The building industry, despite its massive contribution to every coun- try’s GDP and the environment we live in, has traditionally fallen behind in employing strategic technology. The industry just does not compare well to other industries, such as the manufacturing, financial and IT sec- tors. Over the next five years, we see a dramatic change coming. We en- visage a future where technology can produce strikingly better de- signs, more predictable construction results and more cost-efficient man- agement of a building over its entire “The best way to predict the future lifespan. The current practice of operating in In order to achieve better control, form for the change that is about is to invent it.” a 2D environment and using 3D the new “supply chain”, which hardly to take place on a broad scale in geometric models, is inadequate for exists today in the building industry, the industry. With innovative tech- Alan Kay handling the complex information must shift its focus from geometrical nology and more than two decades involved throughout the lifespan of data to integrated process model- of dedicated experience, we are a building project. Moreover, these ing, and thus reduce cost and cycle excited about our ability to assist the technologies perpetuated the gap time, improve quality and gain pre- industry in this transition. between the design, the construction dictability. stage, and finally the building opera- tion phase. The efficient manage- Graphisoft is dedicated to helping ment of information is a crucial companies design, build and man- necessity in the vast scope of the age great buildings to live, work and industry. The industry will change play in. Our mission is to save

from data re-creation to data enrich- the AEC industry billions of Dollars DOMINIC GALLELLO ment at every step in the process. a year. Graphisoft delivers the plat- CEO

2 3 ”ARCHICAD HAS ACTUALLY HAD BUILDING MODELING CAPABILITIES FROM THE START, AND CAN THEREFORE BE REGARDED AS A PIONEER IN THIS TECHNOLOGY.” LACHMI KHEMLANI, AEC ANALYST

The lifecycle of a building consists of three main phases: design, build and operate. Traditionally these phases have been separate, and the overall process linear. During each phase, the relevant project data have to be re-entered in different formats. In order to achieve a much greater level of efficiency and predictability in their processes, the industry-leading AEC companies are striving to find a more holistic solution.

Employing pioneering Building Mod- eling technology, Graphisoft offers the industry’s most advanced plat- form. Our solutions cover the entire lifecycle of a project, and allow the various disciplines involved to collab- orate and to share data throughout the design, build and operate phas- es. This integration of disciplines and phases will reshape industry practices. Our customers, and the community as a whole, will benefit from a better built environment, more predictable processes and better bottom line results.

1905 1945 1947 1974 1982 CENTER OF INNOVATION JOHN VON NEUMANN’S EDVAC INVENTION OF HOLOGRAPHY RUBIK’S CUBE GRAPHISOFT® IS FOUNDED IN BUDAPEST BY GÁBOR BOJÁR AND ISTVÁN GÁBOR TARI. BUILDING ON SINCE 1905, SIXTEEN HUNGARIANS, MANY OF THEM RENOWNED SCIENTISTS, REPORT LEADS TO THE INVENTION DENNIS GABOR, 1971 NOBEL ERNÔ RUBIK THE TRADITIONALLY STRONG MATHEMATICAL EDUCATION SYSTEM IN HUNGARY, GRAPHISOFT DEVELOPS 4 HAVE FEATURED AMONG THE CHERISHED RANKS OF NOBEL PRIZE WINNERS OF THE FIRST COMPUTER PRIZE-WINNING PHYSICIST THE WORLD’S FIRST 3D ARCHITECTURAL MODELING SOFTWARE FOR PERSONAL COMPUTERS 5 ”GRAPHISOFT HAS CONSISTENTLY SHOWN THE STRONGEST COMMITMENT OF ANY CAD VENDOR TO SHIPPING PRODUCTS THAT TRULY LEVERAGE THE INTELLIGENCE OF YOUR DESIGN DATA.” JERRY LAISERIN, AEC ANALYST

Since its foundation in 1982, Graphisoft has been devoted exclu- AEC designers are ceaselessly The Building Modeling concept pro- sively to the AEC community and con- seeking better designs, and must poses a paradigm shift: The 3D tinuously providing cutting edge soft- accomplish their projects faster and Building Model, not the design ware for 3D design. Time and time with fewer mistakes in order to win drawings, should be at the core again, the best buildings in the world, BENCE KOVÁCS more business. Despite this, the of the design process. Moreover designed by renowned architects, VICE PRESIDENT OF PRODUCT MANAGEMENT vast majority of design firms are still — the Building Model is not just have been modeled with our flag- KLAGENFURT CITY THEATRE, GRAZ, AUSTRIA using first generation CAD draft- a geometric representation of the ship 3D design product; ArchiCAD. ARCHITECT: GUNTHER DOMERIG ing aids. This limited technology building — it is also capable of con- is counter-productive when used to taining all the necessary information More than two decades of innovation which allow seamless, object-based Our future development work will examine a design, coordinate it or throughout the whole lifecycle of and experience have enabled us to connectivity between the various focus on further improving the ease perform continuous updates; all a project. adapt the inherent intelligence of architectural and engineering appli- of use, teamwork capabilities, pro- essential tasks in the process of our products to meet the require- cations, making the ideal platform for ductivity and spatial freedom of our building design. By its nature, the Building Modeling ments of 23 localized markets in a fully collaborative Building Model. solutions. We will achieve all this concept assumes seamless cooper- 14 different languages. Throughout Graphisoft is establishing partner- while continuing to serve both the The 2D CAD concept has clearly ation between different disciplines this period, ArchiCAD has proved its ships with leading software creators Macintosh and Windows platforms. reached its limits. It is unable to pro- and different solutions. Therefore, ability to cope efficiently with projects in each industry discipline; Struc- We believe that the choice of operat- vide an appropriate answer to the the role of data sharing is crucial. of any size all over the world. tural, HVAC, GIS, etc., and incorpo- ing system, like all other fundamental developing needs of the AEC indus- Only those solutions using open rating their work into the Building choices, should be that of our cus- try and to support designers in their architecture and capable of commu- As design professionals embrace Model. tomers. challenging tasks. There is a grow- nicating with other model-based the Building Modeling concept, ing demand in the AEC design com- applications will be able to fully meet Graphisoft ArchiCAD, teamed with munity for a tailored solution. The this challenge. its complementary products, will

ARCHITECT: HANI NIJEM, RAINFORTH 2D paradigm is set to give way to prove itself to be the leading solu- – GRAU ARCHITECTS, USA the next generation — Building Mod- tion worldwide. eling and simulation systems. Graphisoft is committed to the latest data exchange standard — the In- dustry Foundation Classes (IFCs) —

ARCHITECT: L. S. CHEW

1984 1987 1988 “THIS IS NOT THE SAME 1984” — GRAPHISOFT REVOLUTIONIZES THE CONCEPT OF ARCHITECTURAL DESIGN GRAPHISOFT LAUNCHES ITS VIRTUAL BUILDING™ CONCEPT — ARCHICAD BECOMES ITALIAN IN ITALY, FRENCH IN FRANCE AND FINNISH IN FINLAND. WITH THE LAUNCH OF ARCHICAD® FOR THE NEW APPLE® MACINTOSH® THE FIRST INTEGRATED BUILDING INFORMATION SYSTEM GRAPHISOFT IS THE EUROPEAN MARKET LEADER IN ARCHITECTURAL CAD FOR THE 6 MACINTOSH PLATFORM 7 ”TO PUT IT IN SIMPLE TERMS, ARCHICAD IS SIMPLY THE BEST CAD SOLUTION FOR US.” JARMO LAITINEN, DEVELOPMENT MANAGER, YIT, FINLAND

More than 70 years ago, one of the greatest achievements in For more than two decades, tion, construction simulation and directly from the model. Using the history of construction took place Graphisoft has affirmed its commit- time & cost control — all intended to Graphisoft solutions, these compa- — the Empire State Building was ment to the AEC industry. We were, drive greatly enhanced predictability. nies are able to substantially reduce completed in one year and 45 for instance, first to introduce 3D the risks traditionally associated with days. Even nowadays, few cons- architectural modeling for the AEC Graphisoft has been at the forefront their projects. truction companies would be willing, market. As a result of our foresight, in supporting the IFC initiative. Our

KAJIMA CORPORATION, JAPAN TAMÁS HAJAS or indeed able, to commit to con- a large proportion of the projects versatile solutions allow integrated We at Graphisoft believe that our CHIEF TECHNOLOGY OFFICER structing a building of such magni- that have been designed and built teams from multiple disciplines to vision of the future role of IT in the tude in such a short time span. In The ability to effectively track and in the full 3D environment were work fluently in close collaboration — construction industry will make a terms of predictability, the construc- control these fundamental elements designed with Graphisoft software. a key factor in delivering greater pro- very significant contribution to how tion industry has hardly improved had not been developed to a proper cess efficiency. this industry will move forward. By over the last seven decades. extent until just recently. The new phase in the evolution of delivering market leading solutions Graphisoft's products will provide Globally, industry-leading construc- to all the industry sectors involved, In spite of the extensive use of com- Due to its complexity, the needs of tailored solutions for the cons- tion companies, such as Kajima, YIT we and our partners will together puters, the construction industry is the construction industry will never truction industry, enabling more and Skanska are using our products achieve our mission — to save far from fully exploiting the great be satisfied by a single, standalone effective performance analyses in to plan the construction process, the construction industry billions of potential of the IT revolution. The IT product. Only close partnerships critical areas, such as clash detec- check interferences and to estimate dollars a year. complete integration of fast and between leading software develop- accurate digital technology into this ers, based on an open architecture highly fragmented and risk-averse concept, can lead to an effective industry is the challenging assign- solution. ment for the next decade. If the construction industry For the construction industry, the con- chooses to follow this path, it cept of a 3D model, not to mention will finally be able to offer proj- 2D CAD, is an incomplete solution. ects to its clients that are pre- It lacks two critical dimensions of dictable in every way; cost, time

ARCHITECT: IVAN JOVANOVIC the building process: time and cost. and quality.

TORRE NORD, GENOA, ITALY ARCHITECTS: SKIDMORE, OWINGS & MERRIL LLP; MARIO LANATA

1989 1991 1993 1996 GRAPHISOFT TARGETS THE HEART OF THE GLOBAL ARCHICAD BECOMES THE TOP ARCHITECTURAL GRAPHISOFT ADOPTS A CROSS-PLATFORM STRATEGY. GRAPHISOFT JOINS THE INTERNATIONAL ALLIANCE FOR INTEROPERABILITY (IAI), ESTABLISHED SOFTWARE INDUSTRY BY FOUNDING GRAPHISOFT US CAD PROGRAM FOR THE MACINTOSH WORLDWIDE ARCHICAD IS FIRST RELEASED FOR THE BY THE MAJOR AEC CAD COMPANIES TO DEVELOP THE INDUSTRY FOUNDATION CLASSES 8 INC. MICROSOFT® WINDOWS® OPERATING SYSTEM (IFCS), A BUILDING INDUSTRY-WIDE DATA EXCHANGE STANDARD 9 ”FACILITY MANAGEMENT IS ONE BRIGHT SPOT IN THE AEC MARKET... THERE IS NOW A REAL OPPORTUNITY TO TIGHTLY ALIGN THE ARCHITECTURAL BUILDING MODEL WITH OTHER APPLICATIONS, ONE OF WHICH IS FM.” THE GARTNER GROUP

GGraphisoft FM solutions fully It has been proven that introducing leverage the functionality of the an FM solution like ArchiFM can re- Maintenance Management Systems The buildings and related assets Building Modeling concept. Our duce facilities-related costs by up (CMMS) market the fastest growing of an enterprise are comparable CAFM/CMMS system offers seam- to 30% in the long term. A good segment of the AEC Industry. to its financial assets and should less integration between the different example is a large financial institu-

be protected and managed with phases of a building’s lifecycle. The tion in the US using Graphisoft solu- HILTON SAN FRANCISCO ULM TOWN HALL GÁBOR DIÓSSY The accelerating growth in the equal care. Data related to build- technology automates routine tasks tions, which dramatically slashed DIRECTOR OF FACILITY MANAGEMENT CAFM/CMMS market is similar to ings and property should be man- and facilitates the efficient planning their vacancy rate, thereby saving Always attentive to our customers' previous trends in the financial soft- aged holistically as part of an inte- and management of properties and over $1M per year in rent alone. feedback, we are constantly refining ware market. Enterprise Resource grated system. This system should any related assets, as well as track- They were effectively able to move our software and related services. The costs incurred during the Planning (ERP) systems have re- enable facility managers, corporate ing and controlling resources. from a 10% vacancy rate to just 2%, In doing so, we will enable the world design phase are only a small por- placed simple accounting software, managers and property owners to empowered by the space visibility to manage buildings more efficiently tion of a building’s total expenses which were designed to automate make well-informed decisions, and The Graphisoft FM suite consists of their Graphisoft CAFM system gave than ever before. throughout its entire life cycle. The manual accounting processes. The to eliminate costly situations that our flagship ArchiFM solution and them. growing awareness of the leading benefits of ERP lie beyond more may arise from not having truly other specialized, targeted products. role of effective facilities manage- efficient accounting — the compre- up-to-date information. They incorporate “RealSync” tech- The service aspect of the Graphisoft ment in reducing costs has made hensive information provided im- nology, enabling seamless and com- FM business has also proved to be a the Computer Aided Facility Mana- proves decision-making and helps As the FM market moves toward prehensive connection to Graphisoft key, value-added element of the ROSENHÜGEL HOSPITAL gement (CAFM) and Computerized drive company-wide profitability. web-based, interactive, multimedia ArchiCAD, the industry-leading package provided to our clients. Our information environments, facility Building Modeling authoring and experienced team provides software managers have the opportunity to editing tool. With its robust database integration, custom development and make a significant transition — from capabilities, this product line pro- business process reengineering con- serving a purely FM role, to being vides optimal solutions for the cost- sultancy, ensuring smooth and succ- an integral contributor to their organ- effective operation and management essful implementation of our solutions. ization’s strategic information re- of office complexes and real estate sources. portfolios.

MESSE BERLIN, THE BERLIN TRADE SHOW AND CONVENTION CENTER

NOKIA HQ OFFICE BUILDING, HELIN AND CO. ARCHITECTS, FINLAND

NEUES MUSEUM, NUREMBERG; ARCHITECT: VOLKER STAAB

1997 1998 1999 COLLABORATIVE ARCHITECTURE. GRAPHISOFT INTRODUCES ARCHICAD FOR TEAMWORK, GRAPHISOFT COMPLETES A SUCCESSFUL INITIAL PUBLIC OFFERING ON THE FRANKFURT NEUER MARKT GRAPHISOFT ARCHIFM® IS LAUNCHED. THE VIRTUAL BUILDING CONCEPT IS EXTENDED A REVOLUTIONARY METHOD TO SHARE ENTIRE 3D BUILDING MODELS ARCHICAD FOR TEAMWORK WINS THE CODIE AWARD FOR BEST GROUPWARE TO COVER THE WHOLE LIFECYCLE OF THE BUILDING, EXPLORING THE FULL POTENTIAL 10 GRAPHISOFT RECEIVES THE EUROPEAN INFORMATION TECHNOLOGY AWARD GRAPHISOFT HEADQUARTERS ARE RELOCATED TO THE NEW GRAPHISOFT PARK OF THE IT REVOLUTION IN THE AEC INDUSTRY 11 "I AM EXCITED ABOUT HOW TECHNOLOGY HAS GIVEN ME A WAY TO BE A MORE EFFECTIVE DESIGNER OF BUILDINGS. THE TECHNOLOGY I AM TALKING ABOUT IS ARCHICAD." N. KATSALIDIS, PRINCIPAL AND DESIGN DIRECTOR, FKAU

After consuming 22,000 truck- David Sutherland, Director of Plan- The Eureka Tower database was more effectively, team members can loads of concrete, 40,000m2 of glass ning at FKAU, describes the use organized around the major prog- now work cohesively, as they are co- and 400 km of aluminum extrusions of ArchiCAD as being the underly- rammatic components. Autonomous operating to craft one Virtual Building.” to construct 88 stories, Eureka ing basis of the design approach teams worked on five subsets of the Adds Nonda Katsalidis. “Rather than Tower, the tallest residential building to Eureka Tower, enabling 3D simu- digital model. The information an office of segregated tribes, we are in the world, will soon rise as a shin- lation throughout the different phas- produced by the teams was creating a practice of coopera- ing beacon in the skyline of Mel- es. All the required documentation then hot-linked to the other tive teams, which means signi- bourne, Australia. was derived through automated models, so that the entire ficant increases in our processes from a single 3D Virtual 3D database was coordin- effectiveness.” This stunning new landmark, locat- Building model. ated at every stage. ed on the Yarra riverside, within the Sutherland believes that flourishing Southgate Precinct of “It must be said that I am a by fully exploiting the Melbourne, is the same height as convert. I am excited about strengths of ArchiCAD, the Eiffel Tower in Paris, at 300 how technology has given his firm has found a way meters/985 feet. It is planned to me a way to be a more to concentrate on their be a truly “vertical city”, with an effective designer of core skills of design eleven-story podium complex con- buildings — the techno- and management. taining residents’ recreational, car logy I am talking about is “ArchiCAD was select- parking, boutique retail and office ArchiCAD.” Says Nonda ed by the practice as facilities. At its pinnacle is an ob- Katsalidis, Principal and the software which provides the DEVELOPER: EUREKA TOWER PTY LTD servation complex featuring public Design Director of FKAU. “The re- optimal balance of technological ENGINEERING: CONNELL MOTT MACDONALD areas and restaurants. The most volution in information technology sophistication and user simplicity, CONSTRUCTION: GROCON PTY LTD striking feature of the building is has, until recently, been of little and which encourages a collabo- ARCHITECTURE: FENDER KATSALIDIS (FKAU) its slim profile, projecting an iconic benefit to architects. We are now rative working environment from FENDER KATSALIDIS ARCHITECTS (FKAU) IS A MELBOURNE-BASED ARCHITECTURAL image while assuring enough light starting to turn that around. " design through construction. The PRACTICE KNOWN FOR DESIGNING CUTTING EDGE BUILDINGS WITH SOUND FUNCTIONAL for the surrounding streets. processes adopted for Eureka Tower PLANNING. THE PRACTICE HAS GENERATED AWARD-WINNING RESIDENTIAL, COMMERCIAL “The benefits started to flow when represent the methodology that will AND PUBLIC DESIGNS EMBELLISHING st AUSTRALIAN CITIES. we committed to using ArchiCAD ful- carry us through the 21 Century.” ly. As well as being able to design

MONTEVETRO PROJECT, LONDON, HRA WITH RICHARD ROGERS PARTNERSHIP

THE FEDERAL CHANCELLERY, BERLIN; ARCHITECTS: AXEL SCHULTES AND CHARLOTTE FRANK

2000 2001 GDL OBJECT TOOLS — INTEGRATION OF E-COMMERCE WITH BUILDING DESIGN CADALYST LABS AWARDS ARCHICAD 5 STARS OUT OF 5 GRAPHISOFT WINS THE TECHNOLOGY PIONEER AWARD FROM THE WORLD ECONOMIC FORUM 12 GRAPHISOFT ACQUIRES DRAWBASE SOFTWARE 13 KIRKSEY, USA

Founded 1971, Kirksey is a full service architectural firm located in Houston, Texas. Made up of 11 different teams and departments, this diverse organ- ization of more than 100 profession- als has designed more than 40 mill- ion square feet and has received much design recognition over more than 3 decades of service. Graphisoft ArchiCAD proved best able to meet Kirksey's goals. “The ers and technical staff, freeing their short learning curve and the ability time to concentrate on design and to produce quick 3D models enabled communication,” Larrew explains. A-KONSULTIT ARCHITECTS, FINLAND KAJIMA EUROPE UK us to effectively communicate “These were the key benefits of A-konsultit is one of Finland’s largest tation sets were delivered as a by- With over 13,000 employees world- design concepts to our clients,” ex- using ArchiCAD that influenced the architectural practices. For the last product. wide, Kajima is the world’s fourth plains David Larrew, Senior Asso- management decision to purchase decade they have been using Gra- “In the project, the architects report- largest building contractor. ciate and Director of Architectural 70 seats — a decision that forever phisoft ArchiCAD at the core of their ed about 50% timesaving in the During the Company’s recent Ac- Technology at Kirksey. “ArchiCAD changed our design and documenta- design processes. design documentation phase,” said cordia housing project, preventing provided a sense of relief for design- tion processes.” The new auditorium at the Helsinki Martin Fischer and Calvin Kam of collisions during construction was University of Technology (HUT) be- Stanford University's Center of In- a major challenge. Total savings on came part of the prestigious campus, tegrated Facility Engineering (CIFE). the project, due solely to modeled originally designed by Alvar Aalto; “Consequently, the project team was clash avoidance, could reach sever- “ArchiCAD gives us the ability to and versatile, yet inherently flexible one of the most influential architects able to quickly perform all the routine al million pounds. do this, and totally outweighs any and easy to use. Every time we use of the Twentieth Century. Utilizing jobs, spent more time in planning for “Avoiding mistakes before they be- time and cost spent creating the ArchiCAD on a project, we become ArchiCAD’s Virtual Building concept constructability and conducting life- come costly is just common sense,” 3D models in the first place. more convinced it is the software allowed the architects to concentrate cycle analyses. The shift to higher risks, such as cost overrun and post- says Graham Starkey, Design Man- When it comes to 3D, ArchiCAD is of the future.” on design. The design documen- value-added work reduced project occupancy dissatisfaction.” ager, Kajima UK. in another league. It is powerful

SIEBER + RENN, MOL, HUNGARY GERMANY “the way that ArchiCAD greatly opti- ArchiCAD’s 3D functionality was vital MOL, a leading European oil and gas “A company of MOL’s size can only “This is the most spectacular stadium mizes workflow made it totally irre- to the success of the project. Using company, and the largest company maintain a competitive edge through in the world!” RTL-Sports reporter placeable.” ArchiCAD, the 2D area plan was in Hungary by sales revenue, has the use of world-class technological Dieter Thoma shout- Because of the extremely challeng- translated into a full 3D topographical chosen Graphisoft ArchiFM for the tools,” says Zsolt Hernádi, President ed enthusiastically at first sight of ing topography of the location, model, enabling the project to be next generation of its IT strategy. and CEO, MOL. “This applies espe- the new 23,000-capacity Allgäu analyzed in the context of its environ- The company has implemented cially to facility management, where ski-jumping arena. ment and to clearly visualize design ArchiFM to manage its countrywide decisions of an extremely great finan- Just fourteen months passed be- intents. facilities, totalling one million square cial impact are made.” meters. All the building-related in- “After careful market analysis, we tween the first design ideas and pro- The new stadium project was suc- formation of MOL’s 6,000 properties decided on Graphisoft ArchiFM,” says ject completion. “With such great cessfully launched and is now one of and 3,500 buildings is now organized Balázs J. Barts, FM Director, MOL. “It pressure on time,” stresses Alfred the safest and most modern winter in one comprehensive database, ac- became clear that Graphisoft provid- Sieber, Partner at Sieber + Renn, sports arenas in the world. cessible via the Company’s Intranet. ed the best development solution to meet MOL’s new FM strategy.”

2002 2003 ARCHICAD RECEIVES IFC 2X CERTIFICATION ARCHICAD 8 HONORED BY THE CADENCE MAGAZINE EDITORS’CHOICE AWARD GRAPHISOFT IS THE MAIN SPONSOR OF THE XXI WORLD CONGRESS OF ARCHITECTURE IN BERLIN AND CADALYST LABS ALL-STARS AWARD 14 16 By guaranteeing the best possible working condi- ters is in a class of its own, even standing compari- According to Graphisoft's values, the well-being of tions, we can attract, retain and develop passionate, son with the elevated standards of the high-tech our employees is not an instrument to encourage committed people to carry out our mission. At the world. The conditions provided are far beyond the their productivity, but a cause in itself. We truly heart of our commitment is the provision of a state- conventional norms. This unique attitude is one of believe that a major part of our role and responsibil- of-the-art working environment to our people. the main reasons for Graphisoft becoming a center ity is to ensure the welfare of the people who work Harmoniously located in the heart of a peaceful park of attraction for talented individuals, not only from for the company's success. on the banks of the Danube, Graphisoft headquar- Hungary, but from all around the globe.

navigate, even for those with no prior architectu- to push the frontiers of architectural expression, GRAPHISOFT® WORLDWIDE Recognizing the great importance of education, ral design experience," says UCLA Professor Graphisoft created the annual Graphisoft Prize, Graphisoft funds unique programs and scholarships of Architecture, Mark Mack. a worldwide annual competition that promotes the

Angola Israel Russia for universities, students and young architects. “We added ArchiCAD in response to requests from use of computers in 3D design. Argentina Italy Saudi Arabia Graphisoft ArchiCAD is being taught in around 1,000 students. It’s a tool suited for courses emphasizing In 1997, Graphisoft created the Math Education Foun- Australia Japan Senegal architectural faculties worldwide, including the dis- geometric modeling and multimedia at many differ- dation to bolster the strong Hungarian tradition of Austria Jordan Serbia-Montenegro tinguished Harvard Design School, Yale University's ent levels.” Comments Spiro N. Pollalis, who directs mathematics achievements, by supporting outstand- Belgium Kenya Singapore School of Architecture and Cambridge University. the Masters in Design and Doctorate of Design pro- ing teachers. Two countrywide math competitions Bolivia Korea Slovakia Botswana Kuwait Slovenia "I find ArchiCAD to be a very useful combination grams at the Harvard Graduate School of Design. are administered annually. Graphisoft awards a me- Brazil Latvia South Africa of 3D simulation and drawing tools that is easy to In an effort to challenge students and professionals dallion and cash prize to the winning teachers. Bulgaria Lebanon Spain Canada Lesotho Swaziland Chile Lithuania Sweden China Luxembourg Switzerland Colombia Malawi Syria Croatia Malaysia Taiwan Czech Republic Malta Tanzania The core concept of sustainable development is the The wide range of Graphisoft solutions allows thor- the repetition of work and thereby save valuable Denmark Mauritius Thailand simple idea of ensuring a better quality of life for ough examination and simulation of all the relevant energy resources. It should be added that Gra- Ecuador Mexico Tunisia everyone today and for generations to come. factors in a successful sustainable development phisoft Park itself was designed in full accordance Egypt Morocco Turkey Buildings and structures permanently change our process, including energy efficiency calculations. with this approach. Estonia Mozambique Uganda towns and countryside. They consume energy and The ability to generate accurate project estimates We are convinced that better designed buildings and Finland Namibia Ukraine France Netherlands United Arab Emirates resources on a scale almost immeasurably greater from a fully coordinated 3D model is a key factor in spaces, based on respect for the local environment, Germany New Zealand United Kingdom than any other industrial sector, so the benefits that reducing materials consumption and minimizing will deliver a host of social and economic benefits Greece Nigeria United States can flow from a more efficient and sustainable con- waste. At all scales — from intricate construction and encourage community spirit. Hong Kong Norway Uruguay struction industry are potentially immense. details to entire city modeling — our products avoid Hungary Peru Venezuela

Iceland Philippines Zambia HENRY DEANE PLAZA, DESIGNED BY RICE DAUBNEY, WON THE MASTER BUILDERS AUSTRALIA 2001 NATIONAL ENVIRONMENT India Poland Zimbabwe AND ENERGY EFFICIENCY AWARD FOR COMMERCIAL BUILDINGS. Indonesia Portugal Ireland Romania

18 19 Headquarters Japan United Kingdom Graphisoft R&D Rt. Graphisoft Japan Office Graphisoft UK Ltd Graphisoft Park 1 Caro Akasaka, 6-13-13 Frankland House 1031 Budapest Akasaka Frankland Road Hungary Minato-ku Blagrove Phone: +36 1 437 3000 107-0052 Swindon Fax: +36 1 437 3099 Phone: +81 3 5545 3800 SN5 8YF E-mail: [email protected] Fax: +81 3 5545 3804 United Kingdom Web: www.graphisoft.com E-mail: [email protected] Phone: +44 1793 492277 Web: www.graphisoft.co.jp Fax: +44 1793 492288 Germany E-mail: [email protected] Graphisoft Deutschland GmbH. Branch office Web: www.graphisoft.co.uk Lindwurmstrasse 129e 6F OHSACHI D-80337 Munich ShinOsaka Bldg. 5-13-17 USA Germany Nishi Nakajima Graphisoft U.S., Inc. Phone: +49 89 746 430 Yodogawaku One Gateway Center, Suite 302 Fax: +49 89 746 43299 Osaka City Newton E-mail: [email protected] Japan Massachusetts Web: www.graphisoft.de Phone: +81 6 6838 6555 02458-2802 Fax: +81 6 6838 6333 USA Branch office E-mail: [email protected] Phone: +1 617 485 4203 Entwicklungszentrum Langenfeld Fax: +1 617 485 4201 Düsseldorfer Str. 14 Spain E-mail: [email protected] D-40764 Langenfeld / Rheinland ArchiCAD Espan˜a, S.L. Web: www.graphisoftus.com Germany Avda. de Filipinas Phone: +49 2173 9029 5 1 Bis, 4a Planta Fax: +49 2173 9029 820 28003 Madrid E-mail: [email protected] Spain Phone: +34 91 535 8750 Fax: +34 91 535 8751 E-mail: [email protected] Web: www.archicad.es

Front cover: Helin & Co. Architects Team photographs: Photo Juhász Holography Image: CityScapes created by Nancy Gorglione 20

JOINT LETTER FROM THE CHAIRMAN AND FROM THE CEO

2003: RETURN TO PREDICTABILITY

2003 was the year we put predictability back into our business. We were successful in achieving our two main goals for 2003: Turning from loss to profit and from revenue decline to growth. Net profit is 2.6 million, compared with a net loss of the same amount in 2002 and a 4 million loss in 2001. We can report a 4% growth in revenue ( 1 million) following two consecutive years of revenue decline.

The first few years of the new millennium challenged not just Graphisoft, but the entire IT indust- ry. The overheated market growth of the 1990s proved to be unsustainable. Customers preferred to maximize the benefits of their existing systems, rather than investing again and again in the latest IT offerings. The Information Revolution is not over: it has only just begun. However, over the last two decades, technological innovations have occurred at such a speed that mainstream users could not reasonably be expected to keep up and adapt to all of them at such a pace. IT firms must adjust their strategies to these realities.

Graphisoft has met these challenges successfully. We have:

1 Consolidated our extended product line

2 Focused on selected markets and geographies

3 Set the stage for a new and accelerated growth strategy

PRODUCT LINE CONSOLIDATION AND SELECTIVE MARKET FOCUS

In its first 15 years of operation (1982-1997), Graphisoft focused exclusively on the architectural design market. Its flagship product, ArchiCAD®, became one of the world’s most popular archi- tectural design software. The 1998-2001 period saw a rapid extension of the product line: Graphisoft turned its focus to new markets, promoting digital integration of the design profession with other disciplines within the building industry:

1 JOINT LETTER FROM THE CHAIRMAN AND FROM THE CEO JOINT LETTER FROM THE CHAIRMAN AND FROM THE CEO

Engineering: With the acquisition of UK’s Cymap Ltd. in 1999, the Company expanded its pro- Model-based design For years, Graphisoft has been a pioneer in the area of architectural file to include building services, such as HVAC (Heating, Ventilation and Air Conditioning) and design software. While many architectural CAD products merely automated the manual process electrical design. Engineering has a strong strategic fit with our core architectural design busi- of two-dimensional architectural drafting, ArchiCAD’s Virtual Building™ concept was the leader ness, but this market has proved to be highly fragmented and country-specific. Therefore, in in three-dimensional building simulation — and has been successful for 22 years. Recently this 2002/2003 we focused our engineering development and marketing activity on the UK market concept is gaining acceptance in the AEC market under the name of "Building Information only, while in other countries we entered strategic partnerships with local vendors, rather than Modeling” (BIM). Modeling buildings, as opposed to just drawing them in 2D, is no longer a ra- creating our own global product. dical novelty: the question is no longer whether building modeling will become widely recognized, but rather when it will be adopted by the mainstream. A growing number of architects are reali- Facility Management: With the development of the ArchiFM product family and the acquisition zing that the benefits of intelligent building simulation extend far beyond the project-selling of Drawbase Software in the US, the Company entered the facility management and building advantages of 3D visualization to include increased productivity and document consistency. maintenance market (CAFM/CMMS). This market is the fastest-growing segment of the entire A/E/C market, although it too is fragmented and country-specific. Most importantly, the facility “With ArchiCAD you concentrate on design, and get the documentation free,” says David management sector is a highly service-intensive business. In 2002/2003, we focused our Sutherland of Fender Katsalidis Architects, Australia, designer of the 90-story Eureka Tower in CAFM/CMMS strategy on the US, Germany and Hungary, and complemented our information- Melbourne. In fact, ArchiCAD is the only BIM solution today that can effectively process building technology products with extensive FM consulting services. With the doubling of ArchiFM sales, information models of this size; and it is for these larger, more complex buildings that the bene- the FM business unit began contributing to the Company’s overall operating profit. fits of BIM are really momentous. The potential for Building Information Modeling to provide sig- nificant, measurable gains to this segment of the A/E/C market plays directly to ArchiCAD’s long- GDL™ technology: The underlying object technology at the heart of ArchiCAD, GDL™ established strengths and is a clear opportunity for further growth. (Geometric Description Language) is an efficient parametric tool for describing building products, such as doors, windows, furniture and other pre-manufactured fixtures. The GDL technology IFC: Parallel to the growing acceptance of 3D model-based design, there is increasing demand group has developed an extensive suite of software tools to facilitate the electronic publication for an open and vendor-independent data format to replace existing standards for 2D drafting- of intelligent building product catalogues (“iCatalogues”) and intelligent building product configu- based CAD. IAI (International Alliance for Interoperability) was formed to address this demand. rations. Following three years of maintaining GDL Technology as a separate business unit, we Its emerging standard for intelligent data exchange, IFC (Industry Foundation Classes), is gai- decided to make our GDL publication software tools freely available to our partners. Rather than ning ever-wider industry acceptance. Graphisoft will benefit from this trend: we have long been a expending resources on pursuing a direct revenue stream, we can better serve our end-users leading proponent of IAI, and we offer the most sophisticated implementation of all IFC releases. through local partners who welcome the opportunity to provide services to building manufactu- rers. This business strategy allows us to continue increasing the number of electronic product Channel confidence: Beyond these favorable market trends, restored confidence among our catalogs from building product manufacturers and thus, providing increasing value to our archi- channel partners was a strong factor in spurring worldwide gains in market share. Keeping our tectural users. partners motivated and committed during difficult times has proven to be a challenging but rewarding task. Maintaining successful win-win partnerships under difficult market conditions As a result of consolidating and focusing these business lines, we reduced operating expenses requires significant investment, but this investment pays real dividends as the market improves. by 10%, while increasing overall revenues by 4%. SETTING THE STAGE FOR A NEW GROWTH PATH TURNAROUND IN THE CORE ARCHICAD BUSINESS The Company’s new corporate governance system, implemented in 2002, has been a crucial fac- While most of our competitors report stagnating or declining revenues in the traditional architec- tor in implementing successful cost-control measures and stabilizing the company. In 2003 we tural design software market, our sales in this segment grew by 8%. This achievement is due to took the next step: having paved the way for a more aggressive growth strategy, the Board of Di- both external and internal factors, including: rectors appointed Dominic Gallello as new President and CEO. Mr. Gallello, a highly respected veteran of the design software industry, brings to Graphisoft an exceptional track record of cus- • Greater familiarity with the benefits tomer focus and the proven ability to dramatically grow revenue and market share. of model-based design • Increasing influence of IAI/IFC standards With our return to growth and profit in an industry on the verge of significant change, we have a • Renewed confidence and momentum tremendous opportunity ahead of us. Thank you for your confidence in our team at Graphisoft. among our channel partners

BUDAPEST, APRIL 01, 2004

GÁBOR BOJÁR DOMINIC GALLELLO CHAIRMAN OF THE BOARD OF DIRECTORS PRESIDENT AND CEO

2 3 MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS

In 2003, revenues grew to 27.2 million EUR, which was 1.0 million EUR or 4% higher than in GEOGRAPHICAL ANALYSIS 2002. Revenue improvement and reductions in operating expenses both accounted for the po- sitive change in earnings: operating income reached 2.8 million EUR or 10.3% of operating mar- Two-thirds of the Company’s revenues were generated in Europe in 2003. Europe also ranked gin in 2003, as compared to a 1.4 million EUR loss in the previous year. Net income improved first in revenue growth, which was 13% in 2003. Besides Italy, Switzerland and Scandinavia, even more significantly: a 2.6 million EUR net loss in 2002 turned into a 2.6 million EUR profit other countries, such as France, Belgium, Poland and Hungary also achieved substantial in 2003. improvement this year. However, revenues decreased in Germany, a key market for Graphisoft, where the launch of the new version of ArchiCAD boosted revenues in the last months of 2002 rather than in 2003. Business continues to be a challenge there, because of the downturn in the 12-month Revenue and Operating Profit Rolling Average building industry.

32 000 4000 31 000 3000 12 months ended % of 30 000 2000 GEOGRAPHICAL BREAKDOWN 12/31/03 12/31/02 03/02 29 000 1000 28 000 Revenue Europe 17,897 15,795 13.3 0 27 000 Profit North-America 4,262 5,548 (23.2) -1000

Revenues 26 000 Asia-Pacific 4,425 4,157 6.4 25 000 -2000 24 000 -3000 Rest of the World 664 711 (6.6)

23 000 -4000 Total 27,248 26,211 4.0 01 01 01 01 02 02 02 02 03 03 03 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Quarters North America, similarly to Germany, was positively affected by the ArchiCAD release cycle in 2002, which had less impact on revenues in 2003. In addition, the US faced execution issues and REVENUE ANALYSIS so its revenues dropped. A USD depreciation of nearly 20% against the EUR exaggerated the decrease, and the region showed EUR revenue declines of 23% on a year-on-year comparison. After two years of top-line decrease, the Company’s revenues grew in 2003 by 4.0% to 27.2 mil- (When measured in USD, revenues decreased by 7% in the North America region.) lion EUR. The availability of all language versions of ArchiCAD 8, and the related upgrade re- venues, greatly contributed to the annual improvement in sales. Another success factor was our In the Asia/Pacific region, revenues for 2003 rose by 6%. The strong sales performance of facility management unit, which doubled its sales in Germany and in Central Europe: from 0.6 Australia, New Zealand and Korea contributed significantly to these results. million EUR in 2002 to 1.2 million EUR in 2003. Revenues rose despite the depreciation of the USD and JPY against the Company’s reporting currency. The estimated negative impact of this Sales performance in the rest of the world, affected by the weak US Dollar, decreased in 2003. depreciation was 1.5 million EUR. The region’s contribution to Graphisoft’s total revenues is still marginal, and due to the small num- bers any trend calculation might be misleading.

4 5 MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS

PRODUCT GROUP ANALYSIS COST OF REVENUES

Two business units: the architectural design and the facility management units accounted for re- Cost of revenues consists of the cost of compact discs, software protection locks, user manuals, venue improvement, while other businesses decreased in 2003. On a year-on-year comparison, packaging materials, royalties, freight and other direct costs related to inventory management. the Company’s architectural design software-related revenues grew by 8.3% to 19.9 million EUR. Cost of sales measured in percentage of revenues dropped from 14.3% to 10.5% on an annual basis. In spite of the 4% increase in revenues, these directly sales-related expenses fell by 23.7%. The lower production costs of software packages, improved order-processing infrastruc- ture, and process reengineering played significant roles in these savings. 12 months ended % of

PRODUCT GROUP BREAKDOWN 12/31/03 12/31/02 03/02

Architectural design 19,943 18,409 8.3 OPERATING EXPENSES Facility management 3,373 3,283 2.7

Building services 466 619 (24.8) The Company reported a 9.5%, or 2.3 million EUR, decrease in operating expenses. In 2003 the management kept spending under tight scrutiny and focused on reducing and restructuring oper- GDL and custom solutions 1,365 1,407 (3.0) ating costs to make the operations more effective. Other revenues 2,101 2,493 (15.7)

Total 27,248 26,211 4.0 Sales and marketing costs comprise spending for advertising, trade shows and sales promo- tions, sales and marketing employee-related expenses, travel and facility costs. Sales and mar- keting expenses decreased by 4.8% and were 10.1 million EUR in 2003. The modest decline is The improvement is largely attributable to increased upgrade and maintenance revenues resul- attributable to more efficient utilization of related resources. Graphisoft considers sales and mar- ting from the localized versions of ArchiCAD® 8 and 8.1. In the facilities management (FM) busi- keting expenses crucial in accelerating revenue growth and supporting new investments in 2004; ness, revenues grew substantially in Europe, while they were flat in North America (in USD). therefore, the sales and marketing budgets for the next year are strongly related to the revenue Because of the weakness of the USD, when measured in EUR these revenues decreased, off- goals and investment strategies. We do not expect these expenses to decrease further. setting the improvement in Europe. On a year-on-year comparison FM revenues grew by only 2.7%. Revenues from the building services unit showed a 25% decrease in the 12-month period. While the Company could not stabilize these revenues, the profitability of the unit has been Research and development expenses consist of software engineers’ employment-related costs, restored. After the weak GDL and custom solutions sales results during the first nine months of outsourced development charges, spending for product translation and localization, and miscel- the year, the last quarter brought a 61% increase over the same period in 2002 in this business laneous costs of computer equipment and other facilities. R&D expenses dropped by 28.8% to unit. As the Company decided to make the GDL publishing technology freely available in October, 4.0 million EUR in 2003 compared to 5.7 million EUR in 2002. The decrease is attributable to the the majority of Q4 revenues derive from custom development. On a year-on-year comparison this following: unit showed a 3% decrease. Other revenues include office space rent, miscellaneous services and other sales. In 2003, rental income, similarly to 2002, was about 1.4 million EUR in the • The software development headcount fell by 13 in 2003 compared to a drop of 6 in 2002. twelve-month period. The decrease in 2003 mainly derived from the Company’s decision to stop developing its own global HVAC product.

• The new ArchiCAD version launched in the last quarter of 2002 induced a significant shift in EXPENSE ANALYSIS software development costs, therefore the basis of the comparison is partly distorted.

The substantial improvement in profitability was mainly driven by the reduction of expenses. The • Research and development expenses are mainly incurred in Hungarian Forint. Therefore, in cost savings achieved in 2003 were primarily attributable to cost-cutting measures, which includ- 2003 these expenses were favorably influenced by the depreciation of the Forint, in contrast ed a freeze on new hiring, elimination of a product development activity targeting the HVAC mar- with 2002, when the Forint strengthened against the Euro. ket, and elimination of a direct sales effort related to GDL Technology. Also, marketing expen- ses were reduced in the absence of a major release and related expenses. The strict cost control was supported by the strengthening of the Euro against the local currencies of the subsidiaries.

6 7 MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS

General and administrative expenses comprise human resources, finance, legal, auditing and The income tax provision amounted to 842 thousand EUR, compared to 131 thousand EUR in other administrative costs, including IT and other facilities. General and administrative expenses the previous year. The significant increase is attributable to the change in profit before tax: the 2 decreased by 3.5% to 5.5 million EUR in 2003. Having reviewed its activities, the Company million EUR loss in 2002 turned to 3.4 million EUR profit before tax. Additionally, the nominal assigned sales-related tasks to some of its administrative staff, which contributed to the lower income tax rate grew to 18.0% from the 7.2% applied in 2002. Graphisoft achieved 2,602 thou- general and administrative costs. sand EUR net income and 0.26 EUR earning per share in 2003, compared to the 2,569 thousand EUR net loss and 0.26 loss per share in the previous year. Depreciation and amortization expense of tangible fixed assets and intangible assets having definite useful lives was almost identical compared to their previous-year amount.

LIQUIDITY, CAPITAL EXPENDITURES AND CAPITAL RESOURCES

OPERATING INCOME The Company’s balance sheet positions for December 31, 2003 show significant improvement compared to December 31, 2002. Working capital increased by 9.2% and totaled 21.6 million The improving gross margin and the strict cost-management regime led to operating income of EUR at the end of 2003. Cash and marketable securities grew by 23% to 16.6 million EUR, rep- approximately 2.8 million EUR in 2003, representing a 10.3% operating margin. In comparison, resenting 66% of the total current assets (in 2002: 56%). Current assets of 25 million EUR the Company reported nearly 1.4 million EUR operating loss in 2002. (amounting to 60% of total assets) contribute to our strong liquidity. Accounts Receivable are down by 714 thousand EUR, DSO (Days Sales Outstanding) reached 83 at year-end compared to 96 at the end of the previous year. By efficiently managing the cred- it risk on trade receivables, the provision for doubtful accounts decreased by 21%. EBITDA, EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET INCOME Investment in tangible and intangible assets totaled 972 thousand EUR, which is slightly lower AND EARNINGS PER SHARE than in 2002.

Earnings Before Interest, Taxes, Depreciation and Amortization substantially increased com- As in previous years, Graphisoft financed its operations mainly from shareholders’ equity (91.7% pared to the previous year, reaching EUR 4.7 million (EUR 427 thousand in 2002). Graphisoft in 2003). The Company does not have any long-term liability (for lease liabilities longer than one adopted the provisions of "SFAS No. 142" as of January 1, 2002. The adoption of this standard year, see the Notes to Financial Statements — 11. Commitments). has significantly changed the method of accounting for intangible assets: the Company discon- tinued amortizing goodwill, and instead tested intangible assets that have indefinite useful lives for impairment. The resulting impairment loss in 2002, 352 thousand EUR, was recognized as the effect of change in accounting principle. The impairment test performed at the end of 2003 STAFF showed that no impairment charge was due for the year. While the Company’s total staff increased by 1 in a year-on-year comparison, the structural Interest and other income totaled 948 thousand EUR in 2003, compared to 174 thousand EUR changes were significant. The steady rise in sales and marketing headcount during 2003 reflects the year before. Graphisoft generated almost identical interest income in 2003 and 2002 (0.8 mil- Graphisoft’s increasing focus on sales activity. The decrease of the staff in software development lion EUR). While interest rates decreased, the Company’s portfolio of marketable securities grew and in general and administrative functions is related to the strict cost-management program. The steadily in 2003. The 0.6 million EUR other loss in 2002 turned to a modest, 0.2 million EUR other table below presents a staffing summary as of December 31, 2002 and 2003. income in the following year. In 2002 the Company wrote off some of its minority participations; in 2003 there were no valuation adjustments on investments. 2002 2003 Exchange rate fluctuations considerably influence the Company’s financial positions. In 2002 Sales and Marketing 93 112 Graphisoft incurred a 862 thousand EUR foreign exchange loss due to the appreciation of the Research and Development 120 107 Hungarian Forint against the Euro and the depreciation of the Japanese Yen and the U.S. Dollar General and Administrative 64 59 against the single currency. In order to neutralize the potential foreign exchange rate loss from Employees Total 277 278 the strengthening Forint, Graphisoft hedged its positions in 2003. In fact, the Forint depreciated against the Euro in 2003. As a result, the Company realized a revaluation gain on some of its Euro-denominated assets, while the loss on the hedging transactions amounted to 931 thousand EUR. The net impact was a consolidated loss of 305 thousand EUR at the end of 2003.

8 9 GRAPHISOFT N.V. AND SUBSIDIAIRES INDEPENDENT AUDITORS’REPORT INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

To the Board of Directors and Stockholders Independent Auditors’ Report...... 10 Graphisoft N.V. Consolidated Balance Sheets...... 12 Amsterdam, Netherlands Consolidated Statements of Operations...... 13 Consolidated Statements of Changes in Shareholders’ Equity...... 14 We have audited the accompanying consolidated balance sheets of Graphisoft N.V. and sub- Consolidated Statements of Cash Flows...... 15 sidiaries (the “Company”) as of December 31, 2002 and 2003, and their related statements of Notes to Consolidated Financial Statements...... 16 operations, shareholders’ equity, and cash flows for the years then ended. These financial state- ments are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain rea- sonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Graphisoft N.V. and subsidiaries as of December 31, 2002 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

February 16, 2004

10 11 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2002 AND 2003 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED 31 DECEMBER 2002 AND 2003

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

Notes 2002 2003 Notes 2002 2003

ASSETS Revenues, net 10 26,211 27,248 Current assets Cost of revenues 3,746 2,859 Cash and cash equivalents 3,546 2,820 GROSS PROFIT 22,465 24,389 Marketable securities 3 9,961 13,811 Accounts receivable, net 4 6,891 6,177 Operating expenses Inventories net 638 346 Sales and marketing expenses 10,644 10,138 Deferred tax assets 13 887 440 Research and development expenses 5,658 4,029 Other current assets 5 2,061 1,451 General and administrative expenses 5,736 5,534 Total current assets 23,984 25,045 Depreciation and amortization 1,822 1,883 Total operating expenses 23,860 21,584 Long-term assets Property, plant and equipment, net 6 16,425 13,830 OPERATING INCOME (LOSS) (1,395) 2,805 Intangible assets, net 7 2,305 2,057 Goodwill and Investments and other assets, net 8 609 526 Foreign currency transaction loss, net (862) (305) Total long-term assets 19,339 16,413 Interest and other income, net 174 948

TOTAL ASSETS 43,323 41,458 INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT LIABILITIES AND SHAREHOLDERS’EQUITY OF CHANGE IN ACCOUNTING PRINCIPLE (2,083) 3,448

Current liabilities Provision for income taxes 13 131 842 Bank overdrafts 56 - Deferred tax liabilities 13 499 267 Accounts payable and accrued expenses 9 2,994 2,494 NET INCOME (LOSS) BEFORE MINORITY Deferred income 617 649 INTEREST AND CUMULATIVE EFFECT OF CHANGE Total current liabilities 4,166 3,410 IN ACCOUNTING PRINCIPLE (2,214) 2,606

Minority interest 9 13 Minority interest (3) (4)

Shareholders’ equity Share capital, 0.05 NLG (0.023 EUR) nominal value, NET INCOME (LOSS) BEFORE CUMULATIVE 40,000,000 authorized shares, 30,000,000 common EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (2,217) 2,602 shares, 10,000,000 preference shares, 10,631,674 issued and outstanding as of 31 December 2002, Cumulative effect of change in accounting principle (352) - and 2003 243 243 Additional paid in capital 19,916 19,916 NET INCOME (LOSS) (2,569) 2,602 Treasury stock 588,910 shares at December 31, 2002 and 2003, respectively, at cost (5,498) (5,498) Basic and diluted income (loss) per share before Retained earnings 28,459 31,061 the cumulative effect of change in accounting Accumulated other comprehensive loss (3,972) (7,687) principle (EUR/share) * 2 (0.22) 0.26 Total shareholders’ equity 39,148 38,035 Cumulative effect of change in accounting TOTAL LIABILITIES AND SHAREHOLDERS’EQUITY 43,323 41,458 principle (EUR/share) (0.04) -

Basic and diluted income (loss) per share (EUR/share) 2 (0.26) 0.26

* Diluted number of shares: 10,034,463 as of December 31, 2002 and 10,138,778 as of December 31, 2003. The accompanying notes are an integral part of these consolidated balance sheets. The accompanying notes are an integral part of these consolidated balance sheets. 12 13 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEARS ENDED 31 DECEMBER 2002 AND 2003 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED IN 31 DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

2002 2003

Share Additional Treasury Retained Accumulated other Shareholders’ CASH FLOWS FROM OPERATING ACTIVITIES capital paid in capital stock earnings comprehensive loss equity Net income (loss) (2,569) 2,602 As of January 1, 2002 243 20,021 (5,631) 31,028 (5,587) 40,074 Adjustments to reconcile net income (loss) with net cash provided by operating activities: Grant of 10,000 shares Depreciation 2,229 1,883 from the treasury stock Effect of change in accounting principle 352 - portfolio - (105) 133 - - 28 Revaluation of Marketable securities (4) 20 Comprehensive Income Provision for doubtful receivables 322 314 Unrealized loss Write off of investments 700 - on available for Deferred tax provision (71) 230 sale securities - - - - 4 Non-cash compensation 50 - Translation adjustment - - - - 1,611 Changes in assets and liabilities: Net income (loss) - - - (2,569) - Accounts receivable 1,751 400 Total Other assets (1,199) 827 Comprehensive Inventories 469 292 Income (954) Proceeds from sale of marketable securities – As of 31 December 2002 243 19,916 (5,498) 28,459 (3,972) 39,148 available for sale - - Accounts payable and accrued expenses 2 (784) Comprehensive Income Deferred income (138) 32 Unrealized gain Effect of exchange rate changes 878 (2,053) on available for Cash provided by operating activities 2,772 3,763 sale securities - - - - 24 Translation CASH FLOWS FROM INVESTING ACTIVITIES adjustment - - - - (3,739) Net income (loss) - - - 2,602 - Purchase of intangible assets (52) (293) Total Purchase in marketable securities – comprehensive available for sale and held to maturity, net (1,603) (3,874) Income (1,113) Purchases of Property, Plant and Equipment (1,069) (679) As of December 31, 2003 243 19,916 (5,498) 31,061 (7,687) 38,035 Purchases of long-term investments (457) 83 Proceeds from disposals of property, plant and equipment 481 274 Net cash used in investing activities (2,700) (4,489)

Net increase (decrease) in cash and cash equivalents 72 (726)

Cash and cash equivalents at the beginning of the year 3,474 3,546

Cash and cash equivalents at the end of the year 3,546 2,820

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest - 8 Cash paid for income taxes 811 465

The accompanying notes are an integral part of these consolidated statements of changes in shareholders’ equity. The accompanying notes are an integral part of these consolidated statements of cash flows. 14 15 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

1. BUSINESS AND BASIS OF PRESENTATION 2. ACCOUNTING POLICIES

Business — Graphisoft N.V. was incorporated in 1996 under the laws of the Netherlands. Significant accounting policies used in the preparation of the accompanying consolidated finan- Graphisoft N.V. and its subsidiaries (the “Company or the “Group”) operations primarily consist cial statements are as follows: of development and distribution of computer aided design (“CAD”) and facility management (“CAFM”) software products. BASIS OF CONSOLIDATION Subsidiaries, defined as enterprises under the control (ownership in excess of 50%) of the Group, The main operating company of the Group is Graphisoft R&D Rt., a company limited by shares have been consolidated in the financial statements. As of 31 December 2002 and 2003, the entire incorporated on 1 November 1993 in Hungary. Subsidiaries outside of Hungary operate mainly Group was controlled by Graphisoft N.V., and, accordingly, financial statements for the periods as sales and marketing branches. ended 31 December 2002 and 2003 include the accounts of Graphisoft N.V. and its subsidiaries. All significant inter-company balances and transactions have been eliminated. In June 1998 Graphisoft N.V. obtained a public listing at the Frankfurt Stock Exchange, Neuer Market. In May 2000 the Group also listed its shares on the Budapest Stock Exchange. CURRENCY TRANSLATION Graphisoft N.V. shares were delisted from the Frankfurt Stock Exchange on September 5, 2003, The functional currency of each of the Group’s operating entities is the local currency of the juris- after the close of the daily trading. Currently the shares of the Company are traded at the diction in which the entity operates. The consolidated financial statements of the Group are pre- Budapest Stock Exchange only. pared using Euro (“EUR”) as the reporting currency. Operating entities’ financial statements are translated into EUR in accordance with the provisions of Statement of Financial Accounting Basis of presentation - The accompanying consolidated financial statements of the Group have Standards (“SFAS”) No. 52 Foreign Currency Translation. According to the provisions of SFAS been prepared in accordance with accounting principles generally accepted in the United States No. 52, the statements of operations are translated using the average exchange rate in the rele- of America. Such consolidated financial statements for the periods ended 31 December 2002 and vant period. Balance sheet items, other than equity, are translated using the exchange rates as 2003 consist of the accounts of Graphisoft N.V. consolidated with the following subsidiaries: of the balance sheet date. Equity accounts are translated at historic rates. Effects of the foreign currency translation are included as a component of shareholders’ equity.

% held as of 31 December SIGNIFICANT ESTIMATES SUBSIDIARY 2002 2003 The preparation of financial statements in conformity with generally accepted accounting princip- Graphisoft R&D Számítástechnikai Fejlesztô Rt 90%* 90%* les in the United States of America requires management to make estimates and assumptions Graphisoft Deutschland GmbH 100% 100% that affect the reported amounts of assets and liabilities at each reporting date and the amount Graphisoft USA Inc. 100% 100% of revenue and expense reported each period. These estimates include provisions for bad debts, Graphisoft Japan KK 100% 100% estimate useful lives of property, equipment and intangible assets, certain accrued liabilities, ArchiCad España SL. 100% 100% recognition of revenue and expenses, and recoverability of deferred tax assets. Actual results Graphisoft UK Ltd. 100% 100% could differ from these estimates. Graphisoft CAD Stúdió Kft. 92% 92% Graphisoft Brasil Ltda 90% - CASH AND CASH EQUIVALENTS CYMAP Ltd.** 95% - The Group considers all highly liquid debt instruments purchased with maturity of three months CAD Works Inc. (Drawbase) 100% 100% or less to be cash equivalents. As of 31 December 2002 and 2003 cash and cash equivalents GDL Technologies 100% 100% consisted of time deposits and cash.

* 10% shares in GSR represent employee preference shares as of 31 December 2002 and 2003. MARKETABLE SECURITIES ** CYMAP Ltd. merged into Graphisoft UK on January 1, 2003. Management determines the appropriate classification of marketable securities at the time of pur- chase and re-evaluates such designation as of each balance sheet date. Held to maturity secu- rities are carried at amortized cost, which approximates fair value. Available-for-sale and trading As part of its corporate restructuring program, Graphisoft sold its Brazilian subsidiary, Graphisoft securities are stated at fair market value as determined by the most recently traded price of each do Brasil Ltda, during 2003. security at the balance sheet date. The net unrealized gains or losses on available-for-sale secu- rities are reported as a component of comprehensive income (loss). Unrealized gains or losses The Company expects to merge the GDL Technologies’ operations into Graphisoft R&D Rt. in of trading securities were recognized in income. 2004, when the dissolution of GDL Technologies is completed.

16 17 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

FAIR VALUE OF FINANCIAL INSTRUMENTS GOODWILL, OTHER INTANGIBLE ASSETS AND LONG-LIVED ASSETS The Company believes the fair value of its financial instruments approximates the carrying value. Long-lived assets primarily include property and equipment and intangible assets with finite lives (purchased software, capitalized software and customer lists). In accordance with SFAS No. 144, CREDIT RISK “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company periodically The Group’s financial instruments that are exposed to credit risk consist primarily of marketable reviews long-lived assets for impairment whenever events or changes in business circumstances securities and accounts receivable. The Company’s accounts receivable include balances due indicate that the carrying amount of the assets may not be fully recoverable or that the useful from a number of geographically dispersed customers and who are generally granted credit with- lives of those assets are no longer appropriate. Each impairment test is based on a comparison out collateral. The Company periodically performs credit evaluations of its customers and main- of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the tains reserves for potential losses. Management believes that the amounts provided for doubtful asset is written down to its estimated fair value based on a discounted cash flow analysis. 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 REVENUE RECOGNITION potential credit risk exposure on marketable securities. Revenues are comprised primarily of the value of software packages, upgrades and enhance- ments, excluding sales taxes and trade discounts. The Company’s software licenses generally INVENTORIES have provided for an upfront license fee and prior to 2002 did not include post contract support. Purchased materials are recorded at cost. Inventories are stated at the lower of first-in-first-out (FIFO) cost or net realizable value. Inventories as of 31 December 2002 and 2003 consisted of The Group accounts for software license and maintenance revenues in accordance with the packaging materials and consumables used for software packages, as well as purchased third American Institute of Certified Public Accountants Statement of Position (SOP 97-2). “Software party software and marketing materials. Revenue Recognition” and SOP 98-9 “Modification to SOP 97-2 With Respect to Certain Transactions”. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at original cost less accumulated depreciation. Accordingly, revenue from software license sales, upgrades and enhancements are recognized Depreciation is provided on all Property, plant and equipment (except land), using the straight- when a persuasive evidence of an arrangement exists, delivery has been made, a fixed fee and line method at rates calculated to write off the cost of the assets over their expected economic collectibility of the fee has been determined; to the extent that obligations exist for other servi- useful life as follows: ces, the Company allocates revenue between license, upgrade or enhancement and the services based upon their relative fair value. Revenues from customer maintenance support agreements is deferred and recognized ratably over the term of the agreements. Buildings 50 years In instances where significant customizations are required, the Group applies contract account- Rental building and related Leasehold improvements 10 years ing using the percentage of completion method to recognize revenues in accordance with the provisions of SOP 97-2 Equipment 3-7 years RENTAL REVENUE Vehicles 5 years Graphisoft's Headquarters are located in a campus nearby river Danube, in Budapest. The site is designed to be the home of information technology companies. The Park is owned and main- tained by Graphisoft , but only approximately 40% of the office space is used by Company, the COMPUTER SOFTWARE DEVELOPMENT COSTS rest being leased out to other high tech enterprises. Management believes the unique environ- In accordance with Statement of Financial Accounting Standards No. 86, “Accounting for the ment and the vicinity of similar profile firms increases the attraction of Graphisoft and contributes Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”, the Group expenses to its ability to hire qualified workforce. software development costs as incurred and capitalizes them when initial technological feasibili- ty has been established until the product is available for general release to customers. Costs The rental income was 1,406 and 1,350 thousand EUR in 2002 and 2003, respectively, repre- incurred after the technological feasibility of the product has been established but before the ge- senting 5.36% and 4.95% of revenues in these years. neral release of the software to the public are capitalized and amortized over the useful life of the product. Cost incurred during the completion of the preliminary design and conception phase and ADVERTISING COSTS prior to the technical and economic feasibility of the product being established and after the gen- Advertising costs are expensed as incurred. For the years ended 31 December 2002 and 2003, eral release of the product are classified as research and development costs. These costs are the Group incurred costs of 2,741 and 1,870 thousand EUR respectively. expensed as incurred.

18 19 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

STOCK-BASED COMPENSATION The Company uses derivative instruments to manage exposures to fluctuations in the value of Compensation costs associated with the grant of options and other stock awards to employees foreign currencies. Certain forecasted transactions and assets are exposed to foreign currency is determined using the intrinsic value method under Accounting Principles Board Opinion No.25 risk. The Company’s objective for holding derivatives is to eliminate or reduce the impact of these Accounting for Stock issued to employees. Compensation cost associated with the grant of exposures. The Company periodically monitors its foreign currency exposures to enhance the options and other stock awards to non-employees is determined using the fair value method. overall effectiveness of its foreign currency hedge positions. The principal currency hedged is the Euro. Forward contracts used to hedge a portion of forecasted international revenue for up to one INCOME TAXES year in the future are designated as cash flow hedging instruments. Unrealized market value The Company records deferred tax assets and liabilities for the expected future tax conse- gains on such contracts were immaterial at December 31, 2003. There were no outstanding fo- quences of temporary differences between the financial reporting and tax bases of existing reign exchange option contracts at December 31, 2002 and 2003. assets and liabilities. Deferred income tax assets are principally the result of net operating loss carryforwards, differences in deprecation and amortization and accrued expenses and deferred The table below details outstanding forward contracts at December 31, 2003 where the notional income and reserves for financial statement purposes and income tax purposes, and are recog- amount is determined using contract exchange rates: nized to the extent realization of such benefits is more likely than not.

EARNINGS PER SHARE (In thousands) Basic earnings per share exclude any dilutive effects of options, warrants and convertible secu- Exchange Exchange Notional rities. Basic net income per share is determined by dividing net income (loss) by the weighted Foreign Currency Hungarian Forint Weighted average number of common shares outstanding during each period. Diluted net income (loss) For Hungarian Forint For Foreign Average per share reflects the potential dilution that could occur if securities or other contracts to issue Currency common stock were exercised. Functional Currency: (Notional Amount) (Notional Amount) Exchange Rate*

The following table sets forth the computation of shares used in the calculation of earnings (loss) Euro 10,000 - 284.74 per share at December 31:

2002 2003 * expressed as local currency unit per Hungarian Forint Shares for the basic computation 10,034,463 10,042,764

Stock options (treasury stock method) - 96,014 COMPREHENSIVE INCOME The components of comprehensive income include foreign currency translation adjustments, Shares for diluted computation 10,034,463 10,138,778 unrealized gains and losses on investments. The foreign currency translation impact was 3,739 thousand EUR loss at December 31, 2003 and 1,611 thousand EUR income at December 31, 2002, respectively. Accumulated unrealized gains on short-term investments were 24 thousand EUR and 4 thousand EUR at December 31, 2003 and 2002, respectively. The impact of stock options calculated using the treasury stock method, were excluded from the diluted computation in 2002 as they were anti-dilutive.

DERIVATIVE INSTRUMENTS All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized immediately in earnings.

20 21 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

CHANGES IN ACCOUNTING PRINCIPLES New Accounting Pronouncements In July 2001, the FASB issued Financial Accounting Standards No.141 (“SFAS 141”), “Business In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Combinations.” SFAS 141 requires the purchase method of accounting for business combina- Entities, an Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial tions initiated after June 30, 2001 and eliminates the pooling-of-interests method. The Company Statements” (FIN 46). FIN 46 establishes accounting guidance for consolidation of variable inte- does not believe that the adoption of SFAS 141 will have a significant impact on its consolidated rest entities that function to support the activities of the primary beneficiary. FIN 46 applies to any financial statements. business enterprise, both public and private, that has a controlling interest, contractual relation- ship or other business relationship with a variable interest entity. The Company does not have Also in July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS any investments in or contractual relationships or other business relationships with any variable 142”), “Goodwill and Other Intangible Assets,” which is effective January 1, 2002. SFAS 142 interest entity and therefore the adoption did not have any impact on the Company’s consolidat- requires, among other things, the discontinuance of goodwill amortization. ed financial position or results of operations.

The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” and completed In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative the transitional intangible asset impairment test as of January 1, 2002, the date of adoption of Instruments and Hedging Activities” (SFAS 149). This statement is intended to result in more con- SFAS No. 142. Goodwill and intangible assets are included in the Company’s building manage- sistent reporting of contracts as either freestanding derivative instruments subject to SFAS No. ment and building services segments, two reporting units (FM and HVAC). The intangible asset 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133), in its entirety, or impairment test compared the carrying amount of the Reporting Units to the estimated fair value as hybrid instruments with debt host contracts and embedded derivative features. In addition, of the Reporting Units. Estimated fair value of the Reporting Units was determined based upon SFAS 149 clarifies the definition of a derivative by providing guidance on the meaning of initial the net present value of undiscounted cash flows from these Reporting Units. As of the January 1, net investments related to derivatives. SFAS 149 is effective for contracts entered into or modi- 2002 transitional intangible asset impairment test, the fair value of the Company’s FM Reporting fied after June 30, 2003. Adoption of SFAS 149 did not have a material effect on the Company’s Unit was greater than the carrying amount of the Reporting Unit. The same test on the consolidated financial position, results of operations or cash flows. Company’s HVAC Reporting Unit found that the carrying amount of this Unit was higher by 352 thousand EUR than the fair value of the HVAC Reporting Unit. Therefore, the transitional intan- In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with gible asset impairment test performed as of January 1, 2002 resulted in a 352 impairment of the Characteristics of Both Liabilities and Equity” (SFAS 150). SFAS 150 establishes standards for Company’s goodwill. classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 represents a signifi- The Company performs the required annual intangible asset impairment test as of December 1, cant change in practice in the accounting for a number of financial instruments, including every year, unless required to perform an interim impairment test due to events or circumstances mandatory redeemable equity instruments and certain equity derivatives that frequently are that would more likely than not reduce the fair value of the Reporting Unit below its carrying used in connection with share repurchase programs. The Company does not use such instru- amount. ments in its share repurchase program. SFAS 150 is effective for all financial instruments creat- ed or modified after May 31, 2003. Adoption of SFAS 150 did not have a material effect on the The impairment test performed respectively as at December 31, 2002 and 2003 did not result in Company’s consolidated financial position, results of operations or cash flows. impairment charges to be recognized in 2002 or 2003.

22 23 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

3. MARKETABLE SECURITIES 5. OTHER CURRENT ASSETS

Marketable securities as of 31 December were as follows: Other current assets as of 31 December were as follows:

2002 2003 2002 2003 Taxes receivable 1,218 577 German bank and corporate bonds – available for sale 4,631 4,394 Accrued interest income 339 346 German government bonds and Hungarian Treasury Bills – Advances given to vendors and employees 14 6 held to maturity 4,618 9,417 Prepaid expenses 83 17 German Corporate bonds – held to maturity 712 - Other 407 505 Total other current assets 2,061 1,451 Total marketable securities 9,961 13,811

6. PROPERTY, PLANT AND EQUIPMENT, NET In accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and based on the Company’s The changes in the book value of property, plant and equipment during twelve months ended intentions regarding these instruments, available for sale securities are carried at fair value with December 2002 and 2003 were as follows: unrealized gains and losses, if any, reported as a component of other comprehensive income. Held to maturity securities are recorded at cost. The unrealized gain on available for sale secu- Land and Construction rities was 4 thousand Euros and 24 thousand Euros as of 31 December 2002 and 2003, res- building Equipment Vehicles in progress Total pectively. The face value of bonds and T-bills held to maturity is 9,850 thousand Euros, the related accumulated interest being 242 thousand Euros as of December 31 2003 and their matu- GROSS BOOK VALUE rity dates are between January 2004 and March 2005. Balance as of 1 January 2002 15,502 4,253 1,318 316 21,389 Additions - 498 351 220 1,069 Disposals - (209) (406) - (615) 4. ACCOUNTS RECEIVABLE, NET Translation difference 764 62 61 22 909 Balance as of Accounts receivable, net as of 31 December were as follows: 31 December 2002 16,266 4,604 1,324 558 22,752

2002 2003 ACCUMULATED DEPRECIATION

Accounts receivable 8,420 7,392 Balance as of 1 January 2002 1,298 2,986 615 - 4,899 Additions 709 649 239 - 1,597 Less: provision for doubtful accounts (1,529) (1,215) Disposals - (135) (227) - (362) Translation adjustment 87 77 29 - 193 Accounts receivable, net 6,891 6,177 Balance as of 31 December 2002 2,094 3,577 656 - 6,327 Net book value as of 1 January 2002 14,204 1,267 703 316 16,490 Net book value as of 31 December 2002 14,172 1,027 668 558 16,425

24 25 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

Land and Construction building Machinery Vehicles in progress Total 8. INVESTMENTS AND OTHER ASSETS GROSS BOOK VALUE 2002 2003 Balance as of 1 January 2003 16,266 4,604 1,324 558 22,752 Additions 124 433 218 72 847 Investments 609 587 Disposals - (376) (200) (221) (797) Valuation reserve - (61) Translation difference (1,650) (448) (137) (58) (2,293) Balance as of Total investments, net 609 526 31 December 2003 14,740 4,213 1,205 351 20,509

ACCUMULATED DEPRECIATION Following is a summary of the Group’s minority interest investments, which are recorded at cost, and other assets at December 31: Balance as of 1 January 2003 2,094 3,577 656 - 6,327 Additions 682 544 206 - 1,432 ExpressionTools Inc.- On 27 March 2000 Graphisoft acquired a minority participation in the Disposals - (333) (98) - (431) Japan-based ExpressionTools Inc., developer of Shade, a general-purpose 3D modeling soft- Translation adjustment (238) (340) (71) - (649) ware. ExpressionTools Inc. had to postpone its IPO at the Tokyo Stock Exchange, as a conse- Balance as of quence of weak investor demand for shares of information technology companies. Difficulties in 31 December 2003 2,538 3,448 693 - 6,679 obtaining long term financing have had the company petition for bankruptcy protection on January 20, 2003. Management believes that as of December 31, 2002 and 2003 the invest- Net book value as of ment was worthless, and this is other than temporary decline in value, accordingly the Company 1 January 2003 14,172 1,027 668 558 16,425 has written-off investment during the fourth quarter of 2002. The net book value of the invest- ment was 573 thousand EUR as of December 31, 2001. The charge for 2002, due to the impact Net book value as of of exchange rate fluctuations was 600 thousand EUR, being recognized in “Interest and other 31 December 2003 12,202 765 512 351 13,830 income, net” in the accompanying statement of operations.

Objects Online Inc.- On 8 August 2000 Graphisoft invested in the US-based Objects Online Inc., acquiring minority share participation. Objects Online is the premier e-commerce site offering 7. INTANGIBLE ASSETS, NET intelligent 3D objects on demand for users of ArchiCAD and other CAD applications. Through continuously increasing the product families offered, the site has become the leading source of Intangible assets as of 31 December were as follows: custom objects for the ArchiCAD user community. Because of the continuing uncertainties of the AEC CAD market, management determined that there was an other than temporary decline in 2002 2003 the value of Company’s investment in Objects Online. The net book value of the investment was Goodwill 3,994 4,142 141 thousand EUR as of December 31, 2001. As of December 31, 2002 the estimated fair value Capitalized software development costs 430 - of this minority stake was 41 thousand EUR accordingly, the Company has recorded a 100 thou- Other intangible assets 851 1,186 sand EUR loss in the 2002 statement of operations, in “interest and other income, net”. As of Total intangible assets 5,275 5,328 December 31, 2003 the net book value remains unchanged at 41 thousand EUR.

Less: accumulated amortization (2,618) (3,271) American Resellers - In March 2001 the Company invested 300,000 USD in three of its American Less: impairment (352) - resellers, for a 5 percent equity interest in each of the Companies. In 2001, Management deter- mined that these investments had been permanently impaired and recorded 270 thousand USD Total intangible assets, net 2,305 2,057 write down of the investments. The net carrying value of these investments was, due to exchange rate fluctuations, 29 and 24 thousand EUR as of 31 December 2002 and 2003, respectively.

Translation difference of gross book value of intangible assets as of 31 December 2002 and 2003 was 52 and (96) thousand EUR, respectively. Translation difference of accumulated amortization of intangible assets as of 31 December 2002 and 2003 was 33 and (84) thousand EUR, respectively.

26 27 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

Employee Notes Receivable - The Group provided secured loans to two of its employees in 10. SEGMENT INFORMATION Japan during fiscal 2001. The duration of the loans are 5 and 15 years, and as of 31 December 2002 and 2003 the net carrying amount of the loan was 89 and 72 thousand EUR, respectively. Graphisoft’s revenues by geographical region for the years ended 31 December were as follows: The loans bear interest at 1% and 4.25%, respectively. The loans are repayable immediately upon the termination of employment. 2002 2003 Change % Distributor Note Receivable– Graphisoft provided a 500 thousand EUR long-term loan to one of TEUR % TEUR % 03/02 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. On 31 December 2002 the outstanding amount was Europe 15,795 60.2 17,897 65.7 13.3 450 thousand EUR. The installment payable in September, 2003 was 100 thousand EUR. Due North-America 5,548 21.2 4,262 15.6 -23.2 to a corporate restructuring at the Distributor, its financing facilities changed this summer, and the Asia-Pacific 4,157 15.9 4,425 16.2 6.4 debtor was unable to make the principal payment in September, and paid the interest only. Rest of the World 711 2.7 664 2.5 -6.6 Graphisoft and the Distributor agreed to reschedule the loan. According to this amendment, the 2003 installment is due in September, 2007. Valuation reserve is management’s best estimate for Total revenues 26,211 100.0 27,248 100.0 4.0 the impairment of this portfolio.

The rental income realized on the office space rented out in Graphisoft Park was approximately 1.4 million EUR in the fiscal years ended December 31, 2002 and 2003. The Company has ca- 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES pitalized approximately 8 million EUR in Rental Building and Leasehold improvements. In 2002 and 2003, costs related to rental operations were approximately 710 and 790 thousand EUR, Accounts payable and accrued expenses as of 31 December were as follows: respectively. This included 590 and 682 thousand EUR of depreciation and amortization expense for these years, respectively.

2002 2003

Accounts payable 808 504 11. COMMITMENTS AND CONTINGENCIES

Taxes payable 732 483 (A)LITIGATION

Payroll and related 607 815 Lease termination Following the move of Graphisoft's U.S. headquarters from San Francisco to Boston, Professional fees payable 28 74 Massachusetts, Graphisoft U.S. Inc. made an agreement with the landlord about the termination of its office lease in San Francisco. Subsequently, a legal dispute arose between the parties Other 737 545 about the interpretation of the termination conditions, and the landlord initiated legal procedures against Graphisoft. Liabilities to employees 82 73 The legal dispute concluded with a settlement in February 2003. According to the settlement agreement Graphisoft paid 170 thousand USD to satisfy all of the plaintiff’s demands. Total accounts payable and accrued expenses 2,994 2,494 Authors’ rights infringement In Graphisoft's judgment its authors' rights were infringed, therefore in 2000 Graphisoft initiated legal proceedings before the court of competent jurisdiction for the declaration that the infringe- ment of right had occurred. On the trial of this lawsuit on December 7, 2001, defendant entered a cross-action against Graphisoft in which it charges Graphisoft with unfair market attitude, demanding damages which amounts to 605 M HUF, as well as injunction of Graphisoft from the distribution of its the flagship product, ArchiCAD and some of its other (already not distributed)

28 29 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

products in countries outside the territory of the former COMECON countries. According to the 12. OPTION AND SHARE PLANS standpoint of Graphisoft the cross-action has no merit and the management doesn't expect that the outcome of the legal proceedings might affect adversely its future course of business. GRAPHISOFT N.V. STOCK OPTION PLANS

In January 2003 Graphisoft and CadLine reported to the court their mutual agreement about the The Group adopted an Incentive and Non-statutory Stock Option Plan in November 1996, which conclusion of the litigation between the two companies. Graphisoft and CadLine agreed, that was restated on 28 July 1999. An aggregate of 1,500,000 Company Common Shares is reserved none of the parties has any claim in connection with the authorship, development and distribu- for issuance under this plan. The Annual General Meeting on April 26, 2002 approved another tion of the other party's software. 500,000 options available for grant. Management, including management of the Group’s sub- sidiaries, were granted share options, which provide a right to purchase common shares at or The Company is not party to other pending litigation or unasserted Claims. above the fair market price at the time of the grant. Graphisoft charged 22 thousand EUR option related compensation expense during fiscal 2002. In 2003 the deferred option related compen- (B)TAX AUDIT sation expense was 94 thousand EUR, which will be expensed in 2005 and beyond. The vesting period of option grants is 4 or 5 years, except for those options granted to distributors where it Hungarian Tax Authority conducted an audit covering the fiscal years from 1996 through 1999 is 10 years, if the optionee is still a service provider. for Graphisoft R&D Rt., the Groups largest subsidiary. The audit started in June 2001, and a final resolution was passed in December, 2003. The audit of year 1996 has been concluded with an The Company uses the intrinsic value method to measure compensation expense associated aggregate amount of 9 thousand Euro penalty and tax-shortfall. For the other three audited with grants of stock options to employees. Had compensation expense for options granted to years, the tax-shortfall and penalties totaled 74 thousand EUR. employees under these schemes been determined based on fair value at the grant dates in accordance with SFAS 123, the Company’s charge for the year ending 31 December 2002 and (C)OPERATING LEASES 2003 would have increased by EUR 842,078 and EUR 298,400, respectively. Net income/(loss) and earnings/(loss) per share would have been reduced to the pro-forma amounts shown below: 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: Years ended 31 December 2002 31 December 2003 Net income (loss) (in thousand EUR) For the years ending December 31 2003 As reported (2,569) 2,602 Pro forma (3,443) 2,304 2004 572 Earnings (losses) per share per (in EUR) As reported (0.26) 0.26 2005 566 Pro forma (0.34) 0.23

2006 569

2007 504 The fair value of options on their grant date was measured using the Black-Scholes option-pric- ing model. Key assumptions used to apply this pricing are as follows: Thereafter 375

Years ended Total 2,586 31 December 2002 31 December 2003 Risk free interest rate 3.75% 3.75%-2.0% Expected life of option grants 3.0 years 3.0 years Expected volatility on underlying stock 53% - 58% 39% - 36% Total operating leases expenses for year ended December 31, 2003 amount to 663 thousand Expected dividend payment rate - - EUR.

30 31 GRAPHISOFT N.V. AND SUBSIDIAIRES GRAPHISOFT N.V. AND SUBSIDIAIRES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003

(All amounts in thousands of Eur except share data) (All amounts in thousands of Eur except share data)

It should be noted that the option-pricing model used was designed to value readily tradeable GRAPHISOFT R&D PREFERRED SHARE PLAN 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 GSR, the Company's primary Hungarian operating subsidiary has sold, and intends to continue used to value the options ad the model applied yield a reasonable estimate of the fair value of to sell, Employee Preferred Shares in GSR to certain employees of such entity. The Preferred the grants made under the circumstances. Shares are subject to repurchase, at the original sale price, by GSR in the event that the hold- er's employment is terminated for any reason and may not be transferred by an employee to any In 2002 and 2003 there were no grants to non-employees. The Company gifted 10,000 shares person other than another employee. GSR pays certain royalties on the Preferred Shares. As the out of its treasury share portfolio to a member of the Board of Directors on October 30, 2002. The Preferred Shares are intended to serve primarily as performance-based compensation and do related non-cash compensation expense was 28 thousand EUR. Graphisoft granted 100,000 not represent a true equity interest in GSR, the dividends are accounted for as compensation options to an employee at a strike price of EUR 4.04 on December 30, 2003. The market price expense in the period in which such compensation is earned. Shares are sold at 70% of the no- at the date of grant was EUR 4.98. The related compensation expense was 94 thousand EUR, minal value. Shares became voting during 1999. which the Company deferred and will expense accordingly to the vesting schedule from 2005 and beyond. As of 31 December 2002 and 2003 the granted number of shares was 1,930 in a nominal value of 19,3 million HUF (approximately 73 thousand EUR). The Company declared 607.95 million The option activity during the years ending 31 December 2002 and 2003 is summarized in the HUF (approximately 2,501 thousand EUR), and 569.35 million HUF (approximately 2,245 thou- following table: sand EUR) in dividends, which were eventually paid and recorded as compensation expense in 2002 and 2003, respectively.

Outstanding

Options Weighted 13. INCOME TAXES available average for grant Options exercise price TAXATION IN THE NETHERLANDS

As a general rule, companies incorporated in the Netherlands are taxed on worldwide taxable Balance as of 31 December 2001 691,638 659,715 EUR 9.14 income. However, if a participation exemption applies, no income originated outside of the Netherlands is subject to the Dutch corporate income tax. As of balance sheet date all sub- Increase in options available for Grant 500,000 - - sidiaries of the Group qualify for the participation exemption. Options granted (842,450) 842,450 EUR 5.00 Options cancelled 50,650 (50,650) EUR 7.71 HUNGARIAN TAX HOLIDAY Options exercised - - - Options renounced 126,000 (126,000) EUR 13.78 Graphisoft R&D Rt met the requirements of the relevant part of the Corporate Income Tax Law LXXXVI/1991 (Chapter III, par. 12. (1). b), therefore in Hungary it receives a 100% tax holiday Balance as of 31 December 2002 525,838 1,325,515 EUR 6.12 from 1993 until 1997 and a 60% tax holiday from 1998 until 2002. From 2003 Graphisoft R&D Rt is subject to the standard Hungarian corporate income tax, which is currently 18%. The tax rate Options granted (1,003,200) 1,003,200 EUR 3.41 changes to 16% effective January 1, 2004. Options cancelled 551,936 (551,936) EUR 4.78 Options exercised - - - Effective 1 January 1997 a 20% withholding tax on dividends distributed outside of Hungary was introduced. The tax holiday is not applicable to the 20% withholding tax; however, the 20% with- Balance as of 31 December 2003 74,574 1,776,779 EUR 5.00 holding tax is subject to limitations contained in double tax treaties concluded between Hungary and the country in which the recipient shareholder is resident. In case of dividends paid from Hungary to the Netherlands the applicable withholding tax rate is 5%.

The weighted average grant date fair value of options granted in 2002 and 2003 were 1.48 Euro per share and 1.09 Euro per share in 2002 and 2003, respectively.

32 33 GRAPHISOFT N.V. AND SUBSIDIAIRES BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED IN 31DECEMBER 2002 AND 2003 EXECUTIVE COMMITTEE, SHAREHOLDERS' STRUCTURE (All amounts in thousands of Eur except share data)

Board of Directors Gábor Bojár Chairman of Graphisoft N.V.

Laurence Orbach, Ph.D. INCOME TAX PROVISION Chairman and Chief Executive Officer of Quarto Group, London

The income tax (benefit) provision for the years ended December 31 consisted of the following: Esther Dyson Chairman of Edventure Holdings Inc., New York

Years ended Victor Leventhal 2002 2003 Groupe Executive of Dassault Systemes and SolidWorks Board Member Currently Payable : 202 657 Deferred : (71) 185 Kazumichi Shimamoto 131 842 Chief Executive Officer of ExecNet, Tokyo

Income taxes payable principally represent taxes payable on the operating profits of Graphisoft R&D. Differences between the statutory rate and the effective rate for Graphisoft R&D are Chief Executive Officer Ray Small (till September 15, 2003) insignificant. The Group’s other operating subsidiaries generally have incurred cumulative loss- es and therefore do not have significant income tax liabilities as of December 31, 2002 and 2003. Dominic Gallello (from September 16, 2003)

DEFERRED TAX ASSETS AND LIABILITIES Executive Committee Sándor Bihari The current effect of temporary differences that give rise to significant portions of deferred tax Chief Financial Officer assets and liabilities as of December 31, were as follows : Péter Hornung Chief Administrative Officer Years ended 2002 2003 Johannes Reischböck Assets General Manager of Graphisoft Deutschland Gmbh Allowance for bad debts 140 93 Valuation of Receivables 86 - Valuation of Securities and Cash 54 - Management Team Eszter Czéh Valuation of Payables 27 100 Human Resources Director Software development capitalization 580 247 Total deferred tax assets 887 440 Gábor Dióssy Director of ArchiFM unit Liabilities Valuation of Receivables - (52) Tamás Hajas Valuation of Securities (148) (22) Chief Technology Officer Software amortization expense (348) - Deferred income (3) (193) Bence Kovács Total deferred tax liabilities (499) (267) VP of ArchiCAD product management

Mark Sawyer Deferred tax assets principally related to unrealized foreign exchange losses and capitalized soft- VP of Worldwide Field Operations ware development costs both of which are not currently deductible under the Hungarian tax law, but had been deducted for book purposes. The decrease in deferred tax assets and liabilities Viktor Várkonyi reflects the change in effective income tax rate from 18% to 16% in December 2003, effective VP of ArchiCAD product development January 1, 2004.

34 35 BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER, EXECUTIVE COMMITTEE, SHAREHOLDERS' STRUCTURE

SHARE OPTIONS OF MEMBERS OF THE BOARD OF DIRECTORS, EXECUTIVE COMMITTEE AND CHIEF EXECUTIVE OFFICER December 31, 2003 December 31, 2002 Board of Directors Gábor Bojár 10,000 10,000 Laurence Orbach 10,000 10,000 Esther Dyson* 10,000 20,000 Victor Leventhal 10,000 10,000 Kazumichi Shimamoto 10,000 10,000

Chief Executive Officer Ray Small** 0 300,000 Dominic Gallello 500,000 0

Executive Committee Sándor Bihari 46,000 46,000 Péter Hornung 15,000 15,000 Johannes Reischböck 113,741 113,741

* 10,000 options were renounced ** 300,000 options were cancelled

SHAREHOLDERS’ STRUCTURE

December 31, 2003 December 31, 2002 % of ownership Number of shares % of ownership Number of shares Board of Directors Gábor Bojár 25.0 2.658,004 25.0 2,658,004 Laurence Orbach 0.08 8,250 0.08 8,250 Esther Dyson 0.0 - 0.0 - Victor Leventhal 0.09 10,000 0.09 10,000 Kazumichi Shimamoto 0.0 - 0.0 -

Chief Executive Officer Dominic Gallello 0.47 50,000 0.0 -

Executive Committee Péter Hornung 4.85 515,426 4.85 515,426 Johannes Reischböck 0.75 80,000 0.75 80,000 Sándor Bihari 0.0 - 0.0 -

Other managers 24.39 2,593,213 25.33 2,693,213 and employees

Treasury 5.54 588,910 5.54 588,910

Free float 38.83 4,127,871 38.36 4,077,871

Total 100.0 10,631,674 100.0 10,631,674

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