Graphisoft Se

GRAPHISOFT SE

ANNUAL REPORT 2006 THE LETTER OF THE CHAIRMAN OF THE BOARD

AYEAR OF DRAMATIC CHANGES

Without question, the year 2006 saw the most sweeping changes in the 24 year history of Graphisoft. Five major events left Graphisoft a very different company at the close of 2006:

• moving the seat of the holding company from the Netherlands to Hungary • spinning out the Real Estate Development Business Unit • exploring the challenges of the new Virtual Construction™ business • placing the core business (ArchiCAD) on an aggressive growth path again, • and finally the major shareholders of the Company sold their controlling stake to our main European industry peer, Nemetschek AG.

MOVING THE CORPORATE SEAT TO HUNGARY

In 1996 CSK, a leading Japanese IT corporation, and Nippon Investment Fund concluded an agreement with Graphisoft to invest USD 7.5 million in the Company. The goal was to list Graphisoft’s shares on one of the major international stock exchanges within 3 years. At that time, however, the international investment community was unfamiliar with the relatively imma- ture Hungarian corporate legislation. To eliminate potential concerns of global technology investors, the original founders and their new Japanese partners registered a new holding company in the Netherlands. Dutch corporate law was regarded by the international investor community as more mature than in Hungary. This holding company became the controlling entity for all Graphisoft Group companies.

In 1998, Graphisoft NV successfully introduced its shares on the Neuer Markt, the new technology oriented section of the Frankfurt Stock Exchange. In 2000 the Company also completed its listing on the Budapest Stock Exchange. As Hungary joined the European Union in 2004, there was no longer any reason not to have its legal seat in Hungary where the Company headquar- ters has operated since its inception in 1982. The adaptation of new legal form "Société Européene" ("SE") allowed more flexibility to operate and move within the European Union. The Company chose this legal corporate form in the tradition of its preference for pioneering solutions. Finally, as one of the very first SEs in the Union, Graphisoft SE used this opportunity to relocate its seat. As of 2006, the Company operates as a Budapest, Hungary-based SE.

1 THE LETTER OF THE CHAIRMAN OF THE BOARD

SPINNING OUT THE REAL ESTATE DEVELOPMENT BUSINESS

Leasing the Company’s temporarily unused office space was a relatively minor side business of the Company in 1998, when it moved into its new facilities at a quiet waterfront location on the Danube in Budapest. In time, however, Graphisoft Park’s exceptional location and high quality standards attracted many other high tech companies, including Microsoft Hungary, SAP Hungary, Canon Hungary and others. As a result, the real estate development/office lease business became a highly profitable venture for Graphisoft. By 2005, the lease revenue grew to €3M with over €1M net income and €24M real estate asset value on historic cost basis. The size of the real estate business made it necessary to have a different source of financing, reporting structure and a clear separation of business and management activity from the core software business.

The financial and legal re-organization began in 2005. Graphisoft Park Kft., responsible for the real estate business and owner of most of the real estate, was separated from Graphisoft R&D Zrt. as a wholly owned subsidiary of Graphisoft SE. On April 28th, 2006, the Annual Shareholder’s Meeting of Graphisoft SE decided to de-merge Graphisoft SE’s traditional core software business and its real estate development activity into two independent corporate entities. The software business (Graphisoft SE) continued its operation as the surviving company, while a new and separate company (Graphisoft Park SE) was created as the holder of all real estate related assets, including Graphisoft Park Kft. The surviving Graphisoft SE continued its listing on the Budapest Stock Exchange, while the shares of the new Graphisoft Park SE were distributed among the shareholders of Graphisoft SE, proportionally with their holding in the predecessor company. Following its legal incorporation on August 21, 2006, Graphisoft Park SE also applied for listing on the Budapest Stock Exchange, which was successfully completed on August 28, 2006.

The corporate restructuring of Graphisoft was received positively by the investor community. Following the separation the combined value of the two companies exceeded by approximately 30% the average value of the predecessor company in the prior months.

Graphisoft SE’s present Annual Report is limited to the presentation of the software business results in 2006 (the first eight-month result of the real estate business is reported as discontinued operation), while Graphisoft Park SE provides its own separate Annual Report for 2006 (for the period from August 21 through December 31, 2006).

THE CHALLENGES OF VIRTUAL CONSTRUCTION™

In late 2004 the Company launched its new 5D Virtual Construction™ product line targeted at the construction market. 5D (model, schedule & cost) helps customers to optimize project cost and schedule while analyzing designs for constructability issues. The result is a reduction in overall cost and shorter project schedules. The first full year results (2005) exceeded even the most opti- mistic expectations. Utilizing a combination of Graphisoft services and in-house adoption, for-

2 THE LETTER OF THE CHAIRMAN OF THE BOARD

ward-looking owners and construction companies such Webcor Builders, Hensel Phelps, Team Limited, Applecross Development , Urban Builders and Rogers Quinn successfully implemented 5D Virtual Construction™ in their daily practice and the product line proved its market viability. In addition to attracting the new and lucrative market of owners and construction companies, 5D Virtual Construction™ helped to improve Graphisoft’s position in its traditional architectural design market. As was the case 20 years ago when Graphisoft pioneered 3D design in architecture, we introduced 5D to the world reinforcing our technology trend-setting position in the building industry.

Following these initial successes, in 2006 the Company aggressively expanded its R&D and construction services resources to capitalize on the new and promising growth opportunity. Although the growth continued in 2006 (+41% revenue), these results were far below the 2006 operating plan. Due to increased operating expenses the loss of the business unit exceeded €7M, even without the one-time extraordinary expenses related to the corporate re-structuring, detailed above.

In spite of a relatively large customer base for a two-year old business, it became clear that moving from a few early adopters within each firm to firm-wide adoption would take a very long time in the traditionally conservative construction industry. It became clear during 2006 that the losses required to develop this business for an unpredictable number of years would not be in the best interest of Graphisoft shareholders. For this reason, management explored other financing opportunities for Virtual Construction™. On February 12, 2007 the Company announced a pre- liminary agreement with the management of the Construction Division, backed by leading venture firms to spin out this business unit into a new company. Graphisoft will hold only a minority stake in this new venture. We anticipate that continuing this business as an independent company will serve to substantially increase the profit of Graphisoft in 2007 while maintaining the syn- ergy between 3D and 5D, helping us to secure new and larger customers.

ARCHICAD ON A NEW AND PROFITABLE GROWTH PATH AGAIN

2006 saw ArchiCAD’s sales grow a robust 25%, faster than the sales of any of the leading competitors in the building industry.

It is important to look at the drivers of this growth from a historical perspective. Graphisoft’s Virtual Building™ solution has led the 3D model-based architectural design market since 1984 when ArchiCAD was first introduced. In recent years, this market has also become known as Building Information Modelling (BIM). The overwhelming majority of architectural design prac- tices, however, retained their 2D workflow. As a result, Graphisoft’s share of the entire architectural design market remained below 10%. The challenge for the Company was not how to grow its share among architects who prefer to design in 3D, but how to move the majority of architects from the 2D drawing automation to 3D model-based design.

3 THE LETTER OF THE CHAIRMAN OF THE BOARD

The opportunity began to appear around 2000 when the saturation of the 2D drafting software market forced Graphisoft’s main competitors to look for new market momentum drivers. They started to promote the concept of BIM aggressively. The concept caught on with mainstream users both in terms of mindset and purchasing behavior. According to Gartner Group’s AEC Market Report for October 2006, after several years of market decline, 2005 showed a new growth momentum in the architectural design software market driven by BIM.

ArchiCAD sales figures in 2006 added strongly to this momentum. During 2006 the number of new license shipments neared 10,000, while the number of maintenance contracts (clients sub- scribing in advance for regular update) achieved 33,200, 15,200 out of them subscribed in 2006. The growing number of clients on maintenance contract is particularly important. It represents a more predictable revenue stream for the Company and leaves more resources for resellers to work on new prospects, rather than spending too much time selling upgrades to the existing client base.

The positive change in market dynamics, strong sales and marketing execution and first and foremost the stability and attractiveness the new ArchiCAD 10 were the key factors behind this success.

Moving beyond the activities that drive revenue for the short term, 2006 marked the year that we rolled out our first comprehensive program for universities, students and teachers on a global basis. The results were simply remarkable. This audience warmly embraced our initiatives and we feel confident that this community will contribute to Graphisoft’s success in the medium and long terms.

The excellent sales results were coupled with exceptionally good profitability in 2006. Stringent expense control led to over €10 million operating profit in the ArchiCAD business unit (excluding the extraordinary expenses relating to the corporate restructuring events) representing an operating margin of 35.7%. We must emphasize, however, that this exceptional operating margin does not appear to be sustainable for the long term. With an ArchiCAD-focused corporate strat- egy, the realistic long-term operating profit margin target is about 25-30%.

KEY FIGURES FOR ARCHICAD IN 2006:

Sales: €28.1M (+25.6%) Operating income: €10.0M (+128.1%) New licenses: 9741 (+21.6%) New maintenance contract subscriptions: 15,200 Total live maintenance contracts: 33,200

4 THE LETTER OF THE CHAIRMAN OF THE BOARD

SIZE MATTERS - CONTINUING AS A MEMBER OF NEMETSCHEK GROUP

The new sales momentum of ArchiCAD is accompanied by new challenges. ArchiCAD’s initial market, composed mainly of early adopters and technology enthusiasts, cared more about the product and less about the size of the company providing it. But the mainstream market that we have now entered has different purchase drivers. For them, and particularly for the larger firms, security is a primary selection factor. In most cases, they prefer to buy from well-established industry giants as opposed to small technology pioneers. Size matters in this phase of market development.

This was the primary consideration when the management and the major shareholders of the Company reacted positively to an approach by Nemetschek AG, the largest European peer of the Company, to explore the potential of a merger. An expanded product portfolio and the larger combined company size are expected to provide more opportunity for both companies to capitalize on the new market growth momentum and meet the challenge of larger competitors. The nego- tiation with a group of shareholders led to an agreement; on the last day of 2006, Nemetschek AG acquired 54.3% of the outstanding shares of Graphisoft. On January 17, 2007, a public ten- der offer was launched to acquire all outstanding shares of the Company. The Board of Directors obtained a fairness opinion from an independent advisor and made the recommendation that the shareholders accept the offer. We believe that the offer price was fair.

As we move forward into 2007, we are confident that the dramatic changes that took place in 2006 were in the best interest of our shareholders, customers and employees. 2007 will see the completion of some of the changes started in 2006 and Graphisoft will continue as a stronger company focused on what it is best at; delivering great software to architects and engineers on a global basis.

Thank you for your confidence in our team.

Budapest, March 12, 2007.

GÁBOR BOJÁR CHAIRMAN OF THE BOARD

5 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Responsibility declaration - As required by the Hungarian Securities law, I, the Chairman of the issuer, declare that the financial data and information disclosed in the 2006 Annual Report is true and fair, and does not hide any fact that might be important for the adjudication of the Company’s financial status.

GÁBOR BOJÁR CHAIRMAN

RESULTS FROM OPERATIONS

2006 was a year of enormous change, achievement and challenge for Graphisoft. The software and the real estate business of Graphisoft was successfully separated in August resulting in two public companies with clear missions. In addition, on the last day of 2006, Nemetschek AG became the largest shareholder in Graphisoft acquiring 54.3% of the outstanding shares with the commitment to acquire all of the shares during 2007. For the year, Graphisoft had a very strong 25.1% increase in revenues and hit the 30 million-euro mark for the first time in six years.

BUSINESS SEGMENTS

ARCHITECTURE

12 months ended Change (%) December 31,

2006 2005 06/05 Revenues, net 28,117 22,379 25.6 Cost of revenues 2,205 2,035 8.4 GROSS PROFIT 25,912 20,344 27.4 Operating expenses 15,865 15,940 (0.5) OPERATING INCOME 10,047 4,404 128.1 Operating margin (%) 35.7 19.7 Effect of option re-pricing (1,265) - n.a. Costs related to change in control (1,768) - n.a. Operating income, adjusted 7,014 4,404 59.3

6 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The ArchiCAD business unit completed an outstanding year. The powerful combination of revenue growth and strong expense control resulted in more than a 100% growth in operating profit and a 35.7% operating margin. This is a strong result when compared to the industry averages. The performance of the business is attributable to both external and internal factors. The growing momentum to move to 3D model based design worldwide and the improving economy in Germany also contributed substantially, but the key factor was the product and business development approach that we set off in 2003. Our emphasis on high customer touch, uncompromis- ing product quality, business partner development and expansion and an innovative approach to development of our next generation of users resulted in impressive achievements in 2006. Cyclicality of revenue is less material than past years as we reached a significant attach rate in our subscription program. New unit sales are up again and in many subsidiary and independent distributor led countries, revenue is growing at very strong rates.

ArchiCAD operating expenses were carefully managed. Direct field sales and software development costs increased slightly (by 3.8% in the 12-month term), however this was entirely offset by a decrease in prorated overhead costs. The weakness of the USD/JPY/HUF against the reporting currency had a positive impact on our profitability.

The profit margin of ArchiCAD was 35.7% for the year. The 12-month pro-forma operating profit reached €10.0 million. This is a 128.1% improvement over the 2005 profit.

7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSTRUCTION

12 months ended Change (%) December 31,

2006 2005 06/05 Revenues, net 2,390 1,684 41.9 Cost of revenues 1,361 995 36.8 GROSS PROFIT 1,029 689 49.3 Operating expenses 8,251 3,635 127.0 OPERATING LOSS (7,222) (2,946) N.A. Effect of option re-pricing (335) - n.a. Costs related to change in control (85) - n.a. Operating loss, adjusted (7,642) (2,946) n.a.

The Construction Solutions Division booked an unexpectedly large loss in 2006. Revenues grew slower than planned, and operating expenses were hit by the impairment charge (1,894 thousand euros) related to acquired technology bought in 2005.

The Company continued to add resources to its new business unit at a relatively high pace. Construction operating costs therefore grew by 73.4% in 2006. Additionally, the business unit suffered a €1.95 million impairment loss in December, 2006, related to the acquired DSS and YIT technologies. In total, costs grew by 127.0%, which was partly offset by a 49.3% improvement in gross profit. The €7.2 million operating loss the business unit suffered was unexpectedly high.

LIQUIDITY AND CAPITAL RESOURCES

After the separation of the software and the real estate businesses and having spent €3.2 million to purchase treasury shares to meet the needs of option exercise the Company closed 2006 with €24.1 million in shareholders equity. This means 72.2% equity financing as of balance sheet date.

As of December 31, 2006 the real estate business owes €14.5 million to the software unit. The loan was entirely paid back on January 10, 2007. Including this amount, the Company had €20.5 million in cash and current financial assets. Accounts receivable was €7.4 million on the balance sheet date, with a DSO of 89.

8 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

STAFF

Dec 31, 2006 Dec 31, 2005 Sales and marketing 82 98 Research and development 112 109 General and administrative 51 53 Total employees 245 260

The decrease in headcount is primarily attributable to the real estate spin off.

SHAREHOLDERS' STRUCTURE

December 31, 2006 December 31, 2005 % of ownership Number of shares % of ownership Number of shares

NEMETSCHEK AG 54.32 5,774,924 BOARD OF DIRECTORS Gábor Bojár - - 25.0 2,658,004 Ferenc Karvalits* - - - - Georg Katcz* - - - - Peter B. Záboji* - - - - Tibor Gáthy*** - - - - Laurence Orbach** - - 0.08 8,250 Zsolt Péter Róna** - - - - Victor Leventhal** - - - -

Chief Executive Officer Dominic Gallello - - 0.47 50,000

Management Management staff 0.01 1,000 4.85 515,426 Field operations - - 0.75 80,000

TREASURY 3.37 358,369 6.28 667,602

FREE FLOAT 42.30 4,497,381 62.57 6,652,392

TOTAL 100.0 10,631,674 100.0 10,631,674

*Mr. Karvalits, Mr. Katcz and Mr. Záboji were elected by the Extraordinary General Meeting of Shareholders held on February 03, 2006.

** The same Meeting revoked the mandate of the former Board, and decided on electing a new Board. Mr. Bojár and Mr. Gallello received a

mandate in the new Board.

*** Mr. Gáthy was elected by the General Meeting of Shareholders on November 16, 2006.

9 INDEPENDENT AUDITORS’REPORT

TO THE SHAREHOLDERS OF GRAPHISOFT SE

We have audited the accompanying consolidated financial statements of Graphisoft SE and subsidiaries, which comprise the consolidated balance sheet as at December 31, 2006, and the related consolidated income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. This responsibility includes. designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

Am audit involves performing procedures to obtain audit evidence about the amounts and dis- closures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Graphisoft SE and subsidiaries as of December 31, 2006, and of its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Budapest, March 2, 2007

JACK BELL BODOR KORNÉL DELOITTE REGISTERED AUDITOR AUDITING AND CONSULTING LTD. 005343 1068 BUDAPEST, DÓZSA GYÖRGY ÚT 84/C. 000083

10 GRAPHISOFT SE AND SUBSIDIARIES INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors’ Report...... 10 Consolidated Statements of Operations...... 12 Consolidated Balance Sheets...... 13 Consolidated Statements of Changes in Shareholders’ Equity...... 14 Consolidated Statements of Cash Flows...... 15 Notes to Consolidated Financial Statements...... 16

11 GRAPHISOFT SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Notes 2005 2006 Revenues 4 26,713 30,507 Cost of revenues 3,423 3,566 GROSS PROFIT 23,290 26,941

OPERATING EXPENSES Sales and marketing expenses 7,746 9,994 Research and development expenses 5,043 6,355 General and administrative expenses 5,447 5,450 Stock-based compensation expense 450 2,565 Depreciation and amortization 2,174 1,256 Impairment charge - 1,949 Total operating expenses 4 20,860 27,569

OPERATING INCOME 2,430 (628)

Foreign currency transaction income/(loss), net 552 (1,203) Interest and other income, net 706 811

FINANCIAL INCOME / (LOSS) 1,258 (392)

INCOME / (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 3,688 (1,020)

Income tax expense 16 345 149

NET INCOME / (LOSS) FROM CONTINUING OPERATIONS 3,343 (1,169)

(Loss) / gain from discontinuing operations 5 (2,675) 513

NET INCOME / (LOSS) BEFORE MINORITY INTEREST 668 (656)

Minority interest 1 4

NET INCOME / (LOSS) 669 (652)

Earnings per share 6 From continuing and discontinuing operations Basic income / (loss) per share (EUR/share) 0.07 (0.06) Diluted income / (loss) per share (EUR/share) 0.06 (0.06)

From continuing operations Basic income / (loss) per share (EUR/share) 0.34 (0.11) Diluted income / (loss) per share (EUR/share) 0.32 (0.11)

The accompanying notes are an integral part of the consolidated Financial Statements. 12 GRAPHISOFT SE AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except per share data)

Notes 2005 2006 ASSETS

CURRENT ASSETS Cash and cash equivalents 5,681 4,688 Financial assets 7 8,809 1,342 Accounts receivable, net 8 7,304 7,406 Inventories net 338 301 Other current assets 9 2,776 17,499 Total current assets 24,908 31,236

NON-CURRENT ASSETS Investment property, net 10,11 18,165 - Other equipment, net 10 6,839 886 Intangible assets, net 12 2,953 220 Non-current financial assets, net 13 259 50 Deferred tax assets 16 695 1,071 Total non-current assets 28,911 2,227

TOTAL ASSETS 53,819 33,463

LIABILITIES AND SHAREHOLDERS’EQUITY

CURRENT LIABILITIES Bank loans 15 1,976 76 Accounts payable and accrued expenses 14 4,755 6,110 Deferred income 2,265 2,989 Total current liabilities 8,996 9,175

NON-CURRENT LIABILITIES Bank loans 15 122 77 Deferred tax liabilities 16 27 32 Total non-current liabilities 149 109

CAPITAL AND RESERVES Share capital 17 213 213 Additional paid-in capital 18,574 15,599 Treasury stock 18 (5,136) (3,236) Retained earnings 37,284 17,194 Cumulative foreign currency translation loss (6,280) (5,606) Equity attributable to equity holders of the parent 44,655 24,164

Minority interest 19 15 Total equity 44,674 24,179

TOTAL LIABILITIES AND EQUITY 53,819 33,463

The accompanying notes are an integral part of the consolidated Financial Statements. 13 GRAPHISOFT SE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Cum. foreign Equity attributable Share Additional Treasury Retained currency translation to equity holder capital paid-in capital stock earnings gain/loss of the parent

As of January 1, 2005213 19,298 (5,883) 36,178 (4,977) 44,829

Translation adjustment - - - - (1,303) (1,303) Net income - - - 669 - 669 Unrealized loss on AFS* - - - (13) - (13) Stock option exercise - (1,668) 1,668 - - - Proceeds from stock option exercise - 925 - - - 925 Treasury share repurchase - - (921) - - (921) Stock-based compensation expense - - - 450 - 450 Grant of shares - 19 - - - 19

ASOFDECEMBER 31, 2005 213 18,574 (5,136) 37,284 (6,280) 44,655

Translation adjustment - - - - 674 674 Net loss - - - (652) - (652) Unrealized loss on AFS* - - - (63) - (63) Stock option exercise - (5,135) 5,135 - - - Proceeds from stock option exercise - 2,160 - - - 2,160 Treasury share repurchase - - (3,226) - - (3,226) Stock-based compensation expense - - - 2,565 - 2,565 Park spin off share buy back - - (9) - - (9) Equity disposed in spin off - - - (21,940) - (21,940)

ASOFDECEMBER 31, 2006 213 15,599 (3,236) 17,194 (5,606) 24,164

* Available for sale securites

The accompanying notes are an integral part of the consolidated Financial Statements. 14 GRAPHISOFT SE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

2005 2006 OPERATING ACTIVITIES Profit / (loss) for the year 669 (652) Adjustments of non-cash expenses Finance costs 14 47 Income tax expense 345 149 Loss / (gain) on disposal of discontinued operation 1,844 (513) Depreciation of property, plant and equipment 1,780 469 Amortisation of intangible assets 394 787 Share-based payment expense 469 2,565 Allowances 86 (154) Impairment charge - 1,949 Operating cash flows before movements in working capital 5,601 4,647 Movements in working capital (Increase) / decrease in inventories (100) 37 Increase in receivables (917) (102) Increase in other current assets - (1,922) Increase in payables 215 1,710 Increase in deferred income 1,229 724 Cash generated from operations 6,028 5,094 Income taxes paid(101) (529) Interest paid(14) (47) Net cash from operating activities 5,913 4,518 INVESTING ACTIVITIES Interest received813 882 Purchases of marketable securities – available for sale (335) (348) Disposal of marketable securities – held to maturity 3,780 7,815 Repayment of loan granted135 209 Proceeds from disposals of property, plant and equipment 97 3,927 Purchases of property, plant and equipment (8,260) (320) Purchases of other intangible assets (115) (162) Purchase of subsidiary (2,582) - Net cash (used in) / provided by investing activities (6,467) 12,003 FINANCING ACTIVITIES Proceeds from bank loans 1,976 31 Repayments of bank loans - (1,976) Proceeds from exercise of stock options 925 2,160 Compensation for non-participating shareholders - (9) Cash transfer to spin off Park operations - (2,500) Loan given to spin off Park operations - (12,863) Purchases of treasury shares (921) (3,226) Net cash provided by / (used in) financing activities 1,980 (18,383) Net increase / (decrease) in cash and cash equivalents 1,426 (1,862)

Cash and cash equivalents at the beginning of the year 5,103 5,681 Effects of foreign exchange rate changes (848) 869 Cash and cash equivalents at the end of the year 5,681 4,688

The accompanying notes are an integral part of the consolidated Financial Statements. 15 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

1. BUSINESS AND BASIS OF PRESENTATION

Business - Graphisoft N.V. was incorporated in 1996 under the laws of the Netherlands. The Company was transformed into a European Company limited by shares (SE – Societas Europaea) in July 2005. In November, 2005, the general meeting of shareholders decided on the transfer of the legal seat to the place of effective management, to Hungary. The Court of Registry ordered the registration of Graphisoft SE in Hungary on December 15, 2005.

Nemetschek AG acquired 54.3% (56.2% of the voting rights) of the Company’s shares on December 31, 2006. The primary goal of the acquisition is to obtain a strong market position in the Design area.

Graphisoft SE and its subsidiaries (the "Company or the "Group") operations primarily consist of development and distribution of computer aided design ("CAD") software products and 5D Construction solutions and services in 2005 and 2006.

The 5D Construction Solutions Division of the Company did not meet its financial plan for 2006, and reported an unexpectedly high loss for the year. In full agreement with the new majority shareholder, management proposed and the Board approved to spin out the Construction Division into a separate company in 2007. The announcement was made on February 12, 2007. In the forthcoming business year ArchiCAD (the Company’s architectural design software) remains the primary segment of the operations. As disclosed in Note 12, the Company recorded impairment charge for intangible assets of Construction Solutions Divison of € 1,949 thousand.

The main operating company of the Group is Graphisoft R&D zrt., a company limited by shares incorporated on 1 November 1993 in Hungary. Subsidiaries outside of Hungary operate mainly as sales and marketing branches.

Currently the shares of the Company are traded at the Budapest Stock Exchange only.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (the "EU"). IFRS as adopted by the EU do not currently differ from IFRS as issued by the International Accounting Standards Board (IASB), except for certain hedge accounting requirements under IAS 39 which have not been endorsed by the EU. The Company has determined that the unendorsed hedge accounting requirements under IAS 39 would not impact the consolidated financial statements had they been endorsed by the EU at the balance sheet date.

16 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are relevant to its operations and effective for annual reporting periods beginning on 1 January 2006. The adoption of these new and revised Standards and Interpretations has resulted in changes to the Group’s accounting policies in the following areas that have affected the amounts reported for the current or prior years:

• investments classified as at fair value through profit or loss; and

• financial guarantee contracts.

These changes did not have a significant impact on the financial statements.

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

IFRIC 7 Applying the Restatement Approach Effective for annual periods beginning under IAS 29, Financial Reporting on or after 1 March 2006 in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 Effective for annual periods beginning on or after 1 May 2006 IFRIC 9 Reassessment Effective for annual periods beginning of Embedded Derivatives on or after 1 June 2006 IFRIC 10 Interim Financial Reporting Effective for annual periods beginning and Impairment on or after 1 November 2006

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Group.

The following standards and interpretations have been issued by IASB but have not yet been endorsed for use in the EU, however endorsement is expected by the time the standards and interpretations become effective:

• IFRS 8 Operating segments • IFRIC 10 Interim financial reporting and impairment • IFRIC 11: IFRS 2 on Group and treasury shares transactions • IFRIC 12 Service concession arrangements

17 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Such consolidated financial statements for the years ended 31 December 2005 and 2006 consist of the accounts of Graphisoft SE and the following subsidiaries:

% held as of 31 December SUBSIDIARY 2005 2006 Graphisoft R&D Számítástechnikai Fejlesztô zrt 85.8%* 85.8%* Graphisoft Park Kft 100% - Graphisoft Deutschland GmbH 100% 100% Graphisoft USA Inc. 100% 100% Graphisoft Japan KK 100% 100% Graphisoft Spain SL 100% 100% Graphisoft UK Ltd. 100% 100% Graphisoft Finland Oy 100% 100% Graphisoft CAD Stúdió Kft. 92% 92%

* 14.2% shares in Graphisoft R&D zrt represent employee preference shares as of 31 December 2005 and 2006.

2. THE SEPARATION OF GRAPHISOFT PARK (THE REAL ESTATE OPERATIONS)

The Board of Directors proposed and the General Meeting of Shareholders approved the separation at the holding company level on April 28, 2006. According to the separation agreement the spin out holding company (Graphisoft Park SE) is entitled to take €2,500 thousand cash and the investment in Graphisoft Park Kft. The 2006 results of operation in Graphisoft Park Kft belong to the spin off operation in full. The Company have not relaized any gain or loss on the spin-off.

The Court registered Graphisoft Park SE on August 21, 2006. Graphisoft Park SE issued new shares, and every shareholder of Graphisoft SE who did not indicate not to participate in the new spin off company automatically received one new Graphisoft Park SE share in addition to every share he had in Graphisoft SE. Shareholders who did not participate in the separating companies received €2.34 and €2.14 compensation for their Graphisoft SE and Graphisoft Park SE shares, respectively. 2,000 and 2,100 shares were redeemed this way. The shares of the new company were introduced to the Budapest Stock Exchange (ISIN code HU0000083696). The first trading day was August 28, 2006.

The following pro forma balance sheets show how the assets, liabilities and shareholders equity were allocated on December 31, 2005.

18 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

PRO FORMA BALANCE SHEET Pro forma Balance Sheet as of 31 December 2005

As reportedPark Software ASSETS

CURRENT ASSETS Cash and cash equivalents 5,681 2,500 3,181 Financial assets 8,809 - 8,809 Accounts receivables, net 7,304 - 7,304 Inventories, net 338 - 338 Other current assets 2,776 983 1,793 Total current assets 24,908 3,483 21,425

NON-CURRENT ASSETS Investment property, net 18,165 18,165 - Other equipment, net 6,839 1,691 5,148 Intangible assets, net 2,953 - 2,953 Non-current financial assets, net 259 - 259 Deferred tax assets 695 - 695 Total non-current assets 28,911 19,856 9,055

TOTAL ASSETS 53,819 23,339 30,480

LIABILITIES AND SHAREHOLDERS’EQUITY

CURRENT LIABILITIES Bank loans 1,976 1,651 325 Accounts payable and accrued expenses 4,755 355 4,400 Deferred income 2,265 - 2,265 Total current liabilities 8,996 2,006 6,990

NON-CURRENT LIABILITIES Bank loans 122 - 122 Deferred tax liabilities 27 - 27 Total non-current liabilities 149 - 149

CAPITAL AND RESERVES Share capital 213 213 213 Additional paid-in capital 18,574 - 18,574 Treasury stock (5,136) - (5,136) Retained earnings 37,284 21,120 15,951 Cumulative foreign currency translation loss (6,280) - (6,280) Equity attributable to equity holders of the parent 44,655 21,333 23,322 Minority interest 19 19 Total equity 44,674 21,333 23,341

TOTAL LIABILITIES AND EQUITY 53,819 23,339 30,480

19 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with International Financial Reporting Standards. The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below.

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applica- ble to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

BUSINESS COMBINATIONS

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date.

The interest of minority shareholders in the acquiree is initially measured at the minority’s pro- portion of the net fair value of the assets, liabilities and contingent liabilities recognised.

GOODWILL

Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

20 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

The Company performs annual impairment tests. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the syner- gies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

REVENUE RECOGNITION

The Company’s revenue recognition is in accordance with the provisions of IAS 18: Revenue Recognition. The standard allows revenue to be recognized when: • Goods are sold: material risks and incomes related to ownership are transferred, revenues and expenses related to the sales transaction are reliably measurable, and cash is expected to flow from the deal to the seller. • Services are provided: revenue, expenses, profit and the percentage of fulfillment are reliably measurable.

The Company’s primary source of revenue is package and customized software sales. Accordingly, revenue from software license sales, upgrades and enhancements are recognized when persuasive evidence of an arrangement exists, delivery has been made, a fixed fee and collectibility of the fee has been determined; to the extent that obligations exist for other services, the Company allocates revenue between license, upgrade or enhancement and the services based upon their relative fair value. Revenues from customer maintenance support agreements are deferred and recognized ratably over the term of the agreements. In instances where significant customization is required, the Group applies contract accounting using the percentage of completion method to recognize revenues.

LEASING

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

21 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

FOREIGN CURRENCIES

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in EUR, which is the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options (see below for details of the Group’s accounting policies in respect of such derivative financial instruments).

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in EUR using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated signif-

22 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

icantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

TAXATION

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

23 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at original cost less accumulated depreciation.

Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful lives, using the straight-line method.

Buildings 50 years

Rental building and related Leasehold improvements 10 years

Equipment 3-7 years

Vehicles 5 years

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

INVESTMENT PROPERTY

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at original cost less accumulated depreciation at the balance sheet date. The fair value of investment property as of December 31, 2005 is disclosed.

INTERNALLY-GENERATED INTANGIBLE ASSETS – RESEARCH AND DEVELOPMENT EXPENDITURE

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset is recognised only if all of the following conditions are met: • an asset is created that can be identified (such as software and new processes); • it is probable that the asset created will generate future economic benefits; and • the development cost of the asset can be measured reliably.

24 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

INVENTORIES

Purchased materials are recorded at cost. Inventories are stated at the lower of first-in-first-out (FIFO) cost and net realizable value. Inventories as of 31 December 2005 and 2006 consisted of packaging materials and consumables used for software packages, as well as purchased third party software and marketing materials.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

FINANCIAL ASSETS

Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost value, plus directly attributable transaction costs.

At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Investments other than held-to-maturity debt securities are classified as either financial assets at fair value through profit or loss or as available-for-sale, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for financial assets classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.

25 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates.

The Group uses derivative financial instruments (primarily foreign currency forward contracts) to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Group does not use derivative financial instruments for specu- lative purposes. Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in profit or loss. The Group’s policy with respect to hedging the foreign currency risk of a firm commitment is to designate it as a cash flow hedge. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in profit or loss in the same period in which the hedged item affects profit or loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in profit or loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time,for forecast transactions, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period.

PROVISIONS

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

26 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

SHARE-BASED PAYMENTS

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-trans- ferrability, exercise restrictions and behavioural considerations. The Group applies IFRS 2 Share-based Payment on equity instruments granted after November 7, 2002.

CREDIT RISK

The Group’s financial instruments that are exposed to credit risk consist primarily of marketable securities and accounts receivable. The Company’s accounts receivable include balances due from a number of geographically dispersed customers and who are generally granted credit without collateral. The Company periodically performs credit evaluations of its customers and main- tains reserves for potential losses. Management believes that the amounts provided for doubtful accounts are adequate to cover credit risk associated with the accounts receivable. The Company invests generally in government-backed or high-grade corporate bonds to limit its potential credit risk exposure on marketable securities.

EARNINGS PER SHARE

Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic net income per share is determined by dividing net income (loss) by the weighted average number of common shares outstanding during each period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised.

USE OF ESTIMATES

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at each reporting date and the amount of revenue and expense reported each period. These estimates include provision for bad debts, estimate useful lives of property, equipment and intangible assets, certain accrued liabilities, recognition of revenue and expenses, recoverability of deferred tax assets and share based payments. Actual results could differ from these estimates.

27 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

4. BUSINESS AND GEOGRAPHICAL SEGMENTS

BUSINESS SEGMENTS

For management purposes, the Group is currently organised into two operating divisions – architectural design and related software, and construction solutions and services. These divisions are the basis on which the Group reports its primary segment information. In 2005 the Company had real estate lease income, which activity was spun off from the Group’s operation with December 31, 2005 accounting date.

Principal activities are as follows: • Architecture: development and sales of shrink-wrapped and customized 3D AEC CAD software • Construction: development and sales of 5D construction modeling, estimating and scheduling software and providing services to construction companies using our applications

Architectural design and related software Construction Other

20052006 % 20052006 % 20052006 %

Revenues 22,379 28,117 25.6 1,684 2,390 41.9 2,650 - - Expenses 17,648 21,103 19.6 4,507 10,032 122.6 2,128 - - Segment operating result 4,731 7,014 48.3 (2,823) (7,642) n.a. 522 - -

As the Group’s expenses are presented by function in the statement of operations, the Group disclosed that its payroll expenses totaled to € 10,284 and € 12,212 thousand in 2005 and 2006, respectively. In 2005 the other activities represented the real estate business line, which is presented as a discontinued operation in 2006. See Note 5.

GEOGRAPHICAL SEGMENTS

The following table provides an analysis of the Group’s sales by geographical markets, irrespec- tive of the origin of goods/services.

2005 2006 Change (%) Revenue % Revenue % 06/05

Europe 18,205 68.2 20,854 68.4 14.6 North-America 3,438 12.9 4,372 14.3 27.2 Asia-Pacific 4,364 16.3 4,376 14.3 0.3 Rest of the World706 2.6 905 3.0 28.2

TOTAL REVENUES 26,713 100.0 30,507 14.2

28 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

5. DISCONTINUED OPERATION

In order to focus on growth and profit, the Group successfully transitioned its FM (Facility Management) business unit to partners in June 2005. In 2006 the Company demerged and span off the real estate businesses. For 2006, the real estate business is accounted for as a discontinued operation. The results of the discontinued operations are set forth in the following table for both business years. 2005 2006

FM FM Real estate

Revenues 875 25 2,499 Cost of revenue 571 22 530 Gross profit 304 3 1,969 Operating expenses 1,362 97 1,091 Operating profit /(loss) (1,058) (94) 878 Foreign currency transaction income (loss) - - (2) Interest and other income (loss), net (1,617) - (58) Income/loss from discontinuing operations before income tax (2,675) (94) 818 Provision for income tax - - 211 Net income/(loss) from discontinuing operations (2,675) (94) 607

6. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the parent is based on the following data:

FROM CONTINUING AND DISCONTINUING OPERATIONS: 2005 2006 Net income (thousand EUR) 669 (652) Shares for the basic computation 9,927,320 10,133,417 Basic EPS (EUR/share) 0.07 (0.06) Stock options (treasury stock method) 471,906 601,530 Shares for diluted computation 10,399,226 10,734,947 Diluted earning / (loss) per share (EUR/share) 0.06 (0.06)

FROM CONTINUING OPERATIONS: 2005 2006 Net income (thousand EUR) 3,343 (1,165) Shares for the basic computation 9,927,320 10,133,417 Basic EPS (EUR/share) 0.34 (0.11) Stock options (treasury stock method) 471,906 601,530 Shares for diluted computation 10,399,226 10,734,947 Diluted earning / (loss) per share (EUR/share) 0.32 (0.11)

29 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

7. FINANCIAL ASSETS

Financial assets as of 31 December were as follows: 2005 2006 U.S., German and Hungarian bank and corporate bonds – available for sale 4,772 1,342 Hungarian Treasury Bills – held to maturity 3,841 - Hungarian bank bonds – held to maturity 141 - Money market funds – held to maturity 55 - Total financial assets 8,809 1,342

All financial assets had a maturity date within 1 year as of December 31, 2005 and 2006, respectively.

8. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net as of 31 December were as follows:

2005 2006 Accounts receivable 7,942 7,890 Less: provision for doubtful accounts (638) (484) Accounts receivable, net 7,304 7,406

9. OTHER CURRENT ASSETS

Other current assets as of 31 December were as follows:

2005 2006 Taxes receivable 1,428 838 Accrued interest income 182 94 Advances given to vendors and employees 701 89 Prepaid expenses 252 215 Loan to GS Park Kft. - 14,514 Receivable on options exercised- 1,552 Other 213 197 Total other current assets 2,776 17,499

The ‘Other’ line includes among others deposits for rent and other accrued income. The receivable from option exercise is due from Concorde Securities Ltd, a Hungarian stock broker company.

30 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

10. PROPERTY, PLANT AND EQUIPMENT, NET

The changes in the book value of property, plant and equipment during twelve months ended December 2005 and 2006 were as follows:

Investment Construction property total Equipment Vehicles in progress Grand total

GROSS BOOK VALUE

Balance as of 1 January 2005 15,473 4,688 1,496 5,802 27,459 Additions 7,633 324 102 210 8,269 Disposals (13) (201) (149) - (363) Translation difference (553) (63) (38) (157) (811) Balance as of 31 December 2005 22,540 4,748 1,411 5,855 34,554

ACCUMULATED DEPRECIATION

Balance as of 1 January 2005 3,358 4,025 848 - 8,231 Additions 1,133 459 186 - 1,778 Disposals (7) (180) (79) - (266) Translation adjustment (109) (60) (24) - (193) Balance as of 31 December 2005 4,375 4,244 931 - 9,550 Net book value as of 1 January 2005 12,115 663 648 5,802 19,228 Net book value as of 31 December 2005 18,165 504 480 5,855 25,004

31 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Land and Construction Investment building Equipment Vehicles in progress property total Grand total

GROSS BOOK VALUE

Balance as of 1 January 2006 - 4,748 1,411 5,855 22,540 34,554 Additions 17 241 62 - - 320 Disposals - (258) (318) (5,682) (22,540) (28,798) Translation difference 1 (15) (1) (173) - (188) Balance as of 31 December 2006 18 4,716 1,154 - - 5,888

ACCUMULATED DEPRECIATION

Balance as of 1 January 2006 - 4,244 931 - 4,375 9,550 Additions 1 191 124 - - 316 Disposals - (258) (229) - (4,375) (4,862) Translation adjustment - (3) 1 - - (2) Balance as of 31 December 2006 1 4,174 827 - - 5,002 Net book value as of 1 January 2006 - 504 480 5,855 18,165 25,004 Net book value as of 31 December 2006 17 542 327 - - 886

11. INVESTMENT PROPERTY

December 31, December 31, 2005 2006 Carrying value 18,165 - Fair value 30,000 -

32 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Investment property, as of December 31, 2005, is stated at original cost less accumulated depreciation. The fair value of the Group’s investment property was estimated by management €30 million as of balance sheet date. The fair value was determined on the basis of discounted net operating cash flows for the next 10-year period. The calculation included cash flows from capitalization of the construction in progress as of December 31, 2005 (€5.9 million) and from future capitalization in amount of €30 million.

By adopting resolution no. 12/2006.04.28 of the Company’s General Meeting, the shareholders of the Graphisoft SE made a decision on the separation of the Company in a way that by separating the real estate business from the Company through a de-merger, Graphisoft Park SE Ingatlanfejlesztô Európai Részvénytársaság (Graphisoft Park SE Real Estate Development European Company Limited by Shares), a new European company limited by shares was established, while the software business continued its operation as the surviving Company. According to the separation agreement approved by the General Meeting, after the separation, Graphisoft Park SE will indirectly possess, through Graphisoft Park Ingatlanfejlesztô Kft. (Graphisoft Park Real Estate Developer Ltd.), a company 100% owned by Graphisoft Park SE, the investment property assets of the Company. The separation (in the form of spin off) was effective on August 21, 2006.

12. INTANGIBLE ASSETS, NET

The changes in the book value of intangible assets during twelve months ended December 2005 and 2006 were as follows:

GROSS BOOK VALUE

Balance as of 1 January 2005 4,855 Additions 2,835 Disposals (2,675) Translation difference 134 Balance as of 31 December 2005 5,149

ACCUMULATED AMORTISATION

Balance as of 1 January 2005 2,660 Additions 393 Disposals (831) Translation adjustment (26) Balance as of 31 December 2005 2,196 Net book value as of 1 January 2005 2,195 Net book value as of 31 December 2005 2,953

33 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

GROSS BOOK VALUE

Balance as of 1 January 2006 5,149 Additions 162 Disposals (150) Impairment charge (2,945) Translation difference (5) Balance as of 31 December 2006 2,211

ACCUMULATED AMORTISATION

Balance as of 1 January 2006 2,196 Additions 787 Disposals - Impairment charge (996) Translation adjustment 4 Balance as of 31 December 2006 1,991 Net book value as of 1 January 2006 2,953 Net book value as of 31 December 2006 220

The Company had intangible assets (acquired technology and capitalized software development costs) related to its Construction Solutions Division in its balance sheet. These assets were tested for possible impairment in December, 2006. The test showed that positive cash flow in the nearby future is not expected from these assets, accordingly management decided to fully impair these intangible assets. The impairment charge relates to the purchased technology in relation to Dynamic Solutions Systems in amount of €1,894 thousand and to YIT technology in amount of €55 thousand.

13. NON-CURRENT FINANCIAL ASSETS

2005 2006

Distributor Note Receivable 209 9 Employee Note Receivable 4 - Investments held at cost 46 41 Total non-current financial assets, net 259 50

Distributor Note Receivable– Graphisoft provided a €500 thousand long-term loan to one of its distributors in January 2002. The duration is five years, and the payback started in September 2002. The loan bears a 3.5% interest p.a. In September 2003 Graphisoft and the Distributor agreed to reschedule the loan and extend the duration by one year. The interest received was €10 and €5 thousand in 2005 and 2006, respectively. The loan decreased to €9 thousand as of December 31, 2006.

Other investments represent minority stakes in a U.S. based company. In 2006 the Company wrote off its investments in U.S. resellers.

34 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of 31 December were as follows:

2005 2006

Accounts payable 2,143 1,252 Taxes payable 901 1,801 Payroll and related 692 1,994 Commission fees payable 38 - Professional fees payable 88 48 Liability on purchased technology 369 165 Accrued acquisition bonus - 400 Liabilities to employees 76 77 Other 448 373 Total accounts payable and accrued expenses 4,755 6,100

15. BANK OVERDRAFTS AND LOANS

2005 2006

Short-term bank loans 1,976 76 Long-term bank loans 122 77 Total bank loans 2,098 153

Graphisoft R&D zrt obtained a €1,976 thousand (HUF 500 million) bridge loan as of December 29, 2005, which facilitated the demerger of the real estate and software development businesses on subsidiary level. The loan was repayable within 30 days, however it was already repaid on January 11, 2006. The loan bore 6.5% nominal interest rate. The cash received was immediately invested at 5.5% nominal interest rate.

16. TAXATION

The income tax provision for the years ended December 31 consisted of the following:

2005 2006

Current tax 764 362 Deferred tax (419) (213) 345 149

35 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Income taxes payable principally represent taxes payable on the operating profits of Graphisoft R&D. Graphisoft R&D zrt is subject to the standard Hungarian corporate income tax. Based on the change in the Hungarian Income Tax Law LXXXI./1996 (Chapter II, par. 7. (1) s), software license revenue is taxed more favorably. In September, 2006, a surtax was introduced in Hungary, which amounts to 4% of profit before tax. Graphisoft’s other operating subsidiaries generally have incurred cumulative losses and therefore do not have significant income tax liabilities as of December 31, 2005 and 2006. The Group does not calculate deferred tax assets for these cumulative losses, as the recoverability of such deferred tax assets cannot be foreseen with sufficient certainty.

The current effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities as of December 31, were as follows:

Opening Charged Charged Closing 2005 balance to income to equity balance

TEMPORARY DIFFERENCES

Allowance for bad debts 5 1 - 6 Revaluation of receivables 359 (60) (169) 130 Revaluation of securities 16 (20) - (4) Revaluation of payables ---- Revaluation of other payables 38 (15) - 23 Income deferred in IFRS 54 59 - 113 Software development not capitalized in IFRS 311 112 - 423 Revaluation of given loans - (20) - (20) Depreciation (365) 362 - (3)

418 419 (169) 668

Opening Charged Charged Closing 2006 balance to income to equity balance

TEMPORARY DIFFERENCES

Allowance for bad debts 6 (3) - 3 Revaluation of receivables 130 110 158 398 Revaluation of securities (4) 11 - 7 Revaluation of payables - (7) - (7) Revaluation of other payables 23 7 - 30 Income deferred in IFRS 113 5 - 118 Software development not capitalized in IFRS 423 92 - 515 Revaluation of given loans (20) (3) - (23) Depreciation (3) 1 - (2)

668 213 158 1,039

36 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Deferred tax assets principally related to unrealized foreign exchange losses and capitalized software development costs are treated differently under Hungarian tax law and under IFRS.

Deferred tax balances are presented in the balance sheet as follows:

December 31, 2005 December 31, 2006

Deferred tax assets 695 1,071 Deferred tax liabilities (27) (32)

668 1,039

The following table shows the effect of the newly introduced 4% surtax:

2006

Effect of 16% tax on tax charge 38 Effect of change in tax rate 175 Total deferred tax charge 213

17. SHARE CAPITAL

December 31, 2005 December 31, 2006

Share capital (in thousand EUR) 213 213

The Company’s share capital consisted of 10,631,674 common shares, which are issued and outstanding as of December 31, 2005 and 2006. The nominal value of the shares is _0.02. 1 share entitles to 1 vote.

18. TREASURY STOCK

Number of in thousand EUR shares Treasury stock as of December 31, 2004 5,883 735,366 Stock option exercise in 2005 (1,668) (213,212) Treasury share repurchase in 2005 921 145,448 Treasury stock as of December 31, 2005 5,136 667,602 Stock option exercise in 2006 (5,135) (668,291) Treasury share repurchase in 2006 3,235 359,058 Treasury stock as of December 31, 2006 3,236 358,369

Treasury stock is valued at historical cost price. When treasury shares are sold, the inventory is decreased by the weighted average share-price of stocks.

37 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

19. ACQUISITION OF ASUBSIDIARY

On 1 September 2005, the Group acquired 100 per cent of the issued share capital of Dynamic Solution Systems Oy for cash consideration of €2.58 million. This transaction has been accounted for by the purchase method of accounting.

The net assets acquired in the transaction are as follows:

Acquiree’s carrying amount

Before Fair value Fair combination adjustments value

Net assets acquired: Property, plant and equipment 9 - 9 Capitalized software development cost - 356 356 Technology purchased- 2,364 2,364 Long-term receivables 15 - 15 Marketable securities 150 - 150 Short-term receivables 57 - 57 Bank and cash balances 51 - 51 Subordinated loans (55) - (55) Long-term liabilities (122) - (122) Short-term liabilities (192) - (192) (87) 2,720 2,633 Total consideration, satisfied by cash 2,633

Net cash outflow arising on acquisition: Cash consideration paid (2,633) Cash and cash equivalents acquired 51 (2,582)

In addition to the Base Purchase Price (€2,633 thousand), the Sellers (former shareholders of the selling company) are entitled to receive as earn out based additional payment 25.48% of the incremental DynaProject related revenue achieved in the financial years 2005, 2006 and 2007 over the actual DynaProject related revenue of €720 thousand achieved in the financial year 2004. The maximum amount of the aggregate earn out additional payment, however, is €3.2 million. The purchase price is not adjusted by the additional payment as it is currently not estimated as likely by management. The Company paid €22 thousand earn-out to the former shareholders of DSS in 2006.

In 2006, the management recorded an impairment charge for the purchased technology in the amount of €1,894 thousand as a part of the total impairment charge on intagible assets, as men- tioned in Note 12. Intangible Assets.

38 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

20. COMMITMENTS AND CONTINGENCIES

LITIGATION

The Company is not party to other pending litigation or unasserted claims.

TAX AUDIT

In 2004 the Hungarian Tax Authority began an audit covering the fiscal years of 2000 and 2001 in Graphisoft R&D zrt., which was closed by legally binding declaration in 2005. The declaration stated tax-shortfall and fine in amount of €61 thousand. In 2006 the Company did not have a comprehensive tax audit.

OPERATING LEASES

The Company has entered into various lease arrangements for office space. Future minimum annual lease payments for operating leases with non-cancelable terms of at least one year at December 31 are as follows:

For the years ending December 31

2007 1,357 2008 1,271 2009 1,199 2010 1,125 2011 167 Thereafter 0

Total 5,119

Total operating leases expenses for years ended December 31, 2005 and 2006 amount to €535 thousand and €1,432 thousand, respectively. The increase is attributable to the separation of Graphisoft Park operations: the software company pays office rent from January 1, 2006.

21. OPTION AND SHARE PLANS

GRAPHISOFT SE STOCK OPTION PLANS

The Group adopted an Incentive and Non-statutory Stock Option Plan in November 1996, which was restated on 28 July 1999. An aggregate of 1,500,000 Company Common Shares is reserved for issuance under this plan. The Annual General Meeting on April 26, 2002 approved another 500,000 options available for grant and further 1,500,000 options on April 29, 2004. Management, including management of the Group’s subsidiaries, was granted share options, which provide a right to purchase common shares at or above the fair market price at the time of the grant.

39 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

Before Park Software the split after the split after the split

The vesting period of option grants is 4 or 5 years, except for those options granted to distributors where it is 10 years, if the optionee is still a service provider.

The fair value of options on their grant date was measured using the Black-Scholes option-pricing model. Key assumptions used to apply this pricing are as follows:

Years ended 31 December 2005 31 December 2006 Risk free interest rate 2.0%-2.3% 3.0%-3.5% Expected life of option grants 3.0 years 3.0 years Expected volatility on underlying stock 21%-25% 24%-28% Expected dividend payment rate - -

It should be noted that the option-pricing model used was designed to value readily tradeable stock options with relatively short lives. The options granted to employees are not tradeable and have contractual lives up to ten years. However, management believes that the assumptions used to value the options and the model applied yield a reasonable estimate of the fair value of the grants made under the circumstances.

In 2005 and 2006, there were no grants to non-employees. The Company – in connection to the split of the real estate operations and the decrease in the equity of the Company – re-priced the outstanding share options on August 21, 2006. The strike price was cut back to 52% of the original strike price based on the decision of the General Meeting. This ratio reflected the change in the shareholders’ equity of the software company (Graphisoft SE).

The Company re-measured the fair value of the options at the date of modification. For already vested options such additional cost was recognized at the date of modification (€1,600 thousand in 2006). For shares that vest in the future, such additional cost will be recognized in the vesting period of such options.

40 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

The movement in options during the years ending 31 December 2005 and 2006 is summarized in the following table: Outstanding

Options available Weighted average for grant Options exercise price

Balance as of 31 December 2004 916,610 2,296,513 EUR 5.27

Options granted(311,000) 311,000 EUR 6.12 Options cancelled188,785 (188,785) EUR 7.01 Options exercised- (212,512) EUR 3.91

Balance as of 31 December 2005 794,395 2,206,216 EUR 5.37

Options granted(77,000) 77,000 EUR 6.82 Options cancelled101,266 (101,266) EUR 6.22 Options exercised- (665,991) EUR 5.00

Balance as of 31 December 2006 818,661 1,515,959 EUR 2.81

The weighted average grant date fair value of options granted in 2005 and 2006 were €1.12 per share and €5.17 per share, respectively. Out of the 1,515,959 options outstanding 1,052,084 vested till December 31, 2006.

GRAPHISOFT R&D PREFERRED SHARE PLAN

Graphisoft R&D zrt, the Company's primary Hungarian operating subsidiary has sold, and intends to continue to sell, Employee Preferred Shares to certain employees of such entity. The Preferred Shares are subject to repurchase, at the original sale price, by Graphisoft R&D zrt. in the event that the holder's employment is terminated for any reason and may not be transferred by an employee to any person other than another employee. Graphisoft R&D zrt. pays certain royalties on the Preferred Shares. As the Preferred Shares are intended to serve primarily as performance-based compensation and do not represent a true equity interest in Graphisoft R&D zrt., the dividends are accounted for as compensation expense in the period in which such compensation is earned. Shares are sold at 70% of the nominal value. Shares became voting during 1999.

As of 31 December 2005 and 2006 the granted number of shares was 1,930 in a nominal value of HUF 19,3 million (approximately €76 - €78 thousand). The Company declared HUF 398.16 million HUF (approximately €1,606 thousand), and 351.26 million HUF (approximately €1,329 thousand) in dividends, which were eventually paid and recorded as compensation expense in 2005 and 2006, respectively.

41 GRAPHISOFT SE AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2006

(All amounts in thousands of EUR except share data)

22. KEY MANAGEMENT PERSONNEL

The remuneration of officers, directors and other key management during the year was as follows:

2005 2006

Short-term benefits 2,254 2,987 Share-based compensation 225 1,767 Management compensation, total 2,479 4,754

The 91.2% increase is attributable to the extraordinary share based compensation costs due to re-pricing of options and special bonuses related to the Nemetschek take over. The Group’s management does not have any long-term or post-employment benefits.

23. EVENTS AFTER THE BALANCE SHEET DATE

Graphisoft Park repaid the €14,568 thousand loan on January 10, 2007. It was announced on February 12, 2007, that the Company reached an agreement in principle about the spinning off of its Construction Solutions Division. It is anticipated that the new company will become opera- tional during March, subject to the successful completion of definitive agreements. Until then, the Construction Division remains part of Graphisoft and will be continuing to drive business and support customers. The spin out will be headquartered in the United States with subsidiaries in Finland, UK and Hungary. According to the agreement in principle Graphisoft will have a minority interest in the spinning out operation, and all Construction related assets and liabilities will be transferred to this new entity.

24. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors and authorized for issue on March 02, 2007.

42 MANAGEMENT

Board of Directors • Gábor Bojár, Chairman • Dominic Gallello, CEO • Ferenc Karvalits • Georg Katz • Peter B Záboji • Tibor Gáthy

Management Staff • Eszter Czéh, Director of HR • Sándor Bihari,CFO • Clay Freeman, VP of Construction Business Unit • Péter Hornung, CAO • Viktor Várkonyi, VP of Software Development

Field Operations • Johan Appelqvist, Finland • Garreth Evans, U.K. • Jaime Franzi, Spain • Nobuhiro Hara, Japan • Donald Henrich, U.S., Construction • Patrick Mays, U.S., ArchiCAD • Johannes Reischböck, Germany • László Drajkó, Director of International Sales

43 GRAPHISOFT OPERATIONS

HUNGARY Osaka Branch Office 6F OHSACHI ShinOsaka Bldg. Graphisoft SE European Company Limited by Shares 5-13-17, Nishi Nakajima Graphisoft Park 1. (Záhony u. 7.) Yodogawaku, Osaka City, Japan 1031 Budapest, Hungary Phone: (81-6) 6838-6555 Fax: (81-6) 6838-6333 Phone: (36-1) 437-3000 Fax: (36-1) 437-3099 E-mail: [email protected] E-mail: [email protected] Web: www.graphisoft.com UNITED KINGDOM

Graphisoft R&D Zrt. Graphisoft UK Ltd. Graphisoft Park 1. (Záhony u. 7.) 21-25 Church Street West 1031 Budapest, Hungary Woking, Surrey GU21 6DJ, United Kingdom Phone: (36-1) 437-3000 Fax: (36-1) 437-3099 Phone: (44-1483) 263150 Fax: (44-1483) 263151 E-mail: [email protected] E-mail: [email protected] Web: www.graphisoft.hu Web: [email protected]

Graphisoft CAD Stúdió Kft. SPAIN Záhony u. 7. (Graphisoft Park) 1031 Budapest, Hungary Graphisoft Spain Phone: (36-1) 437-3366 Fax: (36-1) 437-3367 Avda. Filipinas 1bis, Pl. 4 E-mail: [email protected] 28003 Madrid, Spain Web: www.cadstudio.hu Phone: (34-91) 535 8750 Fax: (34-91) 535 8751 E-mail: mail@archicad.es GERMANY Web: www.archicad.es

Graphisoft Deutschland GmbH FINLAND Lindwurmstrasse 129e D-80337 München, Germany Graphisoft Finland Oy Phone: (49-89) 746 43-0 Fax: (49-89) 746 43-299 Leppäsuonkatu 6 E-mail: [email protected] 00100 Helsinki FINLAND Web: www.graphisoft.de Phone: (358 9) 440 240 Fax: (358 9) 440 277 E-mail: [email protected] UNITED STATES Web: www.graphisoft.fi

Graphisoft U.S., Inc. INVESTOR CONTACT One Gateway Center, Suite 302 Newton, Massachusetts 02458 USA Sándor Bihari Phone: (1) 617-485-4203 Fax: (1) 617-485-4201 Manager of Investor Relations Toll free: (1) 800 344-3468 Phone: (36-1) 437-3026 Fax: (36-1) 437-3099 E-mail: [email protected] E-mail: [email protected] Web: www.graphisoftus.com Ágnes Szíjjártó JAPAN Associate of Investor Relations Phone: (36-1) 437-3031 Fax: (36-1) 437-3099 Graphisoft Japan Office E-mail: [email protected] Caro Akasaka, 6-13-13, Akasaka, Minato-ku 107-0052 Tokyo, Japan Phone: (81-3) 5545-3800 Fax: (81-3) 5545-3804 E-mail: [email protected] Web: www.graphisoft.co.jp