ANNUAL REPORT 2004

(1)

ANNUAL REPORT 2004

(2)

2 0 04

Contents

Fiscal Year 1

President's Review 2

Business Concept, Targets,

and Strategies 3

Markets and Clients 4

Operations 5

Staff and Structural Capital 9

Share 10

Board of Directors 12

Corporate Management 13

Financial Review 14

Directors' Report 15

Statement of Income 18

Balance Sheet 20

Cash Flow Analysis 24

Supplementary Information 25

Notes 29

IFRS Statement of Income 38

IFRS Balance Sheet 39

Proposed Appropriation

of Profits 40

Audit Report 40

Glossary and Definitions Addresses

Cover photo:

Ulrika Olsson, Luleå

Know IT Contents

Know IT is now a dedicated IT consultancy.

Our selection of services is dedicated to streamlining

operations using IT solutions. page 2

Many clients choose to engage a limited number of providers. General agreements are now an important

element of IT consulting firms' structural capital. page 4 Know IT has established operations in new locations,

broadened and deepened its selection of services,

and hired more employees. page 5

Every Know IT consultant has an average of 13.5 years of industry experience; 90 percent have completed university programs or other post upper secondary

training. page 9

Notice of Annual General Meeting

Time

The Annual General Meeting will be held on Tuesday, April 19, 2005 at 4 pm.

Registration for the Annual General Meeting begins at 3:30 pm.

Venue

Know IT AB's office, Kungsgatan 72, Stockholm, Sweden

Participation

To be entitled to vote at the Annual General Meeting shareholders must:

• be entered in the register of shareholders

• have notified the company

Registration in the register of shareholders

Shareholders must be registered in the register of shareholders maintained by the Swedish Securities Register Center (VPC) no later than Friday April 8, 2005. Shareholders whose shares are nominee registered must re-register their shares temporarily in their own names with VPC. Shareholders who want to re-register must inform the nominee in good time before April 8, 2005.

Notification

Notification of participation must be made to Know IT by 4 pm on Friday April 15, 2005, at the following address:

Know IT AB (publ) Box 3383

SE-103 68 Stockholm, Sweden

or by phone +46 (0)8-700 66 00 or e-mail info@knowit.se.

Notice of participation must include the shareholder's name, address, social security number, and number of shares registered.

Nomination Committee

Shareholders who wish to propose board members before the Annual General Meeting may contact:

Petter Stillström, CEO AB Traction, petter.stillstrom@traction.se Anders Nordh, board member Know IT AB, CEO CMA Europe AB, anders.nordh@cma.se

(3)

1

know it annual report 2004

Know IT Fiscal Year 2004

SEK Million

Sales

0 100 200 300 400 500 600

2001 proforma

2002 2003 2004 00/01

99/00

Operating result before goodwill amortization

-40-35 -30 -25 -20-15-10 -505 1015 20 25 SEK Million

2001 proforma

2002 2003 2004 00/01

99/00

Cash flow from current operations

-30-35-25 -20-10-1520401025303515-505

SEK Million

2001 proforma

2002 2003 2004 00/01

99/00

• Net sales rose 30 percent to SEK 383.8m (295.0)

• Operating profit before goodwill amortization reached SEK 22.3m (13.2)

• Deferred tax claim and tax revenue of SEK 17.7m, for an increase in earnings per share of SEK 1.77

• Operating profit after taxes totaled SEK 25.9m (3.5)

• Earnings per share was SEK 2.60 (0.35)

• Current operations generated a positive cash flow of SEK 37.4m (3.8)

• Number of employees rose 15 percent to 346 (302)

• The Board of Directors proposes a dividend of SEK 1.50 (0.75) per share, totaling SEK 15.0m (7.5)

January

February

March

April

May

June

July

August

September

Know IT establishes operations in Göteborg on January 1, focusing on product-based business development.

Know IT sells its operations in the advertising agency Openeye in Östersund through a structural transaction.

Know IT establishes a new division in Stockholm focusing on consulting services linked to IT solutions in Human Resource Management.

For the second year running, Know IT wins Microsoft's .NET award in the category Smart Clients.

Know IT receives the prize for developing the mine and ammunition clearance system EOD IS version 3.0.

Know IT sells advertising agency Explicit & Partners in Göteborg; Know IT becomes a dedicated IT consultancy.

Know IT strengthens its offering in the Stockholm market by acquiring IT consulting company BMK with eleven employees.

SAS Institute International selects Know IT from one hundred qualified competitors as Silver Partner of the Year in the EMEA region.

Know IT strengthens its offering in testing and quality assurance by acquiring TestTeam with ten employees from Forum SQL.

Know IT establishes a presence in Linköping by acquiring the business from IT consultancy A Kraft AB with twelve employees.

2004

(4)

2

Know IT is an enterprise with tremendous potential. We have shown that we are on the right path in 2004. It is a privilege to lead a company with strong growth and good profitability and I am convinced that we have an excellent future. The market situation has improved substantially in 2004 and the IT industry will continue to grow in significance.

Greatly Improved Positive Results

Our earnings have improved substantially. I can report that our operating profit before goodwill amortization is SEK 22.3 million.

Earnings per share amounted to SEK 2.60. These are competitive figures, especially since we achieved this during a period of robust expansion. Our sales growth was 30 percent in 2004 and at year- end our equity/assets ratio was 47.7 percent.

Our financial position is very good.

Focus on IT

We sold our advertising agencies during the year, completing our efforts to focus totally on IT. The sale was arranged so that all involved employees either kept their jobs or found new ones, which is important to us.

Know IT is now a specialized IT consultancy. Our services are dedicated to IT solutions that streamline operations. At the same time, we have expanded our strategic consultation activities by focusing on how our clients develop their processes and IT solutions at an early phase.

Working Close to our Clients

We continue to pursue our successful strategy of maintaining a local presence. During the year, we established a new business in Linköping and launched new specialist divisions in Göteborg and Stockholm. Our clients have responded favorably. In our experience, this combination of a local presence and easy access to specialists is a key to success.

Market Situation

Demand for our services surged in 2004. Our core areas—

strategic consultation, system development, and administration

—and our specialties usually involve long-term assignments.

General agreements continue to be important and we are successful in this area. We currently have general agreements enabling us to sell our services to over 600 companies and organizations. We carefully monitor relevant general agreement procurement processes and maximize use of structural capital.

Constant Focus on Quality

Our own system development and project management procedures, K-RUP, are successful. We constantly work to improve our quality system, which is becoming an increasingly important element in our sales campaigns.

Our clients and partners greatly appreciate the combination of our procedures and our commitment when we provide our expert services. The awards we won in 2004—the “Silver Partner of the Year” award and the .NET award in the Smart Clients category—are external recognition of our achievements. The first award was from SAS Institute International; we were singled out as best partner in the EMEA (Europe, Middle East, and Asia) region, in competition with about one hundred other companies.

Microsoft hands out the .NET awards, which we received for the second year running, this time for our mobile solution for mine clearance, EOD IS 3.0, developed for the Swedish Defence Materiel Administration.

Our Employees: Our Most Important Resource

Know IT's success relies on our employees' expertise and ability to live up to client expectations. We constantly invest in employee skills enhancement and work to create a pleasant environment to make Know IT a great place to work; combined with a strong financial performance, we increase our potential for success.

We showed that we are moving in the right direction in 2004 and we will redouble our efforts in 2005.

February 2005

Anders Nilsson President and CEO

Know IT President's Review

anders nilsson, president and ceo

(5)

Know IT Business Concept, Objectives, and Strategies

3 Strategies

To achieve these targets, Know IT has chosen the following strategies:

• Keep operations close to our clients

We see a huge advantage in offering local contacts and resources and therefore focus on opening offices in our clients’

neighborhoods.

• Assume long-term responsibility for the solutions we develop We offer strategic consultations, participate in developing, and provide customized IT solutions. Our ambition is to assume administrative responsibility for our clients' IT solutions. By doing so, we obtain longer client assignments and greater knowledge of client operations, making our client offering more cost-effective.

• Offer expertise in new fields of technology

We often know about and have access to new technology at an early stage through our partnerships with providers of developmental tools. When new technology has a proven track record as a commercial solution we offer it to our clients.

• Be an independent consulting firm

We remain independent of suppliers and strive to maintain balance among several different partners. Maintaining our independent status benefits our clients, whom we can offer the best solution for their situation.

• Make conscious efforts to continuously foster employee expertise To offer our clients the best possible expertise and to create a working environment where employees can grow, Know IT strives to continuously improve our employees’ skill sets, including through certification in important areas of expertise.

sonja kvål

Business Concept

Know IT contributes to its clients' success by developing and taking long-term responsibility for our clients value-generating processes, functions, and IT solutions.

We develop our clients' businesses and make them more competitive by offering strategic expertise and creating IT solutions tailored to fit business-critical operations. We also assume long-term responsibility for the solutions we helped create through administrative assignments and support functions.

Our clients are mainly organizations and companies that have IT systems with stringent requirements for accessibility from several different interfaces and channels. By combining state-of-the-art expertise in strategic consultation, system development, and administration of IT solutions with knowledge of our clients' operations, we can offer a comprehensive view of IT.

Financial Targets

Profitability

Profitability measured as operating profit before financial items, expressed as a percentage of net sales, should amount to an average of at least eight percent during the next three years.

Growth

Average sales growth should reach at least 15 percent annually during the next three years. This growth will be achieved in both existing operations and through acquisitions.

Equity Ratio

The equity ratio should exceed 30 percent.

krister alm

(6)

4

Know IT Markets and Clients

The market for IT consulting services steadily improved in 2004.

Clients are more interested in investing, though sales cycles continued to be long. Extensions of work in progress and projects to increase efficiency or savings in existing solutions dominated sales. But 2004 also saw demand return for new projects. This growing demand is also reflected in the addition of 65 employees at Know IT, taking into account the sale of the advertising agencies during 2004 and increased sales of 30 percent.

Differences in demand in various local markets in Sweden are completely dependent on each location’s client structure and competition. However, we have also seen demand vary within different technologies and specialties. Know IT met these changes during the year by hiring consultants with specialties such as testing and quality management, strategic consultation, product-based systems, and data warehousing, as well as decision-making support systems.

Market Trends 2004

Prices continued to be low in 2004, especially in system development and administration, though we saw a slight increase during the fourth quarter. Pressures on prices have not been as noticeable for specialized services in strategic consultation and specific fields of technology. One encouraging development is our clients’ improved ability to invest.

The main driving forces in Know IT's market have been the continued work with twenty-four hour public services, maturing technologies, mergers and acquisitions, and the need to modernize existing systems and take advantage of investments.

Regulatory authorities want to provide round-the-clock public services and new generation IT solutions have set the scene for case management, integration, and content management solutions.

Mergers and acquisitions mean that more systems have to be integrated and used more effectively than previously.

Interest in mobile operations continues to be strong and during the year Know IT received a prize for its mobile solution for mine clearance, developed for the Swedish Defence Materiel

Administration.

The need for strategic consultation services has continued to grow. Clients are focusing more effort on ensuring at an early phase that investments are properly carried out with superior quality through preliminary studies, procurement processes, and project audits.

Continued Demand for Support Services

Know IT sees continued demand for its support services, in part because clients are focusing on their core business and in part because of their need to modernize their IT support. Support services are often long-term, which means that in addition to system development Know IT also accepts responsibility for development and administration of applications, quality of information, and integration with other systems. As part of Know IT's support services, clients also receive advice about design and architectural issues, as well as future IT solutions.

General Agreements Still Essential

Many clients choose to engage a limited number of suppliers and general agreements have been developed as an important element of IT consulting firms' structural capital. General agreements make Know IT an attractive partner for purchasers of consultant services, recruiters, and subcontractors. For Know IT, the general agreements contribute to a close and long-term relationship with the client. For clients, general agreements ensure consistency and stability in both price and quality. During the year Know IT signed about ten more general agreements with major buyers, including AstraZeneca, the Swedish Agency for Public Management, the National Social Insurance Board, and the National Government Employee Pensions Board. Know IT has general agreements with some forty parties, with more than 600 companies, local authorities, and regulatory authorities authorized to make purchases.

Client Structure

Know IT’s clients include major and medium-sized companies and organizations, with a focus on the public sector, telecoms, banking, finance, and insurance.

Media 0.4%

Energy 1.8%

Trade 0.5%

Industry 11.9%

Pharma- ceutical 5.3%

Telecommunications 32.2%

Bank, finance and insurance 7.2%

Public sector 40.6%

Sales per industry

≤SEK 1 M 11.4%

> SEK 1–2 M 10.3%

> SEK 3–5 M 8.5%

> SEK 2–3 M 12.9%

> SEK 5–10 M 9.5%

>SEK 10 M 47.3%

Invoicing to clients

by size Top Five Clients

AstraZeneca AB

Swedish National Land Survey Prosecutor-General

TeliaSonera AB

Volvo Car Corporation AB

During the financial year our five biggest clients were responsible for about 37 percent of sales.

No individual client was responsible for more than 26 percent of sales.

(7)

5

Know IT Operations

Know IT continued to expand during 2004 by establishing operations in new locations, broadening and deepening its selection of services, and hiring more employees.

In the spring, Know IT established a new division in Stockholm focusing on consulting services related to Human Resource Management IT solutions. The new division Know IT Technowledge was established in Göteborg to provide services related to product- based system development.

Know IT established operations in strategic consultation by acquiring the business in the local consulting firm A Kraft Resources in Linköping. In addition, Know It acquired operations in testing and quality assurance from Forum SQL in Stockholm and Sundsvall and a system development team from BMK Consulting in Stockholm.

After selling the advertising agency Explicit & Partners and its operations in the advertising agency Openeye, Know IT is now completely focused on consulting operations in the field of IT.

During the year Know IT also continued to provide customized IT solutions by offering:

• Strategic consultations, including a specialty in procurement

• System development in several areas of technology, both to strengthen skills and as total solutions

• Application administration and administration of delivered systems

Our knowledge of how to use the latest technology for maximum client benefit leads to long-term client relationships. Strategic consultation and support function projects are often ordered by departments within the client's core operation, which strengthens our relationship with the clients. Through meaningful and long- term client relationships, we gain extensive understanding of client operations, which sets the stage for added value and long-term profitability.

Strategic Consultations

Using our expertise in technology, processes, and the client's operations as a foundation, we offer strategic consultations that have their starting-point in the interface between IT and business

operations. Strategic consultations often involve taking an IT perspective of the operation and an operational perspective of the IT solution. One effect of our focus on consultations is that we can participate in our clients' IT projects at an earlier stage, which increases the precision of our IT solutions.

Know IT offers the following strategic consultation services:

• Purchasing of IT systems, where we draft and negotiate agreements that offer complete traceability, from the request for tenders to follow-up of deliveries and projects

• Development and follow-up of IT strategies that support the client's business objectives

• Technology-driven business development – we help clients to combine technology and business know-how more effectively

• Quality assurance of clients' critical IT projects

• Technical assessment – we analyze and determine the consequences of alternative technical solutions

• Process and operational issues linked to administration and support of IT-based HRM solutions

• Process development – we help the client analyze work flows to create the most efficient IT solution possible

System Development

System development is the heart of Know IT's operations. We have extensive expertise in a number of methods and fields of technology and can staff all roles from architecture and design to test and installation. During 2004, we noticed a growing interest in total solutions, where Know IT, often together with partners, delivers a complete solution to the client.

We offer expertise in system development in the following fields:

• System development, using platforms such as Java/J2EE, Microsoft (.NET and DNA), IBM/Lotus, SAS Software, and Oracle

• Application servers such as BEA WebLogic and IBM WebSphere

peter dickson monika nygren

tor kamsvåg

mique pitulia

fredrik abrahamsson

Cont.

(8)

Know IT Case Study: EOD IS

Clearing mines and other unexploded ordnance is one of the most dangerous things people can do. They require accuracy, skill, and the right information. Before mine clearing can begin, the position of the minefield and the mines has to be determined.

Frequently one person documents this information using paper and pen and another person transfers the information to a database. The risk of error is imminent and it is extremely dangerous for deminers, who use the information as a basis for clearing mines and ordnance.

To increase safety and eliminate the risk of errors, the Swedish Defence Matériel Administration with the Swedish EOD and Demining Centre (SWEDEC) set the requirements and commis- sioned Know IT to develop a new version of the Explosive Ordnance Disposal Information System, EOD IS.

Using a system that includes a Pocket PC, GPS, and laser binoculars, the deminer locates the mines to let others know where they are. EOD IS 3.0 supports laptop computers and handheld computers, which the deminer can bring into the field.

When the deminer finds a mine or some other form of ordnance the location of the mine is marked in the handheld computer using a GPS, laser binoculars, and a digital camera, all linked to the handheld computer by Bluetooth technology.

The deminer uses a digital camera to take a picture of the mine, the place where the mine was found, and its environment. The handheld computer will be used by different people who will share the information written in the Pocket PC with other handheld computers and other components of the EOD IS system.

The system identifies mines and grenades using an ordnance database that contains over 1,600 entries.

For obvious reasons, the system places great demands on precision, accessibility, and reliability. Using Bluetooth technology to link several units has been a special challenge requiring an advanced technical solution. The interface for handheld computers and the PC client also places high demands on simplicity and the ability to quickly locate correct information. Considering the diverse international target group, it has also been important to adapt the interface to many different social and cultural conditions. Many users, especially in

the developing world, have no previous computer experience, which of course requires a user-friendly interface.

EOD IS 3.0 was designed for use by the Swedish armed forces and the Swedish police, as well anywhere else it might be needed in the world for both military and civilian purposes.

EOD IS helped Know IT win the .NET award. The jury motivated its choice as follows: “For a system that takes the concept of user benefit to new heights. It is hard to imagine a better example of IT having not just strategic significance, but in some cases playing a role involving life and death!”. This was the second consecutive year that Know IT received Microsoft's .NET award.

DID YOU KNOW THAT:

Every third country in the world has land mines.

(9)

7

and data warehouses for business information. By outsourcing functional and technical administration, clients can focus on their core business.

Mobile Solutions

Know IT has a long tradition of developing mobile solutions, accumulating considerable experience in the field since the middle of the 1990s. The number of Know IT's mobile projects increased in 2004. Many existing projects were extended and expanded and several new ones initiated. Mobile solutions streamline work flows to simplify clients' operations and improve quality. We have seen a commercial breakthrough for mobile solutions in 2004.

Content Management

Demand for well functioning Content Management systems grew in 2004. More and more organizations realize that well organized information is one way to improve quality and that it represents a considerable structural capital. A good content management system allows users to use the same data sources to publish information for different target groups, make more reliable searches and publish the same information while targeting different media, such as the web, printed matter, and mobile units. By combining our partnerships with our own expertise, we can deliver customized systems based on standard products or develop them ourselves.

Integration

Technology developments over the past few years have made it much less expensive and more convenient to integrate systems and applications with each other. The technology facilitates huge gains by reducing lead times and operating costs. Many companies and public organizations are trying to create one single cohesive information system.

Driving forces can be expressed as visions of the real-time company and of twenty-four hour public services. Our clients have been extremely interested in our expertise in strategic consultations and our knowledge of various tools in 2004.

Know IT Operations ^(cont.)

peter björklund

• Database managers such as Oracle and SQL Server

• Interface design with a focus on usability

• Infrastructure

• IT architecture

• Data modeling

• Project management

• Developmental methods

• Integration with various EAI tools

Administration

A good IT solution is developed continuously in harmony with the client's core business and new achievements in the field of technology. Know IT views administration and continuing development of IT solutions as a growing component of business operations. Developments take place at the same rate as the client's business development, which makes it possible to convert the technology for optimal client benefit. By taking administrative responsibility for the solutions we deliver, we can guarantee outstanding operating quality.

Our administration offering includes:

• Ongoing development of applications

• Database administration

• Integration administration

• Testing and verification

• Version and release implementation

Offers

Through its great experience and proficiency, Know IT has developed a number of offering that can be provided by the entire Know IT organization and staffed with IT-specialists from different units, though the account manager always comes from the client's local Know IT-office.

During the year, Know IT continued to focus on areas with an increasing interest from our clients, including functional and technical administration, mobile solutions, content management solutions, and integration.

Functional and Technical Administration

Know IT's knowledge of system administration and of the client's business operations has helped the company to receive several orders for support functions to manage business-critical systems

erik johansson hanna thorner per grosskopf

(10)

Know IT Case Study: SCA Packaging

SCA Packaging Obbola outside Umeå produces liner, a strong unbleached paper that serves as the external layer in corrugated cardboard. Raw materials for the paper include both fresh wood fiber and recycled fiber. The facility runs operations continuously, all year long, with six shifts. The paper mill has sales of about SEK 1.6 billion and 360 employees. About 80 percent of production is exported, mainly to other countries in the Nordic countries and to Europe. The company manufactures 351,000 km of paper with a width equivalent to a Swedish highway each year.

As in any industry, SCA Packaging Obbola wants to optimize production. Paper quality has to meet client demands and targets for quantity have to be met, while keeping costs to a minimum.

The operator who runs the paper machine sets the machine for the proportions among the chemicals and pulp used in production.

The operator also determines paper thickness and moisture content while production is underway.

The quality of the paper is monitored and samples are taken regularly.

SCA Packaging Obbola checks the weight per unit area, moisture, thickness, and dry equivalent weight. It used to take five hours to compile the information from the various computer systems. It was difficult for the operator to know when the settings were optimal for productivity.

Know IT was called in to design an integration solution to compile information faster and make it accessible for the operator. The project also involved including information about costs for steam, chemicals, and energy consumption.

The solution provides information in real time and enables the operator to optimize the machine settings. Simple graphs display the contribution margin, production level, loss of time,

and total cost of production. When the settings are modified, the graphs adjust immediately and the operator can see how the measures affect product quality and production cost.

The solution is developed in Microsoft .NET and retrieves information from many different solutions and databases such as Winmops, Oracle, and the SQL-Server database.

The information can be displayed in an ordinary browser, which makes it possible to call up the information on any company computer. The information can also be distributed for tracking purposes and to create a company-wide focus on both quality and cost. The aim is to achieve the company's production target of 420,000 tons of paper, for the right cost.

DID YOU KNOW THAT:

In one year, SCA Packaging Obbola produces 351,000 kilometers of liner, which is almost enough to go around the earth nine times.

(11)

Number of employees Other Consultants employees

Operating units 310 31

Parent company 5

Total employees 310 36

Male Number of employees

<26 26–30 31–35 36–40 41–45 46–50 51–55 >55

Age structure

0 10 20 30 40 50 60 70 80

Female High school

level 10%

Other specialist education 14%

Graduate engineer 19%

Master of business administration 4%

Systems scientist 26%

Other university education 27%

Education levels, consultants

9

Know IT Staff and Structural Capital

To be an attractive supplier consultants must continuously develop their skills. Procedures must be continuously reviewed to maintain the highest standards. Know It consultants earn certification, participate in specialized networks, and attend seminars and training programs to ensure personal development. Another important component of continuously delivering practical client benefit and services with superior quality is the development of each consultant through the assignments in which they participate. Each assignment helps to develop our collective expertise and experience.

Know IT consultants are highly skilled and have extensive experience of the IT industry and our clients' businesses. Our long assignments enable us to thoroughly learn our clients' operations. Each consultant has an average of 13.5 years of industry experience. Ninety percent of Know IT's consultants have a university education or other post-upper secondary education.

We prefer to hire consultants who are university graduates with over five years of industry experience. Just as at many other

IT company's, gender distribution at Know IT is not equal.

At the end of 2004, the distribution was 75 percent men and 25 percent women. Know IT strives to achieve a more equal distribution between the sexes.

Structural capital makes the operation efficient, offering clients added value. We have about forty general agreements with over 600 units that are authorized to make purchases. Our partnerships are important for learning about and gaining access to new technology at an early stage.

The system development and project management method, K-RUP, which we use when clients have no requirements for other methods, is based on a combination of Rational Unified Process and Pejl. During 2004 we continued to train our consultants in K-RUP to increase delivery precision and cost- effectiveness in our client projects.

We also use a relationship-based quality assessment of completed consulting services, where the client, consultant, and Know IT business manager analyze the consultant's efforts in each assignment.

Ninety percent of Know IT's consultants have post-upper secondary education. Seventy six percent have a university education. The most common university programs attended by Know IT consultants are systems science and civil engineering.

More than 80 percent of Know IT's employees are over the age of thirty. Seventy-five percent of the employees are men and 25 percent are women. The average age of our male employees is 39; the corresponding figure for our female employees is 38.

The average age of all employees is 39.

per wallentin

bengt frösdal stefan nordqvist

peter tjernström

kjell-ivar asplund Know IT has 346 employees, 310 of whom are consultants. The category other employees includes sales, business, administration, and group-wide functions.

nina björklund

(12)

Number of shares Share price,

SEK

SIX index for IT and Internet consultants The

share SIX

Generalindex Traded number of shares,

000 (incl. aftermarket) (c) SIX

200 400 600 800 1000

10 15 20 25 30

JAN 04

FEB MAR APR MAY JUNE JULY AUG SEP OKT NOV DEC JAN

05

10

Know IT Share

Ten largest shareholders

Share of capital

Holder Number of shares and votes

AB Traction 2 496 966 25,0

CMA Europe AB 800 000 8,0

Bergström, Per with company 487 500 4,9

Seitola, Pekka witch company 487 500 4,9

LF Småbolagsfonden 356 000 3,6

Carnegie Fond AB/small companies 226 000 2,3

Olsson, Sven-Håkan 223 338 2,2

Stillström, Bengt 173 550 1,7

Nilsson, Anders with family

and company 156 840 1,6

Elsell, Carl Anders 86 000 0,9

Total ten owners 5 493 694 55,1

Others 4 479 869 44,9

Total 9 973 563 100%

1)Bengt Stillström with family is the main owner of AB Traction, with a 79.5 percent share of capital and a 91.1 percent share of voting power.

Share Capital

As of December 31, 2004, Know IT's share capital totaled SEK 49.9m, represented by 9,973,563 shares at a par value of SEK 5 each. All shares carry the same number of votes and rights to dividends.

Market Listing

Know IT's share was listed on SBI (Stockholms Börsinformation), currently NGM (Nordic Growth Market), on November 11, 1997.

The share has been listed on the O list of the OM Stockholm Exchange (Stockholmsbörsen) since March 11, 1999. At the end of the fiscal year, the market value was SEK 25.90 (13.40) per share, equivalent to a total market value of SEK 258.3m (133.6).

The highest price paid during the fiscal year, SEK 26.50, was registered on December 12, 13, and 22, 2004; the lowest price, SEK 13.40, was registered on January 2, 2004. During the fiscal year, 4.2 (2.5) million Know It shares were traded on

Stockholmsbörsen, equivalent to 16,400 (9,900) shares per day.

The traded number of shares is equivalent to 42 (25) percent of the total number of shares at year-end. During 13 (40) of the year's 254 market days, there was no trading in Know It shares.

As of December 31, 2004, the total number of shareholders was 4,243 (4,093).

Dividend Policy

Know IT's dividend policy is to distribute the capital that is not needed for planned expansion of the operations.

Distribution of holdings

Number of Number of

shareholders % votes %

1- 1 000 3 603 84,9 1 125 843 11,3

1 001- 5 000 504 11,8 1 218 281 12,2

5 001- 10 000 61 1,4 473 631 4,8

10 001- 20 000 37 0,9 551 708 5,5

20 001- 50 000 21 0,5 534 287 5,4

50 001- 100 000 8 0,2 546 394 5,5

100 001- 500 000 7¹⁾ 0,1 2 256 388 22,6 500 001- 1 000 000 1 <0,1 800 000 8,0 1 000 000- 5 000 000 1 <0,1 2 467 031 24,7

Total 4 243 100,0 9 973 563 100

1)1) Including two foreign banks that represent nominee-registered shares.

Price Diagram

(13)

Foreign owners 6.9%

Swedish institutions and companies 31.5%

Swedish private investors, including closely held companies 61.6%

Ownership distribution

11

Analysts who monitor Know IT

Den Danske Bank:

Peter Trigarzky, tel +45-33-44 04 49 Enskilda Securities:

Lars Sveder, tel +46 (0)8-52 229 500 Handelsbanken:

Stefan Wård, tel +46 (0)8-701 51 18 Redeye:

Magnus Dagel, tel +46 (0)8-545 013 43

Development of share capital

Increase in Total share Increase in Total number Par value share capital capital, Year Activity number of shares of shares SEK SEK million SEK million

1990 Formation of company 500 100 0.1

1991 New share issue 3,500 4,000 100 0.3 0.4

1992 Stock dividend 1 000 5 000 100

New share issue 1,760 6,760 100 0.2 0.7

1993 New share issue 2,060 8,820 100 0.2 0.9

1994 New share issue 893 9,713 100 0.1 1.0

Stock dividend 2,427 12,140 100 0.2 1.2

1995 New share issue 1,058 13,198 100 0.1 1.3

Stock dividend 6,599 19,797 100 0.7 2.0

1996 New share issue 949 20,746 100 0.1 2.1

1997 New share issue 1,825 22,571 100 0.2 2.3

Stock dividend 22,571 45,142 100 2.2 4.5

Split 857,698 902,840 5 – 4.5

New share issue 1,297,160 2,200,000 5 6.5 11.0

1998 New share issue 490,674 2,690,674 5 2.5 13.5

Stock dividend 2,550,674 5,241,348 5 12.7 26.2

1999 New share issue 50,322 5,291,670 5 0.3 26.5

New share issue 209,375 5,501,045 5 1.0 27.5

2000 New share issue 215,694 5,716,739 5 1.1 28.6

New share issue 17,105 5,733,844 5 0.1 28.7

New share issue 40,000 5,773,844 5 0.2 28.9

2001 New share issue ¹⁾ 800,000 6,573,844 5 4.0 32.9

New share issue ²⁾ 75,198 6,649,042 5 0.4 33.3

New share issue ³⁾ 3,324,521 9,973,563 5 16.6 49.9

1) The new share issue refers to new share issue directed at CMA Europe AB 2) New share issue refers to supplementary purchase price

3) New share issue refers to a share issue with preferential rights for shareholders

As of December 31, 2004, foreign shareholders owned 698,751 shares of Know IT, equivalent to 6.9 percent of capital and votes. Swedish institutions owned 3,138,359 shares, equivalent to 31.5 percent of capital and votes. Swedish private investors, including closely held companies, owned 6,144,453 shares, equivalent to 61.6 percent of capital and votes.

Data per share ¹⁾

99/00 00/01 2001²⁾ 2001 2002 2003 2004

Number of shares on balance sheet date, thousands 5,734 6,574 9,974 9,974 9,974 9,974 9,974

Average number of shares, thousands 5,386 6,006 7,044 7,336 9,974 9,974 9,974

Earnings per share, SEK -11.71 -14.79 -7.48 -6.40 -0.18 0.35 2.60

Equity per share, SEK 29.25 16.31 8.90 8.90 8.72 9.07 10.92

Cash flow per share, SEK 2.32 2.10 iu -2.34 1.03 0.11 2.10

Dividend, SEK - - - - - 0.75 1.50

Price per share, SEK 127.50 27.00 10.20 10.20 5.50 13.40 25.9

P/E-ratio - - - - - 38.3 10.0

1) Adjusted for stock dividend, new issue, and split 2) Refers to pro forma figures for calendar year 2001 ni = no information

may-dec

(14)

12

Know IT Board of Directors

Mats Olsson, b. 1948.

Board member since 1997.

Chairman of the board since 2001.

Chief executive officer, Displayit AB.

MA.

Other directorships:

IAR System AB (chairman), Polyplank AB (chairman), AB Traction, Fenix Outdoor AB, and RBS AB.

Holding in Know IT: 10,000 with family.

Thomas Ahrens, b. 1949.

Chief Executive Officer, Ahrens Rapid Growth AB.

Erik Olsson Fastighetsförmedling AB and MWM Media Workflow Management AB.

Holding in Know IT: 0

Håkan Berntsson, b. 1972.

Venture Manager AB Traction.

BS in economics.

AcadeMedia AB and Gnosjöplast AB.

Holding in Know IT: 10,000.

Petter Ulander, b. 1970.

Elected by employees.

Purchasing support consultant, Know IT Candeo AB. BS in economics.

Anders Nordh, b. 1946.

President and Chief Executive Officer CMA

Europe AB. BA.

Assignments from the CMA wholly owned subsidiary and part-owned subsidiaries CMA Small Systems (chairman) and Asset Management ASA.

Holding in Know IT: 0.

Auditor

Lars Wennberg, b. 1957.

Auditor in the company since 2003.

Öhrlings PricewaterhouseCoopers AB.

The members of the nomination committee are listed on the inside cover.

mats olsson

anders nordh petter ulander

håkan berntsson thomas ahrens

(15)

johan langgren canestrini

13

Know IT Corporate Management

Anders Nilsson, b. 1951.

President and Chief Executive Officer since Feb 2003.

Employed since 1998.

MS in Engineering.

Holding in Know IT: 156,840 with family and company.

Johan Langgren Canestrini, b. 1960.

Chief executive officer, Know IT Software Solutions AB since 1997.

BS in economics and university degree in systems sciences.

Bengt Norvik, b. 1955.

Chief Financial Officer since 2002.

University studies in business with focus on external accounting.

Holding in Know IT: 0.

Mats Ohlsson, b. 1959.

Chief executive officer, Know IT Consulting AB since 2001.

BS in mathematics and computer science.

Patrik Syrén, b. 1959.

Vice President of Corporate Communications since 2000.

Degree in art administration and UC in marketing, advertising and public relations.

bengt norvik

patrik syrén anders nilsson

mats ohlsson

(16)

14

know it anual report 2004

Know IT Financial review

May-Dec.

SEK million 99/00 00/01 2001¹⁾ 2001 2002 2003 2004

Net Sales and Result

Net sales 547.7 500.6 411.4 256.2 326.3 295.0 383.8

Operating result before goodwill amortization -36.5 -3.9 -15.3 -15.4 9.4 13.2 22.3

Income after financial items -61.1 -89.3 -51.1 -43.9 -2.0 3.0 10.9

Profit margin, % -11.2 -17.8 -12.4 -17.1 -0.6 1.0 2.8

Operating margin. % -13.3 -13.0 -11.7 -16.7 -0.5 0.8 2.8

Sales growth, % 19.2 -8.6 -26.3 -25.8 -20.7 -9.6 30.1

000430 010430 011231 011231 021231 031231 041231

Capital structure

Fixed assets 239.9 117.7 87.4 87.4 72.5 61.5 74.7

Current assets 223.5 168.8 106.6 106.6 96.2 109.6 153.8

Total assets 463.4 286.5 194.0 194.0 168.7 171.1 228.5

Shareholder's equity 167.7 107.2 88.8 88.8 87.0 90.5 108.9

Minority interests 0.2 2.5 4.0 4.0 0.8 0.4 2.0

Provisions 7.4 2.1 2.4 2.4 1.1 0.1 0.4

Long-term liabilities 90.1 13.4 6.5 6.5 4.1 4.2 4.8

Current liabilities 198.0 161.3 92.3 92.3 75.7 75.9 112.4

Total equity and liabilities 463.4 286.5 194.0 194.0 168.7 171.1 228.5

Equity ratio, % 36.2 37.4 45.8 45.8 51.6 52.9 47.7

Investments in goodwill and other surplus value 113.6 - - - - 1.2 9.0

Investments in machinery and equipment 15.9 6.0 6.4 5.0 1.7 0.9 1.3

Cash flow before investments -33.2 -6.0 -10.7 -8.5 19.7 3.8 37.4

Net liquid funds 22.7 1.7 25.8 25.8 35.7 33.2 53.9

Capital employed 209.0 158.6 99.3 99.3 91.9 98.3 118.4

Acid test ratio, x 1.1 1.0 1.2 1.2 1.3 1.4 1.4

Net debt ratio, x -0.1 0.0 -0.3 -0.3 -0.4 -0.4 -0.5

Adjusted equity 167.7 107.2 88.8 88.8 87.0 90.5 108.9

May-Dec.

99/00 00/01 2001¹⁾ 2001 2002 2003 2004

Profitability

Return on capital, % -13.4 -22.8 -18.7 -17.5 -0.2 2.1 5.8

Return on equity, % -38.2 -64.6 -50.4 -46.3 -2.0 3.9 25.7

Return on capital employed, % -27.4 -46.6 -36.9 -32.6 -0.4 3.7 10.6

Staff

Average number of employees 558 495 369 351 297 285 322

Net sales per employee 1.0 1.0 1.1 0.7 1.1 1.0 1.2

Value added per employee 0.5 0.5 n/a 0.4 0.7 0.7 0.8

Result after financial income/expense per employee -0.1 -0.2 -0.1 -0.1 0.0 0.0 0.0

Number of employees at year-end 617 397 311 311 283 302 346

1)Refers to pro forma figures for calendar year 2001