model of Interbolsa is changing. Management has concluded that the goodwill paid on the acquisition should be considered impaired for an amount of €13.8 million. 6.3.1.10. Net financing income The losses and gain on disposal reflect results on the sale of available-for-sale shares. The carrying amount of the investment Atos Origin S.A. accounted in the line “Revaluation of held-for-trading assets to fair value”, increased by €8.9 million following adjustment of revaluation to reflect higher market value of shares at year-end 2003. Lower market value at year-end 2002 had led to a €15.7 million provision of the investment. 6.3.1.11. Impairment of investment The increased competition in the settlement- and custody business in Europe led to a lower discounted cash-flow appraisal. Accordingly, and on the basis of the Group’s direct shareholding of 2.35% in Euroclear plc, an impairment of an amount of €47.1 million has been included in the income statement for the period. 6.3.1.12. Gain on disposal of discontinued operation On 25th June 2003, the Boards of Euronext N.V., BCC/Clearnet and London Clearing House announced their intention to merge Clearnet and London Clearing House under a new independent UK holding company called LCH.Clearnet Group Limited. On 22nd December 2003, the Group sold its 80.48% stake in the share capital of BCC/Clearnet and 17.7% in that of LCH to LCH.Clearnet Group Limited in exchange of 49.1% in the newly formed company. Subsequently, the Group sold 7.6% of these shares in 2003. The remaining interest in LCH.Clearnet Group Limited is divided into 16.6% Redeemable Convertible Preference shares and 24.9% of total capital in the form of ordinary shares. Whilst in the possession of the Group, the Redeemable Convertible Preference Shares are intended to be either redeemed or converted into ordinary shares or to be sold in coming years. Reference is also made to note 6.3.5 "Discontinued operations". 6.3.1.13. (Loss)/gain on sale of associates/subsidiaries BCC/Clearnet, Necigef and NIEC In February 2002 the Group and Euroclear plc agreed that Euroclear plc would exercise its option to acquire 20% of the shares of BCC/Clearnet. In addition the Group and Euroclear plc finalised the agreement for the sale of the shares of Necigef B.V. and NIEC B.V. to Euroclear plc. Necigef B.V. and NIEC B.V. are the central securities depositories in the Netherlands. For these two transactions the Group has been attributed a 2.9% share in Euroclear plc as consideration. The shares are received in two tranches, 2.25% in 2002 and 0.65% at the beginning of 2004. The consideration given by Euroclear plc to the Group will also include the dividend (if any) which Euroclear plc would have paid on these latter shares if they had been issued directly. Meanwhile the 2.9% interest diluted to 2.35% as a result of the merger between Euroclear plc and CRESTCo. The transfer of settlement business of CIK S.A./N.V. to Euroclear plc will be finalised in exchange of an additional 0.1% share in Euroclear plc (0.08% as per dilution). STOXX Ltd On 3rd December 2002 the 25% share of the Group in STOXX Ltd, Zurich was sold for a consideration of €7.5 million. The transaction resulted in a capital gain of €5.5 million. Other Other gain and losses on sale of associates/subsidiaries reflects the loss on liquidating non-consolidated subsidiaries. 6.3.1.14. Income from associates/joint ventures The share in the results of NQLX LLC reflects the period prior to 24th July 2003. On that date, the Group became the sole shareholder of NQLX LLC. The net assets, results and cash-flows of NQLX LLC have been fully consolidated in the Group’s financial statements from 24th July 2003 onwards (see also notes 6.3.2.3 and 6.3.7). 6.3.1.15. Income tax expense Reconciliation of effective tax charge Part of the gain achieved from the sale of the Group's share in BCC/Clearnet in 2003 is subject to taxation at the moment of disposal of the Group's interest in LCH.Clearnet, for which a deferred tax liability of €37.2 million is formed which is charged to 2003 income. The remainder of the gain is tax exempt. The influence of the effect of participation exemption relates to the gain on the Group's share in the sale of BCC/Clearnet which is only partially tax exempt. Furthermore this item includes the Group's share in the losses of NQLX LLC for the period prior to its full acquisition in July 2003. The tax exempt gain on sale of Necigef, NIEC and 20% of BCC/Clearnet in 2002 is included in the effect of participation exemption in 2002. The non-deductible expenses mainly consist of amortisation and impairment of goodwill and other assets. The amounts over provided in previous years is explained by certain acquisition costs of foreign entities that became tax deductible following general Dutch tax court decision. 6.3.1.16. Minority interests The Group controls GL Trade S.A. through a 51% participation in Financière Montmartre which holds 51.3% of GL Trade S.A. In addition, the Group holds 1.1% directly in GL Trade S.A. The share of Euroclear plc in the results of BCC/Clearnet reflects their 19.52% interest in the period prior to 22nd December 2003. From that date onwards, the results of BCC/Clearnet are no longer included in the Group’s consolidated accounts (see also note 6.3.1.11).