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2009 creating value for our customers TEMENOS Group AG Annual Report & Accounts TEMENOS Group AG Annual Report 2009 Welcome Overview At a glance Founded in 1993, Temenos Group AG is the leading global provider of integrated modular core banking systems to over 1,000 financial institutions in 125 countries worldwide. Temenos software provides banks with a single, realtime view of the client across the enterprise, enabling banks to maximise returns while streamlining costs. Whether providing 24/7 functionality to the wholesale, retail and private banking sectors, partnering with central banks on core system replacement, or working with world banks on solutions for emerging markets, Temenos knows banking. The company has a transparent approach to its operations and brings its experience, expertise, commitment and professionalism to every project. global net wo rk Geography 56 offices worldwide Over 3,500 dedicated professionals Headquartered in Geneva, Switzerland, the company has 56 offices in 38 countries and had revenues of USD 370.3 million for year ending 31 December 2009. In June 2001, Temenos became a public company 56 3,500 listed on the SIX Swiss Exchange (TEMN). Americas Europe Netherlands Brazil Belgium Amsterdam São Paolo La Hulpe Poland Canada Czech Republic Warsaw Montreal Prague Romania Vancouver France Bucharest Costa Rica Nantes Russia San Jose Montpellier Moscow Ecuador Paris Spain Quito Toulouse Madrid Mexico Germany Switzerland Mexico City Grosswallstadt Zurich Frankfurt Geneva USA Houston Greece United Kingdom Miami Athens Bracknell New York Kazakhstan Birmingham Orlando Almaty Hemel Hempstead London Luxembourg Newcastle Upon Tyne Luxembourg TEMENOS Group AG Annual Report 2009 01 Serving clients in over 125 countries Over 1,000 financial services customers Contents IFC Overview/ At a glance 02 Financial & Operating Highlights 04 Creating Value for our Customers 125+ 1, 000 06 Chairman’s Statement 08 Business Review 12 It is all about people/ Front office strategy 14 It is all about people/ Back office strategy Middle East Asia Pacific Taiwan 16 Partnership Programme Lebanon Australia Taipei 18 Financial Review Beirut Sydney Thailand 20 Board of Directors 22 Executive Committee Saudi Arabia China Bangkok 24 Corporate Social Responsibility Riyadh Shanghai Vietnam 25 Corporate Governance Hong Kong Hanoi United Arab Emirates 34 Report of the Group Auditors on China (PRC) Dubai the Consolidated Financial Statements India 35 Consolidated Income Statement Africa Bangalore 36 Consolidated Statement of Comprehensive Income Egypt Chennai 37 Consolidated Balance Sheet Cairo Mumbai 38 Consolidated Cash Flow Statement Kenya Indonesia 39 Consolidated Statement of Changes in Equity Nairobi Jakarta 40 Notes to the Consolidated Financial Statements 84 Report of the Statutory Auditors on the Unconsolidated Morocco Japan Tokyo Financial Statements Casablanca 85 Unconsolidated Balance Sheet South Africa Malaysia 86 Unconsolidated Income Statement Johannesburg Kuala Lumpur 87 Notes to the Unconsolidated Financial Statements Singapore 90 Remuneration Report Singapore 95 Financial Highlights 96 Information for Investors 97 Temenos Worldwide Offices TEMENOS Group AG Annual Report 2009 02 Financial & Operating Highlights For the year ending 31 December 2009 In a difficult year for the core banking market, Temenos’ strong performance demonstrated sound execution, based on an unique product and value proposition. For the third year running, TEMENOS T24 (T24) was the best- selling core banking system – helping Temenos to record net like-for-like* licence growth of 8% and, in so doing, record over 2 percentage points of market share gains. Financial Highlights • 8% growth in net like-for-like* licences sales – against a market that shrunk by almost 10%, * This metric adjusts for movements in FX rates and cost of sales, as well translating into a market gain of over 2pp as contributions from acquisitions • Operating profit growth of 26% to USD 80m (2008: USD 64m) and the now-terminated agreement with Metavante. • 600 basis points of margin expansion, to reach an operating margin of 21.7% (2008: 15.7%) • Strong cash generation - cashflow from operations reached USD 118m (2008: USD 56m). This represented an EBITDA conversion of 107% (2008: 64%) • 16% growth in maintenance revenues to USD 117m (2008: USD 101m) Operational Highlights • 50 customer go-lives during the year (2008: 44) – a new record • 43 new customer wins, including 8 new tier 1 customers - like Lloyds TSB for international wealth management and Fortis Bank Netherlands for corporate banking • Impressive take-up of TEMENOS Insight, Temenos’ solution for Business Intelligence launched in 2009 – there were 31 licences sold to new and existing customers • Completion of largest acquisition to date – the USD 81m purchase of Viveo Group, the French market leader in core banking. With the Viveo acquisition, Temenos’s installed base now stands at over 1,000 financial institutions • First successes with our partner programme – key global agreements signed with Deloitte, Cognizant, Microsoft and IBM during the year strong execution Outlook Operating Cash Flow (USD 000) Operating Profit (USD 000) Looking ahead, we anticipate and are investing for growth in 2010. Thanks to better payments terms, an expanding partner network and a market-leading product, Temenos will be able to invest and realise significant growth in the year ahead while +110% +26% continuing to expand margins and converting operating cash around the level of EBITDA. 117.9 80 FY 2009 FY 2009 62.5 64.0 FY 2007 FY 2008 64.8 FY 2007 56.2 FY 2008 33.3 FY 2006 22.7 27.5 FY 2005 FY 2006 5.1 FY 2005 TEMENOS Group AG Annual Report 2009 03 growth opportunities Temenos faces a large, secular growth opportunity. We expect banks to shift their core banking spending from internal development to external packaged software, as has happened in other industries. This shift will be driven by the need to improve data quality, lower operating costs, increase flexibility and lower operational risk. We think the shift could drive 18% compound growth for the packaged vendors over the next 10 years. Temenos should be the major beneficiary of the shift. Adam Wood Head of Software & IT Services Equity Research Team Exane BNP Paribas McKinsey Overhauling banks’ IT systems report 2009 Emerging-market tier-three and four banks that transformed the Core Banking Systems (CBS) experienced a 30 percent increase in their rate of asset growth. With the economics improving, the number of packaged solutions has grown by about 20 percent annually since 2004. That volume is expected to rise sharply over the next ten years as more systems reach the end of their lives. Although full-scale CBS transformations require significant up-front planning and investment, evidence suggests that the resulting efficiencies and growth more than compensate for the costs and management time required. * Adjusts for amortisation of acquired intangibles and restructuring costs and treats the convertible bond as equity (adding back the bond interest and dividing by fully diluted number of shares). Total Net Assets (USD 000) Adjusted EPS (USD)* Operating Margins (Basis Points) +47% +8% +600 301.0 1.23 Improved Margins FY 2009 FY 2009 Robust licence sales coupled with strong cost control 1.13 enabled Temenos to record a 26% growth in operating profit FY 2008 and an expansion in operating margins of 600 basis points. 1.03 FY 2007 204.6 FY 2008 177.4 FY 2007 136.1 0.57 FY 2006 FY 2006 101.0 FY 2005 0.32 FY 2005 TEMENOS Group AG Annual Report 2009 04 Creating Value for our Customers The most profitable banks run Temenos Flexible and agile Banking is changing. But Temenos customers are flexible and agile enough to adapt, helping them to significantly outperform their peers. In Europe and the US, the banking crisis is having profound consequences on the future of the banking industry. Already some of these consequences have manifested themselves: balance sheets have shrunk enormously 1; banks have disappeared 2; wholesale and credit market funding has become more tightly rationed; and, liquidity in certain financial markets, like securitised mortgages, has all but dried up. But there are still more results to come, especially in the form of greater government regulation over capital adequacy levels, governance and remuneration. In the developing world, rapidly growing demand places different kinds of strain. Consider China, for example: mass urbanisation and a booming economy are creating enormous demand for retail and corporate banking services and putting pressure on banks’ systems and processes. Moreover, the government’s move to open up and deregulate the banking market is also intensifying competition, meaning that coping with demand is not enough – banks also have to raise their standards of customer service, efficiency and risk management. What is constant across all markets, however, is that the best banks are already reacting, adapting their practices to stay ahead. Where these banks also have modern software, they are responding faster and more cheaply – helping them to generate higher returns than their competitors. Becoming king again – how Temenos software helps to improve flexibility and innovation In the developed world, the shortage of wholesale and capital market funding is forcing banks to shore up their funding bases, while tighter funding is increasing the pressure to generate high- quality assets and higher fees. In the developing world, where wholesale funding

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