Balance sheet 2009

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Board of directors’ report

revenue suBsidiaries

capital account consulting

income statement

accounting principles

segment reporting

maintenance and support assets share taxes profit

product development notes

accounts receivaBle

revenue annual report

equity payaBle share

liaBilities accounts

Balance sheet

statement of cash flows

license costs and expenses

segment reporting

accounting principles

industrial and financial systems, ifs aB

2009 annual report

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TABLE OF CONTENTS

Highlights 4

Five-year summary and financial targets 5

Message from the president 6

IFS and IFS Applications 8

The IFS stock 10

Table of contents of the annual report 12

Annual report 13

Corporate governance report 66

Board of directors 72

Senior management and auditors 73

Financial trend 2005–2009 74

Definitions and glossary 76

FINANCIAL REPORTS 2010

Interim report January–March April 21, 2010 Interim report January–June July 21, 2010 Interim report January–September October 27, 2010

Year-end report February 2011

ANNUAL GENERAL MEETING

The annual general meeting 2010 will be held on Thursday, March 25, 2010 in Stockholm, Sweden.

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SUPPLY CHAIN

IN DU ST RI AL MA NUFACTURING

PROJECT-BASED SOLUTIONS ^SE^RV

ICE & ASSET MANAGEMENT

IFS APPLICATIONS ^™

SOLUTIONS FOR AGILE BUSINESS

3

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HIGHLIGHTS

• During the year, the 10 largest license deals had a total value of SKr 136 million. The corresponding figure for 2008 was SKr 141 million. A total of 23 license agreements exceeding US$ 0.5 million in value were sold during the year.

• The latest version of IFS Applications went on general release in Q3 2009. It includes the revolutionary new user interface IFS Enterprise Explorer, which has been very well received by the market. IFS Enterprise Explorer offers an entirely new user experience—with an ergonomic design that includes a built-in search engine and multimedia functionality—that simplifies the use of the ERP software and increases productivity. The new technology is the result of IFS’s long-term development work, which is directed toward making user-friendly, more efficient applications and generating increased values for customers.

• Investments in product development during 2009 have focused on improvements that will be launched during 2010 within core IFS processes for projects, service & asset management, manufacturing, and supply chain management.

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FIVE-YEAR SUMMARY

2005 2006 2007 2008 2009

Net revenue SKr, million 2 149 2 209 2 356 2 518 2 605

of which license revenue SKr, million 383 433 478 479 426

of which maintenance and support revenue SKr, million 528 600 659 703 789 of which consulting revenue SKr, million 1 175 1 140 1 194 1 310 1 373

Net revenue outside Sweden % 79% 80% 78% 81% 83%

EBIT SKr, million 97 120 141 154 198

EBIT margin % 5% 5% 6% 6% 8%

Profit/loss before tax SKr, million 67 75 129 161 168

Profit margin % 3% 3% 5% 6% 6%

License margin % 84% 90% 90% 92% 88%

Maintenance and support margin % 58% 63% 64% 57% 62%

Consulting margin % 21% 17% 16% 19% 19%

Product development expenditure/net revenue % 10% 9% 9% 9% 7%

Administration expenses/net revenue % 10% 9% 10% 10% 10%

Return on capital employed % 11% 10% 11% 12% 14%

Equity/assets ratio, after full conversion % 38% 45% 50% 50% 53%

Net debt SKr, million 294 166 3 -81 -206

Interest coverage rate times 2.1 2.5 6.1 15.6 8.5

Cash flow after investment operations SKr, million 28 86 20 98 186

Acc rec (avg 12 month)/Net revenue (rolling 12 month) % 22 23 23 23 24

Average number of employees 2 453 2 644 2 646 2 663 2 681

Number of employees at year-end 2 600 2 630 2 627 2 723 2 664

FINANCIAL TARGETS

IFS’s board of directors has established long-term targets for growth, profitability, and financial leverage, as well as a policy for dividends and share repurchase. No later than during 2013, IFS aims to:

• Achieve product revenue (licenses, maintenance, and support) in excess of SKr 2 billion through organic growth and acquisitions.

• Achieve an EBIT margin of 15% and a return of 25% on average operating capital.

Furthermore, IFS has set the long-term objectives of:

• Over time increasing dividends to 50% of earnings after tax.

• Using additional surplus capital, which is not required for investments, expansion, and other needs relating to the financial position of the group, to repurchase shares.

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MESSAGE FROM THE PRESIDENT

STRATEGY DELIVERING GROWTH

We continued to deliver a good performance in a year dominated by a turbulent economic environment. This was achieved because we have recently developed advanced specialized solutions for specific markets such as offshore, defense, and utilities. Furthermore, the economic downturn favors the selection of IFS Applications because of the lower cost of deployment, quicker return on investment, and a lower-risk choice for multinational implementations.

In 2009, our market position was strengthened compared with that of our main competitors. This can be seen in the fact that we increased overall revenue, increased EBIT by 28%, and almost doubled cash flow after

investments.

It was predicted at the start of the year that, due to economic factors, license sales in 2009 would not reach the level achieved in 2008. However, the difference between the two years can also be explained by a single large defense deal in Q3 2008. In Q4, we saw license sales for the year catch up, as expected, and with an achievement of SKr 176 million outperformed the same quarter in the previous year by 21%.

Maintenance revenue increased by 12% and the margin improved by 5%. The customer base continues to develop, providing a strong source of growing predictable recurring revenue with very little contract loss over the period.

The consulting business continued to benefit from major on-going projects and the roll-out of global implementations, with margins slightly increasing through the year. Due to the new business secured in Q4, the consulting backlog, which had held up well in 2009, increased still further going into 2010.

Throughout 2009, we continued to grow in our target sectors by securing important strategic contracts. In particular, we saw strong growth in Engineering, Procurement, Construction, and Installation (EPCI), including higher levels of activity in the offshore and marine sectors. This progress was further boosted by the acquisition of MultiPlus Solutions in Q3.

The pipeline for defense and aerospace business continues to grow, but there have been delays in finalizing contracts due to the conflicting funding priorities in the governments involved. The fundamental growth drivers in this sector remain in place.

The latest version of IFS Applications, including the new user experience, went on general release in Q3 2009.

This is expected to have a positive impact on both new sales and the expected number of upgrade projects.

The improving availability of financing, especially for mid-size companies, together with signs of general economic recovery, is starting to stabilize the ERP market.

However, although the overall market development was flat in the fourth quarter, license sales continued to decline compared with the corresponding quarter the previous year, adding up to a decline in overall license sales for 2009 of over 20%. Industry analysts such as Forrester and IDC expect the market to come back to a modest growth in 2010, including increasing license revenue. Overall, analysts project the ERP market will grow 3–7% in 2010. One of the drivers mentioned is that customers need to use ERP not only to cut costs and to become more efficient, but also to increase the robustness, security, and transparency of processes and the valuation of assets.

We operate in markets with sustainable long-term growth prospects, in which we have developed strong market positions in higher-growth sectors. We anticipate moderate growth in 2010, which is supported by our pipeline of new opportunities, which was 17% up at the year-end over the prior year.

We will continue to execute on our stated growth strategy which, as previously communicated to the market, is to achieve an EBIT of 15% and double product revenue.

This goal was set in 2008 to be achieved within five years.

Given the extraordinary world economic situation in 2008 and 2009, we now expect this achievement to be somewhat delayed. However, our ambition is to achieve the targets in 2013 and that this will be achieved by both organic growth and acquisitions. We will see organic growth coming from both new licenses, resulting from our successful proven market strategy and the continued increase in maintenance revenues coming from the ever growing customer base.

The IFS business is scalable for the expected growth and faces no major investment hurdle in terms of either product technology or international coverage. These two key investments have already been made by IFS. The improved cash flow in 2009 further underlines our capacity to continue to execute on our acquisition strategy—which will be a priority focus for 2010.

Alastair Sorbie

President and CEO

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IFS APPLICATIONS ^™

—FOR AGILE BUSINESS

SUPPLY CHAIN

INDUSTRIAL MANUFACTURING PROJECT-BASED SOLUTIONS

OIL & GASS RETAIL

LIFE SCIENCES

PULP & PAPER

AEROSPACE & DEFENCE

HIGH TECH TELECOM

ENERGY & UTILITIES

FOOD & BEVERAGE COMMERCIAL AVIATION

SERVICE & ASSET MANAGEMENT

CONS

TRUCTION, CONTRACTING & SERV ICE

METAL

SHIPYARD

CHEMICALS

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IFS—THE GLOBAL ENTERPRISE APPLICATIONS COMPANY

IFS, one of the world’s leading suppliers of business software, offers applications that enable companies to respond quickly to market changes and use resources in a more agile way to achieve better business performance and competitive advantages.

IFS was founded in 1983 and has 2,700 employees worldwide. With IFS Applications™, now in its seventh generation, IFS has pioneered component-based ERP software. The component architecture provides solutions that are easier to implement, run, and upgrade. IFS Applications business software provides increased ERP functionality, including CRM, SCM, PLM, CPM, enterprise asset management, and MRO capabilities.

IFS is an organization with a truly global reach and is today represented in approximately 50 countries through wholly and jointly-owned subsidiaries, joint ventures, and partners. IFS has some 2,000 customers and over 800,000 users and its solution is installed in over 60 countries in about 20 languages.

BUSINESS CONCEPT

With its own resources and in cooperation with partners, IFS develops, sells and implements the component-based ERP software IFS Applications.

IFS APPLICATIONS

IFS Applications is a comprehensive business system for mid-sized and large organizations, and is specialized in a number of business processes. Experience from customers, user groups, industry analysts and the company’s strong network of partners has been combined to create leading industry solutions to meet specific customer needs.

Structural changes such as globalization, market transparency through the Internet, consolidation, specializa-

tion, etc. are making it harder to label companies based purely on their industrial belonging. As a matter of fact, the landscape of processes in which a company is operating often offers a better illustration of its actual business and challenges than the industry under which it is labeled.

IFS focuses on agile businesses where any of four core processes are strategic: service and asset management, manufacturing, supply chain, and projects. This focus provides customers with competitive advantages in their own markets and has made IFS the leader in several industries. Within maintenance and logistics systems for aerospace and defense, for example, IFS is the global market leader.

In addition to the processes supported by all business systems, such as finances, inventories, customer management and traditional manufacturing, IFS Applications is specialized in a number of specific manufacturing processes and in support for the entire life cycle of products, from construction to maintenance and aftermarket services. This provides substantial advantages for customers, the information created during construction and manufacturing being important when the products are later maintained, possibly during several decades.

In recent years, IFS has seen increased demand for IT support for project-oriented activities in several of our targeted industries. IFS has worked quickly to provide enhanced software components to better manage challenges such as cost, time, resources, liquidity, and risk in project-driven activities. The optimization of these key areas results in better control and is the key to enhanced efficiency and control. It also provides increased opportunities to capitalize on new business opportunities. The use of traditional organizational structures and systems makes it difficult to handle operational situations in real time and reduces flexibility, as it is necessary to balance resources in relation to expected deliveries. It is expensive and difficult to assess whether new business opportunities, but also ongoing operations, will be profitable.

CREATIVITY AND INNOVATION

IFS has two distinct advantages over competitors: the single integrated product line in IFS Applications and the fact that it has been component-based for more than a decade. This means that IFS is uniquely placed to supply business components that take advantage of today’s service-oriented architectures (SOA).

IFS continued to be creative in 2009. The first customers installed the revolutionary new user interface IFS Enterprise Explorer, a completely new experience in which an ergonomic design, a built-in search engine and multi-

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media functionality simplify the use of enterprise applications and increase productivity. The new technology is the result of IFS’ long-term development work that aims to make business software easier and more efficient. In addition, several important improvements were launched during the year:

• Eco-footprint Management, a tool that is fully integrated with IFS Applications and which makes it possible to budget for, report and follow-up the environmental impact of a business throughout the value chain.

• Advanced Planning Board, which increases

customers’ control of their manufacturing resources.

• Heavy Maintenance Extension, which is primarily intended for service companies in the Maintenance, Repair, and Overhaul (MRO) sector, with particular focus on the aerospace industry.

• eInvoice Adapter, which substantially improves e- invoicing, is fully integrated with Pagero and ready to be integrated with other providers.

• Inventory Planning & Replenishment, a tool that enables access to advanced functionality that supports the process of replenishing inventory at central, regional or store levels.

• Business Analytics 3.0, the latest version of IFS’s business intelligence solution, which extends

Microsoft Excel® from a desktop productivity tool to a full-fledged enterprise-scale client for planning, reporting and analysis.

STRATEGIES IN BRIEF

• IFS will strengthen its profit, cash flow and financial position by focusing on increasing sales, reducing costs and increasing its market share in selected industries.

• Our product development will focus on maintaining our position as technical leader in component-based business software for a global market.

• Our product, IFS Applications, will support the standards that are important for our customers. We

will supply integrated Internet-based solutions that enable increased cooperation among customers, suppliers and partners.

• Our product, methods, support system and infrastructure will support customers with global operations.

• To meet the market’s increased demands for solutions with broad functionality combined with in- depth industry knowledge, we will focus on a limited number of industry segments.

• We will continue to develop global and local cooperation with partners to enable continued development of our competence and market presence with lower risk and capital requirements.

• We will maintain our own supplier capacity for consultant services related to the implementation and use of IFS Applications in important markets and to support our partners.

• Our ability to offer resources from IFS’s Sri Lankan unit for customer projects and cooperation with partners will increase our competitiveness.

• We will stimulate increased mobility among all our employees to increase competence and understanding of various international markets.

SOCIAL RESPONSIBILITY AND ENVIRONMENT

IFS operates in a distinctly low-risk industry in terms of the direct impact of its activities on people and the environment. This applies to the entire value chain, including program development, for which IFS’s largest unit is located in Sri Lanka. In addition, the company has efficient information distribution through its intranet, where all employees have access to policies and guidelines pertaining to sustainability, including environmental impact, gender equality, diversity, work environment, and the values of the company and employees in relation to colleagues and customers.

IFS has a low environmental risk. The Group’s most extensive environmental impact is energy consumption from its companies’ premises, business travel, purchasing of office material and handling of used hardware. IFS’s goal is to conduct business in an environmentally responsible manner. All employees are encouraged to respect the environment and strive to work with sustainability issues such as recycling and energy efficiency when possible.

IFS Applications can be used to manage much of the information required for a company to monitor its sustainability issues, report its environmental impact, and comply with legislation and regulations in respect of environmental issues. In 2009, IFS Eco-footprint Management, a component within IFS Applications was launched and delivered. IFS is working intensively on product development to further improve functionality in this regard.

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SHARE

IFS Series B stock is listed since April 28, 1998 on the Stockholm stock exchange and is traded on the NASDAQ OMX Stockholm Mid-Cap list (sector: information technology). The Company’s Series A stock has been on the same list since June 18, 1998.

As of December 31, 2009, IFS’ capital stock amounted to SKr 531,058,460, represented by 26,552,923 shares, before dilution, with a nominal value of SKr 20 per share. These comprised 1,391,664 Series A shares and 25,161,259 Series B shares. During the year, 400,000 Series

B shares in the company’s own custody after being repurchased in 2008, were cancelled.

Each Series A share carries the right to one vote, and each Series B share carries the right to one tenth of a vote.

All shares carry equal rights to dividends.

During the year, a total of 0.0 million Series A shares and 13.2 million Series B shares were traded. The trading thereby amounted to 50% of the average total number of listed shares. The principal owner is Gustaf Douglas with associated companies, who controlled 20.4% of the capital and 18.5% of the voting rights on December 31, 2009.

STOCKHOLDERS

Stockholder Number of

series A shares Number of

series B shares Share of

capital Share of

voting rights

Gustaf Douglas and associated companies 202 800 5 207 300 20.4% 18.5%

Bengt Nilsson and associated companies 405 063 176 800 2.2% 10.8%

Anders Böös and associated companies 396 300 8 934 1.5% 10.2%

Catella funds - 3 252 358 12.2% 8.3%

Lannebo funds - 2 733 000 10.3% 7.0%

NEC Corporation 110 000 679 000 3.0% 4.6%

Skandia funds - 1 160 503 4.4% 3.0%

Swedbank Robur funds - 1 069 843 4.0% 2.7%

Unionen trade union - 927 146 3.5% 2.4%

Heinz Kopfinger 78 932 31 117 0.4% 2.1%

Fourth Swedish National Pension Fund - 745 307 2.8% 1.9%

Skandia Liv - 673 306 2.5% 1.7%

SHB funds - 599 855 2.3% 1.5%

Other stockholders 198 569 7 896 790 43.2% 25.3%

Total 1 391 664 25 161 259 100.0% 100.0%

Source: SIS Ägarservice, December 30, 2009

SHARE CATEGORIES

Number of

shares Number of

voting rights Share of

capital Share of voting rights Series A shares 1 391 664 1 391 664 5.2% 35.6%

Series B shares 25 161 259 2 516 126 94.8% 64.4%

Total 26 552 923 3 907 790 100.0% 100.0%

DISTRIBUTION OF SHAREHOLDERS

Share of

capital Share of voting rights Swedish individuals 34.1% 51.1%

Swedish mutual funds 37.7% 25.6%

Swedish institutional owners 11.7% 8.0%

Swedish owners 83.5% 84.7%

International owners 16.5% 15.3%

Total 100.0% 100.0%

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SHAREHOLDER STATISTICS

Number of shares held Number of

stockholders Proportion of

stockholders Number of

shares Share of

capital Share of

voting rights

1–1 000 7 942 92.6% 1 058 790 4.0% 3.0%

1 001–2 000 251 2.9% 381 478 1.4% 1.1%

2 001–5 000 151 1.8% 497 878 1.9% 1.6%

5 001–10 000 79 0.9% 581 333 2.2% 2.2%

10 001–50 000 87 1.0% 2 015 319 7.6% 7.5%

50 001–100 000 20 0.2% 1 461 888 5.5% 3.8%

100 001– 43 0.5% 20 556 237 77.4% 80.8%

Summa 8 573 100.0% 26 552 923 100.0% 100.0%

PRICE DEVELOPMENT AND TRADE VOLUME

2009 2004–2009

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TABLE OF CONTENTS OF THE ANNUAL REPORT

13 Board of directors’ report 22 Consolidated income statement

23 Consolidated statement of comprehensive income 24 Consolidated balance sheet – assets

25 Consolidated balance sheet – equity and liabilities 26 Consolidated capital account

27 Consolidated statement of cash flows 28 Income statement of the parent company 29 Balance sheet of the parent company– assets

30 Balance sheet of the parent company– equity and liabilities 31 Capital account of the parent company

32 Statement of cash flows of the parent company 33 Notes to the financial statements

Note 1 Accounting principles 33

Note 2 Segment reporting 42

Note 3 License revenue 44

Note 4 Maintenance and support revenue 44

Note 5 Other revenue 44

Note 6 Development expenditure 44 Note 7 Sales and marketing expenses 44 Note 8 Other operating income 44 Note 9 Other operating expenses 44 Note 10 Transactions between subsidiaries 44 Note 11 Operating expenses per type of cost 45

Note 12 Auditors’ fees 45

Note 13 Salaries, other remunerations, and social costs 45 Note 14 Remunerations paid to senior executives 46 Note 15 Transactions with related parties 47 Note 16 Average number of employees per country 47 Note 17 Results from participations in subsidiaries 48 Note 18 Results from participations in associated companies 48 Note 19 Other interest income and similar income 48 Note 20 Interest expenses and similar expenses 48

Note 21 Taxes 48

Note 22 Profit and dividend per share 49 Note 23 Intangible fixed assets 49 Note 24 Tangible fixed assets 51 Note 25 Operating lease agreements 52

Note 26 Participations in subsidiaries 53 Note 27 Participations in associated companies 54 Note 28 Receivables in subsidiaries 55 Note 29 Deferred tax claims and tax liabilities 55 Note 30 Other long-term receivables 55 Note 31 Accounts receivable 56

Note 32 Other receivables 56

Note 33 Liquid assets 56

Note 34 Stockholders’ equity 56 Note 35 Convertible debentures/bonds 58 Note 36 Liabilities to credit institutions 58 Note 37 Risk structure pertaining to interest and financing 58 Note 38 Pension commitments 59 Note 39 Other provisions and other liabilities 60

Note 40 Other liabilities 60

Note 41 Accrued expenses and prepaid income 60

Note 42 Pledged assets 61

Note 43 Contingent liabilities 61 Note 44 Adjustments for items not included in cash flow 61 Note 45 Acquisition of subsidiaries/operations 61 Note 46 Net acquisition of tangible fixed assets 62 Note 47 Financial risk management and derivatives 62

Note 48 Conversion rates 64

Note 49 Information about the Parent company 64

65 Audit report

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BOARD OF DIRECTORS’ REPORT

GENERAL

The Board of Directors and President of Industrial and Financial Systems, IFS AB (publ), corporate identity number 556122-0996, herewith submit the annual accounts and consolidated accounts for the fiscal year 2009. Unless otherwise stated, all amounts are in SKr million. Informa- tion in parentheses refers to the preceding fiscal year. The terms “IFS”, “Group”, and “Company” all refer to the Parent Company, Industrial and Financial Systems, IFS AB, and its subsidiaries.

SUMMARY

As an effect of the downturn in the global economy the overall objective for 2009 was to achieve a result in line with 2008 with an improved cash flow. EBIT increased to SKr 198 million (154) and cash flow after investments increased to SKr 186 million (98). The positive development is the result of IFS’s continued focus on project-oriented industry and markets with a strong need for well-functioning processes within logistics, maintenance, and service. Net revenue amounted to SKr 2,605 million (2,518). The positive development in earnings has further strengthened IFS’s balance sheet and the company has a positive net cash balance.

OPERATIONS

IFS is a leading provider of component-based business software developed using open standards and based on service-oriented architecture (SOA). The solutions enable companies to respond quickly to market changes and use resources in a more agile way to achieve better business performance and competitive advantage.

Founded in 1983, IFS has 2700 employees worldwide.

With IFS Applications™, now in its seventh generation, IFS has pioneered component-based ERP software. The component architecture provides solutions that are easier to implement, run and upgrade. IFS Applications is installed in over 60 countries in about 20 languages.

IFS has some 2,000 customers and over 800,000 users across seven key vertical sectors: aerospace and defense;

automotive; manufacturing; process industries; construction, contracting, and service management; retail and wholesale distribution; and utilities and telecom. IFS Applications provide extended ERP functionality, including CRM, SCM, PLM, CPM, enterprise asset management, and MRO capabilities.

IFS is today represented in approximately 50 countries through wholly and jointly owned subsidiaries, joint ventures, and partners. Operations are divided into seven

operating areas: Europe North; Europe West; Europe Central; Europe East; Americas; Africa, Asia, and Pacific;

and Defense. These segments have the operational responsibility for sales and delivery to customers. Product development and support are included in corporate functions.

MARKET ANALYSIS

Globalization entails increased competition and more complex supply chains. Companies are meeting this challenge by investing in new, improved ERP solutions to streamline operations and simplify collaboration with suppliers, customers and partners. Moreover, an increasing number of companies are doing business internationally, in part with new business models. Legislation and regulations are becoming more comprehensive, mergers and acquisitions are increasing as the economy strengthens, and many companies are moving from traditional manufacturing/

distribution to more project-based and service-oriented business models. These drivers led to a successive recovery of the ERP market from the middle of the first decade of this century to the end of 2008, when the trend was broken and the market weakened in the wake of events in the global economy. These drivers will, however, continue to be a force in the long term.

The decline in the global ERP market in 2009 primarily affected the sale of new licenses. Consulting revenue also fell somewhat, whereas maintenance and support revenue was stable. The total market decreased by more than 10%, with license sales falling by approximately 25%.

The credit restrictions that were one of the effects of the economic crisis were successively lifted during 2009.

This, combined with signs of a more general economic upswing, has begun to stabilize the ERP market. Business analysts such as Forrester and IDC expect the ERP market to grow by 3–7% during 2010, including an increase in license sales. This trend is expected to continue to increase going forward. One driver that has increased in significance is that many customers are not merely using their enterprise applications to reduce costs and increase efficiency, but also to increase the reliability, security and transparency of business processes and asset valuation.

The competitive position has not changed during 2009 and is not expect to change over the coming years.

After the consolidations of recent years, SAP and Oracle remain the principal global competitors in the industries and processes in which IFS operates. In specific segments and geographic markets, IFS also competes with a number of niche vendors.

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STRUCTURAL CHANGES

In Q3 2009 IFS acquired MultiPlus Solution AS. This acquisition is part of IFS’s strategy for growth and will

strengthen IFS’s presence in the primary target sectors of offshore; Engineering, Procurement, Construction, and Installation (EPCI); and project-based manufacturing.

NET REVENUE

SKr, million 2009

actual Translation

effect Structural

changes 2009

adjusted 2008

actual Organic

change Reported change

License revenue 426 -28 -1 397 479 -17% -11%

Maintenance and support revenue 789 -38 -5 746 703 6% 12%

Total product revenue 1 215 -66 -6 1 143 1 182 -3% 3%

Consulting revenue 1 373 -63 -6 1 304 1 310 0% 5%

Net revenue (including other revenue) 2 605 -129 -12 2 464 2 518 -2% 3%

License revenue for 2009 was lower than the previous year even though the license revenue in Q4 was some SKr 30 million higher than in Q4 2008. The global economic downturn has had an adverse effect on the timing of license revenue. Also, in 2008 IFS won a major defense contract and a corresponding deal of that size was not received

during 2009. During the year, the 10 largest license deals had a total value of SKr 136 million. The corresponding figure for 2008 was SKr 141 million. A total of 23 license agreements exceeding US$ 0.5 million in value were sold during the year.

COSTS AND EXPENSES

SKr, million 2009

actual Translation

effect Structural

changes 2009

adjusted 2008

actual Organic

change Reported change

Operating expenses 2 407 -125 -19 2 263 2 364 -4% 2%

Capital gains/losses 0 0 - 0 0 n/a n/a

Exchange rate gains/losses -2 0 0 -2 8 n/a n/a

Restructuring costs/redundancy costs -19 1 3 -15 -30 n/a n/a

Reversal of restructuring costs 5 - - 5 1 n/a n/a

Depreciation and net capitalization of product development -3 2 1 0 -52 n/a n/a

Adjusted operating expenses 2 388 -122 -15 2 251 2 291 -2% 4%

Operating expenses was SKr 43 million higher than 2008, non-currency adjusted, or SKr 82 million lower than 2008, currency adjusted. Variable expenses, such as costs related to third-party suppliers and partners, and subcontracted consultants amounted to SKr 255 million (288), a decrease of 9 percent at current exchange rates, or a decrease of 15 percent, adjusted for currency effects, primarily as a result of a shift from subcontracted consultants to own consultants in certain regions such as Europe Central. Other operating expenses amounted to SKr 2,152 million (2,076), an increase of 4 percent at current exchange rates, but a decrease of 1 percent adjusted for currency effects. The payroll expenses amounted to SKr 1,642 million (1,531), an increase of 7 percent at current exchange rates, which corresponds to an increase of 2 percent adjusted for currency effects.

PRODUCT DEVELOPMENT EXPENDITURE

Product development expenditure for the year amounted to SKr 214 million (202). Capitalized product development totaled SKr 143 million (119), and amortization of previously capitalized product development amounted to SKr 118 million (143).

PERSONNEL NUMBERS AND EFFICIENCY

The average number of employees increased slightly, amounting to 2,681 (2,663). The headcount for product development at the end of the year was 526 (519), of whom 342 (343) worked at the development center in Sri Lanka.

Net revenue per employee increased by 3 percent during 2009 to SKr 972 thousand (946). Personnel-related expenses per employee amounted to SKr 612 thousand (575), an increase of 6 percent. The number of employees at year-end was 2,664 (2,723).

EBIT

EBIT amounted to SKr 198 million (154), an improvement of 28 percent compared with 2008. EBIT before amortization and depreciation but after reversal of capitalized development expenditure and adjusted for nonrecurring items consisting of severance costs and capital gains and losses, i.e. adjusted EBITDA, amounted to SKr 213 million, corresponding to a margin of 9 percent.

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PROFIT FOR THE YEAR

Net financial items was SKr -30 million (7). Adjusted for exchange rate effects, the underlying net financial items amounted to SKr -18 million (0). Net interest income was SKr -5 million (-5).

Profit before tax improved to SKr 168 million (161) and profit for the year rose to SKr 123 million (95).

EUROPE NORTH

SKr, million 2009 2008 Change

License revenue 92 107 -14%

Maintenance and support revenue 301 284 6%

Consulting revenue 619 582 6%

Net revenue 1 060 1 005 5%

EBIT, undistributed 307 272 13%

Number of employees at the end of the period 588 594 -1%

In quarter 3 MultiPlus Solutions A/S in Norway was acquired. Europe North increased their revenue despite the financial downturn which particularly affected Sweden and Finland. This had a negative impact on primarily license sales in these countries. Maintenance revenue continued to grow and this together with the large increase in consulting revenue and in combination with improved efficiency resulted in an improvement in earnings of 13%. Some of the larger license deals were Seawell Management and Norwegian Defense.

EUROPE WEST

License revenue 90 81 11%

Net revenue 414 404 2%

EBIT, undistributed 103 109 -6%

Net revenue increased due to a growth in maintenance revenue as a result of relative high license sales in 2008.

Europe West won some large license deals during 2009 despite the fact that the UK in particular had felt the effects of the global economic downturn. Earnings remained stable. The major new license contracts were signed with a European field service company and a European telecom- munication company.

EUROPE CENTRAL

Number of employees at the end of the period 195 189 3%

The revenue in Europe Central is positively affected by a currency gain of some 10%.The net revenue for the region is in line with 2008 currency adjusted. Currency adjusted license and consulting revenue decreased slightly whilst maintenance revenue continued to grow steadily. The variable expenses have been reduced but the other operating expenses costs have increased as a result of a shift from subcontractors to own personnel. Some of the larger license deals in Europe Central were Huf and Damen Shipyards.

EUROPE EAST

Consulting revenue 106 111 -5%

Net revenue 211 243 -13%

The revenue in Europe East is negatively affected by currency, primarily the Polish zloty versus the Swedish krona.

The decrease in net revenue in local currency is 3%. The economic recession has had a major impact on Turkey and Poland which has affected the license sales in the region.

Europe East has been through a restructuring phase, communicated in 2008 and carried out in the first half of 2009, which has laid a foundation for good progress in 2010.

AMERICAS

Americas recovered from the economic downturn, and from Q2 2009 onwards showed a steady growth in licenses and maintenance revenue. Consulting revenue declined as a result of lower license sales in the 4th quarter 2008 and the 1st quarter 2009. Reduction in the number of consultants and corresponding cost reductions lead to a positive effect on earnings. The major deals in 2009 were Brookfield Renewable Power, SpaceSaver, and Toronto Transit.

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AFRICA, ASIA, AND PACIFIC

The region had a positive development with increases in all revenue streams compared to the previous year although the economic downturn had a negative impact on investments in this region. Middle East has improved their result significantly but also Asia has shown an improvement as a result of the re-organization in the area started in 2008. The major deals taken in the region were MTN Zambia and GECOL.

DEFENSE

Net revenue 98 158 -38%

EBIT, undistributed -2 42 n/a Number of employees at the end of the period 52 58 -10%

The major license contract taken in 2008 distorts the comparisons with the previous year. The defense sector is a targeted vertical and IFS has won some important defense deals in Americas, Norway, and India during 2009. These deals are recognized as revenue in the respective regions and it is only those deals where IFS Defence is a prime contractor that are recognized as license revenue in IFS Defence. The UK defense budget has been reduced, which has had a negative impact on the IFS Defence numbers and cost reductions have been carried out during 2009.

PRODUCT DEVELOPMENT

Product development in the Group is conducted primarily at the IFS development centers in Sri Lanka and Sweden.

IFS Applications 7 and 7.5 have now been implemented or are being implemented by more than 40% of IFS’s customers. The revolutionary new user interface, IFS Enterprise Explorer, has been very well received by the market. IFS Enterprise Explorer offers an entirely new user experience—with an ergonomic design that includes a built- in search engine and multimedia functionality—that simplifies the use of the ERP software and increases productivity. The new technology is the result of IFS’s long-term development work, which is directed toward making user-friendly, more efficient applications and generating increased values for customers. To this end, a

number of significant enhancements were launched during the year:

• Eco-footprint Management, a tool that is fully integrated with IFS Applications and which makes it possible to budget for, report and follow-up the environmental impact of a business throughout the value chain.

• Advanced Planning Board, which increases customers’ control of their manufacturing resources.

• Heavy Maintenance Extension, which is primarily intended for service companies in the Maintenance, Repair, and Overhaul (MRO) sector, with particular focus on the aerospace industry.

• eInvoice Adapter, which substantially improves e-invoicing, is fully integrated with Pagero and ready to be integrated with other providers.

• Inventory Planning & Replenishment, a tool that enables access to advanced functionality that supports the process of replenishing inventory at central, regional or store levels.

• Business Analytics 3.0, the latest version of IFS’s business intelligence solution, which extends

Microsoft Excel® from a desktop productivity tool to a full-fledged enterprise-scale client for planning, reporting and analysis.

Moreover, investments in product development during 2009 have focused on improvements that will be launched during 2010 within core IFS processes for projects, service

& asset management, manufacturing and supply chain management.

PARTNERS

IFS continues its established partner strategy, which means that responsibility for, and collaboration with, partners lie close to the organization or region in which the collaboration takes place. In this way, the local network of partners grows, which enhances IFS’s presence in the various markets.

The central organizations within IFS, R&D and Product & Industry Marketing, focus on partners who offer complementary products or technologies within the product or the industry segment that IFS operates in. The aim is to provide customers with solutions that increase the value of their investment in IFS Applications.

During the year, Europe North has deepened is collaboration with existing partners. An important partnership that has been further strengthened is that with Pagero, greatly enhancing the capability of IFS Applications in the area of e-invoice management.

In France, IFS collaborates actively with Capgemini, which has more than 50 consultants working with IFS Applications and who are engaged in major customer projects with IFS.

IFS Asia Pacific, in collaboration with Ides, a company based in Linköping, Sweden, has addressed the

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energy market in China. The market there is interesting because of the strong growth in the energy sector in the country. By integrating elMaster from Ides with IFS solutions already installed at a number of nuclear power stations in China, the companies can jointly offer a comprehensive solution that supports engineering processes, project management and asset management at the plants. The offering enables IFS and Ides to gain a unique competitive edge over its competitors.

In India, the ongoing cooperation with BAeHAL intensified, with an increasing number of trained

consultants being made available, and sales cooperation has grown. Other Indian partnerships include CMC Ltd, Instrumentation Ltd., Vayam Technologies, and GSC Infotech Pvt Ltd.

In Bangladesh, IFS has signed a partnership with ICE Technologies & Services Ltd with respect to increased sales collaboration in the country.

Collaboration between Centric and IFS was further intensified during 2009 through the establishment of a joint venture company, IFS Retail. IFS Retail sells and markets solutions for the retail and distribution market based on products from both companies. During its first year, IFS Retail signed three contracts with new customers and extended agreements with two existing customers.

IFS Defence, a jointly owned company with BAE Systems Ltd established in 2000, consolidated its leading position in the defense sector with its partner model that offers customers solution via global systems integrators and solutions providers such as Lockheed Martin, BAE Systems, General Dynamics, IBM, EDS, and Eurofighter.

During 2009, collaboration with partners resulted in several strategically significant agreements, including those with Lockheed Martin, Simulation Training & Support (STS), M7 Aerospace, SAAB AB and BAE Systems Technology and Solution Services.

CASH FLOW, LIQUIDITY AND FINANCIAL POSITION Cash flow from current operations before change in working capital amounted to SKr 345 million (317). Tied working capital decreased by SKr 53 million (-75) compared with the closing position in 2008, which is primarily attributable to increased customer payments. As a result, outstanding receivables were lower at year-end 2009 than in the year-earlier period. Days of sales outstanding (DSO) at year-end was 86 (96) days. DSO calculated on the monthly receivables positions during the year was 67 (72) days.

Investments totaled SKr 212 (144) million. Product development expenditure was capitalized in an amount of SKr 143 million (119). Cash flow after investments amounted to SKr 186 million (98). MultiPlus Solutions AS in Norway was acquired during the year. The investment affected cash flow with SKr -38 million. Cash flow from financing operations was SKr -146 million (-47). Loans from credit institutions decreased by SKr 113 million

during the year while they increased by SKr 17 million the year before.

Cash and cash equivalents on December 31, 2009 totaled SKr 355 million (317). The increase is attributable to the positive cash flow, but was also reduced by decreased borrowing and the distributed dividend.

The company’s financial position improved, and net liquidity, excluding pension liabilities, amounted to SKr 274 million (121). Cash and unutilized credit totaled SKr 594 million (466). External financing amounted to SKr 81 million (196). During the year, the company distributed a dividend of SKr 33 million (26).

IFS SHARE

The Parent Company is listed on the NASDAQ OMX Stockholm Mid-Cap list. The number of shareholders on December 31, 2009 was 8573. The number of shares on December 31, 2009 was 26,552,923, of which 1,391,664 were Series A shares, carrying the right to 1.0 votes per share, and 25,161,259 were Series B shares, carrying the right to 0.1 votes per share. During the year, 400,000 Series B shares in the company’s own custody after being repurchased in 2008, were cancelled.

There is no limit to the number of votes a stockholder may cast at the AGM. The company is not aware of any agreements between stockholders that limit the right to transfer shares.

Three stockholders in the company, through direct or indirect holdings in the company, represent at least one tenth of the voting rights of the total number of shares.

They are Gustaf Douglas and family and associated companies, Bengt Nilsson and associated companies, and Anders Böös and associated companies. The company’s pension trust does not exercise direct ownership of company stock.

The company is party to agreements that may be affected if a change in the control of the company occurs.

GUIDELINES FOR REMUNERATION OF MEMBERS OF THE BOARD, THE PRESIDENT, AND SENIOR EXECUTIVES

Directors’ fees are paid to the chairman of the board and directors as resolved by the AGM. For 2009/2010, director’s fees totaled SKr 2.525 million, of which the chairman of the board received SKr 1 million and other directors SKr 275, 000 each. The chief executive officer was not remunerated for work on the board. For work on the audit committee, the chairman received SKr 100,000 and another director received SKr 50,000.

Remuneration of the CEO and other members of corporate management consists of basic salary, variable remuneration, other benefits and pension contributions.

Variable remuneration shall not exceed 100% of the basic salary. The AGM of 2009 resolved to establish an incentive program whereby the company offered corporate management and other key personnel the opportunity to acquire warrants in the company. The acquisition of one warrant at

Balance sheet 2009

Board of directors’ report

revenue suBsidiaries

capital account consulting

income statement

accounting principles

segment reporting

maintenance and support assets share taxes profit

product development notes

accounts receivaBle

revenue annual report

equity payaBle share

liaBilities accounts

Balance sheet

statement of cash flows

license costs and expenses

segment reporting

accounting principles

2009 annual report

IN DU ST RI AL MA NUFACTURING

IFS APPLICATIONS ™

SOLUTIONS FOR AGILE BUSINESS

IFS APPLICATIONS ™

—FOR AGILE BUSINESS

IFS APPLICATIONS ^™

IFS APPLICATIONS ^™