Euronext 2004

The first phase of Euronext's market consolidation was completed in 2004 with the implementation of Euronext's horizontal market model.
We met our objectives and completed the integration of our five markets on schedule with the migration of the Amsterdam derivatives market to the LIFFE CONNECT® trading platform on 29 November 2004. Today, we have a single trading platform for our cash markets and a single trading platform for our derivatives markets.
With the successful completion of our technological integration, the conclusion of the reorganization of our activities into cross-border streamlined business units and the harmonization of our regulatory framework, all the components of our unique business model have been put in place. This has enabled Euronext to meet its users' needs and pass on the benefits of integration to its customers in the form of increased efficiency and reduced costs.
In 2004 we developed new products and enhanced the quality and the range of our services. Euronext.liffe expanded its activities in the US and launched the Eurodollar contract in March. The cash market developed a single list - Eurolist by Euronext - which will be implemented in 2005, enabling every company that chooses Euronext to benefit from even better liquidity, visibility and depth provided by a large, unified pan-European market. A new structured market for midcaps, Alternext, will also be launched in the first half of 2005.
Despite low market volatility throughout the year, our activities turned in a good global performance. The Euronext cash market was the leading European exchange in terms of capital raised in 2004 and featured a number of prominent European IPOs, while Euronext.liffe broke all records in its STIR contracts.
Building on its successful organic growth, the Group also increased its stake in GL Trade, one of the world's leading providers of electronic solutions. In the light of ongoing exchange consolidation in Europe, Euronext has a proven track record of integrating national financial markets while generating synergies, sustaining growth and meeting clients' needs.
The synergies obtained by integrating our markets have enabled us to achieve our financial targets and reward our shareholders' confidence.
We will continue with the implementation of our strategy in 2005. We want to improve and enlarge the range of products and services provided to our customers and rationalize our costs with the aim, as always, of improving shareholder value.

Jean-François Théodore
Chief Executive Officer and Chairman of the Managing Board

Since Euronext's IPO on 5 July 2001, Euronext N.V. shares have been listed on Euronext's Paris market (Euronext code NSCFR000NXT1), the Trading Facility segment of Euronext Brussels (Euronext code NSCBE0057774) and the Traded-But-Not-Listed segment of Euronext Amsterdam (ISIN code NL0000241511).
In 2004, 97,476 options on Euronext N.V. shares were traded. These equity option contracts were introduced on LIFFE CONNECT® on 23 November 2003 with the aim of enhancing liquidity in the underlying share. At the end of 2004, open interest in options on Euronext N.V. shares stood at 12,908 contracts, up 29.1% year on year.

FIRST QUARTER
> January: Euronext lists first bond ETF
Lyxor Asset Management launches the EuroMTS Global Master Unit on Euronext. This is the first, and so far only, tracker (exchange traded fund) to track the euro-zone government bond market based on a real-time index.

> January: Euronext.liffe launches new FLEX Facility
Euronext.liffe kicks off the second phase of its wholesale services for European equity derivatives with the introduction of the FLEX Facility, which offers customers new European-style options with the possibility of selecting their own strike prices and expiry dates.

> February: FTSEurofirst index range receives CFTC approval
The Commodity Futures Trading Commission (CFTC) grants permission for Euronext.liffe futures contracts based on the FTSEurofirst 80 and FTSEurofirst 100 indices to be offered and sold in the US.

> March: Eurodollar contract available on Euronext.liffe
Euronext.liffe launches three-month Eurodollar futures and option contracts on LIFFE CONNECT®, the most advanced and widely distributed electronic derivatives trading system in the world.

> March: migration of Portuguese derivatives to new trading and clearing systems
Portuguese derivatives products successfully transfer to the Euronext derivatives trading system LIFFE CONNECT® and link up with the clearing platform used for all Euronext cash products and derivatives in continental Europe.

> March: Euronext.liffe's new OTC Facility available
Euronext.liffe launches the third phase of its wholesale services for European equity derivatives with the OTC Facility, which provides trade administration and clearing for OTC equity derivatives.

> June: FTSEurofirst celebrates successful first year
FTSE group and Euronext celebrate the first anniversary of FTSEurofirst, their highly successful jointly-owned series of indices.

> June: new Euronext's single list and Alternext prepares for launch
Euronext announces plans to improve the visibility and liquidity of small and midcaps listed on its markets. A single list - Eurolist by Euronext - and a new structured organised market - Alternext - will be launched to give European companies enhanced visibility and new opportunities for raising capital.

> July: millionth Euronext.liffe Eurodollar contract traded on LIFFE CONNECT®
The number of Eurodollar futures and option contracts traded on LIFFE CONNECT® since their launch on 18 March 2004 passes the one million mark.

> August: warrants on gold and Brent crude listed on Euronext
Société Générale introduces a new series of warrants on gold and Brent crude on the market
of Euronext Brussels.

> September: new indices added to the FTSEurofirst index series
New tradeable indices are added to the FTSEurofirst index series - the FTSEurofirst 300 index (the acknowledged benchmark for large caps in Europe) plus 18 supersector indices that can be traded in real time.

> September: Euronext included in Dow Jones STOXX Sustainability index
Euronext becomes a constituent of the Dow Jones STOXX Sustainability index, which represents Europe's leading companies in the area of sustainable business.

> September: fourth Next Event a great success
Euronext holds its fourth Next Event in Paris, confirming its commitment to the promotion of small and medium-sized companies. A record 1,650 meetings were scheduled during the two-day event, bringing together over 300 European investors and 180 Belgian, Dutch, French and Portuguese companies.

> November: the Marché Libre launched on Euronext Brussels
Euronext creates the Marché Libre (free market), a non-regulated market in Brussels that enables small and medium-sized companies to increase their visibility and raise equity within a less stringent regulatory framework.

> November: completion of migration of all cash and derivatives products
Dutch derivatives contracts successfully migrate to LIFFE CONNECT® on 29 November, marking the end of the migration of all of Euronext's cash and derivatives markets.

> December: Euronext lists the first European tracker based on listed real-estate assets
AXA Investment Managers introduces the Easy ETF EPRA euro-zone on Euronext Paris.
This is the first tracker based on the real-estate indices compiled by the European Public Real Estate Association (EPRA).

> December: FTSEurofirst pan-European indices prove a great success as benchmarks
By the end of the year, La Poste, Écureuil Gestion FCP (Caisse d'Épargne Group), CIC Asset Management (CIC Group) and Crédit Agricole Asset Management (Crédit Agricole Group) have all launched structured products based on the FTSEurofirst 80.

Since it was founded four years ago, Euronext has been committed to promoting the integration and consolidation of Europe's capital markets and increasing the efficiency of cross-border trading. It has developed a business structure based on an open architecture that supports the integration of various markets on the same technological platform. By transferring its settlement activities, Euronext has championed an open back-office architecture and supported the development of independent clearing and settlement organizations that can be used by any exchange.

Euronext uses technology as a basis for its cross-border integration strategy. A significant milestone was reached in 2004 when the ambitious IT integration programme initiated four years ago was completed on schedule with the successful migration of Lisbon's markets and the Amsterdam derivatives market to Euronext's harmonized trading systems.
Today, Euronext's markets are supported by two common platforms, one for cash trading (NSC), and another for derivatives trading (LIFFE CONNECT®), which interface with LCH.Clearnet's clearing systems.
Euronext minimized the disruptions that the migrations could create for users by working in close consultation with IT specialists (AtosEuronext and Euronext.liffe Market Solutions) and customers at every stage of the process.
Euronext now gives customers access to a wider market and a larger range of trading products at lower costs. By harmonizing its systems, reducing the number of systems it has to maintain, and simplifying the roll-out of new releases, Euronext has increased operational efficiency and reduced its cost base.
The dates on which the local marketplaces migrated to Euronext's integrated trading platforms are shown above.

Euronext is a fully integrated, international organization of multinational teams. Its business activities are organized into three cross-border, product-based strategic business units (SBUs). Each SBU - Cash and Listing, Derivatives, and Information Services - is highly cohesive, operates under a single chain of command, and has responsibility for activities and staff at all of Euronext's marketplaces, irrespective of geographic location.
Each SBU focuses on providing core customer services and on achieving the Group's business objective of improved financial performance in terms of EBIT margin.
SBUs are responsible for cost control, and are structured in a way that maximizes the quality of customer service, marketing campaigns and the Group's investment policy. The structure is designed to boost team spirit among staff and create an international, service-focused culture that respects the diversity of Euronext's local marketplaces and can cope with the complexity of the cultural and legal environment in which the Group operates.
The SBUs are assisted by cross-border Group support departments (Finance, Human Resources, Legal, Regulation, Compliance and European Affairs, Corporate Information Systems, Business Strategy and other support departments), which co-ordinate matters and ensure coherence and consistency throughout the organization.

The integration of trading platforms was accompanied by the introduction of a harmonized rule book that has reduced the compliance burden on users, ultimately reducing their costs. Rules and procedures were harmonized by a process of increasingly close co-operation between Euronext and the regulators of the financial markets in each of the EU member states where it operates - AFM (Autoriteit Financiële Markten, the Netherlands), AMF (Autorité des Marchés Financiers, France), CBFA (Commission Bancaire, Financière et des Assurances/Commissie voor het Bank, Financie en Assurantiewezen, Belgium), CMVM (Comissão do Mercado de Valores Mobiliiarios, Portugal), and FSA (Financial Services Authority, UK). The first three regulators adopted a common approach and concluded a Memorandum of Understanding (MoU) on March 2001 regarding the co-ordinated regulation and supervision of the Euronext's group and the regulated markets it operates. On March 2002, the MoU was extended to include the CMVM. It was subsequently followed by a second MoU between Euronext N.V.'s regulators and the FSA regarding the derivatives markets.

Euronext's interest in sustainable development is reflected by its continued promotion of corporate social responsibility (CSR), socially responsible investment, and market best practices among its members, customers, and the financial community as a whole. It is also reflected in its application of best practices in its relations with shareholders, employees and the community at large.

As a member of CSR Europe since 2001, Euronext has been closely involved in raising awareness of CSR among customers, issuers and investors by organizing events and roadshows. In 2004, Euronext took part in the Forum Annnuel de l'Investissement Responsable en Europe (FAIRE), the European CSR roadshow for issuers and investors. Euronext also contributed to surveys into the impact of social and environmental performance on public declarations and decisions by financial managers, fund managers and analysts.
In the last few years, Euronext has been actively involved in promoting socially responsible investment. When trackers (ETFs) based on sustainability criteria were developed, Euronext, which is one of the leading marketplaces for trackers in Europe, was chosen as the listing market for DEXIA IM trackers in 2003, and AXA IM trackers (based on the ASPI Eurozone index) in 2004.

Ensuring best practices on Euronext's markets
As a stock exchange, and as an interface between issuers and investors, Euronext feels it is its responsibility to maintaining long-term relationships with users based on trust.
Because the five European countries in which it operates have different regulatory regimes, Euronext strives to apply the most stringent regime wherever possible. To enhance integrity in the financial markets, the Group strictly observes corporate governance codes and codes of conduct to prevent insider trading. Euronext sets great store by transparency, orderliness, fairness and reliability, as well as equal access to the markets for all investors, whether retail or institutional, irrespective of size.

Recognition of commitment to sustainability

In recognition of Euronext's commitment to social responsibility, Euronext N.V. shares have been included in two major European sustainability indices: the DJSI STOXX (Dow Jones STOXX Sustainability Index) in September 2004, and the ASPI Eurozone index (Advanced Sustainable Performance Indices) in September 2003. The criteria for inclusion in these indices cover company policies on involvement in the community, corporate governance, relationships with customers and suppliers, health, security, the environment, human resources and international labour standards.

As part of its business strategy, Euronext has consistently followed a policy of transparent, pro-active communication with its customers (which include members, banks, brokers/traders, fund managers, institutional investors, financial analysts, issuers and listed companies) and promotes market efficiency.
Euronext communicates with professional customers via advertising, branding, brochures, newsletters, market feeds, direct mailings, a dedicated website, roadshows, presentations, locally organized courses, sponsorship activities and personal visits.
Euronext regularly organizes informal consultations with market participants, institutional investors, issuers and private investors, and takes part in various national advisory committees in all the countries in which it operates. Euronext's website (www.euronext.com) provides information on listed products and companies in the languages of the markets serviced by the Group.

Clear, consistent and regular information, and consistent performance are the two pillars of Euronext's policy on enhancing confidence among stakeholders and improving the quality of its relationship with shareholders.

Encouraging shareholder participation at Annual General Meetings
In order to encourage shareholders to participate at Annual General Meetings, Euronext's Supervisory Board and Managing Board are taking steps in line with national and international developments. In addition to including a record date in the articles of association and enabling proxy voting, Euronext arranged for its Annual General Meeting to be broadcast over the internet for the first time in 2004, to enable shareholders and other stakeholders to follow the meeting without attending in person. A new section of the website was launched early 2005, with the specific aim of providing information to shareholders and other interested parties, in particular in the area of corporate governance, that they can consult at their convenience (see also section 2.3 for further details).

Dividends are paid at regular intervals. The amount depends on the company's capital requirements, return on equity, current and future profitability and market practices in the area of dividend payments.

To support this policy of rewarding shareholders' confidence, Euronext also implemented in 2004 an aggressive share buy-back programme (see section 5.3.6).

(1) The gross dividend of €0.60 per ordinary share for the financial year 2004 that was recommended by the Supervisory Board of Euronext N.V. is subject to the approval of 2004 financial statements by the Annual General Meeting on 1 June 2005.

Dividend tax treatment

Under Dutch tax law, tax is withheld on dividend payments at a rate of 25%. Shareholders who are not Dutch residents may qualify for a reduced tax rate or even full exemption if they are covered by a double taxation treaty that provides for this.
The Netherlands has concluded such treaties with many countries, including most EU member states, Australia, Japan, Switzerland and the US. In 2005, as in the previous years, Euronext will ensure its shareholders benefit from reduced tax rates if they comply with the applicable criteria.

The Group follows policies that promote dignity, fairness and transparency of treatment for all employees, irrespective of race, gender, nationality, religion, sexual orientation, age or disability. Euronext continuously compares its policies against benchmarks. All Group policies reflect and support the five key attributes which Euronext encourages in its staff: customer focus, results focus, teamwork, pushing boundaries, and operational excellence.

Euronext values the diversity of its staff. The skills and experiences of its multinational workforce in Belgium, France, the Netherlands, Portugal, the UK and the US provide essential knowledge and support for our customers and markets.

Euronext attaches great importance to identifying and developing talented staff at all locations. Core policies are aimed at enhancing expertise in cross-border teams, encouraging expatriate mobility, promoting training and providing shared systems for recruitment and performance management. A talent management programme and succession planning reviews have been launched to ensure that Euronext is well able to meet its future needs. Group management development programmes bring some of the best international business techniques and knowhow to managers at all locations.

With regard to employee representation, Euronext has a European Works Council, that represents staff in Belgium, France, the Netherlands, Portugal and the UK and meets four times a year. The agenda and key points discussed in the meetings are communicated to staff at all Euronext locations.

Internal communication is supported by electronic media. Next2U (Euronext's staff bulletin) is published on a regular basis and is supplemented by staff newsflashes.

Finally, as part of Euronext's corporate governance framework, a Group-wide Code of Conduct has been put in place. This covers share dealing, access to price-sensitive information and whistle-blowing policy (see section 2.4).

Rating CSR performance

Since August 2003, Euronext has been awarded a CSR rating by the rating agency Vigeo.
In 2004, the Group arranged for Vigeo to perform an audit in order to obtain an independent assessment of its performance in the key areas of CSR: respect for fundamental human rights, management of human resources, quality of relationships with clients and suppliers, and Corporate Governance.
Based on the encouraging conclusions in the audit report, which was finalized in early 2005, Euronext is continuing to work on CSR-related internal policies and procedures.

Euronext is committed to a wide range of good causes to benefit society. It promotes research and education in the areas of banking and the financial service industry, via the foundation Stichting VvdE in Amsterdam, the CSFI (Centre for the Study of Financial Innovation) in the IMC (Instituto Marcado de Capitais) in Lisbon, the Institute of Directors in Brussels, and De Beursschool/L'École de la Bourse in Belgium and France.

Euronext encourages its staff to support charities. In France, it is a long-standing supporter of the Téléthon (which raises funds for medical research into genetic illnesses), and members of Euronext's staff participate in an annual 24-hour race for charity.
Euronext is a supporter of the arts. It is the main sponsor of the Het Nationale Ballet in the Netherlands, and also supports the Opéra National de Paris in France. In the Netherlands, Euronext works together with the foundation Stichting VvdE to look after the country's extensive exchange heritage publishing books, holding exhibitions, and producing DVDs.

In early 2005, Euronext collected donations from staff to raise funds for the victims of the tsunami that devastated parts of southern and south-east Asia at the end of 2004. The donations made by staff were accrued by the Group and passed on to Unicef.