2000 Annual Report Industrial and Financial Systems, IFS AB Annual general meeting

The annual general meeting will be held on March 27, at 5 p.m. in Collegium, Teknikringen 7, Linköping, Sweden.

Financial report dates

Information on 2001 operations is planned to be released on the following dates:

Three-months 2000 interim report January–March May 8 2001

Six-months 2000 interim report January–June August 24 2001

Nine-months 2000 interim report January–September November 6 2001

Preliminary report on 2001 operations February 2002

Executive summary 6 President’s Message 8 Business Concept, Goal and Strategies 10 IFS policies 12 The IFS offering 16 Product development 18 The Business Applications market 22 Operations in 2000 28 Development by area 30

Administration report 37 Income statement 40 Balance sheet 41 Cash flow analysis 43 Notes to the financial statements 44 Audit report 59 Board of Directors, senior executives and auditors 60 Financial trend 1996–2000 62 IFS share data 64

Definitions 68 Glossary 70 Addresses 72

Industrial & Financial Systems, IFS AB, develops and supplies component-based business applications that streamline operations in medium-size and large enterprises and that offer step-by-step evolution to the extended enterprise. IFS Applications™ increases our customers’ freedom of action, and, as a result, their ability to succeed. IFS Applications offers web-based business applications, includ- ing CRM and supply chain management components, Internet storefronts, e-markets and e-procurement solutions. IFS eBusiness solutions provide seamless integration of all data sources from the fastest web sites and exchanges to legacy ERP. Sales of IFS Applications are the fastest growing worldwide in the market for large-scale business applications. Today IFS is one of the 10 largest companies in the world in this industry, with over 3,600 employees and sales in 43 countries.

5 Executive summary

Growth in the business applications market did not meet expectations during 2000. IFS, however, experienced an improvement after the second half of the year, with continued demand for IFS’ component-based solutions that offer step-by-step implementation and for business applications that support e-business as an integrated part of a company’s internal and external processes. IFS meets this market demand with IFS Applications 2001™, which was launched in August. The development of this version, IFS’ fourth generation of component-based business applications, was IFS’ largest ever investment in product development. The new version includes 500 improvements and full utilization of portal technology. E-business is completely integrated in the busi- ness applications, enabling companies to collaborate with customers, suppliers, and partners in an extended enterprise. During the year IFS continued to develop its sales and consulting organization. A number of companies were acquired to ensure a broader geographical reach and to supplement the product offering. In addition, IFS’ partnership strategy resulted in several global agreements with partners who are market leaders within specific segments. These partners will sell and implement IFS Applications, making IFS less sensitive to fluctuations in the demand for consulting services.

96% License revenue 2352 Consulting revenue

77% Other revenue 1948

57% 48% 1238

632 21% 357

1996 1997 1998 1999 2000 1996 1997 1998 1999 2000

Increase in sales (%) Net sales (MSEK)

6 Growth and product development continue to be important for IFS. MSEK % 600 R&D expenditure (MSEK) 100 However, cash flow and profitability will be prioritized so that future R&D expenditure/license revenue (%) growth can be achieved while retaining financial strength. In December, 500 80 the Board of Directors of IFS decided to implement an action plan to strengthen the Group’s financial position in order to enable further 400 60 expansion. IFS is well positioned for continued growth and increased 300 market share because it offers a leading, proven and advanced product 40 with short implementation times, knowledgeable consultants with 200 long experience of IFS Applications, market-leading partners, and 20 a global presence. 100 Net sales increased by 21%, amounting to SEK 2,352 M, compared 0 0 with SEK 1,948 M in 1999. 1996 1997 1998 1999 2000 License revenue increased by 74% to SEK 960 M, compared R&D expenditure related to license revenue with SEK 552 M in 1999. License sales accounted for 41% of total revenue. Consulting revenue was down 2% to SEK 1,184 M, compared with SEK 1,212 M in 1999, representing 50% of total revenue. Product development expenditure amounted to SEK 517 M, compared with SEK 352 M in 1999. The Group reported a loss for 2000 of SEK 239 M, after net financial items, compared with a loss of SEK 147 M for 1999.

The number of employees increased by 14%, amounting at year- end to 3,669.

Five-year summary

1996 1997 1998 1999 2000 License revenue (MSEK) 87 208 371 552 960 Consulting revenue (MSEK) 210 344 736 1,212 1,184 Other revenue (MSEK) 60 80 131 184 208 Net sales (MSEK) 357 632 1,238 1,948 2,352 Increase in sales (%) 4877965721 Sales outside Sweden (%) 4052606574 Average no. of employees 508 852 1,497 2,637 3,478 Product development (MSEK) 72 117 190 352 517 Profit/loss after financial items (MSEK) 1 –39 10 –147 –239 Equity/assets ratio (%) 44 48 50 40 47 Total assets (MSEK) 299 687 1,167 2,012 2,817 Liquidity (times) 1.7 1.6 1.6 1.0 1.1

7 President’s Message

During the year, IFS achieved a number of the strategic goals that we had set out when we first sought external financing in the mid- 1990s. In addition to developing a product that continues to draw accolades from leading industry analysts, we have grown significantly, achieving the economies of scale required to maintain long-term profitability while ensur- ing the highest technological standards for our products. We have also built a global infra- structure, with sales in 43 countries, and have recorded major sales successes in the extremely important US market. However, 2000 was a disappointment in terms of earnings. The companies we target, having safely transitioned to the new millennium, were slower to modernize than we had projected. As a result, our consulting organization was over-dimensioned. Moreover, the costs of our sales organization were consider- able, with revenue coming in later than expected. IFS was also affected by bad debts related to negative developments in the dotcom industry. However, our collaboration with Internet-based enterprises enabled us to acquire valuable competence within e-business that we can use to our advantage in the future. Four years ago, IFS was the first business applications vendor in the world to launch component-based business applications and to advocate step-by-step implementation. Developments in the market since then have fully vindicated our strategy, with increasing numbers of analysts and suppliers recommending business applications with these very properties. For example, IFS has signific- antly increased its marketshare and can report the strongest growth in license sales in the market for large-scale business solutions, up 74% in 2000.

8 The extended enterprise The focus on selected market segments means that our offering The value of component technology is something that has been becomes more competitive in terms of product and competence. further reflected in the developments within e-business. The year commenced with a strong focus on the new economy, which was Partnerships for the future dominated by consulting enterprises that concentrated on services To further increase the strength of IFS’ solutions within specific based on the Internet and e-business. During the year, a change market sectors, we intend to intensify our collaboration with part- occurred, with IT demand shifting to the suppliers that could ners. IFS’ partner strategy is based on choosing leading players in deliver standard software for distinct e-business requirements, such specific industries to achieve maximum returns on investments in as customer relationship management (CRM), e-procurement, and product development. As a result, IFS gains access to leading supply chain management. In the latter part of the year demand industrial expertise while sales costs and time to market decrease. changed once again to solutions that could handle e-business as an Partnerships include collaboration with ABB, in the asset-intensive integrated part of a company’s other business processes. industry, BAE SYSTEMS, within Defense and Civil Aviation, and During 2000, IFS launched IFS Applications 2001, which Cap Gemini Ernst & Young, within the utility sector. included 500 enhancements and additions as well as integrated We are well positioned for continued strong license sales during e-business functionality that enables companies to quickly become the coming years thanks to our leading component-based product. “extended enterprises”. IFS Applications gives these companies We will continue moving forward with our product development, the ability to collaborate with their suppliers, partners and cus- through in-house R&D and partners, so that we are always one step tomers, transcending traditional boundaries and enhancing mutual ahead, providing customers with the most advanced applications to customer benefits. extend their enterprise. Partnerships will also play a major role in IFS’ new concept for enterprise portals, IFS Personal Portal™, the development of our global presence. Moreover, we will focus has been enthusiastically received. The concept enables access to on the US market and leverage the platform of infrastructure and an enterprise’s entire business applications via the Internet while competence we have established. We expect the US share of IFS’ retaining security. IFS Personal Portal is a configurable, role-based total sales to continue its steady growth. user interface to IFS Applications and other data sources. It allows Our next target is to become one of the five biggest business all users, regardless of whether they are employees, customers, sup- applications vendors in the world. With our product, our partner- pliers, or partners, to access relevant information and functionality. ship strategy, and the competence that resides in our company, I am convinced that this is a realistic goal. Balanced growth Our investments in product development and infrastructure have provided us with a stable foundation for further growth with a lead- ing product and a global presence. Growth and product development continue to be important for IFS. However, cash flow and profitabil- ity will be prioritized so that future growth can be achieved with continued financial strength. The product development involved in IFS Applications 2001 represents the largest R&D investment in the history of IFS. The resulting product ensures IFS Applications a very competitive platform for the future. This will enable us to direct future invest- ments toward projects specifically aimed at increasing our compet- itiveness within selected market segments while actively retaining our BENGT NILSSON technology leadership and continuing to adopt leading technologies. PRESIDENT AND CHIEF EXECUTIVE OFFICER

9 Business Concept, Goal and Strategies

By providing IT solutions that include business applications and e-business products based on advanced component technology, IFS increases its customers’ freedom of action, and, as a result, their ability to succeed. The core solution in our offering is our component-based business application, IFS Applications, which provides companies with a step-by-step evolution to the extended enterprise. The extended enterprise is a company that collaborates with its suppliers, partners and customers to streamline business processes, transcending traditional boundaries and enhancing mutual customer benefits. In addition, IFS offers value-added products and services that allow companies to quickly and easily implement, operate and maintain IFS business applications that span their entire value chain. Our goal is to be a top five global business applications supplier with a number one position in targeted segments. To provide companies with a total solution, we combine our software offering with superior services that we provide through our own resources by attracting, developing and retaining the best staff, as well as by choosing and nurturing the best partners.

10 Strategies in brief IFS will continue to invest in growth and product development but in a more balanced manner and with increased focus on cash flow and profitability. IFS product development will focus on retaining its position as technology leader within component-based systems for the global market. IFS Applications will support the standards that are important for our customers. IFS will supply integrated Internet-based solutions that enable increased collaboration between customers, suppliers, and partners. To meet the market’s increasing demand for solutions with broad functionality combined with profound knowledge of the industry, IFS will focus on a number of market segments where we will con- tinue to build industry competence as well as supply best-of-breed solutions, with market-leading partners in certain segments. IFS will continue to develop global and local partnerships to enable expansion with less risk and lower capital requirements. IFS will implement an action plan that will include increased focus on core operations and cash flow in order to further streamline operations. IFS will encourage increased mobility among its employees by means of a competence and resource development program that will entail personnel from IFS R&D reinforcing major customer projects in local markets.

Professionalism, commitment and simplicity are the qualities that guide our work, and more importantly, our interaction with our customers, partners and co-workers. IFS policies

The policies on which IFS’ operations are based are an important complement to the company’s business concept and strategies. The following is a presentation of such policies in six areas that are critical for success: strategic alliances, operational reliability, environment, quality, personnel and financial and currency policy.

Strategic alliances Service Partners: IFS’ service partners are primarily During 2000, IFS has developed a strategy of collaboration with global companies that are market leaders within one partners in a variety of markets and within important industry seg- or several industrial segments. These partners will be responsible for a large number of implementations and ments. IFS will, however, always retain its own delivery resources in will also drive sales within their segments. To maintain order to guarantee the flow of the extremely important feedback high levels of quality and a close relationship with its that the end user provides. A number of significant partnership partners, IFS will limit the number of service partners agreements have been signed during the year. As a consequence, IFS with whom it collaborates. will continue to expand its partner organization in 2001 to support Channel Partners: In order to strengthen its sales the growing number of partners with whom it collaborates. In the organization and offer IFS solutions in markets where coming years, an increasing share of sales and implementation of IFS has a limited presence, or lacks resources of its IFS Applications will be done via partners. own, IFS collaborates with local distributors, so-called Collaborating with partners on sales and implementation is channel partners. important as it enables IFS to expand with less risk and lower capital requirements. It also enables IFS to reach new customer categories, Hosting Partners: Via its hosting partners, IFS offers its customers a comprehensive solution to operating and such as large corporations and customers within special segments. maintaining IFS Applications. This is done via hosting Moreover, alliances form part of IFS’ globalization strategy. partners in a number of countries and directly via its IFS also collaborates with technology partners and suppliers own hosting unit, @IFS, in the Nordic region. of supplementary software in order to offer its customers the best total solutions while being able to focus its development resources Software Partners: In order to be able to offer its cus- on its core competencies. tomers the optimal total solution while continuing to focus its development resources on core competencies, IFS collaborates with five different partner categories. IFS supplements its offering with software from partners at national and global level. These are products that are used with IFS Applications but also products that are used internally by IFS in its development and production environments.

Technology Partners: IFS’ technology partners deliver hardware, with adherent peripheral equipment, as well as network products that constitute the necessary infrastructure in a modern IT environment. In addition, IFS continuously selects partners that supply the tools used in the development of IFS Applications.

12

IFS policies

Operational reliability and IT @IFS™, our ASP subsidiary, operates all IT systems for Swedish IFS subsidiaries in addition to developing standards, procedures Operational reliability and infrastructure and guidelines for IFS’ global IT infrastructure to which all IFS subsidiaries are linked. @IFS’ objective is to always be in the fore- During this year we have invested in: front in terms of new technology within IT and telecom as well as • Telephony upgrades to be prepared for future IP provide high levels of availability with respect to the network and telephony technology network services. • Continued network expansion and upgrades for IFS Environment offices in other countries As a developer and supplier of business applications, the negative • Updating our business applications to the latest effects of IFS operations on the environment are minimal. In fact, version of IFS Applications our products often help our customers work in a more environmen- • Start-up of IFS Link™ for handling support issues tally friendly manner. An example of this is our maintenance system, from the end user through to IFS R&D which is used primarily in heavy industries. By supporting organized A transition to a uniform infrastructure for all IFS work methods, it contributes to beneficial environmental effects. • subsidiaries, the aim of which is to enable IFS employ- We do not see any significant demand from customers and authorities ees to connect their clients at any IFS location and be for environmental certification and have therefore decided not to able to access the services they would have at their pursue certifications for the time being. own office.

Quality IFS has established several systems and methods to ensure high quality, full traceability and control through the whole life cycle of system development: requirement, design, implementation, system test and release. Quality assurance systems In the Requirement phase, all requirements are uniquely identified and stored with full traceability back to the originator of GRS (Global Request System): handles all issued ideas and requirements the requirement, which ensures that the product meets customer needs. GPS (Global Planning System): project planning and In the Design phase, IFS produces process models based on follow-up ensuring deliveries on time

business scenarios, which are transformed into object models of IFS Link: call handling system providing full control the solution. During the design phase, reviews are conducted on on all raised calls a regular basis, establishing the foundation for a product with the QDS (Quality Distribution System): version handling right technology, functionality, and usability. system The Implementation phase, where system code is developed for new and existing components and then put together into com- IFS Foundation1: IFS’ development platform

plete solutions, is supported by IFS' development platform IFS IFS/Business Modeler™: a process-modeling tool Foundation1 which enables the production of high performance ™ and superior system code. IFS/Project : a project management tool The System test phase includes performance tests, system IFS/Document Management™: IFS’ document integration tests, upgrade tests, platform tests, security tests, and management system compatibility tests to ensure that all aspects of the product have been tested.

14 The Release package includes translation and local adjustments of model and IFS-specific management programs. Via internal recruit- the application, including localized documentation and training ment IFS offers its employees career and development paths that material. secure opportunities for individuals to develop and which contribute Project implementation demands high quality in two main areas: to continued access to competence for the company. Moreover, the quality of the solution delivered to the customer and the quality internal recruitment enables employees to gain increased understand- of the project as such. The quality of the solution is characterized ing of IFS Applications and its capabilities. In addition, knowledge by the manner in which it fulfills specifications and the extent to about organizational issues is enhanced, and a greater awareness of which the customer is satisfied. For IFS customers, there is more to the Group’s internal processes is achieved. the solution than just IFS Applications. It is IFS Applications on IFS’ global presence benefits employees through IFS Transfer, the right platform combined with other software and, increasingly the exchange program where IFS personnel work in other countries often, in a wide, even global, network. The quality of the project for a limited period of time. The exchange program creates oppor- means that the solution has been delivered on time and within the tunities for personal and professional development and contributes agreed budget framework. IFS AIM™, our implementation method- to knowledge transfer between different IFS subsidiaries. ology, guarantees the quality of the solution and of the project. IFS AIM comes in three variations: AIM Enterprise™ (installa- Financial and currency policy tion of the solution with various types of adaptations at one or The main financial objective of IFS is to ensure shareholders high more sites), AIM Fast Track™ (rapid installation of core function- yields by successively maximizing profits per share. Within the ality, often in the form of a pre-packaged solution), and AIM framework of this objective, the Board and management of IFS Multisite™ (installation of a corporate solution at multiple sites). have established certain operative and financial goals. These include IFS AIM contains descriptions of roles and processes, guidelines, a Group goal to sustain an operating margin in excess of 15%, and manuals, as well as procedures for quality control that support while ensuring that the Group’s equity/asset ratio in the long term a project throughout its entire life cycle. Tools for process modeling, should not fall below 35%. issue handling, version management, project management, and The IFS Group has centralized financial management, which document management ensure the traceability and quality of the means that all finances are managed by the Parent Company. The project. Since IFS AIM and adherent tools were introduced, imple- purpose of this is to minimize the Group’s financial risks. mentation times and resource consumption have been cut by more In accordance with the financial policy, all subsidiaries conduct than half at many IFS offices. their financial transactions in the local currency. This means that the Group’s exposure to currency fluctuation will be limited to so-called Personnel translation exposure on compiling the annual accounts. Contracted, The success enjoyed by IFS is due to our ability to attract, develop non intra-Group cash flows should be hedged, while forecast and retain skilled personnel. The combination of competent per- payments, which have not been contracted, should not be hedged. sonnel and an exciting industry facilitates the recruitment of new Derivatives such as swap agreements, etc. may only be used if driven employees. by business reasons for the purpose of minimizing the Group’s The IT business, where IFS operates, is characterized by rapid exposure to currency fluctuation. change. Creating stability requires a strong corporate culture based on Group profits may only be invested in treasury bills issued by common core values – commitment, professionalism, and simplicity. the Swedish government, Swedish government bonds or housing IFS personnel work in small project groups where they are bonds. given considerable individual responsibility. Our employees have the freedom to make their own decisions and actively influence their own development. They are also responsible for sharing their competence with colleagues and customers. IFS encourages competence development through courses about our products and technology as well as the IFS project management

15 The IFS offering

IFS continues to be a leader in the global business applications market. This market is characterized by an endeavor to achieve economies of scale, often by developing special- ized solutions for fewer verticals, which are then marketed globally. In addition, ven- dors must meet increasingly demanding system requirements in respect of support for new functionality, utilization of new technology, and integration with other systems.

Market Focus IFS focuses its marketing efforts in a number of segments within four main groups: manufacturing, utilities and telecom, logistics, and service. Focus on selected segments IFS’ focus and position vary somewhat between different • Manufacturing: medium-size enterprises in the markets. Globally, IFS is a major vendor of solutions for medium- engineering, electronics, plastics, and chemical indu- size manufacturers as well as service and maintenance related opera- stries. Our offering in this segment includes step-by- tions at large enterprises. In the US, an important and rapidly step implementation of the majority of the components growing market, IFS’ principal focus is on medium-size manufac- in IFS Applications. For large companies in asset-intensive industries, turers. In markets where the IFS presence has been established such as pulp and paper, IFS has developed leading longer, such as Sweden, Norway and Poland, the Group has created solutions for managing all types of asset-related a strong position nationally within a considerably greater number information and functionality. of segments, including public sector and logistics. • Utilities and Telecom: major enterprises, such as Product offering producers and distributors of power and telecommu- nications. With its breadth and depth of functionality IFS offers a wide array of Internet-based components that span the for asset-intensive industries, IFS also offers highly entire demand and supply chain. The offering comprises solutions for competitive solutions to this market. financials, human resource management, manufacturing, maintenance, engineering and design, customer relationship management, and • Logistics: enterprises with various types of distribu- supply chain management. It also includes components for sales, tion, such as trading companies, wholesalers, retailers, marketing, procurement, and dynamic partnership collaboration. and marketplaces. IFS offers such enterprises leading- edge solutions based on powerful functionality for Our business applications are among the most integration-friendly marketplaces, web shopping and third-party logistics. on the market, and can be integrated with a large number of technolo- gies from mobile phones, handheld computers and legacy systems to • Service: from service enterprises whose business supplementary best-of-breed applications from our software part- is the provision of service to one or several plants to ners. The leading component architecture that characterizes IFS logistics and service organizations in the defense indu- stry and civil aviation—IFS’ solutions provide efficient Applications also makes it easy to implement the system step by support for a wide range of service organizations. step, at the pace and to the extent the customer wishes.

Services IFS offers a large number of value-adding services that supplement IFS Applications. This includes modeling customers’ business processes to ensure that the system delivered supports customers’

16 operations. The graphical tool, IFS/Business Modeler, produces Positioning: To further strengthen process models that document the solution the customer requests. Based on these models, the system’s standard components are its position in this market, IFS configured to the business processes defined by the customer by will continue to deliver the most accessing a unique repository of documented best-practice busi- advanced component-based business ness processes. IFS/Business Modeler is used by all IFS service partners. applications, whose superior quality Quality, time and cost in the customer project are ensured with provides the greatest flexibility for tools and methods that support the customer’s implementation throughout its entire process. These are packaged under the name step-by-step implementation and IFS AIM (Applications Implementation Methodology). management. Fault reporting and support is handled by IFS Link, a com- prehensive issue handling system that is available to customers and Objective: By focusing our resources, partners. For customers who do not wish to operate the system them- we aim to achieve a number one selves, we can offer @IFS, our hosting concept. @IFS is offered via position in targeted segments. our own subsidiary in the Nordic region, @IFS, and in collaboration with hosting partners in the Nordic region and globally.

17 Product development

Product development is a major investment for all software producers. The ability to transform knowledge about our customers’ procedures, processes and the conditions under which decisions are made into simple but powerful value-adding information systems largely determines the extent of our success in the market. During 2000, IFS invested more than ever in product development to produce IFS Applications 2001. In IFS Applications 2001, we satisfy the market’s increasing demand for standard applications for Internet-based processes, which were previ- ously characterized by tailored, consultant-intensive solutions. Thus, we continue with our strategy of maintaining Internet functionality as central to the entire business applications and not merely as isolated functional add-ons.

IFS Personal Portal uses well-defined components, portlets, that can be combined to give users a personal interface. Each portlet contains information or functionality for specific tasks, or stages in a process.

18 IFS Applications 2001 IFS Applications 2001, launched during the second half of 2000, is one of the most comprehensive and flexible suites of business applications on the market. We offer our customers an advanced IT solution that combines functional breadth and depth with the capability of adding new Internet-based software and services step by step as the need arises. IFS Applications 2001 contains over 500 enhancements and additions, providing broader, deeper function- ality and the capability to implement and operate IFS Applications even more efficiently on a global basis. One of the biggest functional innovations in IFS Applications 2001 is functionality offering complete support for configured IFS Personal Portal products, including sales, planning, manufacturing, and assembly. Improve information exchange quickly and easily. The demand for configured products is one of the clearest trends Collaborate with customers, partners, suppliers and today and is a direct consequence of what is often referred to as your own employees without making major invest- “mass customization” or customer-centered production. ments in infrastructure. Start with the parts of your The technology enhancements include increased technological operations where portals give the greatest business independence, new capabilities for scalability, and advanced con- advantage, and you get: figuration to fully support Internet technology. • Powerful support for sharing information and com- municating, internally and externally, directly linked Leading portal technology to your business transactions IFS Applications 2001 also contains a completely new concept for • An intuitive and easy-to-grasp interface with enterprise portals, IFS Personal Portal, which gives users access to almost zero training requirements the entire suite of business applications via the Internet, without • Capability to add new processes, roles, and users jeopardizing security. IFS Personal Portal is a configurable, role- step by step as your organization requires based user interface to IFS Applications and other data sources. Configurability according to individual needs in All users—employees, customers, suppliers, and partners—can • terms of functionality and data sources access relevant information and functionality. IFS Personal Portal can be applied across parts, or all, of a system and is particularly suited to supporting processes where several companies collaborate. IFS’ development platform, IFS Foundation1, also makes it possible to use IFS Personal Portal as an interface to earlier versions of IFS Applications. In order to fully leverage Internet technology, automated (via XML) and manual transactions (via web-based user interfaces) must be handled. Integration must be fast, flexible, inexpensive, and scalable without compromising security. IFS ensures this with its IFS Foundation1 platform. With configurable Internet-based business solutions that can be implemented step by step, IFS has created comprehensible solutions at low cost, empowering our customers to quickly adapt to changing business conditions.

00 Product development

Future-proof technology To successfully compete in today’s market companies must consist- ently deliver optimal performance. Harnessing technology is, and will continue to be, a key ingredient. IFS is committed to helping XML and IFS Foundation1 our customers utilize technology to gain competitive advantage. We XML is a new standard for easier and more efficient will do so by continuing to invest in our platform, IFS Foundation, information exchange between systems. From a busi- and via strategic alliances and partnerships. ness standpoint XML represents a previously unheard Since it was first released in 1995, IFS Foundation1 has been of capacity to share information. The importance of recognized as a visionary and leading framework for the develop- XML lies in its ability to encapsulate virtually any kind ment of business applications. With IFS Foundation1, IFS intro- of data, which can then be moved across networks, duced object-oriented technology and the concept of components using any protocol, processed automatically and in large-scale business applications. published dynamically. Ultimately, XML opens a new The philosophy behind IFS Foundation1 has always been to world of possibilities for sharing, managing, publishing make it possible to gradually add new technology and features that and processing information on the web. When many make IFS Applications easier to implement and use as well as to solution providers have to rewrite or modify a lot of integrate with other systems or software components. functions to add XML capabilities to them, IFS simply needs to add XML capabilities to IFS Foundation1 and To accomplish this efficiently without totally rewriting the " automagically" every business component inherits software or replacing the IT infrastructure every time new tech- XML capabilities from the framework. nology is presented, the underlying architectural principles must be kept intact and designed for change. The framework must also allow all components implemented to seamlessly co-exist and cooperate. IFS Foundation1 does exactly this. The release of IFS Applications 2001, our fourth-generation component-based application suite, is proof of this principle. This latest release is based on the same architectural principles as the first release but with a whole range of new technologies and capabilities that our customers have been able Collaboration in dynamic networks to put in service in a step-by-step approach. We are well prepared to incorporate the next wave of technologies such as Wireless Internet Examples of prioritized business processes for the into IFS Foundation1 and incubate our components with new fea- extended enterprise: tures that turn technology into business value. • Complete support for sales and customer relation- ships, from campaigns to after sales (CRM) IFS product development— now and in the future • Efficient management of supplier relationships Globalization is often associated with major corporations. Today, (vendor-managed inventory) however, even small and medium-size companies are becoming global at an increasingly faster pace, partly because they are following • Improved requirements and production planning their global customers as they expand and partly because of their along the entire value chain (SCM) own growth requirements. Therefore, they are confronted with the • Joint product development and project management same problems as major corporations but have to solve them with • Management of subcontractors less resources. A critical factor for international expansion is the capability of information systems to realize economies of scale and synergy effects when new production facilities or market channels are added. From an IT standpoint, globalization is an even greater challenge for small to medium-size companies. IFS meets the needs of

20 these companies with broad functionality and a scalable business a greater responsibility for enabling customers to leverage the benefits solution that makes it easy to add new operations regardless of where of IT support. they occur globally. Paradoxically, the Internet has meant that demands for know- In order to efficiently plan and implement IFS Applications in ledge about business processes, segments and industries have international projects, we combine our customers’ demands for local increased rather than diminished. Proven business relationships for support and competence with global coordination and leading-edge various distribution channels or suppliers cannot simply be expanded technology. Our global organization, comprising product planning, with, or replaced by, Internet-based services. One example of this is development, localization, training and support, guarantees that cus- the supplier who is responsible for replenishing customer inventory tomer demands are quickly transformed into new developments with the help of a web interface, where inventory balances and and product enhancement. requirements are displayed for the supplier (so-called vendor- A core feature of IFS’ product development is the creation of managed inventory or VMI). In strict terms, the traditional methods solutions for companies that enable step-by-step implementation of following up delivery reliability no longer work, thus conflict- and upgrading of systems according to market demands and as ing with many ISO 9000 manuals in companies. New procedures resources allow. By taking minor steps, IFS customers can quickly and changes in business conditions can be necessary if the benefits leverage the benefits of the system. The open, component-based of VMI are to be realized. architecture in IFS Applications also facilitates integration with IFS’ product development also means that we continuously other systems so customers can retain applications that work well develop our competence in order to better meet and advise our and avoid disrupting business operations during the implementation customers on issues that ultimately determine the business value of of new functionality. our solutions. We do this by focusing on selected market segments, accumulating experience globally that can then be applied in Solutions for the extended enterprise industry-specific product functionality, clear descriptions of busi- The Internet will continue to drive demand for openness, scalability ness processes, and in our project methodology. and integration of IT solutions, characteristics that are largely dependent on the technological platform and underlying achitecture. The core of our product development for many years has been to satisfy these demands. Our component architecture makes it easy for companies to quickly begin to interact with customers, suppliers Forecast and partners, even at a systems level. As a result, we and our cus- tomers are especially well equipped to meet and overcome future Quantity challenges. on hand There are also increased demands for functionality to support Supplier Customer Initiate/confirm this “extended enterprise”. Having provided support for the first purchase order generation of Internet-based business processes, we intend to deepen and broaden IFS’ functionality to embrace the new business models Update purchase order that entail even closer collaboration between companies via the Internet. A number of business processes in this area involve close Shipment notification collaboration where the information in the business system must be easy to present and integrate, within the company and for Received external partners. shipments Product development also includes further investment in deeper knowledge of our customers’ business segments and the way they utilize business applications. With this knowledge we can further develop industry-specific functionality in IFS Applications, taking VMI can reduce inventory and cut lead times in the supply chain.

21 The Business Applications market

During the year, e-business in various forms has continued to attract the most attention in the market for business applications. However, a major change has occurred. Whereas e-business was considered a highly publicized but mainly isolated phenomenon in a company at the outset of 2000, today it is viewed as an integral part of other internal and external processes in the organization. Such a development is entirely in line with descriptions by AMR Research and Gartner Group, presented as early as 1999, of “Business Community Integration” 1 and “Collaborative Commerce” 2.

Stronger focus on collaboration These changes in the way a company chooses to integrate e-business are driven by several forces. One such is the extensive structural change occurring within almost every industry. There is a general tendency for enterprises to focus on their core competencies and to become more global in their reach so as to fully leverage the benefits of this specialization. Parallel with this, there has been a partial shift of focus from in-house rationalization and cost cutting (traditionally an area well supported by business applications) to increased revenue via new methods of collaboration and running a business. Together, these entail longer value-adding chains and increasing emphasis on the ability to manage multi-partner rela- tionships. In such conditions, an increasing number of enterprises have realized it is no longer satisfactory to use one or several stand-alone systems to manage the various aspects of e-business. The systems must integrate well with each other as well as with the traditional business applications so that business-critical information can be utilized in the external processes. Customers should be able to check for themselves when a product can be delivered or where it happens to be in the manufacturing or distribution process. Based on customers’ production schedules, a supplier should be able to decide when production and delivery take place. These solutions require as much focus on e-business as on the internal applications which previously constituted the principal focus of business appli- cations. All in all, demands on business applications have changed dramatically, toward what Gartner Group designates ERPII 3. This is not so much a technology shift as a change in the way business is done, requiring new applications and new functionality.

22 Innovations primarily include additions to the existing infrastructure For individual enterprises, this is often a very profitable strategy as for internal processes, i.e. business applications. Fundamentally, it is less expensive and more efficient to increase revenue by selling from the systems perspective, this development means that system more to existing customers than to recruit new ones. Integration support must become more flexible, and the integration of applica- between CRM systems and business applications becomes important tions within and between companies must be made easier. during three main phases in customer relationships—the buying process, delivery, and after sales. All three phases offer major bene- Market trends 2000 fits if front-office systems are closely integrated with business The market for business applications grew strongly between 1995 applications. and 1998. During the latter half of 1998, a considerable slowdown set Developments in respect of demands on the underlying archi- in which persisted during 1999, when the market grew by approxi- tecture and functionality in systems has led to a segmentation of mately 17% to US$ 22.7 billion 4. For the most part, it was assumed the market for business applications. Vendors have attempted in that the slowdown was due to many enterprises concentrating their different ways to develop their offering to fulfill these requirements IT resources on securing their existing systems for the transition to as well. A number have failed to develop or integrate the requisite 2000 instead of investing in new systems. Most analysts agreed that functionality and have therefore disappeared as independent actors. investments in business applications—and other IT projects—would Others have experienced lower revenue and license sales. Only a recover after the turn of the millennium. This has indeed been the small group continues to grow. case, but at a much slower pace and more selectively than forecast. As yet, no estimates of market growth have been published, but judging by the results reported by major vendors, a likely figure is 15%. A reason that is often cited for the relatively slow recovery is that sales cycles have become longer than they were in the year immediately preceding 2000. This prolongation should be regarded more as a return to normal cycles since there is no longer any indi- vidual factor that pressures customers to invest at a particular point in time. One particular market trend is the fact that an increasing number of enterprises are considering outsourcing the technical operation of It [IFS] continues to react more their IT systems to a third party. The benefits are manifold, reduc- ing, for example, the need for in-house competence and resources nimbly than the rest of the ERP for running the IT systems, which most enterprises do not consider market to the market trends. We to be part of their core operations. believe that its recipe for success The use of portal technology, a distinct development of business applications, has increased strongly during 2000. With this tech- is a good balance of the following nology, it is easy to construct extremely user-friendly interfaces to required elements of the game—a the system. Furthermore, these interfaces can be adapted to indi- vidual employees’ roles in the enterprise by ensuring that they can flexible and technologically superior access only the functionality and information they need and product, deep vertical functionality, request. For business application vendors, this development means reputable customer service, and that they can reach a greater number of users, increasing thereby the usage and customer benefit of business applications and prudent acquisitions and/or affording them the opportunity for higher license revenue. alliance moves. The year has also seen a stronger focus on customer relation- ship management (CRM) systems that facilitate and strengthen in a variety of ways an enterprise’s relationships with its customers. TechnologyEvaluation.com (2000), “IFS Far Cry From Running Out Of Breath”

23 The Business Applications market

IFS’ position 2000 60 The component architecture has enabled IFS to quickly develop and offer new functionality within the framework of the system. 40 Examples of this include marketplaces, solutions for trading products

via the Internet, electronic procurement, and various portal-based 20 solutions for collaborating with customers, suppliers and partners. SAP PeopleSoft IFS Geac Oracle Intentia J.D. Edwards QAD Epicor In particular, the portal-based user interface, with the opportunities 0 Baan it provides for interaction, has been enthusiastically received.

The fact that IFS Applications is easy to integrate and is com- -20 posed of a large number of individual components also makes it easy to implement the system step by step. Enterprises can introduce -40 support for different e-business-related processes at a pace they Increase in sales 2000 (%) consider reasonable with respect to the competition and their own Source: Plant-Wide Research resources. This is quite simply an easier route to efficient system support that is adapted to the changing needs of their business. It is

also becoming more common for customers to implement the system 80 in stages. This has contributed to IFS sales during 2000. Several customers have chosen to supplement and/or upgrade individual 60 components in their existing IFS solutions. 40 The outsourcing trend has maintained momentum even in respect of IT. The increasingly common decision to outsource the 20 operation of IT support to others has benefited @IFS, a Group sub- IFS Oracle Intentia PeopleSoft J.D. Edwards SAP Geac QAD Epicor sidiary that provides our Nordic customers with operational support 0 Baan for their IT systems. @IFS specializes in operating IFS Applications and adherent software, which provides competence and cost benefits -20 compared with vendors who try to operate several applications from -40 a multitude of suppliers in a large number of different environments. A further positive development for IFS during the year was Growth in license sales 2000 (%) Source: Plant-Wide Research the fact that an increasing number of global corporations that had previously endeavored to standardize, using one system only throughout the corporation, have now adopted a more open strategy Integration means growth based on standardizing the IT architecture and allowing different IFS is among the suppliers that have continued to grow dur- vendors to supply different solutions. New communications stand- ing 2000. The Group reported a 21% increase in total sales ards such as XML have facilitated system integration from different compared with 1999, and license sales rose by no less than suppliers, thus individual enterprises have greater freedom to select 74%, considerably more than the market average. the business applications that best suit their needs. This is also in This is principally due to the fact that demand for com- ponent-based business applications has continued to line with the philosophy that has always governed the development increase and because the leading component architecture of IFS Applications. in IFS Applications is so well adapted to the new demands Finally, IFS launched the fourth and latest version of its com- being made. It is easy to quickly begin to interact with cus- ponent-based product, IFS Applications 2001, during the year. It tomers, suppliers and partners, even at systems level, contains a number of new components and over 500 enhancements because of the component architecture and the fact that compared with the previous version. This has been very well received each component is designed to facilitate integration, not and has already generated new sales during 2000. However, its main only with other components in IFS Applications but also significance will be its impact on IFS sales during 2001 and beyond. with other systems.

24 Major vendors of enterprise applications systems 2000 (Amount in US$ millions) Source: Plant-Wide Research

2000 2000 1999 2000 2000 Calendar Calendar Calendar Calendar Revenue revenue rank growth rank Vendor name revenue revenue growth (%)

1 1 SAP 4,811.6 5,900.1 23 2 5 Oracle 2,528.8 2,825.9 12 3 2 PeopleSoft 1,429.1 1,736.6 22 4 7 J.D. Edwards 944.2 1,001.1 6 5 10 Baan 634.8 441.5 –30 6 4 Geac 360.8 409.0 13 7 6 Intentia 334.1 370.7 11 8 3 IFS 212.4 256.5 21 9 8 QAD 233.7 225.8 –3 10 9 Epicor 258.2 219.8 –15

License revenue for the major enterprise applications vendors 2000 (Amount in US$ millions) Source: Plant-Wide Research

2000 2000 1999 2000 2000 License revenue License revenue Calendar Calendar License rank growth rank license license revenue Vendor name revenue revenue growth (%)

1 6 SAP 1,819.2 2,315.1 27 2 2 Oracle 701.5 1,081.0 54 3 4 PeopleSoft 339.7 496.1 46 4 5 J.D. Edwards 312.8 419.1 34 5 10 Baan 204.6 127.9 –37 6 3 Intentia 82.5 126.2 53 7 7 Geac 108.3 122.7 13 8 1 IFS 60.2 104.7 74 9 8 QAD 94.7 80.8 –15 10 9 Epicor 94.3 75.8 –20

25 The Business Applications market

Market development 2001 and beyond Revenue (US$ billions) 78

In the coming years, development will continue to move in the 65 direction of more open, flexible, and easy-to-integrate systems that fully leverage the benefits of the Internet as a medium, and where 53 new e-business functionality is integrated with other business 41 applications functionality. The pace of development can, however, 33 be discussed. Internet-driven structural changes in the business world are a powerful force for change. However, recent develop- ments concerning Internet-related enterprises, in the media and the stock market, seem to have contributed to slowing the current rate of change. Many enterprises are moving forward more slowly 2000 2001 2002 2003 2004 and more cautiously than was the case just a year ago. At the same Total business applications market forecast 2000–2004 time, there is a degree of concern about economic trends. Source: AMR Research4 Despite these question marks about the pace of development, there is no doubt about the direction it is taking. For business appli- cations vendors, it means demand for a much more open architecture than most systems can provide today, partly in order to handle col- laboration between systems from different suppliers. They also have to support situations where data are distributed across an entire net- work of collaborating enterprises. Moreover, there will be increased demand for more specialized functionality for different types of industries. Consequently, it is likely that many subsystems will be common to different industries, whereas other subsystems will require depth of knowledge and the ability to deliver highly special- ized functionality to certain selected market segments. For vendors, the challenge will be to add functionality that complements the traditional internal focus of the systems. AMR Research 4 estimates that traditional business applications function- ality will constitute only 57% of vendor sales, with the remaining 43% being made up of e-commerce (14%), e-business relationship management (14%), and supply chain management (15%). AMR Research forecasts a total growth in the market for business appli- cations from US$ 33 billion in 2000 to US$ 78 billion in 2004. The new manner of organizing and running a business that underlies these demands involves major changes for most enterprises. It will require several years for the changes to be fully implemented and before customers have installed systems that meet the new demands. This will entail extensive readjustments—perhaps too extensive—for many vendors since the changes affect the very foundations on which the systems are built. TechnologyEvaluation.com (2000), “IFS Far Cry From Running Out Of Breath”

26 IFS’ position 2001 and beyond The cornerstone of IFS’ continued success in the market for business systems is the fact that we can offer our customers leading function- ality and quality in a flexible, easy-to-integrate, and component- based system. The componentized structure of IFS Applications also makes it easy for our customers to choose exactly how much they want to install and/or upgrade. Therefore, IFS’ customers can effortlessly approach new ways of running their operations at a pace they deem suitable. The component architecture gives IFS almost unique capabilities to quickly add new functionality to the system as market needs arise. Several of the trends we have observed in the market in the past year that have been favorable for IFS will continue to apply. This refers to the significance of portal technology in enabling enterprises to easily reach down to the true end-users, and to the ability of enterprises to build solutions that integrate their business processes and promote closer collaboration with customers, sup- pliers and partners. IFS Applications is very likely the best proven component-based system with documented leading functionality, quality, and performance. This ensures us a very strong position in the market. With continued international expansion, IFS has become a global player with extensive operations wherever business applications are sold worldwide. This creates economies of scale and enables us to handle major customers whose operations also are global. Our con- tinued growth in the US market, where awareness of the IFS brand has increased considerably, is particularly important. IFS Applications is now in its fourth generation of component- based solutions. With every new generation, the functionality, quality and performance have been enhanced. Implementation is much faster and better, partly because the product has become easier to install and partly because methodology and procedures are con- stantly refined. Consequently, IFS’ position in the global market for business applications will be strengthened even further.

(1) AMR Research (1999), “Business Community Integration: The Next Wave” (2) Gartner Group (1999), “C-Commerce: The New Arena for Business Applications” (3) Gartner Group (2000), “ERP Is Dead – Long Live ERPII” (4) AMR Research (2000), “The Enterprise Applications Report, 1999–2004”

00 Operations in 2000

IFS develops and supplies business applications that span the entire demand and supply chain. Operations are organized in a Parent Company, an R&D organization, and a sales and consulting organization. At present, IFS is repre- sented in 43 countries through wholly and jointly owned subsidiaries as well as business partners. At the end of 2000, the Group had 3,669 employees [3, 226]1, up 14% from the previous year. Of these, 213 were from companies acquired during the year. The proportion of women in the Group was 29%, unchanged from 1999. As of December 31 2000, the average age of the employees in the Group was 35 [34]. Employee turnover for the Group was 18% [15%]. The Parent Company, IFS AB, functions as a service company for subsidi- aries and associated companies in such areas as finance, business development, marketing, sales strategy and management issues. At the end of 2000, IFS AB had 60 employees [31]. IFS Research & Development AB is responsible for product development within the Group via continuous development of IFS Applications and IFS Foundation1. Operations are carried out in Sweden, Norway, Denmark, Finland, Germany, Poland, Brazil, the US, Sri Lanka, and Malaysia. In addition to these sites, development is carried out in cooperation with some of our partner companies. At year-end, IFS Research & Development AB had 851 employees [664], of whom 121 worked with products other than IFS Applications. The sales and service organization is divided into seven geographic areas: Nordic, EMEA, Central & Eastern Europe (C&EE), Asia Pacific, Japan, North America, and Latin America. In each area there are regional offices that are responsible for a particular region. In addition, each area has a regional head office.

1 Figures within [ ] refer to operations in the preceding year

28 President & CEO

Finance & Administration Marketing Strategic alliances

Nordic EMEA C&EE North America Latin America Asia Pacific Japan R&D

Denmark Benelux Czech Republic USA Brazil Australia Japan Brazil

Finland England Hungary Partners Partners China Partners Denmark

Norway France Poland Indonesia Finland

Sweden Germany Slovakia Malaysia Germany

Partners Greece Partners Philippines Malaysia

Italy Singapore Norway

Portugal Thailand Poland

South Africa Partners Sri Lanka

Spain Sweden

Turkey USA

Partners Partners

Group development during 2000 Product development during 2000 has been characterized by the The IFS Group’s net revenue in 2000 increased by 21%, amounting to development of IFS Applications 2001 and its global launch. IFS SEK 2,352 M [1,948]. The increase in sales was attributable to strong Applications 2001 has entailed extensive investments, the largest new sales of IFS Applications and to IFS’ sales successes in several in the Group’s history. During the year, product development international markets. This expansion has been most notable in North expenditure amounted to SEK 517 M [352], representing 22% [18] America, Latin America, and Central and Eastern Europe (C&EE). of the Group’s net revenue and 54% [64] of license revenue. Of Of the Group’s total net sales during the year, license revenue the total product development costs, SEK 207 M [117] has been accounted for 41% [28], totaling SEK 960 M [552], an increase capitalized. The aim of such major investment is to ensure IFS a com- of 74%. Consulting revenue amounted to SEK 1,184 M [1,212], petitive platform for years to come and to enable IFS to transfer a decrease of 2%. Consulting revenue accounted for 50% [62] of investments to more demarcated projects that provide selected market Group net revenue. Other revenue, consisted mainly of hardware areas with an additional competitive edge. sales and third-party licenses. Companies acquired during the year IFS reported a loss of SEK 239 M [–147] after net financial items accounted for 3% [8] of the Group’s net sales. for 2000. The figure to the right shows how the different revenue cat- egories have developed during 1996-2000. The tendency for license revenue to exceed consulting revenue remains and appears to apply LicensintLicense revenueäkter 2352 across the entire business applications industry. This is because KonsultintConsultingä revenuekter systems are easier to implement, and customers have an increased ÖOthervriga revenueintäkter 1948 cost-awareness concerning the need for customization. In addi- tion, applications from leading vendors have become increasingly comprehensive, reducing the need of customer-specific system 1238 development in delivery projects.

During the year, IFS has entered into a number of global 632 partnerships with partners who are market leaders within specific 357 industry segments. These partners will drive sales within their segments and will also make IFS less sensitive to fluctuating demand 1996 1997 1998 1999 2000 for consulting services as they will also be responsible for an increasingly larger amount of the implementation work. Net sales (MSEK)

29 Development by area

IFS' net sales increased by 21%compared with 1999. This can be attributed to strong new sales of IFS Applications and to sales successes in several international markets, primarily the US, Latin America, and Central & Eastern Europe. New local offices were established during the year in Australia, Czech Republic, Hungary, Italy, Portugal, Spain, South Africa, and Slovakia. Com- panies acquired during 2000 accounted for 3% of the Group's total net sales.

30 IFS Nordic Share of net sales per area (%) IFS Nordic is the biggest unit in the Group, with 19 offices in Sweden, Norway, Finland, and Denmark. The 19th office was established in Luleå, Sweden, during the fall. IFS enjoys a leading IFS Nordic 38 % position in several of the Nordic markets and is today the biggest IFS North America 24% vendor of business applications in Norway. IFS EMEA 21% As a result of its strong position, IFS Nordic covers all industry- IFS C&EE 9% IFS Latin America 5% specific solutions. During the year, a solution for Consulting & IFS Asia Pacific 2% Professional Services was developed, with sales successes reported IFS Japan 1% throughout the Nordic region. In Sweden, sales to the public sector were in focus, and 15 municipalities signed for IFS Applications during the year. IFS worked intensively with solutions for Internet start-ups during the first six months of 2000. The outcome has been generally successful, even if several of the start-ups have experienced financial difficulties, which has affected IFS to some extent in the form of bad debts. The market for business applications was very sluggish during the first six months, but the rest of the year was characterized by strong growth. In Denmark, recovery commenced as late as the fourth quarter. Because of the slow recovery of the market, earnings in the Nordic region have been lower than expected. In particular, con- sulting services have been affected, whereas sales of IFS Applica- @IFS tions have continued to grow in comparison with other years. The final quarter, however, contributed to strong results for the whole @IFS’ operations embrace the entire Nordic region, year, and IFS Nordic’s marketshare increased. Over 120 new with offices in Linköping and Gothenburg, Sweden. As an application service provider, @IFS specializes contracts were signed in 2000. New customers include the Dacke in providing an operational environment for IFS Group, Eltek, Moelven, Incap, Done, Framfab, Munters, Stadium, Applications, with a focus on hosting services. We Volvo Car Dealers and Flextronics. can provide for all types of customers. As part of The outlook for 2001 is positive thanks to the strong growth its offering, @IFS has developed secure solutions for experienced during the fourth quarter of 2000 and developments handling the entire range of e-business services. on the market in general. IFS Applications 2001 was launched During the year, @IFS signed over 20 new cus- during the fall, with very positive results. As 2001 commences, tomers. At the beginning of the year, the emphasis IFS Nordic has a solid order base and higher utilization of con- was on dotcom enterprises, shifting during the latter sultants than before. half to focus on larger customers in more “traditional” industries. Customers include Dacke Hydraulik, which uses @IFS to run its solutions at four facilities with a total of 1,000 employees. Apart from the flow of 2000 1999 new customers, invoicing of existing customers has Net sales (MSEK) 1,032 1,098 increased, partly as a result of @IFS being able to of which internal 133 70 offer additional services. Profit after financial items (MSEK) 1 58 The market for hosting services is growing steadily, No. of employees 1,026 1,145 but not as fast as analysts had forecast. However, the flow of customers to @IFS has been healthy, and orders in hand at the end of 2000 were up considerably on the corresponding period in 1999. Development by area

IFS EMEA IFS C&EE EMEA covers Western Europe, the Middle East and Africa. IFS C&EE focuses on medium-size and large companies, offering The market for business applications grew slowly in EMEA the full suite of IFS Applications. IFS also targets selected industries: during 2000. Nevertheless, IFS continued to grow its marketshare utilities, steel, chemical, manufacturing, telecom, insurance, and in the area and establish awareness of the IFS brand throughout e-business. the area. Collaboration has been established with Cap Gemini Ernst & IFS also expanded geographically with the establishment of Young and Deloitte and Touche, as well as 10 local business partners IFS Italy, IFS Spain, IFS Portugal, and IFS South Africa. All four including Softbank, Matrix PL and MCX. The partnerships comprise countries reported sales successes in key areas, including telecom, customer implementation, sales and consulting. e-business, and manufacturing. Customers include Imediata in IFS C&EE developed favorably throughout the year, with IFS Portugal, an ASP collaboration with OHL in Spain, and Mobile Poland closing the gap on market leaders in the region and almost Telephone Networks in South Africa. doubling the size of the company. Revenue and earnings targets were In addition, a joint venture company was formed in collabora- also met, with turnover doubling compared with the previous tion with BAE SYSTEMS to target the civil aviation and defense year. Direct operations were established in the Czech Republic markets. Soon after the company was formed, it won its first major and Hungary, which subsequently reported sales successes, while contract, in the face of strong competition with major business Slovenia and Russia were supported from IFS Poland and through applications vendors, to supply an e-business package for BAE partners. SYSTEMS’ future spares and repairs supply chain business. The IFS Partner Program was started in Poland during the year, IFS EMEA has also continued to develop its successful part- increasing the number of partners to ten and contributing signifi- nership program, adding such partners as Softlab UK and Cap cantly to total IFS Poland revenue at year-end. Gemini Ernst & Young. Almost 60 new contracts were signed in C&EE in 2000, over Significant new customers during the year in our established 35 of which were concluded by IFS Poland. The Czech company, markets include Vivendi in France, Unipart and National Semi- Elanor, subsequently IFS Czech, signed over 20 contracts for HR conductor in the UK, and JUMPtec in Germany. and payroll solutions. With a comprehensive presence throughout Europe, the Middle Also, 14 existing customers in Poland extended their use of IFS East and Africa, IFS is well equipped to continue to grow within Applications, including the power plants Belchatów and Jaworzno. the markets and verticals it has targeted. In 2001, IFS C&EE will strengthen its position in Poland, the Czech Republic and Hungary, as well as establishing its operations in Slovenia to address the Balkan markets. IFS will also continue to 2000 1999 evaluate other markets in the region, adding one or two to its opera- tions—very likely in Eastern Europe. Net sales (MSEK) 538 449 IFS Human Resources, including payroll administration, will be of which internal 52 16 rolled out in the C&EE area in 2001. IFS C&EE will also host the Profit after financial items (MSEK) –48 18 No. of employees 636 439 IFS World Conference in Warsaw in April 2001.

2000 1999

Net sales (MSEK) 220 120 of which internal 5 4 Profit after financial items (MSEK) 23 3 No. of employees 301 190

32 IFS North America IFS Latin America During 2000, IFS continued its strong investment in, and commit- IFS operations in Latin America are managed by IFS Brazil, of which ment to, the US market. At the end of the year, IFS had about 600 IFS owns 50%. During 2000, IFS Brazil had offices in São Paolo, employees in seven branch offices throughout continental US. The Joinville, and Porto Alegre. seventh branch office was added by the acquisition of BBC Consult- The market for business applications in Brazil developed posi- ing Group in San José, California, at the end of the first quarter. tively during 2000, with investments up from 1999. During the IFS Applications is also sold in Canada, where an office is soon to year, IFS Brazil developed well, adding 50 new customers. Sales be opened. Also, throughout 2000 IFS developed partner relation- efforts focus on complete solutions for the manufacturing industry ships with PSINet, Atos Origin, Deloitte and Touche and Solutions as well as on solutions for human resources and the public sector. Consulting. Strong direct sales and implementation presence through IFS Brazil established new partnerships during 2000, including seven branch offices, combined with the strength of these partner- an agreement with Procergs, which offers hosting services. In the ships, will make IFS a major force in the US market in 2001. São Paolo area, IFS offers its own hosting services via @IFS, its The market for business applications and e-business solutions ASP unit. IFS Brazil also collaborates with Freedom within the was relatively slow in the US in the first half of 2000, but picked pharmaceutical industry, and CTIS Informatica Consult within up considerably in the second half. About 60 new IFS Applications the public sector. customers were added in the US in 2000. IFS North America con- Earnings for IFS in Latin America improved as a result of a tributed 24% of total Group revenue compared with 13% in 1999. better developed and profitable business model based on four Throughout 2000, IFS North America continued to focus on profit centers—Sales, Consulting, @IFS, and Product Direction. selling business applications to mid-market manufacturers. This In 2001, new steps will be taken to develop operations. A local strategy proved very successful, as both the number and size of implementation partnership is in the process of being established customers have grown considerably from 1999 to 2000. Major new with the aim of increasing capacity and enabling continued strong customers include APW, National Semiconductor, Gehl, Maxwell, growth. Via partnerships with new distributors, IFS will also be Midway Airlines and Star Cutter Company. able to reach the markets in Argentina and Uruguay. In Brazil, The demand for business applications and e-business solutions operations will expand within ASP services for business applications in the US is expected to continue to grow over the next few years. and human resource management solutions. IFS is well positioned to continue to gain marketshare in the US, with a superior product, excellent positioning from the analysts, a strong partner program, and a solid organization that is ready for 2000 1999 further growth. Net sales (MSEK) 126 66 of which internal 11 1 Profit after financial items (MSEK) 1 –19 2000 1999 No. of employees 221 174

Net sales (MSEK) 647 283 of which internal 91 37 Profit after financial items (MSEK) –199 –84 No. of employees 594 516

33 Development by area

IFS Asia Pacific IFS Japan IFS Asia Pacific has operations in Australia, The Philippines, Hong IFS Japan is a wholly owned subsidiary of IFS AB. Sales focus is Kong, India, Indonesia, China, Malaysia, Singapore, Sri Lanka, on manufacturing and distribution solutions supporting repetitive South Korea, Taiwan, and Thailand through its own offices and and discrete manufacturing, as well as service management, main- through partners. The market focus of IFS Asia Pacific is on discrete tenance, and e-business solutions. Specific attention is given to the manufacturing, service management and EAM for major infrastruc- Automotive and Electronics segments, and OEM suppliers. Opera- ture projects in the energy sector, telecommunications and trans- tions include close cooperation with NEC, a major partner since portation. E-business will be a major differentiator in our offering. 1998. With NEC mainly focusing on the manufacturing segment, The first full year of IFS operations in China and Australia was new partners were added during 2000 in the areas of service man- very successful, having established several local reference customers agement and e-business. in both countries. Despite many challenges in the political and eco- Initially in 2000, sluggish economic growth in Japan slowed the nomic climate, IFS Indonesia has posted another year of growth and market. The second half of the year, however, showed increased IT profits. During 2000, IFS Thailand and IFS’ local distributor merged investments and growing demand for business applications. Stronger to form a joint venture in order to better penetrate the Thai market. demand for e-business solutions was reflected in intense competition Major events during 2000 include the set up of a regionally and market positioning. focused alliances organization to better leverage our 3rd party Investments in IT solutions did not really take off until the fourth relationships and distributor network, the official launch of IFS in quarter. Meanwhile, IFS Japan focused on a step-by-step approach, Australia, the official opening of the IFS office in Shanghai, China, investing in partner support and delivering top-quality products to and the regional roll-out of IFS Applications 2001. generate income and gain a stable and sustainable market presence. Also during 2000, new partnerships were established with LG- Market acceptance of IFS Applications resulted in strongly EDS, the largest systems integrator in South Korea, Golisa Enterprise increased sales in collaboration with NEC, our Japanese partner. Resources in Indonesia and Singapore, and Escosoft in India. In addi- During 2000, seven new contracts were signed through NEC, five tion, eWserver in Singapore was appointed as a distributor, and the of which were in the second half of the year, and one direct contract worldwide alliance with IBM has resulted in collaboration within with IFS Japan. Market acceptance was clearly demonstrated at the the Asia Pacific area, with good prospects for 2001. Japanese launch event of IFS Applications 2001, with more than IFS won 30 new customers in Asia Pacific during the year, 300 people attending the event. notably Spotlight Online in Australia, Pepsi Shanghai and Qinshan The addition of new partners and distributors in combination Nuclear Power Plant in China, Web Office in Singapore, and Mensa with the overall increasing IT investments is expected to generate Binasukses and Indokomas (ALSTOM) in Indonesia. substantial revenue for the coming year. IFS Asia Pacific achieved modest growth in 2000, but will con- tinue to consolidate existing operations and build competencies in the region, while building more effective channels for sales and 2000 1999 marketing. Net sales (MSEK) 11 5 of which internal 6 3 Profit after financial items (MSEK) –32 –27 2000 1999 No. of employees 17 18

Net sales (MSEK) 59 46 of which internal 9 10 Profit after financial items (MSEK) –26 –4 No. of employees 207 202

34

Administration report

The Board of Directors of Industrial and Financial Systems, IFS AB solutions that enable step-by-step implementation and upgrades, at (publ.), organization number 556122-0996, submit herewith the the pace required by competition and which resources allow. Based annual accounts and consolidated accounts for the fiscal year 2000. on this, IFS has developed a component architecture that is consid- Unless otherwise stated, all amounts are in SEK million. Figures ered the technology leader in the industry. within brackets refer to operations in the preceding year. Product development expenditure during the year amounted to SEK 517 M [352], corresponding to 22% [18] of the Group’s net Operations revenue and 54% [64] of license revenue. Of these costs, SEK 207 M IFS develops and supplies component-based business applications [117], has been capitalized. Depreciation of the year’s capitalized that span the entire demand and supply chain. The company’s over development costs amounted to SEK 74 M [34]. 60 business components improve business processes in medium to large companies. IFS eBusiness solutions provide seamless integration Acquisitions of all data sources from the fastest web sites and exchanges to point In 2000, IFS acquired: solutions and legacy ERP. 100% of the shares in BBC Consulting Group LLC, San José, The number of employees at year-end amounted to 3,669, up USA. The company, which has spearhead expertise in Internet- 14% from 3,226 in 1999. Today IFS is represented in 43 countries based business-to-business solutions, had 24 employees on worldwide through wholly and jointly owned subsidiaries, and acquisition. partners. 33% of Parade Software Pty Ltd., Melbourne, Australia. Like The market for business applications BBC, this is a consulting company, with 12 employees at the During 2000, growth in the market for business applications failed time of acquisition. The acquisition of Parade marks IFS’ entry to reach expectations. The 10 biggest vendors together grew by 14%, proper into the Australian market. compared with 1999, which was a poor year with many companies 100% of the shares in Elanor spol. s.r.o., Czech Republic. The reporting lower volumes than in 1998. company had 70 employees when acquired. For IFS, the market gradually improved after the second quarter. IFS believes that the market for business applications will success- 60% of Vendimo Business Solutions AB, Gothenburg, Sweden. ively strengthen, primarily due to continued consolidation and The company develops and sells sales support systems, which globalization among companies, and because of demands on tradi- are a core part of most e-business solutions today. Vendimo’s tional sectors to modernize in order to handle new business models. products are already integrated with IFS Applications. On Moreover, demand from sectors with high service content is expected acquisition, the company had 23 employees. to grow faster than the market as a whole as a consequence of de- 49% of the shares in IFS France. IFS acquired 51% of the shares regulation and the fact that modern business applications are less in the company in 1997. The company had 155 employees at common in this segment. year-end 2000.

Product development 100% of the shares in IM Brännwall AB, Luleå, Sweden. On During 2000, IFS R&D was reorganized in order to more effectively acquisition, the company had 5 employees. support targeted market segments in addition to improving the service and support offered to IFS customers. Product development Divestments was characterized by the development of IFS Applications 2001 and On signing a collaboration agreement concerning e-business prod- its global launch. IFS Applications 2001 entailed major investments ucts with Pivotal Software Inc., USA, IFS sold its 76% share of in product development, the largest in the Group’s history, in order Exactium Ltd. to Pivotal. Profit from the sale of the Exactium to further develop functionality and architecture as well as complete shares amounted to SEK 180 M. In addition to cash, IFS received the evolution of integrated e-business functionality and personal 830,932 shares in Pivotal for the sale of its shares in Exactium. Of portals. The core objective of IFS’ product development is to create the shares received, IFS sold 655,852 during 2000.

Figures within [ ] refer to operations in the preceding year

37 Administration report

Partners Earnings During the year, IFS entered into a number of global partnerships IFS’ net revenue in 2000 increased by 21%, amounting to SEK with partners who are market leaders within specific industry seg- 2,352 M [1,948]. The increase in sales was attributable to strong ments. These partners will drive sales within their segments and new sales of IFS Applications and to IFS’ sales successes in several will also make IFS less sensitive to fluctuating demand for consulting international markets. This expansion has been most notable in services as they will be responsible for an increasingly larger amount North America, Latin America, and Central & Eastern Europe. of the implementation work. Companies acquired during the year accounted for 3% [8] of the Group’s net sales. A distribution agreement has been reached with ABB Automa- Investments in goodwill as a result of corporate acquisitions tion, aimed mainly at asset-intensive companies, by which ABB amounted to SEK 142 M [370], while investments in machinery, offers its customers components for service, maintenance, logis- equipment and buildings amounted to SEK 104 M [117]. Deprecia- tics, human resources, and financials from IFS Applications. tion for goodwill amounted to SEK 46 M [31]. A strategic alliance has been entered into with Atos Origin that The Group reported a loss after net financial items of SEK 239 M commits its sales organization to actively sell IFS Applications [–147]. to existing and prospective customers, mainly in Western con- tinental Europe and the US. Parent company The Parent Company reported net revenue of SEK 42 M [13], with A joint venture company was formed with BAE SYSTEMS to earnings after net financial items of SEK 137 M [–49]. target the market for logistics, fleet management, repairs, and Investments in stocks and shares amounted to SEK 63 M [284], maintenance in the defense and civil aviation sectors. The com- and in machinery and equipment to SEK 2 M [2]. On December pany reported revenue for the fourth quarter totaling SEK 62 M. 31, the Parent Company’s liquid funds, including unutilized lines The company is included in the consolidated accounts from of credit, amounted to SEK 102 M [4]. October 1, 2000, in accordance with the principal of propor- tional consolidation. IFS owns 50% of the shares in the com- Financing and liquidity pany, which has 173 employees. During the first quarter, IFS AB carried out new rights issues in an A partnership with Cap Gemini Ernst & Young has been ini- amount of SEK 100 M to finance acquisitions. In addition, a rights tiated. The parties will jointly deliver business applications to issue was implemented that yielded SEK 528 M after deductions customers worldwide, focusing on service and maintenance for issuing expenses. within the energy and utilities sector. The convertible debenture loan offered to employees during June yielded SEK 71 M. A strategic alliance was formed with IBM, which means that In August and December, two further rights issues, amounting IBM will actively support joint sales initiatives primarily within to SEK 100 M and SEK 34 M, respectively, were implemented in a number of defined market segments and includes minimum order to finance acquisitions. volumes of IFS licenses. On December 31, liquid funds and current investments A collaboration agreement was signed with Pivotal Software, amounted to SEK 174 M [49]. The Group also had access to unuti- which provides IFS with access to Pivotal’s e-business compo- lized lines of credit totaling SEK 103 M [44]. On December 31, the nents as well as continued access to Exactium’s configurator, debt/equity ratio was 47% [40]. which will continue to be sold in IFS’ name.

Figures within [ ] refer to operations in the preceding year

38 Action plan Group is regulated by rules of procedure governing the Board’s During the fourth quarter, concern about the financing of IFS’ rapid operations and by instructions for the work of the President expansion contributed to lower sales and earnings than expected. adopted by the Board. However, measures to secure IFS’ short-term and long-term The Board met 20 times during 2000. Its work during the year financing as well as improve IFS’ cash flow and profit margins were was characterized by matters related to financing, strategy and initiated during the fourth quarter. The main components of the company acquisitions. proposed measures are: Significant events after the close of the fiscal year An agreement concerning the issuing of a convertible debenture During December, IFS reached an agreement with a consortium loan in an amount of SEK 200 M. concerning a convertible debenture loan in an amount of SEK 200 M, An agreement concerning an underwritten shares issue in a which was authorized by the extraordinary meeting of shareholders maximum amount of SEK 300 M. held on February 15, 2001. The consortium is comprised of SEB, A focus on earnings and cash flow in all IFS units. Gustaf Douglas and associates, Alfred Berg Fondkommission AB, Cost reductions aimed primarily at focusing Group resources and Hagströmer & Qviberg Fondkommission AB. The conversion on prioritized geographic areas and product segments. period for the loan runs from January 1 2002 to June 30 2002. The A strengthening of management and financial functions in the conversion rate shall be set at 70% of the average rate for Series B Group. shares during the 20 working days preceding the conversion period, but shall not be lower than SEK 15 per share. In order to increase revenue, reduce recruitment needs and provide To strengthen future financing in IFS, the Group has entered rapid, cost-effective knowledge transfer, some 100 R&D staff will into an agreement with Hagströmer & Qviberg Fondkommission AB collaborate with IFS Consulting in delivery projects during 2001. that enables IFS, during a period of three years, to issue shares in a The positive impact on earnings resulting from the above mea- maximum amount of SEK 300 M. The resulting capital will accrue sures is expected to exceed SEK 200 M during 2001. to IFS via a number of share issues in an amount of SEK 10–50 M each during the period. Hagströmer & Qviberg Fondkommission Outlook AB will subscribe for the newly issued shares. The agreement is IFS is well positioned for continued growth and increased market conditional upon approval by the extraordinary meeting of share- share by offering customers: holders scheduled for February 26, 2001. A world-leading, proven and comprehensive product with modern architecture, high performance, and short implemen- Proposed disposition of unappropriated earnings tation times As shown in the Group balance sheet, the accumulated loss amounted Highly competent consultants with long experience of IFS to SEK 672.7 M. Applications in collaboration with market-leading partners The following funds are available for disposition by the Annual Standard components for different types of e-business, which General Meeting: can be integrated with existing systems Retained loss SEK –74,806,781 A global presence, with 73 offices and sales in 43 countries Profit for the year SEK 137,078,546 worldwide. Unrestricted shareholders’ equity SEK 62,271,765 Growth and product development are still important for IFS. How- It is proposed that no allocation be made to restricted reserves. ever, cash flow and profit will be prioritized so that future growth can The Board of Directors and the President propose that the un- be achieved while retaining financial strength. Changes in demand appropriated earnings of the Company be retained in the business. for consulting services will successively become less significant for For additional information on Group and Parent Company earnings as a result of increased collaboration with partners. results and position in general, reference is made to the accompanying income statements, balance sheets, cash flow analysis, and notes to The Board of Directors’ work the financial statements. The work of the Board of Directors and the President of the Figures within [ ] refer to operations in the preceding year

39 Income statement Note 2000 1999 2000 1999

GROUP PARENT COMPANY License revenue 1 960.0 551.8 –– Consulting revenue 1,183.7 1,212.5 0.6 0.1 Other 2 208.2 183.2 40.9 12.6 Net sales 3 2,351.9 1,947.5 41.5 12.7 Capitalized work for own use 4, 19 206.6 116.7 –– Other operating income 5 217.8 15.4 206.3 11.9 Total operating income 6 2,776.3 2,079.6 247.8 24.6 Operating expenses: External costs 7 941.7 781.7 101.2 72.4 Personnel costs 8, 9, 10 1,827.8 1,292.0 41.2 19.5 Depreciation/amortization of tangible and intangible fixed assets 11, 19, 20 208.5 120.2 2.0 1.1 Other operating expenses 12 77.3 22.8 18.3 0.4 Total operating expenses 6 3,055.3 2,216.7 162.7 93.4

OPERATING PROFIT/LOSS –279.0 –137.1 85.1 –68.8 Result from financial investments: Result from participations in subsidiaries 13 –– –2.2 Result from participations in associated companies 14 17.4 1.3 –– Result from participations in other companies 15 20.3 2.7 21.0 2.7 Other interest income and similar profit/loss items 16 56.1 19.1 45.1 26.1 Interest expense and similar profit/loss items –53.9 –33.0 –14.0 –11.4 Total result from financial investments 39.9 –9.9 52.1 19.6

PROFIT/LOSS AFTER FINANCIAL ITEMS –239.1 –147.0 137.2 –49.2 Taxes on profit/loss for the year 17 –6.0 –14.5 –0.1 – Minority interest in result for the year –1.2 2.4 ––

PROFIT/LOSS FOR THE YEAR –246.3 –159.1 137.1 –49.2

40 Balance sheet Note Dec. 31 2000 Dec. 31 1999 Dec. 31 2000 Dec. 31 1999

GROUP PARENT COMPANY ASSETS FIXED ASSETS Intangible fixed assets 18 Capitalized expenditures for product development 339.7 228.6 –– Product rights 46.6 15.9 6.1 – Software 34.5 29.2 0.3 0.3 Goodwill 595.9 510.7 1.3 1.5 Other intangible fixed assets 10.3 6.3 –– Total intangible fixed assets 1,027.0 790.7 7.7 1.8 Tangible fixed assets 19, 20, 21 Buildings and land 57.8 35.4 9.1 9.2 Machinery and equipment 198.6 178.7 3.7 2.7 Total tangible fixed assets 256.4 214.1 12.8 11.9 Financial fixed assets Participations in subsidiaries 22 ––1,133.7 750.0 Participations in associated companies 23 38.2 20.1 18.6 18.9 Receivables from subsidiaries –– 82.2 51.1 Other securities held as fixed assets 6.1 5.2 6.1 4.1 Other long-term receivables 24 152.7 88.4 0.8 0.8 Total financial fixed assets 197.0 113.7 1,241.4 824.9

TOTAL FIXED ASSETS 1,480.4 1,118.5 1,261.9 838.6

CURRENT ASSETS Inventories, etc. 4.8 6.4 0.0 2.1 Current receivable Accounts receivable 757.0 582.9 4.8 3.1 Receivables from subsidiaries ––705.4 471.0 Receivables from associated companies 15.4 12.5 5.9 6.7 Tax receivables 9.0 10.5 0.2 0.2 Other receivables 69.3 21.3 40.3 2.0 Prepaid expenses and accrued income 25 307.0 211.3 14.5 10.1 Total current receivables 1,157.7 838.5 771.1 493.1

Current investments 26 50.1 1.3 50.1 1.3

Cash and bank balances 123.7 47.5 57.1 0.2

TOTAL CURRENT ASSETS 1,336.3 893.7 878.3 496.7

TOTAL ASSETS 2,816.7 2,012.2 2,140.2 1,335.3

41 Equity and liabilities Note Dec. 31 2000 Dec. 31 1999 Dec. 31 2000 Dec. 31 1999

GROUP PARENT COMPANY SHAREHOLDERS’ EQUITY 27 Restricted equity Share capital (48,872,867 shares, par value SEK 5 each) 244.4 198.6 244.4 198.6 Restricted reserves 1,727.0 804.9 –– Share premium reserve ––1 476.4 759.9 Statutory reserve –– 18.1 18.1 Total restricted equity 1,971.4 1,003.5 1,738.9 976.6 Accumulated loss/unrestricted reserves Unrestricted reserves/earnings brought forward –426.4 –61.5 –74.8 107.7 Profit/loss for year –246.3 –159.1 137.1 –49.2 Total accumulated loss/unrestricted reserves –672.7 –220.6 62.3 58.5

TOTAL SHAREHOLDERS’ EQUITY 1,298.7 782.9 1,801.2 1,035.1

MINORITY INTEREST 24.7 25.9 – –

UNTAXED RESERVES 28 – – 0.5 0.5

PROVISIONS Provisions for taxes and similar obligations 7.4 5.0 –– Provisions for taxes 0.1 1.9 –– Other provisions 0.8 –––

TOTAL PROVISIONS 8.3 6.9 – –

LONG-TERM LIABILITIES 29 Convertible debenture loan 30 70.9 – 70.9 – Liabilities to credit institutions 31 224.1 300.6 – 42.0 Other liabilities 27.4 13.4 9.7 5.2

TOTAL LONG-TERM LIABILITIES 322.4 314.0 80.6 47.2

CURRENT LIABILITIES Liabilities to credit institutions 210.5 159.6 150.0 109.5 Advance payments from customers 5.5 14.0 –– Accounts payable 254.1 196.9 37.6 45.4 Liabilities to subsidiaries –– 16.6 39.2 Liabilities to associated companies 5.6 0.4 – 0.2 Tax liabilities 10.0 – 0.2 – Other current liabilities 224.8 211.4 40.3 53.9 Accrued expenses and prepaid income 32 452.1 300.2 13.2 4.3

TOTAL CURRENT LIABILITIES 1,162.6 882.5 257.9 252.5

TOTAL EQUITY AND LIABILITIES 2,816.7 2,012.2 2,140.2 1,335.3

MEMORANDUM ITEMS

Pledged assets 33 666.6 405.8 241.6 237.6 Contingent liabilities 34 43.9 25.8 99.0 54.6

42 Cash flow analysis 2000 1999 2000 1999

GROUP PARENT COMPANY CURRENT OPERATIONS Operating profit/loss –279.0 –137.1 85.1 –68.8 Adjustments for items not included in the cash flow: Depreciation 208.5 120.2 2.0 1.1 Gain from sale of subsidiary –180.0 ––180.0 – Other adjustments 2.4 12.2 –– –248.1 –4.7 –92.9 –67.7 Earnings from financial investments 1.5 –12.6 31.1 19.6 Tax paid –5.7 –13.3 –0.1 – Cash flow from current operations before change in working capital –252.3 –30.6 –61.9 –48.1

CHANGE IN WORKING CAPITAL Change in inventories 1.7 0.6 2.1 –1.0 Increase in current receivables –295.9 –134.9 –278.0 –134.6 Change in current, non-interest-bearing liabilities 226.6 173.3 –35.1 91.8 Cash flow from current operations –319,9 8,4 –372,9 –91,9

INVESTMENT OPERATIONS Acquisition of subsidiaries, net –183.4 –296.9 –63.3 –284.3 External sale of subsidiary, net1 227.7 – 228.8 – Sale of subsidiary within the Group, net –– –181.1 Acquisition of other securities, net –1.4 6.9 –1.1 –0.5 Acquisition of tangible fixed assets, net –220.3 –142.3 –2.9 –1.2 Acquisition of intangible fixed assets, net –154.9 –63.3 –5.9 –0.2 Cash flow from investment operations –332.3 –495.6 155.6 –105.1

FINANCING OPERATIONS New issue 762.3 377.9 762.3 377.9 Options granted – 7.3 – 7.3 Change in long-term receivables –64.3 –47.0 –31.1 30.9 Increase in current interest-bearing liabilities 50.9 131.6 40.5 109.5 Change in long-term liabilities –20.8 4.8 33.4 –6.3 Group contribution –––133.0 75.0 Shareholders’ contribution –––397.9 –400.9 Cash flow from financing operations 728.1 474.6 274.2 193.4

Cash flow for the year 75.9 –12.6 56.9 –3.6 Liquid funds, January 1 47.5 63.7 0.2 3.8 Exchange rate difference in liquid funds 0.3 –3.6 –– Liquid funds, December 31 123.7 47.5 57.1 0.2

1) The sale price for the shares in Exactium amounts to SEK 257.2 M. To this amount has been added the profit from the sale of shares in Pivotal Inc., which amounted to SEK 21.7 M. A deduction of SEK 50.1 M has been made in respect of remaining shares in Pivotal. The value for the Parent Company amounts therefore to SEK 228.8 M. Since liquid funds in Exactium amounted to SEK 1.1 M on the sale of the shares, the value for the Group totals SEK 227.7 M.

43 Notes to the financial statements

Accounting principles rate and all items in the income statement are translated at the average The Annual Report has been prepared in accordance with generally rate for the year. Translation differences are credited/debited directly accepted accounting principles, whereby the Group applies the re- to the shareholders’ equity. commendations and directives of the Swedish Financial Accounting Standards Council and the Swedish Accounting Standards Board. Deferred tax in untaxed reserves The Group reports deferred taxes pertaining to the difference Consolidation principles between the book value and the taxable value of the assets and The Parent Company and all the subsidiaries constitute the Group. liabilities. Appropriations and untaxed reserves are not reported Subsidiaries are all companies in which the Group owns an interest in the consolidated accounts. When such items arise in the separate and directly or indirectly holds a voting majority, or has a controlling companies, they are reported in the consolidated accounts, taking interest through agreements. into account the deferred tax. The effect on earnings after tax is The consolidated accounts are prepared in accordance with the reported in the income statement as part of the profit for the year purchase method, whereby consolidated shareholders’ equity in- and in the balance sheet as restricted shareholders’ equity. A tax cludes only that portion of the Group’s share of the shareholders’ rate of 28% is used in Swedish companies. The current tax rate in equity in subsidiaries and associated companies accruing after the each country is applied for the Group’s foreign subsidiaries. date of acquisition. Shares in associated companies, in which the Group’s voting Leasing interest is at least 20% and not more than 50%, are reported in In reporting leasing agreements, the Group applies Recommendation accordance with the equity method. The Group’s share in earnings No. 6 of the Swedish Financial Accounting Standards Council. Most after tax is reported in the item Result from participations in asso- of the leasing agreements are considered to be operational leasing, ciated companies in the income statement. which means that leasing fees are expensed during the leasing period. Capital participations in associated companies are booked at In cases in which leasing contracts are considered to be financial the Group’s share in the associated company’s shareholders’ equity leasing, these are reported as acquisition of tangible fixed assets after adjustment for goodwill not amortized. and as liabilities. Depreciation is applied in the same manner as if Shares in joint ventures are reported in accordance with the prin- the company owned the assets. (See below under Tangible fixed ciple of proportional consolidation, applying recommendation No. 14 assets). In financial leasing, current leasing fees are divided into an of the Swedish Financial Accounting Standards Council. interest portion, which is expensed, and an amortization portion. Consequently, revenue, expenses, assets, and liabilities are booked in the consolidated accounts as participation rights. Translation of receivables and liabilities Participation in other companies is shown at the lower of acquisi- in foreign currency tion value and actual value. Receivables and liabilities in foreign currency are translated at year-end exchange rates. Exchange differences are divided into Goodwill operational and financial. The exchange differences reported in Goodwill is amortized over a period of 10 to 20 years after an operations relate mainly to accounts receivables and accounts individual assessment of the economic lifetime. Goodwill in payable. The financial exchange differences relate to financial strategic acquisitions in new markets is amortized over 20 years. assets and liabilities. Goodwill is reassessed annually and is amortized if the condi- tions for capitalization change. Revenue accounting IFS applies the following principles when reporting license revenue. Translation of accounts when consolidating Revenue is reported: foreign companies When the customer gains access to IFS software The so-called current method is applied when translating the income When cancellation clauses no longer apply statement and balance sheets of foreign subsidiaries to Swedish kronor. Balance sheet items are translated at the year-end exchange When a written agreement has been signed with a customer

44 Maintenance revenue is the fees IFS customers pay to receive the position to utilize major tax deductions for losses, no tax expenses right to be upgraded to new versions of IFS Applications. These have been taken into account for the Group contributions booked fees do not include consulting expenses for installation. IFS annual- directly against shareholders’ equity. Nor has tax been estimated izes these fees over the lifetime of the contract. on the portion of the Group contribution that creates a tax deficit. Consulting services are mainly carried out as an open account, whereby income is reported as the work is performed. Non-invoiced Inventories work is reported as a current asset under the item Prepaid expenses Inventories are reported in accordance with the first-in, first-out and accrued income in the balance sheet. (FIFO) method. Valuation is made at the lower of acquisition cost Work at fixed price, which is a minor portion of the Group’s and actual value, which means that the obsolescence risk is taken revenue, is reported in a similar manner after reservation for loss into account. risks. Revenue from hardware sales is reported on delivery. Tangible fixed assets Tangible fixed assets are reported at acquisition cost. Depreciation Costs for research and development according to plan is based on the fixed assets’ acquisition value. IFS works continually with a large number of product development Assets are depreciated straight-line, based on the estimated eco- projects. Personnel costs constitute the greater part of the costs for nomic lifetime of the assets. The following depreciation periods product development. In addition to these, certain indirect costs are applied for the various types of assets: arise, such as costs of premises, travel and office overheads. Indirect Buildings 2% costs do not include, for example, amortization of capitalized pro- duct development costs and general administration costs. A small Equipment and computers 20% portion of the product development work is carried out by con- tracted consultants. Intangible fixed assets A project begins with the preparation of the demand specifica- Amortization is straight-line and is based on the estimated eco- tions. A model and, in many cases, a prototype of the product is then nomic lifetimes of the assets. The following amortization periods created. The model and prototype form the decision documentation are applied for the various types of assets: for the development projects that will result in a commercial product Goodwill 5–10% or a product intended to be used in proprietary development work. Acquired product rights 5–10% Costs arising through, and including, development of a model/proto- type are charged against earnings as incurred. Software 20% Costs incurred in a development project after a model/proto- Capitalized development expenditure 20% type is developed constitute the basis for capitalizing development costs. Current investments Development costs involve a certain amount of technical and Current investments are valued at the lower of acquisition value commercial uncertainty. In view of this uncertainty, only 40% of and the actual value as of December 31, 2000. the total cost included in the amount for capitalization is capitalized. Capitalized development costs are depreciated during an economic Receivables/liabilities lifetime assessed individually for each development project, but not Receivables and liabilities are reported in the amounts expected to more than five years. Assessments are made continually to determine be realized. whether previously capitalized expenditures are valid, and write- downs are made to the extent necessary.

Group contributions/Shareholders’ contributions Group contributions and shareholders’ contributions have been reported in accordance with the directives issued by the Emerging Issues Task Force of the Swedish Financial Accounting Standards Council in September 1998, whereby these items have been reported directly against shareholders’ equity and therefore have not affected the Parent Company’s earnings. Since the Parent Company is in a

45 Note 1 License revenue 2000 1999 2000 1999

GROUP PARENT COMPANY License revenue 693.2 396.0 –– Maintenance fees 266.8 155.8 –– Total 960.0 551.8 – –

Note 2 Other net sales 2000 1999 2000 1999

GROUP PARENT COMPANY Sales of hardware 80.6 114.4 –– Third-party licenses 77.3 51.2 –– Parent company charges –– 19.3 – Revenue related to outsourcing operations 14.1 0.9 –– Revenue related to flight operations 17.4 9.5 –– Miscellaneous 18.8 7.2 21.6 12.6 Total 208.2 183.2 40.9 12.6

Note 3 Net sales by geographical area 2000 1999 2000 1999

GROUP PARENT COMPANY Nordic region 916.7 997.8 26.2 5.5 Western Europe, Middle East and Africa 492.3 480.6 5.3 0.4 Central & Eastern Europe 215.3 116.2 1.6 3.3 North and South America 674.7 316.6 7.5 3.2 Asia 49.1 36.3 0.9 0.3 Australia 3.8 ––– Total 2,351.9 1,947.5 41.5 12.7

Note 4 Capitalized work for own use

Expenditure on product development amounted to SEK 517 M [352], of which SEK 207 M [117] was capitalized. Depreciation of capitalized expenditures amounted to SEK 74 M [34].

Note 5 Other operating income 2000 1999 2000 1999

GROUP PARENT COMPANY Profit from sale of Exactium 180.0 – 180.0 – Exchange rate gains 29.2 8.6 9.7 0.6 Rent 0.9 0.8 16.6 11.3 Other 7.7 6.0 –– Total 217.8 15.4 206.3 11.9

Figures within [ ] refer to operations in the preceding year

46 Note 6 Purchases and sales between Group companies

In the Parent Company, SEK 55.7 M [22.7] of purchases and SEK 20.6 M [13.3] of sales pertained to own subsidiaries.

Note 7 External costs

Auditors’ fees for the Group amounted to SEK 4.5 M [4.3] and for the Parent Company, to SEK 0.8 M [0.7]. In addition, the Group paid consultants’ fees amounting to SEK 2.7 M [2.2], and the Parent company, SEK 0.2 M [1.0] for consulting services other than those of auditors. 2000 1999 2000 1999

GROUP PARENT COMPANY Auditing PricewaterhouseCoopers 3.1 2.0 0.8 0.7 Ernst & Young 0.2 1.0 –– KPMG 0.3 0.2 –– Other 0.9 1.1 –– Total 4.5 4.3 0.8 0.7

2000 1999 2000 1999

GROUP PARENT COMPANY Consulting services other than auditing PricewaterhouseCoopers 2.5 1.7 0.2 1.0 Ernst & Young – 0.5 –– KPMG –– –– Other 0.2 ––– Total 2.7 2.2 0.2 1.0

Note 8 Wages, salaries, other remunerations and social costs 2000 1999 2000 1999

GROUP PARENT COMPANY Wages, salaries and remuneration 1,387.1 953.2 25.0 12.4 Social expenses 269.6 193.6 9.1 4.1 Pension costs 69.9 39.6 4.0 1.3 Other personnel costs 101.2 105.6 3.1 1.7 Total 1,827.8 1,292.0 41.2 19.5

SEK 0.2 M [0.1] of the Parent Company’s pension costs pertain to the Board and the President. The corresponding amount for the Group is SEK 2.6 M [2.0].

Figures within [ ] refer to operations in the preceding year

47 Note 8 Wages, salaries, other remunerations and social costs continued

Wages, salaries and other remunerations by country and between Board members/CEO and employees: 2000 2000 1999 1999 Board Other Board Other and CEO employees and CEO employees Parent company Sweden 1.1 23.9 1.3 11.1 Subsidiaries in Sweden 6.7 360.0 4.7 310.4 Subsidiaries abroad Norway 1.2 115.6 1.5 111.5 Finland 1.4 17.5 0.6 14.0 Denmark 1.6 45.3 1.5 43.0 Germany 1.8 89.4 1.9 74.8 England 1.4 59.5 1.2 27.7 France 1.3 43.6 1.1 42.5 Netherlands 2.4 20.1 2.2 8.5 Greece 0.9 7.9 0.5 6.6 Portugal 0.5 1.4 –– Spain – 2.2 –– Italy 0.2 1.6 –– South Africa – 1.9 –– Poland 4.6 46.6 2.0 32.2 Czech Republic 1.1 3.9 –– Slovakia – 0.2 –– Hungary – 0.8 –– USA 3.6 403.1 4.6 184.1 Brazil 1.3 47.3 1.8 26.6 Singapore – 14.0 – 7.9 Thailand – 2.0 0.3 0.8 Philippines – 0.7 – 0.3 China – 6.1 – 0.1 Indonesia – 8.8 – 7.7 Malaysia – 0.3 –– Sri Lanka – 14.7 – 6.8 Australia – 1.0 –– Japan 2.7 13.9 3.1 8.3 Subsidiaries abroad, total 26.0 969.4 22.3 603.4 Group total 33.8 1,353.3 28.3 924.9

Note 9 Remunerations paid to senior executives and others

Fees to the Board during the year amounted to SEK 0.3 M [0.4]. Fees to the Chairman of the Board amounted to SEK 72,000 [90,000]. The Group President and CEO received salary and other benefits amounting to SEK 1.1 M [1.2]. If the Group terminates the employment, the President is to receive 12 months’ notice; if the employment is terminated by the President, the Group is to receive 6 months’ notice. No pension benefits in addition to normal schemes are paid. For other senior executives, the notification period is between 6 and 12 months from the Group and 6 months from the senior executive. The current pension schemes conform with the rules applied within the SAF/PTK union area. IFS International Flight Service leases aircraft from Greenfield AB on an hourly basis and on market terms. Greenfield AB is 90% owned by Bengt Nilsson, president and CEO of IFS. During the year, SEK 1,337,684 (excluding VAT), compared with SEK 877,410 (excluding VAT) for 1999, was paid in the form of consulting fees to companies owned by Board of Directors member, Rolf Erichs. Excluding the above transactions, no Board member or senior executive has participated directly or indirectly in any business transaction which is or was unusual in nature or in respect to its terms, and which occurred during the current or preceding fiscal year. This also applies to transactions in earlier years that remain unsettled or incomplete in any respect. The Group has not made loans or issued guarantees or sureties on behalf of any Board members, senior executive or Group auditor.

Figures within [ ] refer to operations in the preceding year

48 Note 10 Average numbers of employees per country 2000 1999 2000 1999

GROUP PARENT COMPANY Sweden 1,090 924 51 30 of whom, women 343 301 21 12 Norway 244 247 –– Finland 56 46 –– Denmark 90 93 –– Germany 175 136 –– England 87 49 –– France 152 142 –– Netherlands 51 27 –– Greece 45 37 –– Portugal 4 ––– Spain 5 ––– Italy 4 ––– South Africa 4 ––– Poland 202 172 –– Czech Republic 32 ––– Slovakia 9 ––– Hungary 8 ––– USA 565 296 –– Brazil 202 146 –– Singapore 25 21 –– Thailand 11 9 –– Philippines 6 3 –– China 23 ––– Indonesia 154 132 –– Sri Lanka 210 142 –– Australia 1 ––– Japan 18 15 –– Malaysia 4 ––– India 1 ––– Subsidiaries abroad, total 2,388 1,713 –– of whom, women 654 451 –– Total 3,478 2,637 51 30 of whom, women 997 752 21 12

Note 11 Amortization/depreciation of tangible and intangible fixed assets 2000 1999 2000 1999

GROUP PARENT COMPANY Capitalized expenditures for R&D 73.5 34.3 –– Product rights 6.3 3.4 0.5 – Software 9.2 5.0 0.1 0.1 Goodwill 45.9 31.2 0.2 0.2 Other intangible fixed assets 1.4 0.6 –– Total amortization of intangible fixed assets 136.3 74.5 0.8 0.3 Buildings and land 2.0 2.1 0.1 0.2 Leased Assets 14.9 6.0 –– Other machinery and equipment 55.3 37.6 1.1 0.6 Total depreciation of tangible fixed assets 72.2 45.7 1.2 0.8 Total 208.5 120.2 2.0 1.1

49 Note 12 Other operating expenses 2000 1999 2000 1999

GROUP PARENT COMPANY Bad debts and restructuring expenses 59.6 – 17.1 – Exchanges rate losses 10.6 8.4 1.2 0.4 Other 7.1 14.4 –– Total 77.3 22.8 18.3 0.4

Note 13 Results from participations in subsidiaries 2000 1999 2000 1999

GROUP PARENT COMPANY Dividends, IFS France –– –2.2 Total – – – 2.2

Note 14 Result from participations in associated companies 2000 1999 2000 1999

GROUP PARENT COMPANY Loss, IFS Malaysia Sdn Bhd –0.4 ––– Share in profits, Elsidor KB, Jönköping 17.8 1.3 –– Total 17.4 1.3 – –

Note 15 Results from participations in other companies 2000 1999 2000 1999

GROUP PARENT COMPANY Profit from sale of shares in Pivotal Software Inc 21.7 – 21.7 – Profit from sale of IQ-Soft 0.6 – 0.6 – Profit from sale of Linktech – 2.7 – 2.7 Write-down of shares in boo.com –1.3 ––1.3 – Other –0.7 ––– Total 20.3 2.7 21.0 2.7

Note 16 Other interest income and similar profit/loss items 2000 1999 2000 1999

GROUP PARENT COMPANY Interest 4.7 2.2 4.1 8.8 Exchange differences 51.4 16.9 41.0 17.3 Total 56.1 19.1 45.1 26.1

50 Note 17 Taxes on profit/loss for the year 2000 1999 2000 1999

GROUP PARENT COMPANY Paid –5.7 –13.3 –0.1 – Deferred –0.3 –1.2 –– Total –6.0 –14.5 –0.1 –

Note 18 Intangible fixed assets Other Capitalized intangible expenditures Product fixed Group for R&D rights Software Goodwill assets Total

ACCUMULATED ACQUISITION VALUE Opening balance 351.5 30.3 41.1 569.4 6.9 999.2 Accumulated acquisition value in acquired companies 4.1 – 0.5 43.8 4.9 53.3 Purchases 203.4 43.8 24.8 99.6 0.1 371.7 Sales/disposals –10.5 –7.4 –10.2 –78.6 0.0 –106.7 Reclassification –19.9 ––2.5 24.8 0.1 2.5 Exchange differences during the year 9.0 0.7 0.8 34.1 0.4 45.0 Closing balance 537.6 67.4 54.5 693.1 12.4 1 365.0 ACCUMULATED DEPRECIATION Opening balance –122.9 –14.4 –11.9 –58.7 –0.6 –208.5 Accumulated depreciation in acquired companies –0.4 ––0.3 –1.9 ––2.6 Depreciation during the year –73.5 –6.3 –9.2 –45.9 –1.4 –136.3 Sales/disposals 4.3 – 1.1 2.3 – 7.7 Reclassification –0.1 – 0.7 1.7 – 2.3 Exchange differences during the year –5.3 –0.1 –0.4 5.3 –0.1 –0.6 Closing balance –197.9 –20.8 –20.0 –97.2 –2.1 –338.0 Total 339.7 46.6 34.5 595.9 10.3 1 027.0

Product Parent Company rights Software Goodwill Total

ACCUMULATED ACQUISITION VALUE Opening balance 0.0 0.4 2.1 2.5 Purchases 6.6 0.1 – 6.7 Closing balance 6.6 0.5 2.1 9.2 ACCUMULATED DEPRECIATION Opening balance 0.0 –0.1 –0.6 –0.7 Depreciation during the year –0.5 –0.1 –0.2 –0.8 Closing balance –0.5 –0.2 –0.8 –1.5 Total 6.1 0.3 1.3 7.7

51 Note 19 Tangible fixed assets Buildings Leased Other machinery Group and land assets and equipment Total

ACCUMULATED ACQUISITION VALUE Opening balance 46.4 63.4 277.7 387.5 Accumulated acquisition value in acquired companies 3.4 – 14.5 17.9 Purchases 19.1 27.7 56.8 103.6 Sales/disposals –0.6 ––25.4 –26.0 Reclassification 0.2 –16.9 18.5 1.8 Exchange difference during the year 2.3 2.7 13.6 18.6 Closing balance 70.8 76.9 355.7 503.4 ACCUMULATED DEPRECIATION Opening balance –11.0 –13.9 –150.2 –175.1 Accumulated depreciation in acquired companies –0.5 ––9.7 –10.2 Depreciation during the year –2.0 –14.9 –55.3 –72.2 Sales/disposals 0.2 – 16.8 17.0 Reclassification 0.9 5.0 –4.5 1.4 Exchange difference during the year –0.6 –1.1 –8.0 –9.7 Closing balance –13.0 –24.9 –210.9 –248.8

ACCUMULATED WRITE-UPS Opening balance ––1.7 1.7 Exchange difference during the year ––0.1 0.1 Closing balance – – 1.8 1.8 Total 57.8 52.0 146.6 256.4

Buildings Other machinery Parent company and land and equipment Total

ACCUMULATED ACQUISITION VALUE Opening balance 10.6 5.3 15.9 Purchases – 2.1 2.1 Closing balance 10.6 7.4 18.0 ACCUMULATED DEPRECIATION Opening balance –1.4 –2.6 –4.0 Depreciation during the year –0.1 –1.1 –1.2 Closing balance –1.5 –3.7 –5.2 Total 9.1 3.7 12.8

Note 20 Future leasing arrangements

In addition to the assets above, equipment and cars are leased by the Group. The remaining rental payments for these amount to SEK 52.1 M [44.5] and are distributed in future years as follows: 2001: 27.2 2002: 18.0 2003: 6.7 2004: 0.2 2005: –

Note 21 Tax values

The tax values for the Swedish property, Lärkfalken 2, in Värnamo, Sweden, belonging to IFS Softwind AB, amount to SEK 6.8 M [2.9]. In addition, the Group owns offices in the Czech Republic and France.

Figures within [ ] refer to operations in the preceding year

52 Note 22 Participations in subsidiaries Organization No. of Capital/ Book value number Reg. office shares votes, % MSEK IFS Americas, Inc. USA 100 100 635.2 IFS North America, Inc. USA 100 100 – Intercim, Inc. USA 100 100 – IFS Brasil Ltda Brazil 60,000 50 83.1 IFS Europe AB 556139-5541 Linköping 7,500 100 101.8 IFS Applications España, S.A. Spain 10,017 100 – IFS Benelux BV Netherlands 264 66 – IFS Belgium BVBA Belgium 7,125 95 – IFS Netherlands BV Netherlands 20,000 100 – IFS Verwaltung GmbH Germany 2 100 – IFS Beteiligung GmbH Germany 1 100 – IFS Deutschland GmbH & Co KG Germany 2 100 – IFS France SA France 45,000 100 – Eurinfo GmbH Germany 100 100 – SCI Le Château France 100 100 – IFS Hellas SA Greece 1,938,000 64 – IFS Italia Srl Italy 1 65 – Industrial and Financial Systems, IFS UK Ltd England 194,000 97 – Application Software IFS South Africa (Pty) Ltd South Africa 51 51 – BAE SYSTEMS-IFS Ltd UK 2,500 50 – Paradigm Logistic Systems Ltd UK 2 100 – Infiseuro, Serviços Informáticos Lda Portugal 1 100 – IFS International Flight Service AB 556160-2938 Linköping 10,000 100 1.0 IFS International Operations AB 556040-6042 Linköping 2,400 100 0.3 IFS Japan Inc. Japan 200 100 75.0 IFS Nordic AB 556248-4856 Linköping 1,000 100 81.0 Access International AB 556530-9316 Linköping 1 100 – At IFS AB 556221-7835 Linköping 100 100 – IFS Danmark A/S Denmark 50 100 – IFS Applications A/S Denmark 2 100 – IFS Norge AS Norway 2,200 100 – IFS Sverige AB 556211-7720 Linköping 3,000 100 – IM Brännvall AB 556516-0115 Luleå 10,000 100 – Oy IFS Industrial Systems Finland AB Finland 23,000 100 – Tadema AB 556512-9185 Linköping 1,000 100 – IDOK Försäljning i Norrköping AB 556389-0895 Linköping 1,020 100 – IDOK i Norrköping AB 556319-1922 Linköping 50,000 100 – IFS Poland Sp, z.o.o Poland 26,189 100 32.6 Elanor spol. s.r.o Czech Republic 1 100 – Elanor Slovakia s.r.o Slovakia 1 100 – Elanor Zilina s.r.o Slovakia 1 100 – IFS Czech s.r.o Czech Republic 1 100 – IFS Hungary Ltd Hungary 1 99 – IFS R&D Asia Pacific Sdn Bhd Malaysia 2 100 0.0 IFS R&D Ltd Sri Lanka 300,000 100 0.4 IFS Research & Development AB 556209-6528 Linköping 1,000 100 52.5

53 Note 22 Participations in subsidiaries continued Organization No. of Capital/ Book value number Reg. office shares votes, % MSEK IFS Solutions Asia Pacific Pte Ltd Singapore 275,000 100 42.7 IFS (Beijing) Ltd China 200,000 100 – IFS Philippines Inc. The Philippines 7,730,000 100 – IFS Solutions (Thailand) Ltd Thailand 20,000 100 – IFS Sri Lanka Ltd Sri Lanka 150,000 50 0.4 IFS Svensk Idéutveckling AB 556150-5735 Linköping 1,000 100 0.1 Softwind AB 556279-8370 Värnamo 7,470 100 – Softwind Holding AB 556284-4554 Värnamo 1,000 100 – Torron System AB 556150-5735 Linköping 20 100 2.3 IFS Indonesia PT Indonesia 29,762 58 – Vendimo Business Solutions AB 556400-2946 Gothenburg 1,052,630 60 25.3 Total book value in the Parent Company 1,133.7

2000 1999

PARENT COMPANY Opening balance 750.0 245.9 External acquisitions 63.3 284.3 External sales –77.2 – Sales within the Group, net ––181.1 Shareholders’ contribution/new share issues in subsidiaries 397.6 400.9 Closing balance 1,133.7 750.0

Note 23 Participations in associated companies

Book value Book No. of Capital/ in Parent value in Org. no. Reg. office shares votes, % Company Group

DIRECTLY OWNED Elsidor KB, Jönköping 916523-2126 Jönköping 1/3 33.3 18.0 37.0 IFS Malaysia Sdn Bhd Malaysia 250,000 25 0.6 0.2 INDIRECTLY OWNED Eurinfo Méditerranée France 847 33.9 – 0.3 Acropolis Technical Park SA Greece 200 1 – 0.1 IFS Australia Pty Australia 50,000 33 – 0.1 Interbiz Spain 3,006 10 – 0.5 Total 18.6 38.2

54 Note 24 Other long-term receivables Other Long-term Receivables Accounts financial license minority Deposits receivable fixed assets agreements Total

GROUP Opening balance 14.0 13.3 14.3 16.1 30.7 88.4 Changes during the year –0.4 –6.4 –4.5 –6.7 82.3 64.3 Closing balance 13.6 6.9 9.8 9.4 113.0 152.7 PARENT COMPANY Opening balance –––0.8 – 0.8 Changes during the year –––––– Closing balance – – – 0.8 – 0.8 The minority receivables reported under long-term receivables refer to receivables related to capital infusions. In such cases there is a binding commitment on the part of the minority. In subsidiaries where minority interests occur and where equity is negative, the Group has not booked any minority receivable as the minority owners are not bound to cover capital deficits. Negative minority interests amount to SEK 0.8 M [5.6].

Note 25 Prepaid expenses and accrued income 2000 1999 2000 1999

GROUP PARENT COMPANY Work in progress 62.5 23.2 –– Prepaid rents 12.0 9.6 3.8 4.8 Other prepaid expenses 36.6 28.5 6.8 0.1 Current license revenue 193.7 136.5 3.9 3.4 Other accrued income 2.2 13.5 – 1.8 Total 307.0 211.3 14.5 10.1

Note 26 Current investments

The item, valued at the lower of acquisition value and the actual value on December 31, 2000, refers to 175,080 shares in Pivotal Software Inc. The shares may not be sold before June 2001. On February 1, 2001, the market value of the shares amounted SEK 51 M.

Note 27 Shareholders’ equity Share Restricted Unrestricted capital reserves reserves

GROUP Amount, January 1 198.6 804.9 –220.6 New issue, gross 45.8 743.9 – New issue, less issue costs ––27.4 – Adjusted item, from restricted to unrestricted reserves – 158.9 –158.9 Change in translation difference – 46.7 –37.9 Other changes –––9.0 Net loss 2000 –––246.3 Amount, 31 December 244.4 1,727.0 –672.7

Figures within [ ] refer to operations in the preceding year

55 Note 27 Shareholders’ equity continued Share capital Premium fund Reserve fund Non-restricted equity PARENT COMPANY Amount, January 1 198.6 759.9 18.1 58.5 New issue, gross 45.8 743.9 –– New issue, less issue costs ––27.4 –– Group contribution received –––99.5 Group contribution paid ––––232.5 Shareholders’ contribution ––––0.3 Net profit 2000 –––137.1 Amount, 31 December 244.4 1,476.4 18.1 62.3

Options programs IFS' outstanding options program, introduced in 1998, was offered to employees in IFS subsidiaries in Sweden, Brazil, Denmark, Finland, France, Japan, The Netherlands, Norway, Poland, Singapore, UK and Germany. The program is designed to encourage long-term involvement among employees in IFS' operations. If fully exercised, the program will entail a maximum of 1.1% dilution of the capital and 0.5% of the voting rights. No. of shares Subscription No. of upon full exercise Equity capital Program Recipients Due date price options of option added TO2B Employees 2001-12-31 130.00 530,000 641,300 83,369,000

Note 28 Untaxed reserves 2000 1999

PARENT COMPANY Accumulated difference between booked depreciation and depreciation according to plan 0.4 0.4 Tax allocation reserve 0.1 0.1 Total 0.5 0.5

Note 29 Long-term liabilities The long-term liabilities falling due for payment later than five years after year-end are shown here. 2000 1999 2000 1999

GROUP PARENT COMPANY Liabilities to credit institutions 6.2 ––– Other liabilities 0.6 ––– Total 6.8 – – –

Note 30 Convertible debenture loan

In 2000, IFS employees subscribed for a convertible debenture loan in a nominal amount of SEK 70.9 M. The annual interest rate on the loan corresponds to 12-month STIBOR less one percentage point and falls due on January 15 2001-2005, April 30 2005 and June 30 2005. The loan can be converted into shares up to and including June 30 2005 at a conversion rate of SEK 243. Fully exercised, the debenture loan entails a maximum dilution of 0.6% of the capital and 0.3% of the voting rights.

Note 31 Liabilities to credit institutions 2000 1999 2000 1999

GROUP PARENT COMPANY Credit facilities 124.2 160.8 – 42.0 Other loans 99.9 139.8 –– Total 224.1 300.6 – 42.0 Committed lines of credit 227.7 205.2 45.0 45.0 Unutilized credit 103.5 44.2 45.0 3.0

56 Note 32 Accrued expenses and prepaid income 2000 1999 2000 1999

GROUP PARENT COMPANY Accrued interest expenses 3.4 0.5 1.9 0.5 Accrued vacation allowances 120.3 68.4 5.7 2.1 Accrued social security fees 57.3 39.5 2.7 1.3 Accrued payroll expenses 28.2 17.4 1.8 0.1 Other accrued expenses 56.9 49.0 1.1 0.2 Annualized maintenance revenue 176.4 60.0 –– Other prepaid income 9.6 65.4 – 0.1 Total 452.1 300.2 13.2 4.3

Note 33 Pledged assets 2000 1999 2000 1999

GROUP PARENT COMPANY Pledged assets for own liabilities Real estate mortgages 38.4 28.9 5.0 5.0 Chattel mortgages 155.8 139.0 4.0 – Equipment utilized according to leasing agreements 52.0 49.5 –– Accounts receivable (factoring) 56.9 ––– Participations in limited partnership 18.0 18.0 18.0 18.0 Blocked bank accounts 38.9 4.9 –– Other current assets 192.2 90.3 –– Other fixed assets 114.4 74.7 –– Shares in subsidiaries 0.0 0.5 214.6 214.6 Total 666.6 405.8 241.6 237.6

Note 34 Contingent liabilities 2000 1999 2000 1999

GROUP PARENT COMPANY Sureties, external 42.9 13.5 42.9 13.5 Other external contingent liabilities 1.0 12.3 –– General surety for subsidiaries –– 9.8 9.8 Parent Company guarantees –– 38.7 23.9 Subordinated guarantees for benefit of subsidiaries –– 7.6 7.4 Total 43.9 25.8 99.0 54.6

LINKÖPING FEBRUARY 25, 2001

Jan Danielsson Bengt Nilsson CHAIRMAN OF THE BOARD PRESIDENT & CEO

Rolf Erichs Åke Fredriksson Lars Karlsson Dag Sehlin Terje Vangbo

OUR AUDIT REPORT WAS SUBMITTED ON FEBRUARY 25, 2001

Håkan Thörnholm Anders Wiger AUTHORIZED PUBLIC ACCOUNTANT AUTHORIZED PUBLIC ACCOUNTANT 57

Audit report To the general meeting of the shareholders of Industrial and Financial Systems, IFS AB (publ.) Corporate identity number 556122-0996

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the Managing Director of Industrial and Financial Systems, IFS AB (publ.) for the year 2000. These accounts and the administration of the company are the responsibility of the Board of Directors and the Managing Director. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstate- ment. An audit includes examining, on a test basis, evidence supporting the amounts and dis- closures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant deci- sions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the Company of any Board Member or the Managing Director. We also examined whether any Board Member or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Associa- tion. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the financial position of the company and group and of the results of operations in accordance with generally accepted accounting standards in Sweden. We recommend to the general meeting of shareholders that the income statement and balance sheet for the Parent Company and Group be adopted, that the profit for the Parent Company be dealt with in accordance with the proposal in the administration report and that the Board of Directors and the Managing Director be discharged from liability for the financial year.

LINKÖPING FEBRUARY 25, 2001

Håkan Thörnholm Anders Wiger AUTHORIZED PUBLIC ACCOUNTANT AUTHORIZED PUBLIC ACCOUNTANT 59 Board of Directors, senior executives and auditors

Board of Directors Dag Sehlin, (1945), MBA. Active in various boards and as a consult- Jan Danielsson, (1935), M.Sc (Engineering). Chairman. Formerly ant. IFS Board member since 2000. Other board memberships: member of Volvo Group Management. IFS Board member since Proact AB, Frontec AB, Mogul.com Group AB, D. Carnegie AB, 1997. Other board memberships: A-Banan Projekt AB, MediTeam PBK Outsourcing AB, AB Piccola, and Jiway Broker Services AB. AB, Fingerprint Cards AB and AB Chalmersinvest. IFS shares IFS shares held: 233 Series B. held: 0. Terje Vangbo, (1953), economics graduate (Norway), Bachelor of Rolf Erichs, (1946), Business studies at Oglethorpe University, Science and MBA in Business Administration from University of USA and Lunds Universitet, Sweden. President, Erichs Communi- Wyoming, USA. President, IFS North America Inc. IFS Board cations AB. IFS Board member since 1997. Other board member- member since 1992 and Chairman, 1992–1997. Other board mem- ships: HOAB. IFS shares held: 20 Series A and 1,168 Series B. berships: Chairman of Tervan AS. IFS shares held: 301,510 Series A, 56,423 Series B and 900 warrants. Åke Fredriksson, (1948), M.Sc (Engineering). President and Group Chief Executive Officer, Perstorp AB. IFS Board member since Senior executives 1998. Other board memberships: Perstorp AB, Industriförbundet Bengt Nilsson, (1955). President of IFS AB and Group Chief and Kemikontoret. IFS shares held: 0. Executive Officer. Employed since 1983.

Lars Karlsson, (1948), MBA. IFS Board member since 1983. Other Michael Hallén, (1964). Senior Vice President and President of IFS board memberships: LinkTech AB, Mjärdevi Science Park AB, Park Research & Development AB. Employed since 1994. IFS shares Alliance AB and Fastighets Partner AB. IFS shares held: 396,345 held: 15,000 Series A, 29,000 Series B and 900 warrants. Series A. Sverker Lundberg, (1954). Senior Vice President and Chief Financial Bengt Nilsson, (1955), Engineering and management studies at Officer. Employed since 1994. IFS shares held: 12,071 Series A, Linköping Institute of Technology, Sweden. President of IFS AB 46,463 Series B and 900 warrants. and Group Chief Executive Officer. IFS Board member since 1983. Other board memberships: Greenfield AB, Nocom AB, Terje Vangbo, (1953). President, IFS North America Inc. Employed Carmen AB, LinkTech AB and Linköping Institute of since 1991. Technology. IFS shares held: 1,467,715 Series A, 19,864 Series B (via companies) and 900 warrants.

60 IFS Board of Directors 2000

Jan Danielsson, Terje Vangbo, Rolf Erichs, Dag Sehlin, Lars Karlsson, Bengt Nilsson and Åke Fredriksson

Jan Moodh, (1961). Senior Vice President, Nordic region. Employed Stefan Gustafsson, (1959). President, IFS Japan. Employed since since 1985. IFS shares held: 7,250 Series A, 2,000 Series B and 900 1999. IFS shares held: 3,208 Series B. warrants. Klas Kensfors, (1952). Senior Vice President, Global Consulting. Thomas Petersson, (1959). Senior Vice President, EMEA region. Employed since 1989. IFS shares held: 30,210 Series B. Employed since 1985. IFS shares held: 88,937 Series A, 99,100 Series B and 900 warrants. Piotr Kozlowski, (1962). President, C&EE region. Employed since 1999. IFS shares held: 300 warrants. Manni Svensson, (1955). Senior Vice President, Marketing. Employed since 1983. IFS shares held: 545,087 Series A, 5,000 Lennart Lindell, (1959). Chief Group Accountant. Employed since Series B and 900 warrants. 1997. IFS shares held: 346 Series B and 450 warrants.

Rolf Erichs, (1946). Director of Corporate Communications on Mark Rabjohns, (1963). President, Asia Pacific region. Employed consulting basis since 1997. since 1997. IFS shares held: 9,864 Series B.

Other senior executives Auditors Ulf Annas, (1950). Senior Vice President, Market Development. Håkan Thörnholm, (1941). Authorized Public Accountant. Öhrlings Employed since 1985. IFS shares held: 19,110 Series A, 74,876 PricewaterhouseCoopers AB. IFS Auditor since 1984. Series B and 900 warrants. Anders Wiger, (1951). Authorized Public Accountant. Ernst & Alf Andersson, (1943). President, Latin America region. Employed Young AB. IFS Auditor since 1998. since 1996. IFS shares held: 364 Series B. Deputy Auditors Roger Cederberg, (1952). Senior Vice President, Strategic Alliances. Dick Svensson, (1954). Authorized Public Accountant. Öhrlings Employed since 1999. IFS shares held: 800 Series B and 900 warrants. PricewaterhouseCoopers AB. Deputy auditor since 1997.

Michael D. Dunham, (1945). Senior Vice President, Business Olof Cederberg, (1949). Authorized Public Accountant, Ernst & Development. Employed since 1999. IFS shares held: 95,667 Series B. Young AB. Deputy auditor since 1998.

61 Financial trend 1996–2000

From income statements (MSEK) 1996 1997 1998 1999 2000

License revenue 87 208 371 552 960 Consulting revenue 210 344 736 1,212 1,184 Other revenue 60 80 131 184 208 Net sales 357 632 1,238 1,948 2,352 Other operating revenue 23 19 67 132 424 Operating revenue 380 651 1,305 2,080 2,776 Operating expenses –353 –649 –1,233 –2,097 –2,847 Profit/loss before depreciation 27 2 72 –17 –71 Depreciation –22 –39 –66 –120 –208 Operating profit/loss 5 –37 6 –137 –279 Financial revenue 3 14 27 23 94 Financial expenses –7 –16 –23 –33 –54 Profit/loss after net financial items 1 –39 10 –147 –239 Taxes –4 –1 –11 –14 –6 Minority interest – 372–1 Profit/loss for the year –3 –37 6 –159 –246

From balance sheet (MSEK) 1996 1997 1998 1999 2000

Intangible assets 66 159 303 791 1,027 Other fixed assets 50 171 206 328 453 Accounts receivable 137 195 390 583 757 Other current assets 37 131 204 263 456 Liquid funds 9 31 64 47 124 Total funds 299 687 1,167 2,012 2,817

Shareholders’ equity 132 319 567 783 1,299 Minority interest – 11 11 26 25 Long-term, non-interest-bearing liabilities 5 8 3 7 8 Interest-bearing liabilities 52 130 195 473 533 Accounts payable 31 54 112 197 254 Other current, non-interest-bearing liabilities 79 165 279 526 698 Total equity and liabilities 299 687 1,167 2,012 2,817

62 Key data 1996 1997 1998 1999 2000

Net sales growth (%) 48 77 96 57 21 Net sales outside Sweden (%) 40 52 60 65 74 Gross margin (%) 7.7 0.3 5.8 –0.9 –3.0 Operating margin (%) 1.5 –6.0 0.5 –7.0 –11.9 Profit margin (%) 0.3 –6.2 0.8 –7.6 –10.2 Return on capital employed (%) 6.1 neg 5.4 neg neg Return on shareholders’ equity (%) neg neg 1.3 neg neg Total assets (MSEK) 299 687 1,167 2,012 2,817 Equity/assets ratio (%) 44 48 50 40 47 Liquidity (times) 1.7 1.6 1.6 1.0 1.1 Net debt/equity ratio (times) 0.3 0.3 0.2 0.5 0.3 Percentage of risk capital (%) 46 49 50 40 47 Interest coverage ratio (times) 1.1 neg 1.4 neg neg Working capital (MSEK) 65 107 201 123 261 Net investments in long-term assets (MSEK) 64 220 236 496 332 Cash flow (MSEK) –97 –273 –286 –487 –652 Total product development (MSEK) 72 117 190 352 517 of which, capitalized (MSEK) 25 35 56 117 207 Product development related to net sales (%) 20 19 15 18 22 Product development related to license sales (%) 83 56 51 64 54 Average number of employees 508 852 1,497 2,637 3,478 Sales per employee (000s SEK) 703 741 827 739 676 Average number of shares outstanding, millions 16.5 22.1 28.3 33.2 44.9 Average number of shares after full dilution, millions 16.5 22.5 29.4 34.6 45.9 Number of shares at December 31, millions 18.9 25.2 31.5 39.7 48.9

Data per share 1996 1997 1998 1999 2000

Profit (SEK) –0.17 –1.70 0.20 –4.80 –5.49 Shareholders’ equity (SEK) 6.99 13.10 18.36 20.37 27.08 Cash flow (SEK) –5.88 –12.35 –10.08 –14.67 –14.52 Market price at end of accounting period (SEK) – 54.00 94.00 186.00 38.50 Market price/shareholders’ equity (times) – 4.1 5.1 9.1 1.4 Net sales (SEK) 19 25 39 49 48 Market price/sales (times) – 2.2 2.4 3.8 0.8 Dividend (SEK) –– –––

63 IFS share data

As of December 31, 2000, IFS’ share capital amounted to SEK 244.4 M, represented by 48.8 million shares with a par value of SEK 5 per share. These comprised 7.2 million Series A shares and 41.6 million Series B shares. Each Series A share carries a right to one vote, and each Series B shares carries a right to one tenth of a vote. All shares carry equal rights to dividends. IFS Series B shares were listed on the “O” List of the Stockholm Stock Exchange on April 23, 1998. On June 18, 1998, the Company’s Series A shares were also listed on the same list. Previously, the shares had been listed on the so-called SBI List since June 30, 1997. During 2000 a total of 555,014 Series A shares and 61 million Series B shares were traded. The trading thereby amounted to 126% of the total number of listed shares. The highest quotation for the Series A shares during the year was SEK 244.10 on March 10, and the highest for the Series B shares was SEK 246.50, also on March 10 (rates are adjusted for new share issues). The lowest quotations were SEK 18 for the Series A shares on December 27, and SEK 17 for the Series B shares, also on December 27. As of December 29, 2000, the market value of all listed IFS shares was approximately SEK 1,921 M. The figure below shows the share price trend for IFS Series B shares in relation to Affärsvärlden’s General Index.

IFS Series B share compared with the general index.

IFS Series B share Afv General Index 250

200

150

100

50

0 1997 1998 1999 2000 2001 2002

64 Source: Affärsvärlden 00 IFS share data

Largest shareholders in terms of share capital

Series A Series B Share Voting Shareholders shares held shares held capital (%) rights (%)

AFA (formerly AMF Insurance) – 2,301,102 4.7 2.0 Länsförsäkringar Wasa Liv – 2,175,287 4.5 1.9 Skandia Life Insurance – 2,034,909 4.2 1.8 Gustaf Douglas, Family, and Associated Companies 1,748,000 – 3.6 15.3 Bengt Nilsson and Associated Companies 1,467,915 19,874 3.0 12.9 Nordea/Nordbanken funds – 1,446,699 3.0 1.3 National Pension Fund, Sixth Board – 1,160,191 2.4 1.0 National Pension Fund, Third Board – 988,283 2.0 0.9 Heinz Kopfinger 609,690 102,120 1.5 5.4 Lars Karlsson 677,881 – 1.4 6.0 Other shareholders 2,724,338 31,416,578 69.7 51.5 Total 7,227,824 41,645,043 100.0 100.0

Largest shareholders in terms of voting rights

Series A Series B Share Voting Shareholders shares held shares held capital (%) rights (%)

Gustaf Douglas, Family, and Associated Companies 1,748,000 – 3.6 15.3 Bengt Nilsson and Associated Companies 1,467,915 19,874 3.0 12.9 Lars Karlsson 677,881 – 1.4 6.0 Heinz Kopfinger 609,690 102,120 1.5 5.4 Manni Svensson 545,087 5,000 1.1 4.8 Terje Vangbo 301,510 56,423 0.7 2.7 Åke Hjort 263,511 76,560 0.7 2.4 Ulf Stern 212,589 237,550 0.9 2.1 AFA (formerly AMF Insurance) – 2,301,102 4.7 2.0 Länsförsäkringar Wasa Liv – 2,175,287 4.5 1.9 Other shareholders 1,401,641 36,671,127 77.9 44.5 Total 7,227,824 41,645,043 100.0 100.0

Source VPC February 16, 2001

66 Dividend policy The objective of the Board of Directors of IFS is to continue to apply the growth strategy that has been practiced in recent years. Ownership However, cash flow and profit will be prioritized in order to enable (shares %) future expansion while retaining financial strength. IFS’ policy is Swedish legal entity 52% that the Group’s cash flow in the years ahead should be used to Swedish physical 26% finance this continuing expansion. Accordingly, the IFS Board of International legal entity 21% Directors does not plan to propose that any dividend be paid during International physical 1% the next few years. Thus no dividend is being proposed in 2000.

IFS shareholders Ownership of IFS shares is relatively well distributed. At year-end 2000, IFS had approximately 14,800 shareholders. The tables on the opposite page show the largest shareholders Ownership in IFS at year-end 2000 in respect of share capital and voting rights, (voting rights %) respectively, as of February 5, 2001. Swedish legal entity 50% Swedish physical 32% Ownership control International legal entity 17% International physical 1% The Board of Directors appoints a special committee among its members whose task is to present annual proposals as to the com- position of the Board of Directors of IFS. At year-end, this nomina- tions committee consisted of three members: Jan Danielsson, Ownership categories (%). chairman, Lars Karlsson and Bengt Nilsson. Source: VPC December 29 2000

Ownership structure

Percentage Number of Percentage of Ownership structure No. of shares of shares shareholders shareholders

1–1,000 3,549,939 7.3 12,272 82.9 1,001–5,000 4,300,032 8.8 2,013 13.6 5,001–10,000 1,388,944 2.8 190 1.3 10,001–20,000 1,566,980 3.2 106 0.7 20,001–50,000 3,119,008 6.4 97 0.7 > 500,000 34,947,964 71.5 121 0.8 Total 48,872,867 100.0 14,799 100.0

Source VPC December 29, 2000

67 Definition

Average number of shares. Average of the number of shares Net debt/equity ratio. Interest-bearing liabilities at year-end, less outstanding during the year. The average number of shares for liquid funds, as a percentage of shareholders’ equity, including 1995–1997 has been adjusted for the 30:1 split during 1997. minority interest.

Average number of shares after full dilution. The average number Net sales per share. Net sales as a percentage of the number of of shares, including the potential increase in the number of shares shares at year-end. if the company’s options programs are fully exercised. Operating margin. Operating profit as a percentage of net sales. Cash flow. Cash flow from current operations and from investment Percentage of risk capital. Sum of shareholders’ equity, including operations according to the cash flow analysis. minority interest, and deferred tax liability as a percentage of total Cash flow per share. Cash flow as a percentage of the average assets. number of shares. Profit margin. Profit before tax and minority interest as a percentage Earnings per share. Net earnings as shown in the income state- of net sales. ment as a percentage of the average number of shares. Return on capital employed. Profit after net financial items plus Equity/assets ratio. Shareholders’ equity and minority interest at financial expenses as a percentage of average capital employed. year-end as a percentage of total assets. Capital employed refers to total assets less non-interesting-bearing liabilities and deferred tax liability. Gross margin. Operating profit before depreciation as a percentage of net sales. Return on shareholders’ equity. Net profit as shown in the income statement as a percentage of average shareholders’ equity. Interest coverage ratio. Profit after net financial items plus interest expense as a percentage of interest expense. Shareholders’ equity per share. Shareholders’ equity, including minority interest, as a percentage of the number of outstanding Liquidity. Current receivables in relation to current liabilities. shares at year-end. Market price. The share price has been established as a percentage Working capital. Accounts receivable and other current receivables, of the number of outstanding Series B and Series A shares, respec- excluding liquid funds, less accounts payable and other short-term, tively, and the share price of these shares at year-end. non-interest-bearing liabilities. Market price/net sales. The market price per share as a percentage of net sales per share.

Market price/shareholders’ equity per share. The market price as a percentage of shareholders’ equity per share.

68

Glossary

Application. A program that helps a user deal with a specific task, Configured products. Products where customers can influence the e.g. purchasing, employee development or accounting. final design by choosing from a selection of dimensions with respect to appearance and function, for example. Application Service Provider (ASP). An ASP aggregates, facilitates and brokers IT services to deliver IT-enabled business solutions Customer Relationship Management (CRM). A business strategy across a network via subscription-based pricing (Gartner Group, designed to optimize profitability, revenue and customer satis- 1999). faction. To realize CRM, enterprises must foster behaviors and implement processes and technologies that support coordinated Architecture. Architecture describes the manner in which the customer interactions throughout all customer channels (Gartner hardware, system software and applications software integrate to Group, 1999). achieve a desired result. Development platform. The set of methods and tools used to Best-of-breed solution. A solution that focuses on a narrower area develop an information system. than an integrated package does, e.g. a system that handles only customer relationships compared with a complete suite of business E-business relationship management. A term used by AMR applications where customer relationship management is just one Research to denote systems that manage relationships with cus- of several functions. tomers, suppliers and partners.

Best practice business processes. Proven, “ideal” methods of Electronic Marketplace (E-Marketplace). A web site that enables designing and implementing a certain process. buyers to select from many suppliers. E-marketplaces—which focus on putting the buyer in control—are buying environments Business Applications. A set of applications that covers all internal that aggregate supplier content and provide decision support tools as well as external business processes a company is involved in. that enable a buyer to make an informed decision (Gartner Group, Business Community Integration. A concept launched by AMR 1999). Research to describe a business environment characterized by Enterprise Portal. A personalized interface in a corporate network intensive, close business relationships between several collaborating that gives individual users easy access to the internal and external companies in network-like structures. information they need for performing assigned tasks. Can also Collaborative commerce (C-Commerce). A concept launched by include services such as e-mail and search functions. Gartner Group to describe a business environment characterized by Enterprise Resource Planning (ERP). A method of planning that intensive, close business relationships between several collaborating originally comprised all internal business processes, such as finan- companies in network-like structures. cials, manufacturing and distribution, but which has been extended Communication standard. Standard for transport and exchange of to cover a range of other functions from contact with suppliers to data between systems, e.g. XML. maintenance of delivered products.

Compatibility test. A test performed to ensure that different versions E-procurement. An integrated system of services and technology of a system are compatible with each other. that supports the entire procurement process via the Internet: from identifying new suppliers to establishing framework agreements Component-based architecture. Refers to the design of any system for receipt and payment. composed of separate components that can be connected together. The benefit of modular architecture is that you can replace or add ERPII. A term used by Gartner Group to illustrate the evolution any one component without affecting the rest of the system. The of ERP toward support that includes business processes involving opposite of a component-based architecture is an integrated archi- actors outside company boundaries. tecture, in which no clear divisions exist between components.

70 Extended enterprise. The extended enterprise is a company that Utility. An organization of company that provides some form of collaborates with its suppliers, partners and customers to streamline infrastructure in a society, such as heating, electricity, or water. business processes, transcending traditional boundaries and enhanc- Vendor-managed Inventory (VMI). A business process whereby ing mutual customer benefits. Business applications that address such suppliers take responsibility for customer inventory and ensure extended enterprises are referred to by Gartner Group as ERPII. that agreed inventory and service levels are fulfilled. Hosting. The operation and development of customers’ business Web storefront. A solution for shopping on the Internet, including applications via the Internet from an infrastructure at the location functions like searching, price and availability checks, customer of a service provider. Under a hosting contract, the service provider registration, order tracking, etc. sells or resells an application license to a customer on a one-to- one basis. Wireless Internet. When the content and services of the Internet are made available wirelessly, i.e. via some form of radio-based Internet-based process. A business process involving two or more solution. An example of such is the new types of mobile telephone parties who interact via the Internet. networks. IP telephony. Telephony based on IP, one of the protocols required XML (eXtensible Markup Language). XML is a standard that enables for communication via the Internet. Enables telephony via networks almost any form of data to be encapsulated so that they can be built for data communication, such as the Internet. transmitted between individuals or companies, regardless of protocol, Mass customization. Production in large series, yet where each processed automatically, and published dynamically. product is adapted to individual customer requirements; often characterized by customers being offered a choice of several dimensions.

Object technology. Used for developing programs in which the software is built up from many small parts (objects) which contain both data and processing functions. The objects are made in such a way that they can be used in a number of different contexts, resulting in higher efficiency and quality.

Outsourcing. The practice of subcontracting parts of a company’s operations to other companies.

Protocol. A set of data communication rules for transmitting and receiving data.

Scalability. The capability to scale up, or expand, an information system so that it can be utilized by a larger number of users.

Supply Chain Management (SCM). The process of optimizing the delivery of goods, services and information from supplier to cus- tomer. This set of business processes encompasses a trading-part- ner community engaged in the common goal of satisfying the end customer (Gartner Group, 1999).

71 Industrial & Financial Systems

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