Take control of your savings. Nordnet’s Annual and Sustainability Report 2018 Contents. About Nordnet The year in brief page 3 The year in figures page 4 This is Nordnet page 5 Comments from the CEO page 6 Market Macro environment and market page 9 Sustainability Report Sustainability in figures page 19 Nordnet in Society page 20 Our actions page 24 Employees page 26 Environment page 31 Auditor’s opinion page 34 Nordnet Annual Report Board of Directors’ report page 36 Corporate Governance Report page 41 Board of Directors page 50 Management page 51 Financial statements page 54 Consolidated income statement page 55 Consolidated statement of comprehensive income page 56 Consolidated balance sheet page 57 Consolidated changes in equity page 58 Consolidated cash flow statement (direct method) page 59 Parent company’s income statement page 60 Parent Company’s balance sheet page 61 Parent Company’s statement of changes in equity page 62 Parent Company’s cash flow statement (direct method) page 63 Notes page 64 Key figures page 128 Signatures of the Board of Directors page 127 Auditor’s report page 129 Definitions page 134 Other sustainability information page 136 The English version of the Annual Report is a translation. In case of any discrepancy between the Swedish version and the English version, the Swedish version shall prevail The year in brief. Quarter 1 Quarter 2 → Strong customer growth → Nordnet’s new Android app despite turbulent stock launched in all Nordic market - 29,200 new markets customers choose Nordnet → Nordnet surpasses 700,000 → Nordnet’s head office moves customers, which corre- to new premises at Alström- sponds to customer growth ergatan, in Stockholm of 17 percent in one year → Record high net savings for a single quarter at SEK 11.5 billion Quarter 3 Quarter 4 → New mobile app for iPhone → Acquisition of Netfonds introduced - triples app store → Anders Danielsson is rating appointed Acting CEO → Strong stock market and → Launch of Smart Portfolios 21 percent increase of savings capital on an annual → Launch of stock lending pro- basis gram, wins prize as "Savings Innovation of the Year 2018" → The social investing network Shareville reaches 200,000 → Stockbroker of the Year in members Denmark The year in figures. January–December Income Expenses¹ Profit before tax SEK 1,310.4 million SEK -1,169.2 million SEK 141.2 million (1,244.0) (-1,043.8) (200.2) New customers Net savings Number of trades 95,900 SEK 23.5 billion 26,119,800 (102,500) (17.3) (26,181,300) 31 December 2018 Savings capital Lending2 SEK 286 billion SEK 13.7 billion (272) (11.4) Customers Number of accounts 765,200 1,016,300 (669,300) (884,500) ¹Total expenses including credit losses 2 Excluding lending against pledged cash and cash equivalents This is Nordnet This is Nordnet Our operations User-friendliness, stability and speed are important pa- rameters as we develop our trading platforms, whether Nordnet is a digital bank for savings and investments in in the form of websites, mobile apps or more advanced shares, mutual funds, exchange traded funds, warrants applications. The less-active savers can also use our and a number of other asset classes. Our market is the digital advisory services, including Robosave and Fund Nordic region and the ambition is to build a world class Advisor. user experience for savers and investors. We do this by turning consumer trends and today’s rapid technology Nordnet operates the Nordic region’s largest social development into products and services that are rele- investment network Shareville, with more than 200,000 vant to our customers. We want to help our customers members. Here, members can be inspired by, and fol- grow, both personally and financially, so that they can low, how other investors act, and receive notifications achieve their dreams and goals in life. when these investors make changes in their portfolios. Our long-term goal is for our customers to become the best investors they can be. We coach and inspire Pension through information, guidance, social investment In Sweden, Norway and Denmark, we offer pension networks, and a broad range of digital advisory tools. savings without fixed fees and with a wide range of We provide user friendly and reliable tools and applica- investment opportunities. In Sweden, we have the most tions so that our customers can make smart investment complete pension solution for individuals and compa- decisions regardless of whether they are experienced nies. investors or beginners, whether they are knowledge- able or need guidance, wish to spend hours on their Loans investments every day or prefer savings that are man- Nordnet offers three kinds of loans: personal loans aged automatically. (unsecured loans), margin lending, and residential mortgages. Personal loans are available on the Swed- Our business areas ish market, both via Nordnet’s own brand and under the brand Konsumentkredit. Margin lending with securities Savings and investments as collateral is available in all four of our markets and Nordnet’s core business is savings and investments. allows our customers to borrow against their securities, Our customers can save and invest in different types of increasing their investments. Our residential mortgages securities at low fees in seven markets. target the Private Banking segment and are available in the Swedish market. Investments and savings √ √ √ √ Pensions √ √ √ Margin lending √ √ √ √ Residential mortgages √ Personal loans √ Nordnet Annual Report 2018 5 Comments from the CEO Comments from the CEO 2018 was an eventful year for both Nordnet and the Financial results savers. There were major fluctuations on the Nordic The ambition of building the world’s best customer stock exchanges, and in some periods, strong negative experience for savings and investments requires us development. However, the savers did not passively to work on various fronts and test a number of hy- follow the developments from the stands, but instead potheses. For more than a year, Nordnet has been in were very active and reviewed their investments to a an intensive investment phase, implementing many record extent. Nordnet’s own agenda was at least as initiatives aimed at boosting growth and broaden our rich in content as the savers with a number of product business. As a result of this, our costs on a full-year ba- launches and partnerships, as well as a strong growth sis were higher than before, mainly due to investments in customers and savings. in IT, product development and marketing. Expenses Nordnet Annual Report 2018 6 Comments from the CEO before credit losses amounted to SEK 1,133.2 million In the fourth quarter, we were also named the “Stock- (1,008.5), an increase of 12 percent since 2017. The broker of the Year” by the Danish Shareholders’ Asso- fourth quarter was encumbered by non-recurring costs ciation. This award is extra enjoyable since it’s based related to both savings initiatives carried out in the au- on the private savers’ own ratings of the quality of the tumn and the acquisition of Netfonds, although under- actors who offer trading in shares and funds in the lying expenses decreased during the year. During the Danish market. autumn of 2018, we reached a point where we chose to discontinue the initiatives that have not had the effect Our new asset management product Nordnet Smart we expected and further develop those that provided Portfolios was introduced in our markets during the the most customer value, and we are looking forward year. The concept is based on modern portfolio man- to a return to a more normalized cost level. Income was agement in cooperation with JP Morgan, combined also higher than before and amounted to SEK 1,310.4 with a digital advice model developed by Nordnet. million (1,244.0), an increase of 5 percent since 2017. Profit before tax decreased by 29 percent to SEK 141.2 “I see our stock lending million (200.2) program as a financial Product launches and awards Nordnet is on a journey of change towards the vision of innovation – we give the making it possible for our customers to make profitable savers the opportunity investments through the right tools, information and inspiration. From a development perspective, 2018 for a third kind of return began with significant resources being invested in adapting to Mifid2 and other regulations, as well as on their shareholdings, in platform and infrastructure development in order to addition to positive value adapt scalability to larger Nordic operations. changes and dividends.” In May, we launched a service whereby, as a Nordnet customer, you can obtain a full overview of your invest- The foundation of Smart Portfolios is three funds with ments through a single interface. With a few simple different risk levels – Nordnet Smart 5, 10 and 15. The clicks and identification using Mobile Bank ID, you have funds invest in a large number of indexes in the asset the opportunity to review your savings in shares and classes of shares, fixed interest products, commodities, mutual funds on the Nordnet website, regardless of real estate and credits. What is smart in the funds is which bank they are held at. that they redistribute between the assets depending on how the market acts, so that you as a customer will In the autumn, we launched a stock lending program keep an even risk level in your savings. As a customer, where our Swedish savers are given the opportunity you get an asset distribution calculated on volatility in- of extra returns on their shares. The returns are creat- stead of a static proportion of shares and fixed interest ed through lending of the shares to global investment products, and a risk that fits your own investment pro- banks, for example.