INDUS TRIAL AND FINANCIAL SYS TEMS, IFS AB

I N D U S T R I A L A N D F I N A N C I A L S Y S T E M S , I F S A B

ANNUAL REPOR

T

2007

TA B L E O F C O N T E N T S

TABLE OF CONTENTS

4 Highlights

5 5-year summary 5 Financial targets

6 Message from the president 8 IFS and IFS Applications 10 The IFS stock

12 Table of contents of the annual report 13 Annual report

66 Board of directors

67 Senior management and auditors 68 Financial trend 2003–2007 70 Definitions and glossary 71 Addresses

FINANCIAL REPORTS

Quarterly report January–March April 22, 2008 Quarterly report April–June July 18, 2008 Quarterly report July–September October 21, 2008

Preliminary report on 2008 operations February 2009

ANNUAL GENERAL MEETING

The annual general meeting (AGM) will be held on Thursday

April 3, 2008 in Solna, Sweden.

H I G H L I G H T S

HIGHLIGHTS

• Product revenue during the year increased by 12% organically, continuing the positive trend from the previous year, when product revenue increased by 13%. The main reason for this positive trend is that IFS focused on, strengthened its position among, and successfully sold to companies and industries for which logistics, asset management, and service management, as well as certain types of manufacturing, are central processes.

• The 10 largest license agreements during the year had an aggregate value of SKr 103 million.

The corresponding figure for 2006 was SKr 95 million. A total of 23 license agreements valued at more than US $ 0.5 million each were signed. In all, 177 (188) new customers were added, and 778 (593) customers either upgraded or expanded their existing solutions.

• The new version of IFS’ enterprise applications, IFS Applications 7.5, and the new user interface, Aurora, were launched. IFS Applications 7.5 is the result of more than 600, 000 development hours and offers, among other things, enhanced support for global operations, including the ability to use one code base for all the major markets in the world and additional functionality for project-based companies. The first customers have already gone live with IFS Applications 7.5 and have been running it since January 2008. Aurora is a completely new experience in which an ergonomic design, a built-in search engine and multi-media functionality simplify the use of business applications and increase productivity.

• In July, Information Science Consultants Ltd (iSC), a U.K.-based company, was acquired for cash by IFS Defence Ltd, a joint-venture company owned by BAE Systems and IFS AB. iSC specializes in naval maintenance management systems and services. The company’s biggest customer is the U.K. Royal Navy.

• Net revenue reached SKr 2,356 million (2,209). License revenue increased to SKr 478 million (433), whereas maintenance and support revenue amounted to SKr 659 million (600). Consulting revenue reached SKr 1,194 million (1,140).

• EBIT amounted to SKr 141 million (120), with earnings before tax of SKr 129 million (75). Profit after tax was SKr 122 million (246). Profit in 2006 was positively affected by a revaluation of activated deferred tax claims of SKr 184 million compared with SKr 58 million in 2007.

• Cash flow from current operations amounted to SKr 174 million (252). Cash flow after investment

operations totaled SKr 20 million (86).

5 - Y E A R S U M M A R Y

5-YEAR SUMMARY

2003 2004 2005 2006 2007

Net revenue SKr, million 2 335 2 178 2 149 2 209 2 356

of which license revenue SKr, million 513 451 383 433 478

of which maintenance and support revenue SKr, million 406 470 528 600 659

of which consulting revenue SKr, million 1 302 1 174 1 175 1 140 1 194

Net revenue outside Sweden % 75% 77% 79% 80% 78%

EBIT SKr, million -29 -128 97 120 141

EBIT margin % 0% -6% 5% 5% 6%

Profit/loss before tax SKr, million -139 -204 67 75 129

Profit margin % -5% -9% 3% 3% 5%

License margin % -12% -15% -13% -9% -4%

Maintenance and support margin % 60% 61% 58% 63% 64%

Consulting margin % 21% 22% 21% 17% 16%

Product development expenditure/net revenue % 12% 14% 10% 9% 9%

Administration expenses/net revenue % 11% 11% 10% 9% 10%

Return on capital employed % neg. neg. 11% 10% 11%

Equity/assets ratio, after full conversion % 30% 37% 38% 45% 50%

Net debt SKr, million 634 363 294 166 3

Interest coverage rate times neg. neg. 2.1 2.5 6.1

Cash flow after investment operations SKr, million -169 -76 28 86 20

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

Average number of employees 2 846 2 661 2 453 2 644 2 646

Number of employees at year-end 2 684 2 583 2 600 2 630 2 627

As of fiscal year 2005, the IFRS accounting principles have been applied; fiscal years 2003 and 2004 have been restated accordingly.

For further information, see “Accounting principles”; for definitions, see page 70.

FINANCIAL TARGETS

During the coming five-year period (2008-2012) IFS’ goal is to double product revenue. This will be achieved through organic growth and the acquisition of application product companies that have customers in industries in which IFS has a strong market position. Moreover, during the five-year period, IFS aims to:

• achieve an EBIT margin of 15% and a return of 25% on average operating capital,

• over time distribute 50% of earnings after tax as dividends.

In addition to dividends, surplus capital, i.e. capital not needed for investments, expansion and other needs relating to the financial

position of the Group, will be transferred to shareholders by means of share repurchase.

M E S S A G E F R O M T H E P R E S I D E N T

MESSAGE FROM THE PRESIDENT

A continued solid performance sees IFS delivering to strategy and executing on its vision of providing a real alternative for customers and the market.

Strategic View

IFS saw a third year of profitable growth in 2007, with profits before tax increasing by 72% and net debt reduced to almost zero. This positive result is due to the successful execution of our strategy over the last two years, where our focus has been to grow revenue without increasing the cost structure.

Product revenue (licences, maintenance and support) continued to increase and is very much the priority for the business as IFS is increasingly positioning itself as a software product company. This focus will continue to generate better margins, more predictable recurring revenue and improved cooperation with partners.

Starting in 2008, IFS has embarked on a five-year strategy with the goal of doubling product revenue through continued organic growth and by acquiring application product companies. The Board of IFS has communicated clear long- term financial targets for this growth strategy which cover the coming five-year period (2008-2012). During this time, IFS plans to achieve an EBIT margin of 15% and increase dividends to 50% of earnings after tax. Additional surplus capital, not required for investments, expansion and other needs relating to the financial position of the group, will be used for repurchasing shares.

This signifies a major evolution in the strategy of IFS. As a first step on this new route the Board proposes to pay out a dividend in 2008 of SKr 0.10 /share.

IFS—the REAL alternative and the intelligent choice The enterprise software market is continuing to evolve and is driven by both technology advances and the demands of a rapidly changing world market. I strongly believe that IFS is the real alternative for discerning customers in an ever- consolidating IT sector. IFS will be increasingly attractive to organizations in our target markets because we will continue to provide deepening, truly needed functionality, delivered on a future-proof technology platform, and implemented in the step-by-step manner best suited to our customers.

The first sight of Aurora

IFS’ new user interface ‘Aurora’ debuted to universal acclaim at the IFS World Conference in Berlin in October. Over 1,000 attendees, including customers, prospects, partners and the media from 44 countries, saw IFS bring the concepts of good design to the world of business software with Aurora. This visually attractive and functionally rich front-end to IFS Applications will deliver increased usability and user produc- tivity for our customers. Aurora was developed and launched

two years ahead of the original planned date. This is a power- ful demonstration of the new agility we have fostered in our Product Organization, which now works in closer coopera- tion with IFS country operations to drive increased sales.

The outlook for 2008

The indicators show that 2008 is likely to be more turbulent and challenging for the global economy. Fortunately IFS’

strategic focus is on industries and markets that are somewhat buffered from downturns in consumer confidence—for example, the defense markets, infrastructure, utilities and oil sector businesses, which are influenced by different business drivers.

IFS begins 2008 in a stronger position with a clear vision to provide a real alternative for the market. We have an

articulated strategic direction for growth, and we are in a financially stronger position to execute on this. Aurora will deliver a technologically advanced refresh to our product set to enhance its competitiveness. IFS is ready to face the opportunities of the coming year.

Alastair Sorbie

President and CEO

M E S S A G E F R O M T H E P R E S I D E N T

I F S A N D I F S A P P L I C AT I O N S

IFS – THE GLOBAL ENTERPRISE APPLICATIONS COMPANY

Today IFS stands as a growing independent provider of component-based business software to a select number of industry verticals worldwide. IFS' solution, IFS Applications, helps organizations be more agile in an increasingly turbulent global business environment.

IFS' technology innovations make IFS Applications easier to implement and upgrade. IFS' customer orientation, evident from the origins of the company, makes IFS a true collaborative business partner.

Together these factors make IFS the REAL alternative in an ever consolidating IT sector.

IFS – Snapshot

IFS is an organization with a truly global reach, with 79 IFS offices and over 40 distributors around the world. IFS Applications is available in 54 countries and in more than 22 languages. IFS has over 2,000 customers and more than 600,000 end users of IFS Applications.

IFS has around 2,600 employees worldwide. With a major development center in Asia since 1997, IFS was among the first to realize the advantages of globalizing its operations. IFS' long-held values are simplicity, commitment & profession- alism. These values form the basis of how the company works—and guide the way it interacts with customers, partners, the market, and colleagues.

IFS – gets closer to customers

IFS was founded in 1983 by five engineers from the University of Linköping, Sweden. They dreamt of starting a company that was different—somewhere people really wanted to work, that was a distinctive business partner for clients. When IFS landed its first customer, the young entrepreneurs literally pitched a tent and camped outside the organization’s plant, working double shifts until the job was done. This desire to be closer to customers is still at the heart of how IFS continues to do business—with a direct involvement in most customer projects and an ongoing program of joint software develop- ment together with clients. And the first customer still uses IFS’ solutions today.

IFS Applications – The solution for the agile enterprise IFS Applications is a functionally rich extended ERP solution which powers the business processes of organizations of all sizes. IFS focuses on 7 broad industry segments:

• Aerospace & Defense,

• Automotive,

• Construction, Contracting & Service Management,

• Manufacturing,

• Process Industries,

• Retail & Wholesale,

• Utilities and Telecom.

This specialization makes IFS able to deliver industry-specific functionality to give customers the competitive edge in their own markets.

In the past few years IFS has seen increased demand for

‘project-centric’ capabilities across a number of our targeted verticals. IFS has responded quickly to provide enhanced software components to better manage risk, cost, cash, time and resources in real-time. This enables a business to manage with an eye on the future rather than with historical

information alone.

IFS Applications’ ‘project-centric’ capabilities let a

company take informed business decisions looking across their global value chain. When the success of products, services, projects and even brand-reputation increasingly rely on elements provided by partners, suppliers and sub-contractors, traditional ways of working and traditional ERP systems are not enough. With IFS, information is assigned to a project which can be reviewed minute-by-minute. The need for these capabilities are seen not only in the traditional project-related industries such as construction, but also in sectors like manufacturing, where organizations need to add the capability to manage risk, complex contracts and sub-contractor rela- tionships as more production is outsourced and off-shored.

IFS Applications was always strong in such areas, but IFS has rapidly enhanced these business components to meet the new challenges.

IFS – 25 years of technology 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 over a decade. This means IFS is uniquely placed to supply business components that take advantage of today’s service-oriented architectures (SOA) and the company has been able to focus its technology investments on the next wave of innovations—rather than having to componentize and integrate disparate systems.

IFS continued to drive innovation in 2007 with the debut of

the new user interface, Aurora, at the company’s successful

world conference in Berlin in October. With Aurora, IFS

brings the world of good design to business software. Visually

appealing elements, ergonomic design and collaboration

features will make customer employees more productive.

I F S A N D I F S A P P L I C AT I O N S

S T O C K

STOCK

IFS Series B stock is listed since April 28, 1998 on the Stockholm stock exchange and is traded on the OMX Nordic Exchange, 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, 2007, IFS’ capital stock amounted to SKr 526,933,314, represented by 263,466,657 shares, before dilution, with a nominal value of SKr 2 per share. These comprised 13,916,638 Series A shares and 249,550,019 Series B shares. After full dilution, the number of shares amounts to 270,093,660.

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 8.1 million Series A shares and 213.7 million Series B shares were traded. The trading thereby amounted to 87% of the average total number of listed shares.

The principal owner is Gustaf Douglas with associated companies, who controlled 18.9% of the capital and 17.5% of the voting rights on December 31, 2007.

Terms and conditions for convertible debentures/bonds issued are detailed in note 35 of the annual report.

Stockholders

Stockholder

Number of series A shares

Number of series B shares

Share of capital

Share of voting rights

Gustaf Douglas and associated companies 2 028 000 47 883 000 18.9% 17.5%

Bengt Nilsson and associated companies 3 973 213 1 413 235 2.0% 10.6%

Anders Böös and associated companies 3 950 000 89 349 1.5% 10.2%

NEC Corporation 1 100 000 6 790 000 3.0% 4.6%

Catella funds - 17 450 820 6.6% 4.5%

DnB NOR funds - 11 204 456 4.3% 2.9%

Skandia Liv - 8 276 252 3.1% 2.1%

Fourth Swedish National Pension Fund - 7 720 400 2.9% 2.0%

Sif - 7 623 273 2.9% 2.0%

AMF Pension funds - 6 386 000 2.4% 1.6%

Skandia funds - 6 127 020 2.3% 1.6%

HQ Bank AB 2 000 5 878 841 2.2% 1.5%

Lannebo funds - 5 456 000 2.1% 1.4%

DnB/Carlson funds - 3 486 700 1.3% 0.9%

SEB - 3 428 577 1.3% 0.9%

Other stockholders 2 863 425 110 336 096 43.2% 35.8%

Total 13 916 638 249 550 019 100.0% 100.0%

Source: SIS Ägarservice, December 28, 2007

Share category

Number of shares

Number of voting rights

Share of capital

Share of voting rights

Series A shares 13 916 638 13 916 638 5.3% 35.8%

Series B shares 249 550 019 24 955 002 94.7% 64.2%

Total 263 466 657 38 871 640 100.0% 100.0%

Source: SIS Ägarservice, December 28, 2007

Distribution of stockholders

Share of capital

Share of voting rights

Swedish individuals 37.5% 53.6%

Swedish mutual funds 18.9% 12.8%

Swedish institutional owners 15.4% 10.4%

Swedish owners 71.8% 76.8%

International owners 28.2% 23.2%

Total 100.0% 100.0%

Source: SIS Ägarservice, December 28, 2007

S T O C K

Stockholder statistics Number of shares held

Number of stockholders

Proportion of stockholders

Number of shares

Share of capital

Share of voting rights

1–1 000 6 346 60.8% 2 325 198 0.9% 0.8%

1 001–2 000 1 438 13.8% 2 449 111 0.9% 0.7%

2 001–5 000 1 214 11.6% 4 276 121 1.6% 1.2%

5 001–10 000 673 6.4% 5 236 374 2.0% 1.4%

10 001–50 000 551 5.3% 12 266 519 4.7% 3.5%

50 001–100 000 83 0.8% 6 091 802 2.3% 2.4%

100 001– 141 1.3% 230 821 532 87.6% 90.0%

Summa 10 446 100.0% 263 466 657 100.0% 100.0%

Source: SIS Ägarservice, December 28, 2007

IFS Series B share price development and trade volume

January 1, 2007–December 31, 2007 2003–2007

Shares and convertible debentures/bonds

Series A shares Series B shares KV5B

Nominal amount, SKr million 35

Conversion price, SKr 5.25

Maturity date 2008-03-31

No of shares after dilution 13 916 638 249 550 019 6 627 003

TA B L E O F C O N T E N T S O F T H E A N N U A L R E P O R T

TABLE OF CONTENTS OF THE ANNUAL REPORT

13 Board of directors’ report 21 Consolidated income statement 22 Consolidated balance sheet – assets

23 Consolidated balance sheet – equity and liabilities 24 Consolidated capital account

25 Consolidated statement of cash flows 26 Income statement of the parent company 27 Balance sheet of the parent company– assets

28 Balance sheet of the parent company– equity and liabilities 29 Capital account of the parent company

30 Statement of cash flows of the parent company 31 Notes to the financial statements

Note 1 Accounting principles 31

Note 2 Segment reporting 40

Note 3 License revenue 42

Note 4 Maintenance and support revenue 42

Note 5 Other revenue 42

Note 6 License expenses 42

Note 7 Other operating income 43

Note 8 Other operating expenses 43

Note 9 Development expenditure 43

Note 10 Transactions between subsidiaries 43 Note 11 Operating expenses per type of cost 43

Note 12 Auditors’ fees 43

Note 13 Salaries, other remunerations, and social costs 44 Note 14 Remunerations paid to senior executives 45 Note 15 Transactions with related parties 46 Note 16 Average number of employees per country 46 Note 17 Results from participations in subsidiaries 47 Note 18 Results from participations in associated companies 47

Note 19 Financial income 47

Note 20 Financial costs 47

Note 21 Taxes 47

Note 22 Profit and dividend per share 48

Note 23 Intangible fixed assets 48

Note 24 Tangible fixed assets 50

Note 25 Operating lease agreements 51

Note 26 Participations in subsidiaries 52

Note 27 Participations in associated companies 53

Note 28 Receivables in subsidiaries 54

Note 29 Deferred tax claims and tax liabilities 54

Note 30 Other long-term receivables 55

Note 31 Accounts receivable 55

Note 32 Other receivables 55

Note 33 Liquid assets 55

Note 34 Stockholders’ Equity 55

Note 35 Convertible debentures/bonds 56

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 Acquisition of joint ventures consolidated using the

proportional method 62

Note 47 External sale of subsidiaries/operations 62 Note 48 Acquisition of tangible fixed assets 62 Note 49 Financial risk management and derivatives 62

Note 50 Conversion rates 64

Note 51 Information about the Parent company 64

65 Audit report

B O A R D O F D I R E C T O R S ’ R E P O R T

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 2007. Unless otherwise stated, all amounts are in SKr million. Information 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

The overall objective for 2007 was to grow product revenue, improve profitability and strengthen cash flow. Product revenue increased during the year by 12% organically and earnings before tax by 72%. The main reason for the positive trend was that IFS focused on, consolidated its strong position among, and successfully sold to companies and industries for which logistics, asset management and service, as well as certain types of manufacturing, are central processes. Expenses increased somewhat more than expected, mainly because of inflationary pressure in certain markets. In addition, variable costs increased. The target of improved cash flow was not achieved, primarily due to the postponement of customer payments until after the turn of the year. The financial

position is good, however, and the company is free of net debt.

Net revenue amounted to SKr 2,356 (2,209) million, EBIT improved to SKr 141 (120) million, and cash flow after investments totaled SKr 20 (86) million.

Operations

IFS is a leading provider of component-based business software developed using open standards and based on service-oriented architecture. The solutions enable

organizations 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 2,600 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 available in 54 countries in 22 languages.

IFS has over 600,000 users across seven key vertical sectors:

aerospace & defense; automotive; manufacturing; process industries; construction, contracting & service management;

retail & wholesale distribution and utilities & telecom. IFS Applications provide extended ERP functionality, including

CRM, SCM, PLM, CPM, enterprise asset management, and MRO capabilities.

IFS is today represented in 50 countries through wholly and jointly owned subsidiaries, joint ventures, and partners.

Operations are divided into three regions, EMEA, Americas, and Rest of the World, which have the operational responsibil- ity for sales and delivery to customers. Product development and support are included in corporate functions.

The Market

Globalization has led to increased pressure from competitors and more complex supply chains. To meet these challenges, many companies are investing in new, improved enterprise applications with the aim of streamlining operations and simplifying collaboration with suppliers, customers and partners. Moreover, an increasing number of companies are operating internationally, using partly new business models.

Legislation and regulations are becoming more extensive, mergers and acquisitions are more frequent, and many companies are moving from traditional manufacturing/

distribution to more project- and service-based business models.

Although these drivers, which have led to increased growth in the ERP market in recent years, remain, there is increasing uncertainty as to the effects of economic trends. Analysts such as Gartner and AMR expected the total market to grow by 8–

10% up to 2010. Surveys of IT budgets for 2008 indicate an increase of 5–12%. IFS expects that growth in the market will slow down but that the weaker economic trend will primarily impact the consumer market and have limited effect on industries such as defense, construction and energy, in which IFS does much of its business.

The situation with respect to competition remained unchanged during 2007 and is expected to remain unchanged in the coming years. After the consolidation of recent years, SAP and Oracle continue to be the main competitors in the industries in which IFS operates.

Structural Changes

In July, Information Science Consultants Ltd (iSC), a U.K.- based company, was acquired for cash by IFS Defence Ltd, a joint-venture company owned by BAE Systems and IFS AB.

iSC specializes in naval maintenance management systems and services. The company’s biggest customer is the U.K. Royal Navy.

In Asia Pacific, actions were taken to reduce costs by

streamlining organizational structures and increasing

representation via partners. Anthony Lorge assumed

responsibility for Asia Pacific.

B O A R D O F D I R E C T O R S ’ R E P O R T

Net Revenue

SKr, million

2007 actual

Translation effect

Structural changes

2007 adjusted

2006 actual

Organic change

Reported change

License revenue 478 8 0 486 433 12% 10%

Maintenance and support revenue 659 11 -2 668 600 11% 10%

Total product revenue 1 137 19 -2 1 154 1 033 12% 10%

Consulting revenue 1 194 19 -6 1 207 1 140 6% 5%

Net revenue (including other revenue) 2 356 38 -8 2 386 2 209 8% 7%

Product revenue continued to develop positively compared with previous years, with an organic improvement of 12%

compared with 2006. The increase in license revenue is the result of strong positions in capital-intensive industries such as the defense, energy, communications, construction, and process industries. Common to these is the fact that logistics, service, asset management and certain types of project-based manufacturing are central processes. Moreover, IFS has a modern, competitive product with deep functionality, strong references and many partners in these industries.

During the year, the 10 largest license agreements had a total value of SKr 103 million. The corresponding figure for 2006 was SKr 95 million. A total of 23 license agreements exceeding US $ 0.5 million in value were sold during the year.

License agreements were signed with 177 (188) new customers, and 778 (593) customers upgraded or expanded their existing solutions. EMEA accounted for 68% (58) of license revenue, Americas for 15% (22), and Rest of the World for 17% (20).

The growth in maintenance and support revenue is attributable to a continued increase in the customer base and

number of users per customer and the fact that fewer customers have terminated their maintenance contracts. The higher amount of maintenance and support revenue also enables greater predictability and stability with respect to revenue and cash flow. The regional shares of the total maintenance and support revenue were stable. EMEA contributed 71% (72), the Americas 16% (17) and Rest of the World 13% (11).

Utilization of consultants, however, was uneven within the Group. EMEA reported strong sales and high levels of utilization, whereas other regions were reported low levels of utilization at times. Uneven utilization, combined with staff turnover and inflationary pressure, had a negative effect on the consulting margin, which was 16% (17) in 2007. Toward the end of the year, improved utilization and a higher billing rate, combined with a reduction in the effect of staff turnover, improved the consulting margin to 21% (16) during the fourth quarter. EMEA generated 77% (75) of the Group’s consulting revenue, Americas 14% (16), and Rest of the World 9% (8).

Costs and Expenses SKr, million

2007 actual

Translation effect

Structural changes

2007 adjusted

2006 actual

Organic change

Reported change

Operating expenses 2 215 35 -5 2 245 2 089 7% 6%

Capital gains/losses 3 - - 3 3 n/a n/a

Exchange rate gains/losses -13 - - -13 -11 n/a n/a

Restructuring costs/redundancy costs -3 - - -3 -13 n/a n/a

Depreciation and net capitalization of product development -52 -1 - -53 -43 n/a n/a

Adjusted operating expenses 2 150 34 -5 2 179 2 025 8% 6%

Variable expenses, such as costs related to third-party suppliers and partners, and subcontracted consultants amounted to SKr 264 (240) million, an increase of 10% at current exchange rates, primarily as a result of higher volumes.

Other operating expenses amounted to SKr 1,951 (1,849) million, an increase of 5% at current exchange rates, mainly due to increased payroll expenses. These amounted to SKr 1,420 (1,350) million, an increase of 5% at current exchange rates, of which fixed salary increases accounted for 3%. The remainder of the increase pertains to an increase in variable remuneration, a change in personnel mix, and other personnel- related expenses. In the fourth quarter, other expenses increased by SKr 10 million related to provisions made to cover ongoing disputes with suppliers.

Product development expenditure

Product development expenditure for the year amounted to SKr 187 million (190). Capitalized product development reached SKr 122 million (125), whereas amortization of previously capitalized product development amounted to SKr 146 million (139).

Personnel numbers and efficiency

The average number of employees was generally unchanged, amounting to 2,646. The headcount for product development at the end of the year was 481 (502), of whom 329 (321) worked at the development center in Sri Lanka.

Net revenue per employee increased by 7% during 2007 to SKr 890,000 (835,000). Personnel-related expenses per employee amounted to SKr 537,000 (511,000), an increase of 5%.

The number of employees at year-end was 2,627 (2,630).

B O A R D O F D I R E C T O R S ’ R E P O R T

EBIT

EBIT amounted to SKr 141 million, an improvement of 18%

compared with 2006. Provisions of SKr 10 million related to two disputes had a negative impact on EBIT. EBIT before amortization and depreciation but after reversal of capitalized development expenditure and adjusted for one-time items consisting of severance costs and capital gains and losses, i.e.

adjusted EBITDA, reached SKr 206 million, corresponding to a margin of 9%.

Profit for the Year

Net financial items improved by SKr 33 million to SKr -12 (- 45) million. Adjusted for exchange rate effects, the underlying net financial items amount to SKr -17 (-37) million. The conversion and maturity of convertible debentures/bonds during 2007 reduced financial costs related to the convertible debentures/bonds by SKr 18 million.

With IFS recording three consecutive years with positive pre-tax results each quarter, activated deferred tax claims have been re-evaluated. The total net effect on profit for the year is SKr 58 (184) million, mainly as a result of deficit deduction.

Profit before tax improved to SKr 129 (75) million, with profit for the year decreasing to SKr 122 (246) million.

EMEA

SKr, million

License revenue 325 247 32%

Maintenance and support revenue 467 432 8%

Consulting revenue 921 858 7%

Net revenue 1 723 1 556 11%

EBIT 449 420 7%

Number of employees at the end of the period 1 241 1 124 10%

The region, accounting for 73% of IFS net revenue in 2006, consists of operations in Europe (excluding Eastern Europe), the Middle East, India and Africa, as well as consulting operations in Sri Lanka, and is represented in 20 countries, of which independently owned partners account for 5. The joint venture company, IFS Defence Ltd, owned 50/50 with BAE Systems, is also included in the region.

The region consists of mature markets, e.g. operations in Scandinavia, as well as markets showing high growth and/or growth potential, e.g. in the Middle East, India, and IFS Defence.

EMEA increased its revenue by 11% compared with 2006, primarily as a result of increasing product revenue. License revenue increased substantially in Benelux, France and the U.K. Operations in the Nordic region also displayed positive trends as a consequence of higher consulting revenue toward the end of the year. Operations in the Middle East reported lower net revenue, but comparison with 2006 is affected by the number of very large contracts signed in that year. License sales in IFS Defence did not meet expectations because license contracts were delayed. However, the volume of ongoing sales

continues to be large, and IFS Defence is the preferred vendor in a number of major defense projects.

Consulting operations were strengthened considerably toward the end of the year, with higher levels of invoicing and better margins driven by strong license sales and an increase in utilization and billing rates. The negative effects of problem- atic projects in the Nordic region and the high staff turnover decreased during the latter part of the year.

A total of 77 new customers were added, and 468 customers upgraded or expanded their existing solutions. New customers in 2007 include Neste Oil in Finland, Saab Microwave Systems in Sweden within aerospace and defense, Heerema Fabrication Group in Holland and Wellstream in the U.K. within

construction, contracting and service management in the oil and gas industry, and the National Hydroelectric Power Corporation, a significant breakthrough in the energy and utilities industry in India.

Americas

SKr, million

License revenue 72 97 -26%

Maintenance and support revenue 107 103 4%

Consulting revenue 161 186 -13%

Net revenue 340 388 -12%

EBIT 109 104 5%

Number of employees at the end of the period 209 224 -7%

The region, which accounted for 15% of IFS net revenue in 2007, consists of operations in the U.S.A., Canada and Latin America and is represented in five countries, of which independently owned partners account for three. The vast majority of the outcome in the region relates to the US market.

Operations in Americas have undergone a substantial improvement in recent years, although net revenue for 2007 was lower, mainly because of contract postponements in the defense industry. The volume of ongoing sales in the defense sector has increased considerably, however, due in part to the increase in publicity related to ongoing implementation projects for the US Air Force. The increased activity in the defense industry has led to a growing interest in collaborating with IFS, and new alliances were established with corporations such as CSC, Booz Allen Hamilton and SAIC.

Revenue was negatively affected by exchange rate effects.

The organic decrease in net revenue was 5%. As a result of successful cost containment, however, earnings improved, increasing by 13% adjusted for exchange rate effects.

A total of 37 customers were added and 189 customers

either upgraded or expanded their existing solutions. New

customers in 2007 include Clancy Group and Tindall

Corporation within constructing, contracting and service

management, Hecla Mining in the process industry, and

Sevens Seas Water and Horizon Utilities. The latter contract is

IFS’ first energy and utilities customer in the U.S.A.

B O A R D O F D I R E C T O R S ’ R E P O R T

Rest of the World

SKr, million

License revenue 80 87 -8%

Maintenance and support revenue 83 64 30%

Consulting revenue 110 95 16%

Net revenue 282 251 12%

EBIT 5 -8 n/a

Number of employees at the end of the period 387 463 -16%

The region, which accounted for 12% of IFS net revenue in 2007, consists of operations in Asia Pacific and Eastern Europe, with representation in 25 countries, of which independently owned partners account for 10.

Net revenue in the region increased during the year as a result of an increase in maintenance, support and consulting revenue in Eastern Europe, primarily in Poland, Russia, and the Czech Republic. During the year actions were taken in Asia Pacific to simplify organizational structures and reduce cost levels. These actions had a negative impact on earnings for the year. Despite this, earnings in Rest of the World improved thanks to positive developments mainly in Poland and Russia.

In all, 64 customers were added in the region, and 121 customers either upgraded or expanded their existing solutions. New customers included Varz-400 from Russia in the aerospace and defense industry, AB Equipment from New Zealand and Transsystems SA from Poland in the engineering industry, KVK from Turkey in the retail and wholesale industry, and Hornonitrianske bane Prievidza from Slovakia in the process industry.

Product Development

The Group’s product development is carried out mainly in its development centers in Sri Lanka and Sweden. During the fall, the new version of IFS Applications and an entirely new user interface, Aurora, were launched at the IFS World Conference for customers, business analysts, and partners. The World Conference was held in Berlin October 14–17 and attracted more than 1,000 attendees. The new version, IFS Applications 7.5, is the result of more than 600, 000 development hours and offers enhanced support for global operations, including the ability to use one code base for all the major markets in the world and additional functionality for project-based companies.

Aurora is a new innovative user interface for enterprise applications that adapts itself to what users need and the way they work. Aurora is a completely new experience in which an ergonomic design, a built-in search engine and multi-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 to use in order to increase customer benefits. The first customers have already been running IFS Applications 7.5 since January 2008, and

deliveries of Aurora will commence in the second half of 2008.

Partners

In 2007, efforts increased to establish new partnerships and enhance collaboration with existing partners. The aim was to increase the agility of the consulting operations and widen the network of partners in order to improve IFS’ presence in various markets and add complementary products and technologies. Marketing and consulting collaboration with Logica/VM-data was expanded in Scandinavia, and an alliance was formed with Tata consultancy Services in asset manage- ment and service management. Product collaboration was initiated with Savi Technology in logistics and with Profit Base in business intelligence. In addition, a product and marketing collaboration was established with Centric to supply enter- prise applications to European retailers. This partnership will enable IFS to reach a large new market without major invest- ments in product development. Moreover, an alliance was entered into with Ides to deliver enhanced lifecycle manage- ment to organizations in the energy and utilities industry, and product collaboration was begun with ClickBase in respect of business intelligence and with Pagero for e-invoicing. The partnership with Pagero is an example of IFS’ efforts to help customers reduce their environmental impact. In the U.S.A., new and deeper collaboration was established with companies such as CSC, Booz Allen Hamilton and SAIC in the aerospace and defense industry.

Cash Flow, Liquidity, and Financial Position

Cash flow from current operations before change in working capital amounted to SKr 283 (227) million. Tied working capital increased by SKr 109 million compared with the closing position in 2006, which is primarily attributable to delays in customer payments in certain projects. As a result, outstanding receivables were higher than normal at year-end.

Days of sales outstanding (DSO) at year-end was 94 (84) days.

DSO calculated on the monthly receivables positions during the year was 69 (67) days.

Investments totaled SKr 154 (166) million. Product development expenditure was capitalized in an amount of SKr 122 (125) million. Cash flow after investments amounted to SKr 20 (86) million. Cash flow from financing operations amounted to SKr -140 (-16) million. Loans from credit institutions decreased by SKr 126 million during the year.

Liquid funds on December 31, 2007, totaled SKr 254 (372) million. The decrease reflects the amortization of loans.

The financial position strengthened, with a net cash position at year-end of SKr 75 (67) million, excluding convertible bonds and pension liabilities. Cash and unutilized lines of credit amounted to SKr 479 (405) million. External financing totaled SKr 213 (478) million, of which a booked liability for convertible bonds constituted SKr 34 (173) million.

During the year, convertible debentures/bonds correspond-

ing to a nominal value of SKr 154 (47) million were converted

to shares. In addition, SKr 3 million was repaid when the

KV3B and KV4B convertibles debentures matured. The total

B O A R D O F D I R E C T O R S ’ R E P O R T

nominal value of outstanding convertible bonds at year-end was SKr 35 (192) million.

At the end of the year, the Parent Company entered into a new financial agreement with a duration of 2.5 years.

CORPORATE GOVERNANCE

IFS Stock

The Parent Company is listed on the OMX Nordic Exchange, Stockholm Mid-Cap list. The number of stockholders on December 31, 2007 was 10,439. The number of outstanding shares on December 31, 2007 was 263,466,657, of which 13,916,638 were Series A shares, carrying the right to 1.0 votes per share, and 249,550,019 Series B shares, which carry the right to 0.1 votes per share. The company has an outstanding convertible bond program which on full conversion will entail an increase in the number of shares of 6,627,003 Series B shares. The conversion price is SKr 5.25.

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.

Annual General Meeting of Stockholders

The annual general meeting of stockholders (AGM) shall elect the members of the board. Changes in the articles of

association can be adopted by the AGM or an extraordinary meeting of stockholders.

The Annual General Meeting of Stockholders (AGM) held on March 28, 2007 resolved to re-elect all members of the board.

The AGM for 2008 will be held on April 3, in Solna. The nominations committee was announced in a press release on October 30, 2007, and comprises Gustaf Douglas, representing the Douglas family and associated companies, Caroline av Ugglas, representing Skandia, Ulf Strömsten, representing Catella Fonder, Bengt Nilsson, representing the founders, and Anders Böös in his capacity as chairman of the board.

The nominations committee’s proposals for the AGM for 2008 will be announced in connection with the official notice convening the AGM.

Board and Management

Since the AGM of 2007, the board of directors of IFS has consisted of Anders Böös, Gregory Gorman, Ulrika Hagdahl, Bengt Nilsson, Jacob Palmstierna, Alastair Sorbie, and

Christina Stercken. Anders Böös is chairman of the board;

Bengt Nilsson is deputy chairman.

Since March 10, 2006, Alastair Sorbie has been president and chief executive officer. Alastair Sorbie was previously responsible for the EMEA region and has been employed by IFS since 1997.

The Board of Directors’ Work

IFS is not formally part of the group of companies included in the initial introduction of the Swedish Code of Corporate Governance. However, its ambition is to fulfill applicable parts of the code and its guidelines.

The work of the board of directors is conducted in accordance with the requirements of the Swedish Companies Act, the listing agreement of the Stockholm Stock Exchange, other rules and regulations relevant to the company, and operating procedures adopted by the board. A specific instruction regulates the division of tasks between the board and the president, the forms of financial reporting, and the president’s assignments and right to make decisions.

Furthermore, the board establishes a finance policy that regulates risk related to financing, interest, liquidity, credit, and currency. It also determines an information policy that regulates the way in which IFS disseminates information. The operating procedures of the board, related instructions and the information policy are reviewed annually. Other instructions and principles are reviewed as required.

In accordance with the current operating procedures, the board shall meet at least six times per year (in addition to the constitutory meeting held after the AGM). Each ordinary meeting treats issues related to business and market development, adherence to the business plan and earnings, cash flow and financing, the current outlook, and acquisitions, divestment and pledged guarantees. One board meeting is dedicated mainly to strategic issues, and one is dedicated to the business plan and budget. Auditors participate in two board meetings per year. Furthermore, the board is regularly informed by the president concerning developments in IFS.

In 2007, the board met 10 times (2 of which were by correspondence) in addition to the constitutory meeting after the AGM. The work of the board in 2007 focused on managing IFS’ profitability issues, organizational structure, strategic position, and outlook. During the year, regional managers and other senior executives, according to a rolling schedule, have presented and discussed their areas of responsi- bility with the board.

The work of the board in 2007 was evaluated at a plenary session on the basis of an agenda established in advance. No external evaluation of the board was conducted during the year.

Committee Work

The board has decided not to appoint separate compensation and audit committees.

Remuneration of the president is determined by the board

as are the principles and earnings targets for variable

B O A R D O F D I R E C T O R S ’ R E P O R T

remuneration of the president and senior executives reporting to the president. Other remuneration of senior executives reporting to the president is determined in consultation with the chairman of the board, and information is subsequently provided to the other members of the board.

Audit issues are treated by the entire board. Normally, the board and IFS’ external auditors meet two times a year, in connection with the board meeting in September and at the year-end closing meeting in January. The meeting in

September deals with specific items that are to be scrutinized, and the January meeting follows up the completed audit.

Förvaltnings AB Wasatornet, the principal owners of IFS, convenes the nominations committee, which, in addition to the chairman of the board, shall consist of a representative of the principal owners, a representative of each of the two largest institutional owners, and a representative of the other stockholders, who is elected from among the founders. Prior to an AGM that shall elect a board member and/or the chairman of the board and/or an auditor and/or resolve pertaining to remuneration of a board member and/or an auditor, the nominations committee shall prepare a resolution for the AGM in respect of such decisions. The nominations committee shall also propose a chairperson for the AGM.

In accordance with the present financial policy, IFS shall have a finance committee that ensures compliance with regulations and guidelines for handling financial risks in line with the finance policy adopted by the board. During the year, changes continued to be made and work was carried out to successively implement the finance policy. For this reason, no finance committee was appointed.

External Audit

The auditors elected at the AGM in 2007 for a period of four years are Öhrlings Pricewaterhouse Coopers, represented by Lars Wennberg, as principal auditor and Nicklas Kullberg as co-responsible auditor.

Fees paid to Öhrlings Pricewaterhouse Coopers and other auditors for 2007 amounted to SKr 8 (11) million, of which SKr 1 (3) million pertains to other assignments. In addition to the external audit, the auditors have been engaged for certain advisory and analysis assignments.

Guidelines for Remuneration of Members of the Board, the President, and Senior Executives

The chairman and members of the board are remunerated in accordance with the resolution adopted by the AGM. For 2007/2008, members of the board were paid SKr 2 million, of which the chairman received SKr 750,000, and the president, SKr 0.

Remuneration of the president and other senior executives consists of a basic salary, variable remuneration, other benefits, and pension contributions.

In 2007 the president had an annual basic salary of £210,000 and a premium-based pension with a premium corresponding to 15% of the basic salary. Variable remuneration shall not exceed 50% of the basic salary. The variable remuneration for 2007 was linked to the Group’s EBIT margin. As the targets

for 2007 were not met, no variable remuneration will be paid.

For further information, please see Note 14.

Resolution Concerning Guidelines for Remuneration of Senior Executives

The proposal of the board of directors, for adoption at the 2008 AGM, in respect of guidelines for remuneration of senior executives is the following.

The board of directors proposes that guidelines for remuneration of senior executives applied in previous years continue to apply, with the amendments and additions given below.

The board of directors proposes that variable remuneration of senior executives, including the president, be amended to enable it to comprise a maximum of 75% of basic salary.

Variable remuneration for senior executives is not expected to exceed SKr 5,564 thousand for fiscal 2008.

At the 2008 AGM, the board of directors also intends to submit a proposal in respect of a subscription warrant plan that will enable senior executives in the Group to acquire subscription warrants. The acquisition of a subscription warrant at market price entitles to holder to obtain one subscription warrant without any consideration being paid.

For employees outside Sweden, adjustments might be required to ensure compliance with particular regulations or market conditions. Compared with the current guidelines for remuneration of senior executives, it is proposed that the proposal concerning the guidelines, for adoption at the 2008 AGM, be amended to enable the above subscription warrant plan to be implemented. The total cost to the company (including social security fees) for warrants that are not acquired at market price is expected to amount to approxi- mately SKr 1 million.

Stock Market Information, etc.

IFS issues information in accordance with the information policy established by the board.

The annual and quarterly reports are published in Swedish and English. Press conferences for analysts, brokers, and journalists were held in connection with the quarterly reports.

In addition, information sessions and meetings are held regularly during the year with the media and the finance market.

Corporate governance information, the annual and quarterly reports, and press releases are available at www.ifsworld.com, where information can be ordered or subscribed for. The annual report for 2007 will not be distributed in printed form.

The board, management, and certain other senior executives who are registered as insiders may trade in shares according to current market praxis. No additional internal regulations exist.

Financial Risk Management

In the course of its business, the Group is exposed to risk

related to currency, financing and interest rates. Such risks and

their management are described in Note 49 and in the section

covering Risks and Uncertainties below.

B O A R D O F D I R E C T O R S ’ R E P O R T

Accounting Principles

The Group applies the IFRS accounting principles approved by the European Commission. No changes in accounting principles have been made during 2007 compared with those prevailing during the previous year.

Risk and Uncertainties

In its operations IFS is confronted with certain risk elements that can to a greater or lesser extent have an impact on operational outcome. One such risk is the rapid technological development in the industry, which can create the need for more substantial technology changes at high cost. A further cause of uncertainty is the ability to attract and retain critical personnel resources, especially in a labor market in which the demand for and cost of attractive personnel are increasing. In addition to the above risks, IFS in its business is exposed to other operational risks and uncertainties e.g. in customer projects, dependence on certain suppliers and partners, and currency exposure.

IFS, through its use of component technology and by establishing internal processes and routines, considers that it has addressed such risks and taken measures to reduce and control them. As the Parent Company does not engage in operational activities, its risk is limited to foreign currency and liquidity.

Outlook

The objective of IFS’ strategy is to maximize return on investment in an agile product, a global presence and cost- effective development resources. Economies of scale are achieved through industry alliances and partnerships in combination with its own sales efforts with the aim of building strong market positions within a limited number of industries with long-term, stable growth.

Financial stability and increased profitability will be achieved through an increase in the amount of recurring revenue and more flexible cost structures.

IFS believes that weaker economic trends will impact growth in the market for enterprise applications, which has been approximately 10% in recent years. The slower trends, however, will primarily affect the consumer market and have less of an impact on industries such as defense, contracting and service management, construction, and energy, in which IFS has much of its sales. In these industries, logistics, asset management, service management, and certain types of manufacturing are central processes. IFS has a strong position, a modern, competitive product with deep functionality, strong references and a large number of partners in these industries.

The conditions for continuing to increase product revenue with limited cost increases are deemed to be good. The target of the board of directors for 2008 is to increase EBIT and significantly improve cash flow.

Additional Information

IFS is the subject of a number of disputes and claims that can be considered normal given the nature of its operations. In

addition to such disputes, two disputes exist that cannot be considered a normal aspect of the Group’s operations.

In Sri Lanka, IFS Sri Lanka and the members of its board of directors were sued by partners in a jointly owned company in 2002, who claim that breach of the articles of association and stockholders’ agreement has been committed. They also claim that IFS owes liabilities to IFS Sri Lanka, without stating a definite amount. IFS have disputed the claims, which they consider unfounded.

IFS has a special insurance policy for employees in the Nordic area who are temporarily stationed abroad to secure such individuals’ local Nordic pensions while they are abroad.

This insurance policy was purchased via a Swedish insurance broker. According to IFS, this purchase is in breach of the stipulations made by IFS, as a result of which breach IFS was liable for payments for the pension plans of a number of individuals for a longer period than was intended. IFS considers the insurance broker to have acted in a negligent manner, thereby causing IFS damage as a consequence of increased payment liabilities. In December 2005, IFS initiated litigation against the insurance broker. Furthermore, in France and in the UK disputes with two customers have been brought to court proceedings. The Company assesses provisions made to be sufficient, but Company liquidity can be affected by the outcome of such claims.

Parent Company

Parent Company, IFS AB, operations include certain corpo- rate management and finance functions as well as the manage- ment of stockholdings in subsidiaries and associated compa- nies. In 2007, net revenue amounted to SKr 18 (15) million, with earnings before tax of SKr 335 (-48) million. The figure includes a dividend of SKr 371 million (-) from a subsidiary, of which SKr 300 million is an anticipated dividend.

Net investments in stocks and shares amounted to SKr 48 (0) million, which consisted of a stockholders’ contribution of SKr 47 (7) million and a supplementary consideration of SKr 3 (-) million pertaining to previous acquisitions. Stock in IFS Central & Eastern Europe was divested internally to IFS Europe AB at a book value of SKr 2 million. Investments in machinery and equipment amounted to SKr 0 (0) million. On December 31, 2007, Parent Company liquid funds, including unutilized lines of credit, totaled SKr 248 (116) million, whereas Parent Company debt was SKr 141 (378) million, of which SKr 107 (144) million was to credit institutions, SKr 34 (173) million pertained to convertible bonds, and SKr 0 (61) million was related to intra-Group borrowing.

Stockholders’ equity in the Parent Company increased by SKr 509 million to SKr 1,607 million, of which unrestricted stockholders’ equity accounted for SKr 507 (59) million. The increase is chiefly attributable to the above-mentioned dividend from a subsidiary and the conversion of convertible debentures/bonds in an amount of SKr 144 million net, which increased capital stock by SKr 60 million and the share premium reserve under unrestricted equity by SKr 84 million.

At year-end, the Parent Company had 5 employees (5).

B O A R D O F D I R E C T O R S ’ R E P O R T

Proposed Disposition of Profits

The board of directors and the president propose the following funds, SKr 507 million, which are available for disposition, be allocated as follows:

Dividend of SKr 0.10 per share

to stockholders SKr 26 347 thousand Carried forward SKr 480 689 thousand Accumulated profit SKr 507 036 thousand Statement by the board of directors concerning the proposed dividend

The board presents the following reasons to demonstrate why the proposed dividend is in accordance with the provisions of Chapter 17 §3, sections 2 and 3 of the Swedish Companies Act.

The business conducted by the company does not entail risks over and above those that arise or can be expected to arise in the industry or the risks generally associated with doing business. Significant events are reported in the Board of Directors’ Report. Over and above these, no other events have occurred that affect the company’s ability to issue a dividend.

The financial position of the company and group as of December 31, 2007 is presented in the following balance sheets. The annual report also presents the principles applied when valuing assets, provisions, and liabilities.

The board proposes a dividend of SKr 0.10 per share, corresponding to a total amount of approximately SKr 26 million. The proposed dividend constitutes 1.6 percent of Parent Company stockholders’ equity and 2.3 percent of Group stockholders’ equity. Unrestricted equity in the Parent

Company amounted to SKr 507 million at the end of fiscal 2007. The board proposes that the record day for the dividend by Wednesday, April 11, 2008.

The Group asset/equity ratio is 48 percent. The proposed dividend does not jeopardize the completion of investments that have been deemed necessary.

The company’s financial position does not indicate any assessment other than that the company can continue to do business and that the company can be expected to fulfill its short-term and long-term commitments.

In view of the above and based on what the board is otherwise aware of, the board considers that a comprehensive assessment of the financial position of the company and Group justifies a dividend in accordance with Chapter 17, §3, sections 2 and 3 of the Swedish Companies Act, i.e. taking into consideration the requirements imposed by the nature, extent, and risks associated with doing business on the equity of the company and Group and considering the need of the company and Group to strengthen its balance sheet, liquidity and financial position in general.

The financial reports were approved for issuance by the board of directors of the Parent Company on March 3, 2008.

Additional information on Group and Parent Company

results and general position is available in the accompanying

income statements, balance sheets, cash flow statement, and

notes to the financial statements.

F I N A N C I A L S TAT E M E N T S

Consolidated income statement

SKr, million Note 2007 2006

License revenue 3 478 433

Maintenance and support revenue 4 659 600

Consulting revenue 1 194 1 140

Other revenue 5 25 36

Net revenue 2 2 356 2 209

License expenses 6 -495 -472

Maintenance and support expenses -236 -223

Consulting expenses -1 008 -949

Other expenses -15 -29

Direct expenses -1 754 -1 673

Gross earnings 602 536

Development expenditure 9 -214 -208

Administration expenses -236 -204

Other operating revenue 7 12 19

Other operating expenses 8 -23 -23

Indirect expenses, net -461 -416

EBIT 11, 12, 13, 14, 15, 16 141 120

Result from participation in associated companies 18 1 1

Financial revenue 19 12 5

Financial expenses 20 -25 -51

Financial net -12 -45

Profit/loss before tax 129 75

Taxes 21 -7 171

Profit/loss for the year 22 122 246

Profit/loss for the year is allocated as follows:

Parent Company stockholders (SKr million) 122 246

Minority interest (SKr million) 0 0

Profit/loss per share pertaining to Parent Company stockholders, before dilution (SKr) 22 0.48 1.07 Profit/loss per share pertaining to Parent Company stockholders, after dilution (SKr) 22

Number of shares (thousands)

On December 31 263 467 233 366

On December 31, after full dilution 270 094 270 709

Average for the period 253 919 229 622

Average for the period, after full dilution 270 337 270 709

F I N A N C I A L S TAT E M E N T S

Consolidated balance sheet – assets

SKr, million Note Dec 31, 2007 Dec 31, 2006

Capitalized expenditure for product development 476 497

Goodwill 232 219

Other intangible fixed assets 14 12

Intangible fixed assets 23 722 728

Tangible fixed assets 24, 25 79 83

Participations in associated companies 27 2 7

Participations in other companies 1 2

Deferred tax receivables 29 306 291

Other long-term receivables 30 30 14

Financial fixed assets 339 314

Fixed assets 1 140 1 125

Inventories 0 0

Accounts receivable 31 759 633

Current tax receivable 19 15

Other receivables 32 139 160

Liquid assets 33 254 372

Current assets 1 171 1 180

Assets 2 311 2 305