ifs | annual report 2015€¦ · 22/2/2016 · june 17. south african consultancy fourier-e...

ANNUAL REPORT 2015

TABLE OF CONTENTS

Five-year summary 3

Significant events 4

Message from the president 8

IFS and IFS Applications 9

The IFS share 12

Table of contents of the annual report 13

Annual report 14

Board of directors 66

Executive management and auditors 67

Financial trend 2011–2015 68

Definitions and glossary 70

FINANCIAL REPORTS 2016

Interim report January–March April 21, 2016

Interim report January–June July 21, 2016

Interim report January–September October 20, 2016

Year-end report February 2017

2

FIVE-YEAR SUMMARY

2011 2012 2013 2014 2015

Net revenue SKr, million 2,576 2,676 2,704 3,034 3,389

of which license revenue SKr, million 431 467 535 558 682

of which maintenance and support revenue SKr, million 823 909 902 1,037 1,174

of which consulting revenue SKr, million 1,311 1,283 1,256 1,427 1,524

Net revenue outside Sweden % 80% 82% 84% 85% 84%

EBIT SKr, million 233 200 261 275 314

EBIT margin % 9% 7% 7% 9% 9%

Profit/loss before tax SKr, million 218 190 243 258 306

Profit margin % 8% 7% 7% 9% 9%

License margin % 94% 94% 93% 91% 95%

Maintenance and support margin % 67% 69% 72% 75% 75%

Consulting margin % 22% 18% 19% 20% 21%

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

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

Return on average operating capital % 26% 22% 19% 24% 29%

Equity/assets ratio, after full conversion % 51% 44% 46% 45% 45%

Net debt SKr, million -273 50 -118 -191 -252

Interest coverage rate times 37.3 24.7 19.4 33.2 39.2

Cash flow after investment operations SKr, million 94 -41 122 269 196

Accounts receivable (avg. 12 month)/net revenue (rolling 12 month) % 20% 19% 19% 18% 18%

Average number of employees 2,716 2,830 2,688 2,645 2,771

Number of employees at year-end 2,821 2,829 2,616 2,707 2,838

Net revenue Maintenance and support revenue EBIT

Cash flow after investments Net liquidity Average number of employees

2,000

2,250

2,500

2,750

3,000

3,250

3,500

'11 '12 '13 '14 '150

250

500

750

1,000

1,250

'11 '12 '13 '14 '15

0

100

200

300

400

500

'11 '12 '13 '14 '15

-50

0

50

100

150

200

250

300

'11 '12 '13 '14 '15 0

100

200

300

400

500

'11 '12 '13 '14 '15

2,500

2,600

2,700

2,800

2,900

3,000

'11 '12 '13 '14 '15

3

SIGNIFICANT EVENTS

JAN. Finland’s largest electricity distributor chose IFS Applications

January 22. IFS announced that Finnish utility Caruna selected IFS Applications to support vital business processes including financials,

purchasing, invoicing and HR. The agreement included licenses and services worth in excess of € 1 million.

FEB. Launch of plug-and-play CPM solution for power generation

February 9. IFS presented a plug-and-play version of IFS CPM (corporate performance management), which comes preconfigured out-of-

the-box with cockpits and KPIs tailored for companies in the complex and highly regulated power generation industry to enable better

decision-making and minimal time to value.

MAR. Cooperation with Accenture in the Nordic market

March 3. IFS and Accenture will work together to grow IFS’s license sales and Accenture’s implementation and application management

services related to IFS Applications. Accenture will also strengthen its existing IFS practice with training and certification of 100 consultants

through the IFS Academy.

Swiss DOPAG Group to implement IFS Applications

March 20. IFS communicated that DOPAG Group, a leading manufacturer of polymer metering and mixing systems, chose to implement

IFS Applications to modernize and streamline the company’s operations by replacing its legacy ERP system. The order was valued in excess

of € 1.2 million.

Nordic manufacturer accelerating global growth with IFS

March 31. A Nordic manufacturer of packaging solutions chose IFS Applications as its comprehensive, single-instance ERP system to

support its mixed-mode manufacturing while enabling rapid, global growth. The agreement was won in competition with Microsoft and SAP

and is worth approximately SKr 11 million.

MAY Major company announcements at IFS World Conference

May 5–7. At IFS World Conference in Boston, IFS launched IFS Applications 9, the new core version of its enterprise applications suite.

During the conference, IFS also announced the global availability of the cloud offering IFS Managed Cloud on Microsoft Azure, its plans to

launch in-memory capabilities, as well as a host of updates of its enterprise service management suite. In addition, IFS was proud to

announce that it had reached the one million mark in terms of users.

Finnish L&T selects IFS Enterprise Service Management

May 11. L&T, a leading provider of property maintenance and recycling services, chose to implement IFS Applications 9 to support

processes including service management, mobile work order, and mobile workforce management. The IFS solution will be deployed for

more than 1,000 employees.

ARC Advisory Group identifies IFS as industry leader

May 28. Leading information technology research and advisory firm ARC Advisory Group identified IFS as the number one vendor in terms

of market share of enterprise asset management (EAM) and field service management (FSM) solutions for the aerospace & defense and

oil & gas industries.

Maersk Drilling and IFS strengthen partnership

May 29. IFS announced that Maersk Drilling is live on IFS Applications and that the companies will collaborate on the development of

advanced maintenance planning functionality. The agreement included additional licenses worth approximately US$ 1.8 million.

JUNE Engineering company signs £ 1 million contract with IFS

June 1. MWH is a global company providing technical engineering, construction services and consulting solutions to protect, enhance,

store and distribute water. MWH expanded its use of IFS Applications by purchasing additional user licenses to support its expansion

through a number of joint venture projects.

Capgemini joins IFS Partner Network

June 3. Through the partnership, Capgemini will train and certify consultants through IFS Academy to develop its IFS competence.

Capgemini’s IFS Solution Centers in France and India employ around 90 consultants providing implementation, rollout, support, and

maintenance services worldwide.

4

Aluminum producer to optimize efficiency with IFS Applications

June 15. Aludium, a leading European producer of aluminum products, has chosen to deploy a comprehensive ERP solution from IFS at its

plants in Spain and France. The agreement is worth in excess of € 1 million and the solution is expected to be fully implemented during

Q1 2016.

Steel producer Açotubo Group invests in IFS Applications

June 15. São Paulo-based Açotubo, one of Brazil’s largest steel producers and distributors, invested US$ 1.3 million to deploy a

comprehensive cloud-based ERP solution from IFS to manage the company’s complex operations, including procurement, manufacturing,

planning, and maintenance.

IFS aims for African growth with Fourier-E

June 17. South African consultancy Fourier-E Consultation Services joined the IFS Partner Network as implementation partner to help

expand IFS’s African business. The companies will collaborate to support customers with ERP and EAM solutions in South Africa and Sub-

Saharan Africa.

Global telecom company expands use of IFS Applications

June 25. A telecom company chose to expand its use of IFS’s solutions to support a smart metering project. IFS Applications will be the

central engine for handling cases and assigning work orders to field service staff. The agreement is valued at approximately

SKr 12.5 million.

Elevator manufacturer OSMA selects IFS Applications 9

June 26. Germany’s second largest elevator manufacturer OSMA chose IFS Applications to replace a legacy ERP solution and streamline

work processes for 600 employees, including 180 service technicians. The agreement includes licenses and services valued at

approximately € 2.4 million.

High-tech manufacturer invests in IFS Applications 9

June 26. A global high-tech manufacturer based in Northern Europe has chosen to invest in IFS Applications 9 to help the company enhance

its core business processes, comprising high-tech manufacturing and service management. The agreement is valued at approximately SKr

11.5 million.

IFS signs US$ 2 million deal with oil and gas company

June 30. Norwegian Interwell, a leading provider of well solutions for oil and gas recovery, has chosen IFS Applications to enhance its

operational efficiency. The IFS solution will be used by some 400 Interwell staff in Norway, the UK, the US, and the United Arab Emirates.

The Swedish alcohol monopoly upgrades to IFS Applications 9

June 30. Systembolaget will upgrade and expand its current IFS solution to ensure increased user satisfaction and business value.

IFS Applications 9 will be used by 4,000 employees in more than 400 stores. The agreement includes licenses worth approximately

SKr 13 million.

JULY IFS acquires VisionWaves

July 6. IFS purchased Dutch company VisionWaves B.V., a leading provider of enterprise operational intelligence solutions, to help

customers accelerate their strategy realization and boost business performance. Its product helps companies map, monitor, and manage

end-to-end business processes across multiple business units, data sources, and applications.

IFS Partner Network continues to grow

July 22. RigServ joined the IFS Partner Network as a referral and services partner focusing on the North American oil and gas industry.

RigServ is a supply chain and technology consulting company that offers best-in-class solutions to leading offshore companies. In line with

IFS’s long-term growth strategy, RigServ will help IFS expand its footprint in the North American oil and gas industry.

AUG. Large U.S. defense contractor expands use of IFS Applications

August 26. A major contractor doing work for the U.S. Department of Defense chose to implement IFS Applications across another of the

company’s divisions. The total value of the agreement was estimated at US$ 30 million over the next ten years. This includes a total of

US$ 5 million in license revenue, which will be recognized over the next 2 years.

SEPT. German IT service company aims for global growth with IFS

September 3. Technogroup IT-Service GmbH, one of the leading IT service providers in Central Europe, chose to implement IFS Applications

9 to support its international growth. IFS will help Technogroup improve its data quality and combine all business processes in one

comprehensive solution. IFS Applications will enable Technogroup management to achieve better understanding and control of its

operations to improve the quality of its mission-critical services.

IFS named as the “Challenger” in Gartner’s Magic Quadrant

September 18. IFS was named as the only challenger in the Gartner Magic Quadrant for Energy and Utilities Enterprise Asset Management.

IFS attributes this position to its significant growth in energy and utilities sectors such as power generation and oil and gas.

5

International service company extends its IFS investment

September 29. A Stockholm-based provider of environmental services chose to upgrade to IFS Applications 9 in a deal worth approximately

SKr 35 million. The company chose to extend and upgrade its IFS solution to continue to empower its service and back office staff with

leading ERP and field service management functionality.

OCT. German engineering company selects IFS Applications 9

October 2. Munich-based Maurer focuses on steel constructions such as buildings, bridges, roller coasters, Ferris wheels, and other

complex dynamic, stressed structures. Following an evaluation process involving several major ERP vendors, Maurer selected

IFS Applications to promote a unified way of working, enhance data quality, and promote business transparency at all levels of the

organization.

IFS Applications 9 update launched and new support model

October 26. Among the new and enhanced features of IFS Applications 9 update 1 are new in-memory capabilities, enhanced visualization

of manufacturing processes, extended support for rental management, and improved group consolidation functionality. IFS also launched

a new support model that lets customers benefit from the latest product enhancements faster and at a lower cost.

NOV. Sartorius implements IFS Field Service Management

November 11. German pharmaceutical and laboratory equipment supplier Sartorius will implement IFS Field Service Management at

50 sites worldwide. The solution will support the company’s growth plans and empower Sartorius staff with self-service tools, leading to

faster response times to customer inquiries.

Australian Service Stream selects IFS

November 13. Service Stream is an essential network service provider to the telecommunications and utility industries throughout

Australia. Service Stream will replace and consolidate multiple enterprise information systems with IFS Applications to promote operational

efficiencies in its infrastructure projects and optimize project execution.

German security specialist consolidates with IFS

November 16. Following a rigorous selection process involving several well-known ERP vendors, Telenot chose IFS Applications 9 based

on its comprehensive functional support. With IFS, the company will benefit from a modern, integrated ERP suite that will empower its

employees through an intuitive user interface.

DEC. Skanska UK to implement IFS Applications 9

December 7. Skanska UK will implement IFS Applications as its new works management system at its Infrastructure Services division. The

solution will provide Skanska with an advanced system to manage its infrastructure contracts, including work order planning, scheduling

and execution, purchasing, inventory, time and attendance, and mobile work orders.

New version of IFS Field Service Management released

December 9. IFS Field Service Management 5.6.3 includes major enhancements such as a next-generation mobile client for Windows 10,

several predefined IFS Lobbies, and the option to deploy in the IFS Managed Cloud on Microsoft Azure.

Finland’s biggest rail constructor selects IFS

December 10. VR Track, part of the state-owned VR Group, chose IFS Applications 9 to support its service and maintenance processes.

The IFS solution covers field service and maintenance management, B2B contracting, and powerful reporting capabilities through

IFS Lobby.

IFS named a ‘leader’ in Gartner Magic Quadrant

December 14. For the third consecutive year, IFS was recognized as a ‘leader’ in the 2015 Gartner Magic Quadrant for Single-Instance

ERP for Product Centric Midmarket Companies.

High-tech automotive manufacturer to deploy IFS Applications

December 21. A global provider of electromagnetic components chose to deploy to IFS Applications 9 at more than 20 sites worldwide.

The solution will enhance the company’s configure-to-order (CTO) processes, enhance quality, minimize waste, and reduce inventory by

optimizing demand planning.

WinGroup selects IFS Applications 9 in the cloud

December 21. WinGroup, a leading manufacturer of aluminum-framed glazing systems, has chosen to implement IFS Applications 9 as its

central ERP platform. The solution will be deployed in the IFS Managed Cloud on Microsoft Azure and will be used by some 200 users in

seven countries.

Saab to deploy IFS Applications 9

December 28. Saab has chosen to deploy IFS Applications 9 at its Aeronautics unit and South African operations. The agreement is valued

at approximately SKr 11 million in licenses. The company will leverage the layered application architecture of IFS Applications 9 to enable

more efficient applications development and configuration at a lower total cost of ownership.

6

SIGNIFICANT AGREEMENTS SIGNED DURING THE YEAR

Aerospace and Defense

Babcock Marine Division

BAE Systems

General Dynamics -

Information Systems &

Technology General Dynamics -

Ordinance and Tactical

Systems (OTS) KVG Stade

Portsmouth Aviation

Saab

TAE

Thai Aviation Industries Co.

(TAI) Asset Intensive

BillerudKorsnäs

Hecla Mining Company

Holmen

SCA Graphic Sundsvall

SSAB Europa

Automotive

CalsonicKansei North

America Mianyang Fulin Precision

Machining Co. Öhlins Racing

Runner Group

Shiloh Industries

Toyota Lanka

Zakład Metalowy Plast-Met

Construction and Contracting

AIC Steel

Arkon Prima Indonesia

Barnhart Crane & Rigging

Co. CMC-TNRSP (Tamilnadu

Road Sector Projects) Heerema Fabrication Group

JK Williams Group

LKS Ingeniería

Mostostal Zabrze S.A.

MWH Treatment

NG Bailey Group

Skanska UK

VolkerWessels Telecom

VR Track

Energy and Utilities

Caruna

Chesapeake Utilities

Corporation Hafslund

Jacopa

Jönköping Energi

JSC Energo-Pro

Nordmøre Energiverk

PGNIG Termika

Ragn-Sells Group IT

Service Stream

Statnett

Svenska Kraftnät

Türksat Uydu Haberleşme

Kablo TV ve İşletme Umeå Energi

High Tech

Axis Communications

BHE Bonn Hungary

Elektronikai H2O Innovation

Jotron

Lab126 (A2Z Development

Center) Mafelec

Sartorius

Sierra Wireless

Sunbelt Transformer

Teledyne Oil & Gas

Telenot Electronic

Terumo Cardiovascular

Systems Corporation Tomra Sorting

Tomra Systems

Industrial Manufacturing

Aludium Transformación de

Productos Alyaf Industrial Co.

Andersen Steel

Anstee Ware Group

AOA Apparatebau Gauting

Bemis Manufacturing

Company BRC Industrial (Saudi)

CC Höganäs Byggkeramik

Circor International

CSIC Haizhuang Windpower

Equipment Co. Dopag Dosiertechnik und

Pneumatik Durham Manufacturing

Gislaved Gummi

Huber

IMI Critical Engineering

J & E Hall

Janoschka Kippenheim

Kaman RWG Germany

Lakeside Process Controls

Loram Maintenance of Way

Maurer

Munters Europe

Newag

Nordson Medical (formerly

Value Plastics) OSMA-Aufzüge

Polypipe

Robertson Fuel System

Roxtec International

Saueressig

Shapes Precision

Manufacturing Shawcor

South Asia Textile Industries

Lanka Superior Graphite Company

Tennsco Corporation

Vegum

Vítkovice Steel

Völkl Sports

Whirley Industries

Wingroup

Oil and Gas

Bibby Offshore

Dixie Electric

Floatel International

Interwell

Maersk Drilling Services

Maersk Supply Service

Songa Offshore

Wood Group Mustang

Norway Yinson Holdings Berhad

Process Manufacturing

Açotubo

Brugarolas

Diamond Pet Foods

Evotec (UK)

Instituto Butantan

Isofarma Industrial

Farmaceutica Kanes Foods

Marabu

Oxford Biomedica

PBI/Gordon Corporation

Prince Minerals

Pukka Herbs

Richardson International

Swedish Orphan Biovitrum

(SOBI) Synergy Health

The Binding Site Group

Volac International

Whitford

Whitworths

Willamette Valley Company

William Grant & Sons

Wolf Minerals (UK)

Retail and Wholesale

AG Thames Holdings

Gosiger Holdings

Ingram Micro Mobility

Sanitec Europe

Singer Sri Lanka

Systembolaget

UBM Group

Service Providers

APM Terminals

Management Associations (Homeside

Properties) Auto Windscreens

Avinor

Eltel Networks Infranet

Grey Matter

J Tomlinson

JEOL USA

Lassila & Tikanoja

Medical & Pharmaceutical

Services Orbotech

Reliance Comfort

Reliance Home Comfort

Sporveien Oslo

SSI Services (UK)

Turner & Co (Glasgow)

URB - Urbanismo de Recife

Wennstrom Fuel Systems

Wilhelmsen Ships Service

Other

Cumfin

Evry Norge

Foundation Garments

Q-TC

Savex Computers

SII - Société pour

l'informatique industrielle Technogroup IT-Service

Tiga Pilar Sejahtera Food

Tribunal de Justiça RJ

Vektis

7

MESSAGE FROM THE PRESIDENT

Strong growth in license sales and earnings

License sales showed strong growth, currency adjusted, of 27 percent in

the final quarter of the year and 14 percent for the full year. This growth

was achieved despite the fact that throughout 2015 many of our target

sectors showed a significant decline, including all markets affected by

the fall in the price of oil and also those regions affected by the downturn

in the demand for commodities. This demonstrates that IFS is both a

resilient and an agile business with many new customers being added

in the last quarter.

In a market that remains very competitive IFS continues to be

selected because of our understanding and ability to deliver both

solutions to our target sectors and global projects with a lower cost of

ownership than our larger competitors The ongoing addition of new

customers and the low level of churn has resulted in the growth of our

maintenance and support revenue being, currency adjusted, 7 percent

for the quarter and 6 percent for the full year and being fully in line with

our expectations. Product revenue as a proportion of total revenue for

the quarter continues to move in the correct direction at 57 percent

(Q4 '14: 53). The maintenance and support margin for the quarter

improved to76 percent (72) and for the full year remained unchanged at

75 percent. The ongoing investment being made in the centralization of

our global support operation should continue to create margin

improvement.

The low growth in the consulting revenue at 3 percent in the quarter

and 2 percent for the year, currency adjusted, is in line with our strategic

direction, which is to grow our partner ecosystem as a complimentary

delivery resource. This, as previously stated, will provide reach and

scalability to IFS and provide our customers with choice. The partner

ecosystem grew during 2015 with a good number of new partners joining

each month and the Partner Academy coming on stream creating an

increasing global pool of IFS certified consultants. The consulting margin

increased to 24 percent (Q4 '14: 23).

The gradual improvement of the buying environment seen in recent

years continued. Based on preliminary figures, the ERP market as a

whole grew by around 7 percent in 2015. Demand in North America,

Western Europe, and Asia Pacific (excluding China) remains steady and

industry analyst firms such as Gartner expect this trend of rather

moderate overall growth to persist in 2016.

The acquisition of VisionWaves undertaken in July 2015 has been

successfully integrated into the IFS Group. We are seeing that the

acquired product is able to be packaged with other parts of the IFS

product set to provide new innovative solutions and so create new

market opportunities. Our acquisition strategy continues to be a high

priority as we seek to build a stronger solution for our target markets.

On December 7, following the acquisition of the shares held by the main

owner and other larger shareholders in IFS, EQT, through IGT Holding,

announced a mandatory cash offer to the shareholders to acquire all

outstanding shares. On December 17, the board of directors of IFS*

unanimously recommended the shareholders to accept this offer. On

February 9, 2016, IGT Holding owned 83.8 percent of the capital and

87.4 percent of the votes in the company. Over the five years preceding

the offer, shareholders have seen total returns including reinvested

dividends of 314 percent, or 33 percent per annum. This reflects the

steady improvement that we have achieved and the attractiveness of

our product for our ever-expanding group of customers. For 2016, we

expect to see continued positive development and further improvements

to our strengths.

Alastair Sorbie PRESIDENT & CEO

* Anders Böös, chairman of the board, and Bengt Nilsson, deputy chairman of the

board, did not participate in the recommendation and decision.

8

IFS AND IFS APPLICATIONS

IFS, one of the world’s leading suppliers of business software, offers

applications that enable companies to respond quickly to market

changes and use resources in a more agile way to achieve better

business performance and competitive advantages.

IFS was founded in 1983 and has 2,800 employees worldwide. With

IFS Applications™, now in its ninth generation, IFS has pioneered

component-based ERP software.

The company now has some

30 years’ experience in the

implementation of ERP systems,

with consultants with deep

industry expertise and who

understand the customer’s

business and needs. The

component architecture provides

solutions that are easier to

implement, run, and upgrade. IFS

Applications business software

provides increased ERP

functionality, including CRM, SCM,

PLM, CPM, enterprise asset

management, and MRO

capabilities.

IFS is an organization with a

truly global reach and is today represented in approximately

50 countries through wholly or jointly-owned subsidiaries, and partners.

IFS has more than 2,400 customers and over one million users and its

solution is installed in over 60 countries in about 20 languages.

BUSINESS CONCEPT

With its own resources and in cooperation with partners, IFS develops,

sells and implements the component-based ERP software

IFS Applications.

IFS APPLICATIONS

IFS Applications is a comprehensive business system for mid-sized and

large organizations, and is specialized in a number of business

processes. Experience from customers, user groups, industry analysts

and the company’s strong network of partners has been combined to

create leading industry solutions to meet specific customer needs.

Structural changes such as globalization, market transparency

through the Internet, consolidation, specialization, etc. are making it

harder to label companies based purely on their industrial belonging. As

a matter of fact, the landscape of processes in which a company is

operating often offers a better illustration of its actual business and

challenges than the industry under which it is labeled.

IFS focuses on agile businesses where any of four core processes

are strategic: service and asset management, manufacturing, supply

chain, and projects. This focus provides customers with competitive

advantages in their own markets and has made IFS the leader in several

industries. Within maintenance and logistics systems for aerospace and

defense, for example, IFS is the global market leader.

In addition to the processes supported by all business systems, such as

finances, inventories, customer management and traditional

manufacturing, IFS Applications is specialized in a number of specific

manufacturing processes and in support for the entire life cycle of

products, from construction to maintenance and aftermarket services.

This provides substantial advantages for customers, the information

created during construction and manufacturing being important when

the products are later maintained, possibly during several decades.

In recent years, IFS has seen increased demand for IT support for

project-oriented activities in several of its targeted industries. IFS has

worked quickly to provide enhanced software components to better

manage challenges such as cost,

time, resources, liquidity, and risk

in project-driven activities. The

optimization of these key areas

results in better control and is the

key to enhanced efficiency and

control. It also provides increased

opportunities to capitalize on new

business opportunities. The use of

traditional organizational

structures and systems makes it

difficult to handle operational

situations in real time and reduces

flexibility, as it is necessary to

balance resources in relation to

expected deliveries. It is

expensive and difficult to assess

whether new business

opportunities, but also ongoing operations, will be profitable.

CREATIVITY AND INNOVATION

IFS has two distinct advantages over competitors: the single integrated

product line in IFS Applications and the fact that it has been component-

based for more than a decade. This means that IFS is uniquely placed to

supply business components that take advantage of today’s service-

oriented architectures (SOA).

The Group’s product development is primarily conducted at IFS’s

R&D centers in Sri Lanka, Poland, the United Kingdom, the United

States, and Sweden. This year’s biggest news was the launch of the

latest main version of IFS Applications. IFS Applications 9 provides new

and existing customers significant improvements in areas such as

flexibility and ease of use. It also contains powerful features designed to

support customers in IFS’s target sectors. In addition, new versions of

IFS Field Service Management and Mobile Workforce Management were

launched, as well as a number of important enhancements designed to

increase the business value of existing versions.

STRATEGIES IN BRIEF

IFS will strengthen its profit, cash flow, and financial position by

focusing on increasing sales, reducing costs, and increasing its

market share in selected industries.

The company’s product development will focus on maintaining IFS’s

position as a technical leader in component-based business

software for a global market.

IFS Applications, will support the standards that are important for

the customers. IFS will supply integrated Internet-based solutions

that enable increased cooperation among customers, suppliers, and

partners.

The product, methods, support system, and infrastructure will

support customers with global operations.

9

To meet the market’s increased demands for solutions with broad

functionality combined with in-depth industry knowledge, IFS will

focus on a limited number of industry segments.

The company will continue to develop global and local cooperation

with partners to enable continued development of IFS’s competence

and market presence with lower risk and capital requirements.

IFS will maintain its own supplier capacity for consultant services

related to the implementation and use of IFS Applications in

important markets and to support its partners.

The company’s ability to offer resources from IFS’s Sri Lankan unit

for customer projects and cooperation with partners will increase its

competitiveness.

IFS will stimulate increased mobility among all its employees to

increase competence and understanding of various international

markets.

PARTNERS

IFS continues to prioritize investment in the development of its global

partner ecosystem. An emphasis on developing opportunities with the

several hundred existing partners already in the IFS partner network,

rather than adding new partners, has resulted in a strengthened partner

sales pipeline and an increase in closed opportunities. IFS continued to

add new modules and content to the IFS Academy as part of a program

designed to maintain and improve the quality of service delivered by

partners. The IFS Academy training content is now available globally

through all regions in multiple languages with both on-line and

classroom delivery options available.

In May 2015 at the IFS World Conference in Boston, USA, the

company launched the IFS Managed Cloud on Microsoft Azure and

successfully closed its first sales during the summer months. The first

customers went live later in 2015 and there are now customers running

IFS Managed Cloud on Microsoft Azure in Europe and North America.

During 2015 the company extended its existing relationships with both

Accenture and Cap Gemini to become global and also developed other

present relationships with systems integrators around the world. During

2016, the company will continue to develop its relationships with its

existing partner ecosystem and will develop several new programs with

both service and technology partners to accelerate partner sales growth.

SOCIAL RESPONSIBILITY AND ENVIRONMENT

IFS operates in a distinctly low-risk industry in terms of the direct impact

of its activities on people and the environment. This applies to the entire

value chain, including software development, for which IFS’s largest unit

is located in Sri Lanka. In addition, the company distributes information

efficiently through its intranet, where all employees have access to

policies and guidelines pertaining to sustainability, including

environmental impact, gender equality, diversity, and work environment.

Corporate social responsibility (CSR) is becoming increasingly

important in the global marketplace—both in terms of mitigating risks

associated with legal compliance as well as enhancing business insight

to boost profitability. IFS’s unique ERP offering includes a broad variety

of solutions for efficient reporting and enhanced control in the field of

CSR and non-financial reporting. The solutions are fully integrated with

IFS Applications to promote user productivity and reduce time spent on

non-value-adding administration and thereby cut costs. Through its Eco-

footprint Management component, IFS Applications can be used to

manage much of the information required for a company to monitor its

sustainability issues, report its environmental impact, and comply with

legislation and regulations governing environmental issues. IFS is

working actively on product development to further improve functionality

in this regard.

Implementation and monitoring of the Code of Conduct and

Environmental Policy

IFS attaches great importance to the issues of sustainability and

corporate responsibility, such as the environment, health and safety,

equal opportunities, diversity, anti-corruption work and business ethics,

and the company’s and employees’ values. IFS’s Code of Conduct is

based on the UN Global Compact’s ten principles and both the Code of

Conduct and the Environmental Policy are set down formally by the CEO.

Interest in these documents has increased from both the stock market

and customers and prospects. Questions about IFS’s various policies

and CSR work are increasingly common in enterprise software

procurements, which is why IFS has intensified its efforts to

communicate its commitment and concrete initiatives.

Sustainability, education, and company employees

Corporate social responsibility (CSR) has been an area of growing

interest for IFS over the last few years. In 2015, the Company spent time

conducting a thorough audit of its local and global initiatives, with the

purpose of communicating a consolidated view of all CSR activities to its

employees and external parties. Within the framework of this project,

three areas have been identified in which the Group is actively working

and all major commitments can be divided into. These three areas are

the local/global environment and society (sustainability), training and

support for future generations of workers (education), and good

treatment and job satisfaction among IFS’s staff (company employees).

10

IFS has a low environmental risk. The Group’s most significant

environmental impact is energy consumption from its premises,

business travel, purchasing of office material and handling of used

hardware. In all these areas there are initiatives to reduce the company’s

environmental impact, e.g. through technology that enables remote work

and meetings (thus minimizing travel), sensors that regulate power

supply in the offices, and smart solutions that minimize paper waste

from printers, for instance. IFS is also centralizing servers and other

computer equipment in a few locations managed by suppliers that meet

the Group’s environmental requirements, thus reducing the emissions

from cooling and power consumption. All employees are encouraged to

respect the environment and strive to work with sustainability issues

such as recycling and energy efficiency when possible.

In many parts of the world, education is not a matter of course, and

many times it is economic conditions that determine whether a person

can receive training or not. The company has therefore made significant

investments in helping financially vulnerable people get training that

leads to work, which in turn affects the wider community in a positive

way. IFS’s efforts have mainly been concentrated to Sri Lanka, where the

Group has a large number of its employees and where access to a highly

educated workforce with good expertise in IT and business systems has

previously not been a given. IFS collaborates with the country’s largest

universities through various initiatives to offer more people the

opportunity to study at university level. Through one of the programs, IFS

covers tuition fees and living costs during the time the student is

studying for a university degree. Stundents begin their education with a

six-month study period at IFS: four days a week at IFS and two days at

the university. Following this, the student works as an intern four days a

week at IFS and continues to study two days at the university. There is

no obligation attached to the scholarship to continue working within IFS;

yet, as many as 90 percent choose to do so. To invest in scholarship

programs and support the universities in Sri Lanka benefit society in the

long term. IFS not only helps with scholarships to economically

disadvantaged students, but also sponsors a professorship at the

University of Moratuwa. IFS Sri Lanka employees regularly give guest

lectures at universities to offer students insight into how global IT

companies work and IFS donates equipment to the computer labs on

campus. Guest lectures and the donation of computer equipment are

initiatives taken in other parts of the IFS Group as well, for instance in

Germany and Sweden.

Although CSR is usually associated with the environment and

helping society’s weakest members, it is equally important to ensure

that it contributes to the positive development of the company’s

employees. IFS employees are ambassadors for the Group and their

value system is the prerequisite for success in CSR as well as in the

company’s daily operations. IFS is working actively with equality and

wants to set a good example to inspire the entire IT industry to improve

equality and attract more women to enter the industry. The basis of this

is a gender-neutral view of the workplace, including discussions in

workshops and in conjunction with the annual salary revision. IFS is

sponsoring networks for women in IT, such as Oda of Norway, and

participates with many other global companies in the Womentor

initiative to support female managers in the IT industry with the help of

mentors. Additionally, IFS wants to increase interest in technology

among younger women and participates in NextUp, a Swedish

competition for eighth-graders to which IFS contributes both financially

and with a case that the contestants work on.

The goal of IFS’s CSR program moving forward is to take the very

best of all the local initiatives and roll them out as global best practice

across the organization. The Company will also focus on improving

interest in and understanding of the IT industry as a whole among the

coming generation of IT workers, with the hope of increasing the

proportion of underrepresented groups in the IT sector. IFS believes that

a growing interest for IT within all social groups will benefit not only IFS

but also its customers and partners, through a future larger and broader

pool of potential co-workers. In 2016, IFS will focus on improving its

collaboration with universities around the world.

11

IFS SHARE

IFS B share is listed since April 28, 1998 on the Stockholm stock

exchange and is traded on the Nasdaq OMX Stockholm Mid-Cap list

(sector: information technology). The company’s A share has been on the

same list since June 18, 1998.

As of December 31, 2015, IFS’s capital stock amounted to

SKr 499,436,600, represented by 24,971,830 shares, before dilution,

with a nominal value of SKr 20 per share. These comprised

1,029,341 A shares and 23,942,489 B shares. On December 31, 2015,

the Company held 426,600 B shares in its own custody.

Each A share carries the right to one vote and each B share carries

the right to one tenth of a vote. All shares carry equal rights to dividends.

During the year, a total of 1.0 million A shares and 26.4 million

B shares were traded, corresponding to 110 percent of the average total

number of listed shares. The principal owner is EQT, through IGT Holding,

which controlled 83.8 percent of the capital and 87.4 percent of the

voting rights on February 9, 2016.

Mandatory cash offer by EQT

On December 7, EQT, through IGT Holding, announced a mandatory cash

offer to the shareholders in IFS to acquire all outstanding A- and B-shares

in IFS at a price of SEK 362.50 per share, regardless of share class. On

December 17, the board of directors of IFS* unanimously recommended

the shareholders to accept this offer. On February 9, 2016, IGT Holding

owned 83.8 percent of the capital and 87.4 percent of the votes in the

company.



SHARE CATEGORIES

Number of

shares

Number of

voting rights

Share of

capital

Share of

voting

rights

A shares 1,029,341 1,029,341 4.1% 30.1%

B shares 23,942,489 2,394,249 95.9% 69.9%

Total 24,971,830 3,423,590 100.0% 100.0%

Dec. 31, 2015

PRICE DEVELOPMENT AND TRADE VOLUME 2015

0

100000

200000

300000

400000

500000

220

240

260

280

300

320

340

360

380

Q

1

Q

2

Q

3

Q

4

Volume IFS B All-share index

12

TABLE OF CONTENTS OF THE ANNUAL REPORT

BOARD OF DIRECTORS’ REPORT 14

Corporate governance report 20

FINANCIAL STATEMENTS 26

Consolidated income statement 26

Consolidated statement of comprehensive income 27

Consolidated balance sheet—assets 28

Consolidated balance sheet—equity and liabilities 28

Consolidated capital account 29

Consolidated statement of cash flows 30

Income statement of the parent company 31

Statement of comprehensive income of the parent company 31

Balance sheet of the parent company—assets 32

Balance sheet of the parent company—equity and liabilities 33

Capital account of the parent company 33

Statement of cash flows of the parent company 34

NOTES TO THE FINANCIAL STATEMENTS 35

AUDITOR’S REPORT 64

Notes to the financial statements

Note 1 Accounting principles 35

Note 2 Segment reporting 42

Note 3 License revenue 44

Note 4 Maintenance and support revenue 44

Note 5 Other revenue 44

Note 6 Development expenditure 45

Note 7 Sales and marketing expenses 45

Note 8 Other operating income 45

Note 9 Other operating expenses 45

Note 10 Transactions between subsidiaries 45

Note 11 Operating expenses per type of cost 45

Note 12 Auditors’ fees 45

Note 13 Salaries, other remunerations, and social costs 45

Note 14 Remunerations paid to the board and executive management 45

Note 15 Transactions with related parties 46

Note 16 Average number of employees per country 47

Note 17 Results from participations in subsidiaries 47

Note 18 Results from participations in associated companies 47

Note 19 Other interest income and similar income 47

Note 20 Interest expenses and similar expenses 47

Note 21 Taxes 47

Note 22 Profit and dividend per share 48

Note 23 Intangible fixed assets 48

Note 24 Tangible fixed assets 50

Note 25 Operating lease agreements 51

Note 26 Participations in subsidiaries 52

Note 27 Participations in associated companies and joint ventures 53

Note 28 Receivables in subsidiaries 53

Note 29 Deferred tax claims and tax liabilities 53

Note 30 Other long-term receivables 54

Note 31 Accounts receivable 54

Note 32 Other receivables 54

Note 33 Liquid assets 54

Note 34 Stockholders’ equity 54

Note 35 Liabilities to credit institutions 56

Note 36 Risk structure pertaining to interest and financing 56

Note 37 Pension commitments 57

Note 38 Other provisions and other liabilities 58

Note 39 Other liabilities 58

Note 40 Accrued expenses and prepaid income 59

Note 41 Pledged assets 59

Note 42 Contingent liabilities 59

Note 43 Adjustments for items not included in cash flow 59

Note 44 Business combinations 59

Note 45 Net acquisition of tangible fixed assets 59

Note 46 Financial risk management and derivatives 59

Note 47 Conversion rates 62

Note 48 Information about the Parent company 62

13

BOARD OF DIRECTORS’ REPORT

GENERAL

The board of directors and the chief executive officer of Industrial and

Financial Systems, IFS AB (publ.), corporate identity number

556122-0996, herewith submit the annual accounts and consolidated

accounts for the fiscal year 2015. Unless otherwise stated, all amounts

are in SKr million. Information in parentheses refers to the preceding

fiscal year. The terms “IFS,” “Group,” and “Company” all refer to the

Parent Company—Industrial and Financial Systems, IFS AB—and its

subsidiaries.

SUMMARY

The overall objective for 2015 was to achieve good growth in both

licenses and EBIT; both objectives were reached by far. IFS continued its

focus on project-oriented industry and markets with a strong need for

well-functioning processes within logistics, maintenance, and service

and the Company won highly-competitive contracts in its target sectors

during the year. Net revenue increased by 5 percent, currency adjusted.

Licenses increased by 14 percent, currency adjusted, which underlines

that IFS’s strategy of focusing on targeted sectors is paying off.

Maintenance revenue increased by 6 percent, currency adjusted,

resulting from license sales and strong customer loyalty, the ongoing

development of which remains a priority. Consulting revenue increased

by 2 percent, currency adjusted, with a steadily larger proportion of

services being delivered from a growing partner ecosystem. Despite the

higher proportion of services being delivered by partners, the consulting

margin increased to 21 percent (20). Net revenue amounted to

SKr 3,389 million ('14: SKr 3,034 million). EBIT increased to

SKr 314 million ('14: SKr 275 million), and cash flow after investments

was SKr 196 million ('14: SKr 269 million).

OPERATIONS

IFS is a leading provider of component-based business software

developed using open standards and based on service-oriented

architecture (SOA). The solutions enable companies to respond quickly

to market changes and use resources in a more agile way to achieve

better business performance and competitive advantage.

Founded in 1983, IFS has more than 2,800 employees worldwide.

With IFS Applications™, now in its ninth generation, IFS has pioneered

component-based ERP software. The component architecture provides

solutions that are easier to implement, run and upgrade.

IFS Applications is installed in more than 60 countries in about

20 languages.

IFS has some 2,400 customers and over one million users across

seven key vertical sectors: aerospace and defense; automotive;

manufacturing; process industries; construction, contracting, and

service management; retail and wholesale distribution; and utilities and

telecom. IFS Applications provide extended ERP functionality, including

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

capabilities.

IFS is today represented in approximately 50 countries through

wholly and jointly owned subsidiaries, joint ventures, and partners.

Operations are divided into six operating segments: Europe North;

Europe West; Europe Central; Europe East; Americas; and Africa, Asia,

and Pacific. These segments have the operational responsibility for sales

and delivery to customers. Product development and support are

included in corporate functions.

MARKET ANALYSIS

Globalization entails increased competition and more complex supply

chains. Companies are meeting these challenges by investing in new,

improved ERP solutions to streamline operations and simplify

collaboration with suppliers, customers, and partners. Moreover, an

increasing number of companies are doing business internationally, in

part with new business models. Legislation and regulations are

becoming more comprehensive, mergers and acquisitions are

increasing as the economy strengthens, and many companies are

moving from traditional manufacturing/distribution to more project-

based and service-oriented business models. These drivers led to a

successive recovery of the ERP market from the middle of the first

decade of this century to the end of 2008, when the trend was broken

and the market weakened in the wake of events in the global economy.

These drivers will, however, continue to be a force in the long term.

Uncertainties surrounding the prospects for an upturn in global

economic growth remain the major retardants of IT growth. This

uncertainty has engendered the pessimistic business and consumer

sentiment in evidence throughout much of the world. Despite caution

among buyers due to the prevailing macroeconomic environment, the

gradual improvement of the buying environment seen in recent years

continued. Based on preliminary figures, the ERP market as a whole

grew by around 7 percent in 2015. Demand in North America, Western

Europe, and Asia Pacific (excluding China) remains steady and industry

analyst firms such as Gartner expect this trend of rather moderate

overall growth to persist in 2016.

The competitive position has not changed during 2015 and is not

expect to change over the coming years. After the consolidations of

recent years, SAP, Oracle, and Microsoft are the principal global

competitors in the industries and processes in which IFS operates. In

specific segments and geographic markets, IFS also competes with a

number of niche vendors.

14

SKr, million 2015

actual

Translation

effect

Structural

changes

2015

adjusted

2014

actual

Organic

change

Reported

change

NET REVENUE

License revenue 682 -45 -8 629 558 13% 22%

Maintenance and support revenue 1,174 -77 -4 1,093 1,037 5% 13%

Total product revenue 1,856 -122 -12 1,722 1,595 8% 16%

Consulting revenue 1,524 -72 -8 1,444 1,427 1% 7%

Net revenue (including other revenue) 3,389 -195 -19 3,175 3,034 5% 12%

OPERATING EXPENSES

Operating expenses 3,075 -193 -23 2,859 2,759 4% 11%

Other operating income/costs net -33 0 - -33 -1

Capital gains/losses 0 0 - 0 -

Exchange rate gains/losses -26 -1 - -27 -24

Restructuring costs/redundancy costs -6 0 - -6 -15

Reversal of restructuring costs 0 - - 0 2

Amortization of capitalized product development -186 - - -186 -175

Amortization of acquired intangibles -37 3 - -34 -38

Other amortization/depreciation -36 2 - -34 -29

Capitalized product development 210 - - 210 190

Adjusted operating expenses 2,961 -189 -23 2,749 2,669 3% 11%

Adjusted EBITDA 428 -6 4 426 365 17% 17%

Adjusted EBITDA/net revenue 13% 13% 12%

NET REVENUE

License revenue for 2015 was 14 percent higher than in the previous

year, currency adjusted. During the year, the ten largest license deals

had a total value of SKr 132 million; the corresponding figure for 2014

was SKr 107 million. A total of 25 license agreements exceeding

US$ 0.5 million in value were sold during the year. Maintenance and

support revenue continued to grow and consulting revenue was also

higher than in the previous year, currency adjusted. Net revenue was

SKr 355 million higher than in 2014, an increase of 5 percent, currency

adjusted.

COSTS AND EXPENSES

Operating expenses were SKr 316 million higher than in 2014, which

represents an increase of 4 percent, currency adjusted. Variable

expenses such as costs related to third-party suppliers, partners, and

subcontracted consultants amounted to SKr 349 million (367), a

decrease of 11 percent, currency adjusted. Other operating expenses

amounted to SKr 1,528 million (1,281), an increase of 6 percent,

currency adjusted. Payroll expenses amounted to SKr 2,042 million

(1,771), an increase of 8 percent, currency adjusted.

PRODUCT-DEVELOPMENT EXPENDITURE

Product development expenditure for the year amounted to

SKr 357 million (318). Capitalized product development totaled

SKr 210 million (190) and amortization of previously capitalized product

development amounted to SKr 186 million (175).

PERSONNEL NUMBERS AND EFFICIENCY

The average number of employees increased, amounting to 2,771

(2,645). The headcount for product development at the end of the year

was 623 (593), of whom 383 (359) worked at the development center

in Sri Lanka. Net revenue per employee increased with 1 percent,

currency adjusted, and with 7 percent non-currency adjusted to

SKr 1,223 thousand (1,147). Personnel-related expenses per employee

amounted to SKr 737 thousand (670), an increase of 4 percent,

currency adjusted. The number of employees at year end was 2,838

(2,707).

EBIT

EBIT amounted to SKr 314 million (275), an increase of 13 percent

compared with 2014. EBIT before amortization and depreciation but

after reversal of capitalized development expenditure and adjusted for

nonrecurring items consisting of severance costs and capital gains and

losses, i.e. adjusted EBITDA, amounted to SKr 428 million (365),

corresponding to a margin of 13 percent.

PROFIT FOR THE YEAR

Net financial items were SKr -8 million (-17). Adjusted for exchange rate

effects, the net financial items, including bank costs, were

SKr -11 million (-9). Net interest income was SKr -4 million (-5). Profit

before tax increased to SKr 306 million (258) while profit for the year

increased to SKr 214 million (211).

OPERATING AREAS

Europe North

SKr, million 2015 2014 Δ

License revenue 183 149 23%

Maintenance and support revenue 384 361 6%

Consulting revenue 646 649 0%

Net revenue 1,235 1,185 4%

EBIT, undistributed* 408 359 14%

Number of employees at the end of the period 470 465 1%

* EBIT before allocation of corporate revenue and expenses

Europe North’s revenue increased with 6 percent, currency adjusted.

Licenses increased by 24 percent, currency adjusted, thanks to a

number of high-profile deals. Maintenance revenue grew by 8 percent,

currency adjusted, as a result of the improved license sales. Consulting

revenue increased by 1 percent, currency adjusted. The usage of

partners in implementation projects continue to increase. Operating

expenses increased with 3 percent, currency adjusted. EBIT thereby

improved by 14 percent. Larger license deals included Maersk Drilling

Services, Systembolaget, Saab, and Ericsson.

15

Europe West





Net revenue 721 628 15%




Net revenue increased by 4 percent, currency adjusted. License grew by

7 percent, currency adjusted, and maintenance revenue grew by

5 percent, currency adjusted. Consulting improved by 6 percent,

currency adjusted. Operating expenses were 2 percent higher, currency

adjusted. EBIT thereby increased by 7 percent. Larger license deals

included MWH Treatment, SII, and Skanska UK.

Europe Central









Net revenue for Europe Central was 6 percent better than in 2014,

currency adjusted, mainly due to the acquisition of VisionWaves in July

2015. The acquisition of VisionWaves had an impact of SKr 19 million

in revenue and SKr 23 million in operating expenses. EBIT improved by

2 percent, currency adjusted. Some of the larger license deals in Europe

Central were OSMA-Aufzüge Albert Schenk, Janoscka Kippenheim, and

Maurer.

Europe East







Number of employees at the end of the period 204 208 -2%


Net revenue increased by 6 percent, currency adjusted, mainly from an

increase in license revenue, which grew by 41 percent, currency

adjusted. Maintenance and consulting remained at approximately the

same level as in the previous year. Operating expenses decreased by

2 percent, currency adjusted. EBIT thereby more than doubled and

improved by SKr 16 million. Some of the major license contracts were

Unitec, Y Soft Corporation, and Vegum.

Americas









Americas increased its net revenue by 3 percent, currency adjusted,

mainly due to increased product revenue. Both license revenue and

maintenance revenue increased by 7 percent, currency adjusted.

Operating expenses increased by 5 percent, currency adjusted, to a large

part as a result of a one-off gain in ‘other operating income’ in 2014.

EBIT was thereby 2 percent lower than the previous year. Some of the

largest deals during the year were General Dynamics, Calsonic, and

Reliance Comfort.

Africa, Asia, and Pacific






EBIT, undistributed* 24 48 -50%



Net revenue decreased by 4 percent, currency adjusted, to a large extent

as a result of larger payments in 2014 of previously deferred

maintenance revenue. Operating expenses were 7 percent higher than

in 2014, currency adjusted, mainly due to an increased number of

employees. EBIT thereby decreased by SKr 27 million, currency

adjusted. Larger license revenue recognitions included Emirates Group,

Arabian International Company for Steel Structures and Elektromag

Makine.

PRODUCT DEVELOPMENT

The Group’s product development is primarily conducted at IFS’s R&D

centers in Sri Lanka, Poland, the United Kingdom, the United States, and

Sweden. This year’s biggest news was the launch of the latest main

version of IFS Applications. IFS Applications 9 provides new and existing

customers significant improvements in areas such as flexibility and ease

of use. It also contains powerful features designed to support customers

in IFS’s target sectors. In addition, new versions of IFS Field Service

Management and Mobile Workforce Management were launched, as

well as a number of important enhancements designed to increase the

business value of existing versions.

PARTNERS

IFS continues to prioritize investment in the development of its global

partner ecosystem. An emphasis on developing opportunities with the

several hundred existing partners already in the IFS partner network,

rather than adding new partners, has resulted in a strengthened partner

sales pipeline and an increase in closed opportunities. IFS continued to

add new modules and content to the IFS Academy as part of a program

designed to maintain and improve the quality of service delivered by

partners. The IFS Academy training content is now available globally

through all regions in multiple languages with both on-line and

classroom delivery options available.

16

In May 2015 at the IFS World Conference in Boston, USA, the company

launched the IFS Managed Cloud on Microsoft Azure and successfully

closed its first sales during the summer months. The first customers

went live later in 2015 and there are now customers running

IFS Managed Cloud on Microsoft Azure in Europe and North America.

During 2015 the company extended its existing relationships with both

Accenture and Cap Gemini to become global and also developed other

present relationships with systems integrators around the world. During

2016, the company will continue to develop its relationships with its

existing partner ecosystem and will develop several new programs with

both service and technology partners to accelerate partner sales growth.

CASH FLOW, LIQUIDITY, AND FINANCIAL POSITION

Cash flow from current operations before change in working capital

amounted to SKr 544 million (450). Change in tied working capital

amounted to SKr 2 million (51). Days of sales outstanding (DSO) at year-

end was 67 days (76). DSO calculated on the monthly receivables’

positions during the year was 57 days (55).

Investments totaled SKr 350 (232) million. Product development

expenditure was capitalized in an amount of SKr 210 million (190). Cash

flow after investments totaled SKr 196 million (269). Cash flow from

financing operations was SKr -151 million (-164). Loans from credit

institutions increased by SKr 36 million during the year (decreased by

67).

Cash and cash equivalents on December 31, 2015 totaled

SKr 533 million (489). The Group’s net liquidity position at year end,

excluding pension liabilities, amounted to SKr 361 million (359). Cash

and unutilized credit totaled SKr 936 million (859). External financing

amounted to SKr 172 million (130).

During the year, the Company distributed a dividend of

SKr 111 million (89). The Company bought back own shares for an

amount of SKr 69 million as well as warrants for an amount of

SKr 10 million (11).

IFS SHARE

The Parent Company is listed on the Nasdaq Stockholm Mid-Cap list. The

number of shareholders on December 31, 2015 was 4,252. The number

of shares on December 31, 2015 was 24,971,830, of which 1,029,341

were A shares, carrying the right to 1.0 vote per share, and 23,942,489

were B shares, carrying the right to 0.1 vote per share. On December 31,

2015, the Company held 426,600 B shares in its own custody.

There is no limit to the number of votes a stockholder may cast at

the AGM. The Company is not aware of any agreements between

stockholders that limit the right to transfer shares.

The Company’s pension trust does not exercise direct ownership of

company stock. One stockholder, through direct or indirect holdings in

the Company, represented at year end at least one tenth of the voting

rights of the total number of shares, namely EQT.

One of the company’s loan agreements may be affected if a change

in the control of the Company occurs. After the change in ownership

published November 30, 2015, the lender announced that it reserved

the right to cancel the facility with no less than five working days’ notice.

At year-end, the Company was party to an agreement entered into in

2015 with financial advisers, under which a fee was to be paid in the

event of changes in the control of the Company. In early 2016, IFS was

billed a final invoice of SKr 27 million as a result of this agreement. The

amount has been expensed in the 2015 financial statements.

Mandatory cash offer by EQT

On December 7, EQT, through IGT Holding, announced a mandatory cash

offer to the shareholders in IFS to acquire all outstanding A- and B-shares

in IFS at a price of SEK 362.50 per share, regardless of share class. On

December 17, the board of directors of IFS* unanimously recommended

the shareholders to accept this offer. On February 9, 2016, IGT Holding

owned 83.8 percent of the capital and 87.4 percent of the votes in the

company.



GUIDELINES FOR THE REMUNERATION OF MEMBERS OF THE BOARD

AND EXECUTIVE MANAGEMENT

Directors’ fees are paid to the chairman and the other directors of the

board as resolved by the AGM. For 2015/2016, director’s fees totaled

SKr 3.425 million, of which the chairman of the board received an

amount of SKr 1.4 million and each of the other directors received an

amount of SKr 375 000. The chief executive officer was not

remunerated for work on the board. Remuneration for work on the audit

committee was unchanged from the previous year: the chairman

received SKr 100,000 and another director received SKr 50,000.

In accordance with the guidelines adopted by the AGM of 2015, the

remuneration of the CEO and other members of executive management

consists of basic salary, variable remuneration, other benefits, and

pension contributions. For the CEO, the maximum variable remuneration

shall not exceed 50 percent of the basic salary, and for the other

members of executive management variable remuneration shall be

payable in the interval 25–60 percent of the basic salary, based on

achievement of 80–120 percent of individual goals. The AGM of 2015

resolved to establish an incentive program whereby the Company

offered executive management and other key personnel the opportunity

to acquire warrants in the Company. The acquisition of one warrant at

market price carried the right, subject to certain terms and performance

conditions, to receive up to three additional warrants at no charge.

In 2015, the CEO received a basic annual salary of £ 373,320 and

a premium-based pension with a premium corresponding to

20.0 percent of the basic salary. For 2015, variable remuneration to the

CEO has been linked to Group adjusted EBITDA and will be payable in

the amount of £ 74,664. For further information, see Note 14.

INCENTIVE PROGRAM

In accordance with the resolution of the AGM of 2015, IFS issued during

the year warrants that were offered to, and acquired by, executive

management, other officers, and other key employees of the Group. For

each warrant acquired at market price and subject to certain conditions,

the participants were entitled to receive a maximum of three additional

warrants free of charge.

The allotment of additional warrants free of charge has been

dependent on the outcome of a performance condition linked to the

company’s earnings-per-share (EPS) target for 2015 (SKr 10.16), under

which a target completion rate of 85 percent would result in one (1),

100 percent in two (2), and 115 percent in three (3) additional warrants

free of charge. The outcome of the 2015 EPS, adjusted for non-recurring

effects that have impacted the income statement in connection with the

new majority owner, has been established to SKr 10.91, corresponding

to a target completion rate of 107 percent and meaning that the

participants in the program will be allotted two additional warrants free

of charge for each warrant they have acquired at market price.

The warrants can be exercised for subscription of B shares no later

than June 2020. The strike price is SKr 309.40 per share. The warrants

refer to a maximum of 179,430 B shares.

During the year, the Company bought back a number of warrants

from programs TO9B and TO10B.

17

RESOLUTION CONCERNING GUIDELINES FOR THE REMUNERATION OF

EXECUTIVE MANAGEMENT

The board proposes that the AGM of 2016 resolve that the following

guidelines for remuneration of the president and other members of

executive management be applied. The Board strives for continuity and

the proposals are thus essentially in line with the current guidelines and

remuneration policy approved by the AGM 2015. The guidelines deal

with remuneration and other terms and conditions of employment of the

executive management of the Group, including its chief executive officer

(CEO).

The principles apply to employment contracts entered into after the

resolution is adopted by the AGM and to changes made to existing terms

and conditions after this point in time.

Remuneration to the executive management in IFS shall be aligned

with market terms and conditions, shall be individual and differentiated,

and shall support the interests of the stockholders. Remuneration

principles shall be predictable, both in terms of costs for the company

and benefits for the individual, and shall be based on factors such as

competence, experience, responsibility and performance.

Total remuneration paid to executive management shall consist of

a basic salary, variable remuneration, an incentive program, pension

contributions, and other benefits.

The total annual monetary remuneration paid to each member of

executive management, i.e., basic salary and variable remuneration,

shall correspond to a competitive level of remuneration in the respective

executive's country of residence.

Variable remuneration shall be linked to predetermined measurable

criteria designed to promote long-term value generation in the company.

The relationship between basic salary and variable remuneration shall

be proportionate to the executive’s responsibility and powers. Variable

remuneration varies according to position. For 2016, it is proposed that

the guidelines for the variable remuneration payable to the executive

management be unchanged from the previous year. For the CEO this

means that the maximum variable remuneration shall not exceed

50 percent of the basic salary, and for the other members of executive

management variable remuneration shall be payable in the interval

25–60 percent of the basic salary, based on achievement of

80–120 percent of individual goals.

Regarding the issue of long-term incentive programs, in light of the

large ownership change that has taken place and the fact that a new

board will be appointed at the forthcoming AGM, the board has decided

not to propose any new incentive program to thereby give the new board

the freedom to design the company’s strategy in this question. For

information on IFS’s other equity-related incentive programs, see

Note 34.

Pension benefits shall correspond to a competitive level in the

respective executive’s country of residence and shall, as in previous

years, consist of a premium-based pension plan. The CEO is entitled to

a premium-based pension plan with a premium that is 20 percent of the

basic salary. The retirement age for the CEO and other members of

executive management is 65, but the CEO and the company are entitled

to invoke the right to early retirement for the CEO at the age of 64. In

such a case, the CEO shall receive the equivalent of 60 percent of the

basic salary until he is 65. Furthermore, the CEO’s retirement should not

affect the warrants acquired by him in the framework of the adopted

incentive programs.

Other benefits are chiefly related to company cars and telephones

and shall, where they exist, constitute a limited portion of the

remuneration and be competitive in the local market.

If the company terminates the employment, the period of notice is

normally 6–12 months; if the executive terminates the employment, the

period of notice is normally 3–6 months. The basic salary during the

period of notice, together with severance pay, shall not exceed an

amount corresponding to two years’ basic salary.

The board of directors shall have the right to deviate from the above

guidelines in individual cases if there is good reason to do so. In such an

event, the board shall inform the immediately following AGM and explain

the reason for the deviation.

STOCK MARKET INFORMATION, ETC.

IFS issues information in accordance with the information policy

established by the board. The annual and quarterly reports and press

releases are published in Swedish and English. Press conferences for

analysts, brokers, and journalists are typically held in connection with

the quarterly reports, based on expected interest. Information sessions

and meetings are held regularly during the year with the media and the

financial market.

Corporate governance information, annual and quarterly reports,

and press releases are available at www.ifsworld.com, where

information can be ordered or subscribed for. The annual report for

2015 will be distributed in a corresponding manner, and not in printed

form.

The board, executive management, and certain other officers who

are registered as insiders may trade in shares according to applicable

legislation and current market praxis. No additional internal regulations

exist.

FINANCIAL-RISK MANAGEMENT

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

currency, financing and interest rates. Such risks and their management

are described in note 46 and in the section covering risks and

uncertainties below.

ACCOUNTING PRINCIPLES

The Group applies the IFRS accounting principles approved by the

European Commission. The new standards, recommendations, and

interpretations that are adjudged to affect the Group were applied when

preparing the financial statements for 2015.

SOCIAL RESPONSIBILITY

IFS operates in a distinctly low-risk industry in terms of the direct impact

of its activities on people and the environment. This applies to the entire

value chain, including product development, for which IFS’s largest unit

is located in Sri Lanka. In addition, the Company has efficient

information distribution through its intranet, where all employees have

access to policies and guidelines pertaining to sustainability, including

environmental impact, gender equality, diversity, work environment, and

the values of the Company and employees in relation to colleagues and

customers.

Group management has adopted and published the IFS Code of

Conduct, which is based on the ten principles of the U.N. Global Compact

embracing human rights, labor rights, the environment and anti-

corruption. In addition, corporate management has adopted and

published an environmental policy.

A number of Group-wide processes, tools, and guidelines related to

personnel were implemented during the year. For Group-wide processes,

targets are established and the outcome is monitored on a regular basis.

Continuous actions are taken to improve the Company’s

psychosocial environment. In most countries, discussions are held

annually with all employees. Those who choose to leave IFS are

interviewed, and their reasons for departing are compiled to increase

employees’ job satisfaction and reduce personnel turnover. Absence

related to illness was 4.3 days annually per Group employee and

personnel turnover was 4.9 percent in 2015.

In 2015, the percentage of female employees was 31 percent. The

percentage of female members on the Company’s boards was

21 percent, and the percentage of female senior managers was

18

23 percent. The share of female members on the Parent Company’s

board of directors was 43 percent. The lower percentage of women in

the Company is a frequently occurring phenomenon in the software

industry as a whole.

Diversity is encouraged through exchange programs that contribute

to exposure to other cultures. The Company believes that an

understanding of other cultures is necessary to conduct business

effectively, because both IFS and the majority of its customers are active

throughout the world.

IFS’s largest research and development center is located in Sri

Lanka. At the center, a comprehensive corporate social responsibility

project comprising support to schools and universities has been

operating for 10 years. Investments were increased after the 2004

tsunami disaster, and since then, more than 700 stipends have been

distributed. IFS also strives to attain leadership in Sri Lanka with respect

to salaries and other benefits. The Company actively works to promote

equality regardless of gender, ethnicity, religion, or sexual orientation.

IFS has a low environmental risk. The Group’s most extensive

environmental impact is energy consumption from its companies’

premises, business travel, purchasing of office material and handling of

used hardware. IFS’s goal is to conduct business in an environmentally

responsible manner. All employees are encouraged to respect the

environment and strive to work with sustainability issues such as

recycling and energy efficiency when possible. The Company fulfills its

commitments by:

complying with environmental legislation,

conducting business in an environmentally sound manner,

increasing the extent of recycling, using recycling deposit systems

and reducing the consumption of resources when possible,

minimizing business travel by using online conferencing and

videoconferencing,

using an IT structure that allows employees to work from home to

minimize travel to work,

continuously pursuing efforts to reduce environmental impact.

Corporate Social Responsibility (CSR) is becoming increasingly

important in the global marketplace—both in terms of mitigating risks

associated with legal compliance as well as enhancing business insight

to boost profitability. IFS’s unique ERP offering includes a broad variety

of solutions for efficient reporting and enhanced control in the field of

CSR and non-financial reporting. The solutions are fully integrated with

IFS Applications to promote user productivity and reduce time spent on

non-value-adding administration and thereby cut costs. Through its Eco-

footprint Management component, IFS Applications can be used to

manage much of the information required for a company to monitor its

sustainability issues, report its environmental impact, and comply with

legislation and regulations in respect of environmental issues. IFS is

working intensively on product development to further improve

functionality in this regard.

RISKS AND UNCERTAINTIES

In its operations, IFS is confronted with certain risk elements that can to

a greater or lesser extent have an impact on operational outcome. One

such risk is the rapid technological development in the industry, which

could create the need for substantial technology changes. A further

cause of uncertainty is the ability to attract and retain critical personnel

resources, especially in a labor market in which the demand for and cost

of attractive personnel are increasing. In addition to the above risks, IFS

in its business is exposed to other operational and legal risks and

uncertainties, including in customer projects, dependence on certain

suppliers and partners, the outcome of actual and possible disputes,

and currency exposure.

IFS, through its use of component technology and by establishing

internal processes and procedures, believes that it has addressed such

risks and taken measures to reduce and control them as far as possible.

As the Parent Company does not engage in operational activities, its risk

is limited above all to financing, foreign currency, liquidity, guarantees,

and possible disputes.

OUTLOOK

Despite caution among buyers due to the prevailing macroeconomic

environment, the gradual improvement of the buying environment seen

in recent years continued. Based on preliminary figures, the ERP market

as a whole grew by around 7 percent in 2015. Demand in North America,

Western Europe, and Asia Pacific (excluding China) remains steady; the

buying environment’s positive trajectory leads industry analyst firms

such as Gartner to anticipate the ERP market to maintain this rather

moderate overall growth rate in 2016. During the year, IFS will continue

to build on its successes and strengthen its recognition as the intelligent

choice for global businesses. The Company will continue to work on

strengthening its brand, develop its partner ecosystem, and grow its

pipeline. For 2016, IFS expects to see continued positive development

and further improvements to its strengths.

ADDITIONAL INFORMATION

IFS is involved in a minor number of disputes and claims, which can be

considered normal given the nature of its operation. The Company

assesses that no provisions are necessary, but its result and liquidity

may be affected by the outcome of such disputes.

As reported previously, IFS has in addition been involved in a legal

dispute that was instituted in Sri Lankan courts in 2002 by the other

major shareholder of the partly-owned company IFS Sri Lanka. Following

dismissal of the case by the local court in 2008 and ensuing arbitration

proceedings in Singapore, the dispute was finally decided in a Final

Award issued in June 2014. Confirming IFS’s position that the

counterparty’s allegations were completely unfounded, the Final Award

rejected the counterparty’s claims, declared that IFS had not committed

any of the alleged contract breaches, and awarded IFS compensation

from the counterparty for legal costs. The Final Award has gained full

legal force.

During 2015, IFS received notice that the counterparty had

requested a leave for a legal action in Sri Lankan courts that entailed a

reexamination of the merits of the case. It is IFS’s unequivocal position

that the case has been finally settled by the Final Award and that there

are no grounds whatsoever for any leave to be granted by the court.

PARENT COMPANY

Parent Company, Industrial and Financial Systems, IFS AB, operations

include certain corporate management and finance functions as well as

the management of stockholdings for subsidiaries. In 2015, net revenue

amounted to SKr 28 million (19), with earnings before tax of


During the year, 226,600 B shares were bought back to a value of

SKr 69 million. At the end of the year, the Company held

426,600 B shares in own custody. The Parent Company did not make

any investments in equipment during the year. On December 31, 2015,

liquidity, including unutilized credit, amounted to SKr 628 million (587),

and Company debt was SKr 172 million (130), of which SKr 172 million

(130) was from credit institutions and SKr 0 million (0) was related to

intra-Group borrowing.

In 2015, stockholders’ equity in the Parent Company increased by

SKr 15 million to SKr 1,563 million, of which unrestricted stockholders’

equity accounted for SKr 491 million (476). The change is mainly

attributable to the net earnings, which were affected by a reversal of

SKr 200 million of previously recognized impairment of shares in the U.S.

subsidiary, and a distributed dividend of SKr 111 million. At year-end,

the Parent Company had 3 (3) employees.

19

PROPOSED DISPOSITION OF PROFITS

The board of directors and the president propose that the earnings of

the parent company available for disposition, SKr 491 million, be

allocated as follows:

Dividend to stockholders -

Carried forward SKr 490,836 thousand

Total SKr 490,836 thousand

STATEMENT BY THE BOARD OF DIRECTORS CONCERNING THE

PROPOSED DIVIDEND

In view of the recent major ownership change and as a new board will

be appointed at the forthcoming annual general meeting, the board has

decided not to propose any dividend for the fiscal year 2015 in order to

provide the new board with the freedom to outline the company’s

strategy and assess the company’s capital requirements. The board is

therefore of the opinion that a dividend under these circumstances

would not be justifiable in view of the requirements that may be imposed

by the nature, extent, and risks associated with doing business as

regards the size of the equity of the company and considering the need

of the company to strengthen its balance sheet, liquidity, and financial

position in general.

The Company’s liquidity forecast entails preparation to handle

variations in the current payment obligations. The Company’s financial

position does not indicate any assessment other than that the Company

can continue to do business and that it can be expected to fulfill its short-

term and long-term commitments. The board’s assessment is that the

extent of the equity as reported in the most recently issued annual report

is in reasonable proportion to the extent of the Company’s operations

and the risks associated with conducting them.

Corporate Governance Report

Industrial and Financial Systems, IFS AB (publ.) (hereafter “IFS”) is a

public Swedish stock corporation listed on the Nasdaq Stockholm. The

Company is the parent company of the IFS Group. IFS corporate

governance is based on legislation, where applicable, primarily the

Swedish Companies Act, the Swedish Code of Corporate Governance,

the regulations of the Nasdaq Stockholm Nordic Exchange for issuers,

and other rules, ordinances, and recommendations that might apply. IFS

follows developments in the field of corporate governance, continuously

adapting its corporate governance principles so as to generate value for

its owners and other interested parties by providing timely information,

real owner influence, and efficient working procedures on the part of the

management and board of directors.

APPLICATION OF THE SWEDISH CODE OF CORPORATE GOVERNANCE

This report, which has been submitted in accordance with the

regulations for the Swedish Code of Corporate Governance, is the IFS

corporate governance report for fiscal 2015 and reports on how

corporate governance was conducted during that year. The report has

been subject to a statutory review by the auditors.

Deviation from the Swedish Code of Corporate Governance and

infringements

IFS has followed the Swedish Code of Corporate Governance in all

respects apart from section 7.2 (concerning the composition of the audit

committee), see further details under Nomination Committee. During

2015, IFS has not infringed Nasdaq Stockholm regulations for issuers or

been in breach of good practice on the securities market as resolved by

the disciplinary committee of exchange or reported by the Swedish

Securities Council.

STOCKHOLDER INFLUENCE—THE GENERAL MEETING OF

SHAREHOLDERS AND ITS RIGHT TO MAKE DECISIONS

Rules applying to the general meeting

According to the Swedish Companies Act, the general meeting of

shareholders is the highest decision-making body in a company. At the

general meeting, stockholders exercise their right to vote. IFS has issued

two categories of shares: A shares, which according to the articles of

association entitles holders to one vote per share at the general

meeting; and B shares, which entitle holders to 0.1 votes per share. All

stockholders who are registered in the stock register on the record day

and who have registered their intent to participate in time are entitled to

attend the general meeting and vote in accordance with their total

stockholding. Stockholders who are unable to attend in person may

participate through a proxy.

Resolutions at the general meeting are usually adopted by a simple

majority vote, except in cases where the Swedish Companies Act

requires a higher proportion of the shares represented and votes cast at

the general meeting. Resolutions adopted by the general meeting are

published after the general meeting in a press release, and the minutes

of the general meeting are published on the Company website.

The general meeting resolves, among other things, on the adoption

of the Company’s annual report, the disposition of the Company’s profit

or loss, and on discharge from liability for the board of directors and the

chief executive officer. The general meeting also appoints board

directors and auditors, and resolves in respect of establishing a

nomination committee. It also determines the fees paid to board

directors and auditors in addition to guidelines for determining salary

20

and other remuneration for the CEO and other members of executive

management.

The Annual General Meeting (AGM) shall be held in Linköping or

Stockholm within six months after the close of the fiscal year. Notice to

attend the AGM reflects the simplified general meeting notification

procedure pursuant to the rules of the Swedish Companies Act, through

publication in the Swedish Official Gazette and on the Company website.

At the same time, information to that effect is advertised in Svenska

Dagbladet.

Annual general meeting 2015

IFS’s Annual General Meeting (AGM) for 2015 was held in the IFS office,

Lindhagensgatan 116, in Stockholm on March 25, 2015. A total of

106 stockholders, including proxies, participated in the meeting,

representing 68.1 percent of the votes and 66.1 percent of the capital.

The board of directors and management of IFS, and the Company’s

auditor, were present at the meeting.

Resolutions adopted at the AGM 2015 concerned, among other

things, the composition of the board of directors and auditor, fees paid

to board directors and auditors, principles guiding the remuneration of

executive management, the incentive program, and the establishment

of a nomination committee. Moreover, a resolution to issue a dividend

of SKr 4.50 per share was adopted. The AGM also resolved to re-

authorize the board of directors to repurchase during the period up to

the coming AGM Series-B shares on the Nasdaq Stockholm in

accordance with the rules of the stock exchange in such an amount that

does not exceed 10 percent of the total number of shares in the

Company, at a share price within the registered share price interval on

each occasion, i.e. between the highest buying price and the lowest

selling price.

The minutes of the AGM can be downloaded from the Company

website as can all proposals for resolution and other documentation.

Annual general meeting 2016

The Annual General Meeting for 2016 will be held in the IFS office,

Lindhagensgatan 116, in Stockholm on March 14, 2016 at 09:00 a.m.

Notification of the AGM has been published in the Swedish Official

Gazette and on the Company website on February 15, 2016. On the

same day information to that effect has also been advertised in Svenska

Dagbladet. Other information about the AGM will be published on the

Company website.

Ownership changes

On December 7, 2015, following the acquisition of the shares held by

the main owner and other larger shareholders in IFS, EQT, through IGT

Holding, announced a mandatory cash offer to the shareholders to

acquire all outstanding shares. At the time of writing, IGT Holding owned

83.8 percent of the capital and 87.4 percent of the votes in the

company. On December 17, 2015, the board of directors of IFS*

unanimously recommended the shareholders to accept this offer.

* Anders Böös, chairman of the board, and Bengt Nilsson, vice-chairman of the


NOMINATION COMMITTEE

The election of the board of directors and auditors and related matters

is prepared by the IFS nomination committee, which is appointed in

accordance with guidelines resolved by the AGM. Pursuant to the

guidelines adopted by the AGM 2015 the nomination committee shall,

in addition to the chairman of the board, consist of a representative of

the principal owner, one representative of each of the two largest

institutional owners, and a representative of other stockholders, who is

selected from the founders. The representative of IFS’s principal owners

convenes and is the chairman of the nomination committee.

Nomination committee members for the AGM 2016

The nomination committee for the AGM 2016, whose composition was

based on the ownership position on August 31, 2015, consisted of the

following members:

Gustaf Douglas, Chairman, representing the Company’s principal

owners, the Douglas family and Förvaltnings AB Wasatornet

Lars Bergkvist, Lannebo Fonder

Ulf Strömsten, Catella Fonder

Bengt Nilsson, for the founders

Anders Böös, chairman of the board of IFS

At the time the composition was announced, September 23, 2015, the

nomination committee represented approximately 55 percent of the

votes in IFS. As a result of the recent change in ownership, the conditions

for the nomination committee have substantially changed, meaning that

the new ownership structure cannot be meaningfully reflected in a

nomination committee composed according to the principles adopted by

the AGM. The company's new principal owner has therefore declared

that, for the forthcoming AGM, it intends to prepare the proposals that

would normally have been the mandate of the nomination committee.

The proposals are at the time of this Corporate Governance Report being

prepared and will be presented later when finalized, however no later

than at the AGM.

The members are not remunerated for their work on the nomination

committee.

BOARD OF DIRECTORS

The board consists of seven members, without deputies, elected by the

AGM. With the exception of Alastair Sorbie, the president and CEO of IFS,

none of the members of the board is employed by IFS. The average age

of the members is 57, and three are women. Information about the

independence of board members follows below.

The members of the board

At the AGM 2015, all board members were re-elected, and Gunilla

Carlsson was elected, to the board. In addition to the board members,

other participants at the board meetings are the Group’s CFO Paul

Smith, Fredrik vom Hofe, vice president Business Development, and

Jesper Alwall, general counsel and secretary of the board of directors.

Other salaried employees of the Group participate in the board meetings

as representatives of specific issues when applicable.

The proposals for election of board members and related matters

for the AGM 2016 are at the time of this Corporate Governance Report

being prepared and will be presented later when finalized, however no

later than at the AGM.

Independence of the board of directors

The assessment of the nomination committee, which is shared by the

board of directors, pertaining to the independence of board members in

relation to the Company, executive management and stockholders, is

indicated in the table below. As shown in the table, IFS complies with the

independency regulations of the Swedish Code of Corporate

Governance.

21

Name Position Elected Independence Audit

committee

Number of

series A shares*

Number of

series B shares*

Total number

of shares*

Anders Böös Chairman 2003 Yes** - - - -

Bengt Nilsson Vice-chairman 1983 Yes - - - -

Gunilla Carlsson Member 2015 Yes - - - -

Ulrika Hagdahl Member 2003 Yes Chairman - - -

Birgitta Klasén Member 2009 Yes - - 11,000 11,000

Neil Masom Member 2009 Yes Member - - -

Alastair Sorbie Member 2006 No** - - 8,526 8,526

* Ownership per December 31, 2015.

** Until his transfer of shares to EQT, Anders Böös controlled more than 10 percent of the votes in the Company and was thereby considered dependent in relation to the

Company’s major owner, but independent in relation to the Company and the executive management. Following the transfer, he is independent in relation to both the

Company and the major shareholders. Alastair Sorbie is dependent in relation to the Company as a result of his position as president and CEO of IFS.

The board of directors’ work

The work of the board of directors is conducted in accordance with the

requirements of the Swedish Companies Act, the regulations of the

Nasdaq Stockholm, the Swedish Code of Corporate Governance, other

rules and regulations relevant to the Company, and operating

procedures adopted by the board. Specific instructions regulate the

division of tasks between the board and its committees, and between

the board and the CEO, the forms of financial reporting, instructions to

board committees, and the CEO's assignments and right to make

decisions. Furthermore, the board establishes a finance policy that

regulates risk related to financing, interest, liquidity, credit, and

currency, an information policy that regulates the way in which IFS

disseminates information, and guidelines to govern the Company’s

conduct in society. The operating procedures of the board, related

instructions and the information policy are reviewed annually. Other

instructions and guidelines are reviewed as required.

In accordance with the current operating procedures, the board

shall meet at least six times per year (in addition to the statutory meeting

held after the AGM). Each ordinary meeting addresses issues related to

business and market development, adherence to the business plan and

earnings, cash flow and financing, the current outlook, and acquisitions,

divestment and pledged guarantees. One board meeting is dedicated

mainly to strategic issues, and one is dedicated to the business plan and

budget.

The chairman of the board leads the board’s work and is responsible

for ensuring that other board members receive the necessary

documentation for high- quality discussions and decisions, and for

continuously updating and deepening their knowledge of the Company.

In addition, the chairman monitors operations in dialog with the CEO and

ensures that board decisions are executed. The chairman is also

responsible for evaluating the work of the board and ensuring that the

nominations committee gains access to this evaluation. Furthermore,

the chairman also participates in assessment and development issues

pertaining to the executive management and other officers of the Group.

The chairman represents the Company in ownership issues.

In 2015, the board met 11 times (three of which were held by phone)

in addition to the statutory meeting after the AGM. In addition, two

meeting were held to handle the board’s recommendation regarding

EQT’s mandatory cash offer, at which Anders Böös, chairman of the

board, and Bengt Nilsson, vice-chairman of the board, did not

participate. In Anders Böös’ and Bengt Nilsson’s absence the board’s

work was led by Ulrika Hagdahl.

In addition to the ordinary items on its agenda, the work of the board

in 2015 focused on managing IFS’s growth, profitability, strategic

position, and development of the Company’s partner ecosystem. During

the year, regional managers and other officers, according to a rolling

schedule, presented and discussed their areas of responsibility with the

board. Minutes are taken of each board meeting and are normally made

available to directors pursuant to the stipulations of the Swedish Code

of Corporate Governance.

An important part of the board’s work relates to ensuring that the

Company has good internal controls and that the Company has

formalized routines to ensure that approved principles for financial

reporting and internal controls are applied, and that the Company’s

financial reports are produced in accordance with legislation, applicable

accounting standards and other requirements for listed companies. This

is further described below.

In 2015, in accordance with the Swedish Code of Corporate

Governance, the board submitted the nine-month report for review by

the auditors, and on two occasions during the year met the auditors

when neither the CEO nor any other member of executive management

was present.

The work of the board in 2015 was evaluated both in writing and

orally within the board and has also been treated at a plenary session of

the board in December 2015 on the basis of an agenda established in

advance in accordance with a structured, systematic process. Relevant

parts of the result of the evaluation have been reported to the

nomination committee. No external evaluation of the board was

conducted during the year. In addition, the work of the CEO has been

continuously evaluated, in particular at board meetings at which no

members of the executive management were present.

The chairman of the board and other board members, with the

exception of the CEO, are remunerated for work on the board in

accordance with resolutions adopted by the AGM. The AGM 2015

resolved that directors’ fees of SKr 3.425 million be paid, of which

SKr 1.4 million was paid to the chairman of the board and SKr 375,000

was paid to each of the remaining board members, with the exception of

the CEO who receives no board remuneration. A fee of SKr 100 000 was

paid to the chairman and SKr 50 000 to other members of the audit

committee. All directors’ fees were unchanged from the previous year.

Board of directors’ attendance in 2015

Name Position Board

meeting

Audit

committee

Anders Böös Chairman 85% -

Bengt Nilsson Vice-chairman 85% -

Gunilla Carlsson Member 100% -

Ulrika Hagdahl Member 100% 100%

Birgitta Klasén Member 100% -

Neil Masom Member 100% 100%

Alastair Sorbie Member 100% -

* Anders Böös och Bengt Nilsson did not participate at the two meetings that dealt

with the board’s recommendation regarding EQT’s mandatory cash offer. In Anders

Böös’ and Bengt Nilsson’s absence the board’s work was led by Ulrika Hagdahl.

22

COMMITTEE WORK

Audit committee

To increase the efficiency of, and intensify, the work of the board, an

audit committee was established in April 2008. The audit committee is

normally convened in conjunction with ordinary board meetings. The

primary task of the committee is, in accordance with the instructions

established by the board, to ensure and follow-up compliance with the

established principles with respect to the financial reporting, the review

of the annual and consolidated accounts, and efficiency of internal

control and risk management, and that appropriate relations with the

board’s auditors are maintained with proper impartiality and

independence, in particular with regard to non-auditing services. The

audit committee is also responsible for managing the work of the

internal audit function that the board established during 2010, see

below for details, and assisting in preparation of proposal to the AGM for

election of auditors.

The audit committee is a preparatory entity. The outcome of the

audit committee’s work in the form of observations, recommendations

and proposals for decisions and actions is reported continuously to the

board, which takes any decisions made necessary by the audit

committee’s work. Minutes are kept of audit committee meetings and

are made available to the board.

In 2015/16, the audit committee comprised board members Ulrika

Hagdahl, chairman, and Neil Masom. Accordingly, the Company deviated

from section 7.2 of the Swedish Code of Corporate Governance, which

states that the Audit Committee shall comprise at least three board

members. However, the board, which appoints the committee members,

determined that these persons were the most suited to constitute the

Company’s Audit Committee for 2015/16, taking into account

experience, interest and competence. In doing so, the board has taken

into particular account the legal requirements of independence and

requisite competence in matters of accounting or auditing. The Group’s

CFO Paul Smith and General Counsel Jesper Alwall, who is also the

secretary of the audit committee, participate in the audit committee’s

meetings. The Audit Committee met five times in 2015, and all members

were present at the meetings. IFS’s external auditors participated in two

of the audit committee’s meetings.

Remuneration committee

The board has decided not to appoint a separate remuneration

committee. Remuneration of the CEO is determined by the board, as are

the principles and earnings targets for variable remuneration of the CEO

and officers reporting to the CEO. The CEO does not participate in

decisions regarding his/her remuneration. Other remuneration of

officers reporting to the CEO is determined in consultation with the

chairman of the board, and information is subsequently provided to the

other members of the board.

The board continuously monitors and evaluates both the execution

of the guidelines determined by the AGM for remuneration of executive

management and prevailing remuneration structures and remuneration

levels in the Company, and the ongoing and completed programs for

variable remuneration in the Company. In accordance with the

regulations of the Code of Corporate Governance, a report on the

findings of this evaluation is publicized on the Company website no later

than three weeks before the AGM.

The Company website also contains a more detailed account of

current guidelines for remuneration of executive management and of the

outstanding incentive programs adopted by the board.

THE CEO AND EXECUTIVE MANAGEMENT

The CEO is appointed by the board and is responsible, according to the

Swedish Companies Act, the Operating Procedures of the Board and the

Instruction to the CEO for the day-to-day management of the business of

the Company and Group. The CEO leads the work of executive

management and takes decisions in consultation with other members

of management. In addition to the CEO, these comprise the Company’s

CFO, the Vice President of Business Development and the general

counsel. Executive management participates in regular operational

reviews under the leadership of the CEO. The CEO is also responsible for

providing the board with the necessary background information and

documentation for its work, both before and between board meetings.

AUDITORS

IFS’s auditing company, reelected at the 2015 AGM for a statutory term

of one year, is PricewaterhouseCoopers AB (PwC). It is the responsibility

of the auditors to appoint an auditor in charge. Since fiscal 2012, PwC

has appointed Nicklas Kullberg as auditor in charge.

For the AGM 2016 it is proposed that PwC be re-elected for an

additional term of one year. Following the approval of the AGM, PwC has

appointed Nicklas Kullberg to remain as auditor in charge.

The task of the auditor is to scrutinize, on behalf of the stockholders,

the annual report and accounts, as well as the administration of the

board of directors and the CEO. The auditor in charge also presents an

audit report at the AGM. Stockholders are invited to question the auditor

at the AGM.

In addition to the audit, PwC, when required, undertake a number of

other assignments for IFS. These primarily pertain to audit-related

services such as a more detailed presentation in connection with the

audit as well as tax consultancy.

GUIDELINES FOR REMUNERATION OF EXECUTIVE MANAGEMENT

For 2015, the following guidelines established by the AGM concerning

remuneration and other terms and conditions of employment for the

CEO and other members of the executive management were applied.

Remuneration of executive management in IFS shall be aligned with

market terms and conditions, shall be individual and differentiated, and

shall support the interests of the stockholders. Remuneration principles

shall be predictable, both in terms of costs to the Company and benefits

for the individual, and shall be based on factors such as competence,

experience, responsibility and performance.

Total remuneration paid to executive management shall consist of

a basic salary, variable remuneration, an incentive program, pension

contributions, and other benefits.

The total annual monetary remuneration paid to each member of

executive management, i.e., basic salary and variable remuneration,

shall correspond to a competitive level of remuneration in the respective

executive's country of residence.

Variable remuneration shall be linked to predetermined measurable

criteria designed to promote long-term value generation in the Company.

The relationship between basic salary variable remuneration shall be

proportionate to the executive’s responsibility and powers. Variable

remuneration varies according to position. For 2015, variable

remuneration for the CEO was not permitted to exceed 50 percent of the

basic salary, and for the other members of executive management

variable remuneration was payable in the interval 25–60 percent of the

basic salary, based on achievement of 80–120 percent of individual

goals.

The AGM of 2015 resolved to adopt an incentive program for the

executive management and key personnel based on terms and

conditions consistent with the previous years’ programs.

The incentive program entails that the Company has offered

executive management and key personnel in the Group the opportunity

to subscribe for warrants in the Company valued at market price. To

stimulate participation in the program, the participants will be allotted,

subject to certain terms and conditions, up to three warrants free of

charge for each warrant acquired at market price. The number of

23

warrants that participants can be allotted free of charge is dependent

on the outcome of a performance condition linked to the Company’s

earnings-per-share target during 2015 as determined by the board. Each

warrant carries the right to acquire one Series-B share during the period

from publishing the interim report for the first quarter 2018 up to and

including June 30, 2020, at a subscription price corresponding to

110 percent of the volume-weighted average price paid for the

Company’s share on the Nasdaq Stockholm Exchange between April 23,

2015 and April 29, 2015.

Pension benefits shall correspond to a competitive level in the

respective executive’s country of residence and shall, as in previous

years, consist of a premium-based pension plan. The CEO is entitled to

a premium-based pension plan with a premium that is 20 percent of the

basic salary. The retirement age for the CEO and other members of

executive management is 65, but the CEO and the Company are entitled

to invoke the right to early retirement for the CEO at the age of 64. In

such a case, the CEO shall receive the equivalent of 60 percent of the

basic salary until he is 65.

Other benefits are chiefly related to company cars and telephones

and shall, where they exist, constitute a limited portion of the

remuneration and be competitive in the local market.

If the Company terminates the employment, the period of notice is

normally 6–12 months; if the executive terminates the employment, the

period of notice is normally 3–6 months. The basic salary during the

period of notice, together with severance pay, shall not exceed an

amount corresponding to two years’ basic salary.

The board of directors shall have the right to deviate from the above

guidelines in individual cases if there is good reason to do so. In such an

event, the board shall inform the immediately following AGM and explain

the reason for the deviation.

The principles apply to employment contracts entered into after the

resolution is adopted by the AGM and to changes made to existing terms

and conditions after this point in time.

INTERNAL CONTROL AND RISK MANAGEMENT PERTAINING TO

FINANCIAL REPORTING

A report on internal control pertaining to financial reporting for fiscal

2015 was prepared and submitted by the board in accordance with the

Swedish Code of Corporate Governance, the guidance developed by

FAR SRS and the Confederation of Swedish Enterprise, and the

instruction for 2007 issued by the Swedish Corporate Governance

Board.

The report describes how IFS’ internal control pertaining to financial

reporting is organized. Internal control pertaining to financial reporting

is a process that involves the board of directors, executive management

and other employees, and is designed to ensure reliability in the external

financial reporting. The internal control function can be divided into five

areas: the control environment, risk assessment, control activities,

information and communication, and monitoring. This are further

described below.

Control environment

IFS’s values form the basis for the control environment. Simplicity,

commitment, and a businesslike nature are the key concepts that are

the foundation for IFS’s work and interaction with customers, partners,

and employees. Attitudes and values are at least as important as

experience and competence, and IFS places great emphasis on ensuring

that its operations are characterized by openness, for example by

working for a strong cohesion and encouraging honest, open dialogue.

The internal control environment pertaining to financial reporting is

based on a clear division of roles and responsibility in the organization,

established and communicated decision-making procedures, and

instructions pertaining to authorization and responsibility. These are

documented and communicated in the form of instructions to the board,

guidelines, manuals, codes, and accounting and reporting instructions.

At the Group level, a well-defined Finance Manual is prepared and made

available to ensure correct, reconciled and standardized financial

reporting in all of the Group’s companies. Controls pertaining to correct

reporting occur first locally, then regionally and finally at the Group level.

Financial reporting is secured on these levels through continuous

analysis of detailed monthly accounts and through a hard-close process

that secures the quality of the annual financial statements well before

year-end.

Risk assessment

Executive management prepares an annual combined risk assessment

pertaining to the financial reporting, which is reviewed with the audit

committee. In the risk assessment, IFS has identified a number of

processes in which the relative risk of substantial errors is higher,

depending on the complexity in the process, or in which there is a risk

that the impacts of any errors will be significant because the value of the

transactions is high. These processes include, for example, procedures

for reporting license revenues and valuation of deferred tax and

disputes.

Control activities

The risk assessment results in a number of control activities. The

purpose of these activities is to prevent, detect and correct errors and

discrepancies. The control activities include analytical monitoring of

decisions, comparisons between income statement items, checklists

and automatic controls through IT systems. A differentiation of work

tasks is desirable so that different individuals carry out or check each

task. The essential control activities are documented and updated

continuously.

Information and communication

The Company has clear lines of communication and reporting, which

form the basis for internal monitoring and external financial reporting.

Manuals and guidelines that are significant for financial reporting are

updated and communicated continuously to the affected employees.

Executive management and the audit committee report regularly to the

board based on established procedures. For external communication,

guidelines have been established to ensure that the Company meets

strict requirements for correct information.

Monitoring

The board continuously evaluates information from executive

management and the audit committee. At each board meeting, the

Company’s financial position is reported. The audit committee

thoroughly reviews all interim and annual reports before publication. The

Company’s financial reporting process is evaluated annually by

executive management to ensure that it includes all essential areas that

affect financial reporting. As part of their audit, the accountants elected

by the AGM, PwC, also review a selection of IFS’s controls.

Recommendations from the external accounting are continuously

monitored by executive management and the audit committee. The

subsidiaries reported on a number of prioritized risk areas. The Company

applies a process in conjunction with the year-end financial statement in

which managing directors and financial managers of the subsidiaries

submit representation letters on essential information for the

accounting.

Internal audit

During 2010, the board established a separate internal audit function to

take responsibility for strengthening internal risk management,

monitoring and control, as well as processes. The internal audit’s tasks

include mapping and scrutinizing essential areas of risk, and providing

monitoring and specific scrutinizing and support input in selected areas.

24

The internal audit plans its work in collaboration with the audit

committee, executive management and the Company’s external

auditors; the results of actions taken are reported continuously to the

audit committee. During 2015, in addition to the continuous mapping of

risk areas within the Group, the work of the internal audit has primarily

been focused on implementing and following up minimum internal

control requirements to be observed locally by the IFS group companies.

The internal control requirements have been identified on the basis of

financial reporting and divided into separate processes depending on

materiality, risk for reporting errors, complexity, and risk for fraud etc.

25

CONSOLIDATED INCOME STATEMENT

SKr, million Note 2015 2014

License revenue 3 682 558

Maintenance and support revenue 4 1,174 1,037

Consulting revenue 1,524 1,427

Other net revenue 5 9 12

Net revenue 2 3,389 3,034

License expenses -36 -53

Maintenance and support expenses -299 -264

Consulting expenses -1,200 -1,149

Other net expenses -12 -12

Cost of revenue -1,547 -1,478

Gross earnings 1,842 1,556

Development expenditure 6 -333 -303

Sales and marketing expenses 7 -769 -635

Administration expenses -367 -312

Other revenue 8 3 4

Other expenses 9 -60 -35

Result from associated companies and joint venture 18 -2 -

Other operating expenses, net -1,528 -1,281

EBIT 11, 12, 13, 14, 15, 16 314 275

Other interest income and similar income 19 6 4

Interest costs and similar costs 20 -14 -21

Financial net -8 -17

Profit/loss before tax 306 258

Taxes 21 -92 -47

Profit/loss for the year 22 214 211

Profit/loss for the year is allocated as follows:

Parent Company stockholders (SKr million) 211 213

Non-controlling interests (SKr million) 3 -2

Profit/loss per share pertaining to Parent Company stockholders, before dilution

(SKr) 22 8.54 8.60

Profit/loss per share pertaining to Parent Company stockholders, after dilution (SKr) 22 8.37 8.45

Number of shares with deduction of shares in own custody (thousands)

On December 31 24,545 24,772

On December 31, after full dilution 25,071 25,177

Average for the period 24,706 24,772

Average for the period, after full dilution 25,207 25,202

26

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SKr, million Not 2015 2014

Earnings for the year 214 211

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation of defined-benefit pension plans 33 -100

Items that may be subsequently reclassified to profit or loss

Exchange rate differences -12 106

Other comprehensive income for the year, net of tax 21 6

Total comprehensive income for the year 235 217

Total comprehensive income allocated as follows:

Parent Company shareholders 232 219

Non-controlling interests 3 -2

27

CONSOLIDATED BALANCE SHEET—ASSETS

SKr, million Note Dec 31, 2015 Dec 31, 2014

Capitalized expenditure for product development 630 608

Goodwill 512 452

Other intangible fixed assets 99 84

Intangible fixed assets 23 1,241 1,144

Tangible fixed assets 24, 25 119 115

Participations in associated companies and joint venture 27 2 4

Deferred tax receivables 29 130 146

Other long-term receivables 30 25 28

Financial fixed assets 157 178

Fixed assets 1,517 1,437

Accounts receivable 31 777 790

Current tax receivable 47 50

Other receivables 32 259 262

Liquid assets 33 533 489

Current assets 1,616 1,591

Assets 3,133 3,028

CONSOLIDATED BALANCE SHEET—EQUITY AND LIABILITIES


Capital stock 499 499

Other capital contributed 692 694

Reserves - 12

Accumulated earnings, including profit/loss for the year 221 157

Stockholders' equity pertaining to Parent Company stockholders 1,412 1,362

Non-controlling interests 1 -2

Stockholders' equity 34 1,413 1,360

Liabilities to credit institutions 35, 36 0 0

Pension obligations 37 109 168

Deferred tax liabilities 29 33 10

Other provisions 38 3 4

Long-term liabilities 145 182

Accounts payable 104 127

Current tax liabilities 77 51


Other provisions 38 1 2

Other liabilities 39 1,221 1,176

Current liabilities 1,575 1,486

Liabilities 1,720 1,668

Stockholders' equity and liabilities 3,133 3,028

MEMORANDUM ITEMS

Pledged assets 41 23 903

Contingent liabilities 42 25 17

28

CONSOLIDATED CAPITAL ACCOUNT

SKr, million Note 34

Capital

stock

Other

contributed

capital

Reserves

Accumulated

earnings, incl.

profit/loss for

the year

Equity

pertaining to

shareholders

of the parent

company

Non-controlling

interests

Total

stockholders'

equity

Amount on January 1, 2014 499 701 -94 131 1,237 0 1,237

Revaluation of defined-benefit pension plans - - - -100 -100 - -100

Change in translation difference - - 106 - 106 - 106

Total changes in net wealth recognized in other

comprehensive income, excl. transactions with the

company's owners - - 106 -100 6 - 6

Profit/loss for the year - - - 213 213 -2 211

Total changes in net wealth, excl. transactions with the

company's owners - - 106 113 219 -2 217

Share-based payments - 4 - - 4 - 4

Repurchase of warrants - -11 - - -11 - -11

Dividend - - - -87 -87 - -87

Amount on December 31, 2014 499 694 12 157 1,362 -2 1,360

Revaluation of defined-benefit pension plans - - - 33 33 - 33

Change in translation difference - - -12 - -12 - -12

Total changes in net wealth recognized in other

comprehensive income, excl. transactions with the

company's owners - - -12 33 21 - 21

Profit/loss for the year - - - 211 211 3 214

Total changes in net wealth, excl. transactions with the

company's owners - - -12 244 232 3 235

Share-based payments - 8 - - 8 - 8

Repurchase of warrants - -10 - - -10 - -10

Repurchase of own shares - - - -69 -69 - -69

Dividend - - - -111 -111 - -111

Amount on December 31, 2015 499 692 0 221 1,412 1 1,413

29

CONSOLIDATED STATEMENT OF CASH FLOWS


CURRENT OPERATIONS

Profit/loss after net financial items 306 258

Adjustments for items not included in the cash flow, etc. 43 269 264

Interest paid -14 -13

Interest received 3 3

Income tax paid -20 -62

Cash flow from operations before change in working capital 544 450

CHANGE IN WORKING CAPITAL

Change in current receivables 15 -73

Change in current non-interest-bearing liabilities -13 124

Change in working capital 2 51

Cash flow from current operations 546 501

INVESTMENT OPERATIONS

Acquisition of subsidiaries 44 -111 -

Sale of subsidiaries - 0

Acquisition of intangible fixed assets -197 -192

Acquisition of tangible fixed assets 45 -40 -40

Change in long-term receivables -2 0

Cash flow from investment operations -350 -232

Cash flow after investment operations 196 269

FINANCING OPERATIONS

Repurchase of warrants -10 -11

Raising of loans from credit institutions 35 80 0

Amortization of liability to credit institutions 35 -44 -78

Dividend distributed -111 -87

Repurchase of own shares -69 -

Decrease in other long-term liabilities - -1

Increase in financial liabilities 2 12

Received premium fee for warrants 1 1

Cash flow from financing operations -151 -164

Cash flow for the year 45 105

LIQUID FUNDS

Liquid funds on January 1 489 354

Exchange rate differences in liquid funds -1 30

Liquid funds on December 31 33 533 489

30

INCOME STATEMENT OF THE PARENT COMPANY


Net revenue 5 28 19

Administration expenses -34 -33

Other costs -27 -

EBIT 10, 12, 13, 14, 15, 16 -33 -14

Result from participation in subsidiaries 17 199 118

Other interest income and similar income 19 50 58

Interest costs and similar costs 20 -10 -38

Profit/loss before tax 206 124

Tax on profit/loss for the year 21 -8 -14

Profit/loss for the year 198 110

STATEMENT OF COMPREHENSIVE INCOME OF THE PARENT COMPANY

SKr, million 2015 2014

Earnings for the year 198 110

Other comprehensive income - -

Other comprehensive income for the year - -

Total comprehensive income for the year 198 110

31

BALANCE SHEET OF THE PARENT COMPANY—ASSETS


FIXED ASSETS

Tangible fixed assets 24 0 0

Participations in subsidiaries 26 1,197 994

Receivables in subsidiaries 28 1 57

Deferred tax receivables 29 2 2

Other long-term receivables 30 2 2

Financial fixed assets 1,202 1,055

Fixed assets 1,202 1,055

CURRENT ASSETS

CURRENT RECEIVABLES

Receivables in subsidiaries 790 851

Other receivables 9 4

Prepaid expenses and accrued revenue 4 2

Current receivables 803 857

Cash and bank balances 33 225 217

Current assets 1,028 1,074

Assets 2,230 2,129

32

BALANCE SHEET OF THE PARENT COMPANY—EQUITY AND LIABILITIES


STOCKHOLDERS' EQUITY

RESTRICTED STOCKHOLDERS' EQUITY

Capital stock 499 499

Restricted reserves 573 573

Restricted stockholders' equity 1,072 1,072

UNRESTRICTED STOCKHOLDERS' EQUITY

Share premium reserve 115 118

Retained earnings 178 248

Profit/loss for the year 198 110

Unrestricted stockholders' equity 491 476

Stockholders' equity 34 1,563 1,548

PROVISIONS

Provisions for pensions and similar commitments 37 11 7

Provisions 11 7

CURRENT LIABILITIES


Accounts payable 18 18

Liabilities to subsidiaries 418 409

Other current liabilities 17 9

Accrued expenses and prepaid revenue 40 31 8

Current liabilities 656 574

Stockholders' equity, provisions, and liabilities 2,230 2,129

MEMORANDUM ITEMS

Pledged assets 41 - 983

Contingent liabilities 42 38 31

CAPITAL ACCOUNT OF THE PARENT COMPANY

RESTRICTED EQUITY UNRESTRICTED EQUITY Total

stockholders'

equity

SKr, million Note 34 Capital

stock

Reserve

fund

Total

Premium

fund

Earnings carried

forward

Total

Amount on January 1, 2014 499 573 1,072 126 335 461 1,533

Repurchase of warrants - - - -11 - -11 -11

Share-based payments - - - 3 - 3 3

Dividend - - - - -87 -87 -87

Profit/loss for the year - - - - 110 110 110

Amount on December 31, 2014 499 573 1,072 118 358 476 1,548

Repurchase of warrants - - 0 -10 - -10 -10

Share-based payments - - 0 7 - 7 7

Repurchase of own shares - - 0 - -69 -69 -69

Dividend - - 0 - -111 -111 -111

Profit/loss for the year - - 0 - 198 198 198

Amount on December 31, 2015 499 573 1,072 115 376 491 1,563

33

STATEMENT OF CASH FLOWS OF THE PARENT COMPANY


CURRENT OPERATIONS

Profit/loss after net financial items 206 124

Adjustments for items not included in the cash flow, etc. 43 -187 29

Interest paid -9 -8

Interest received 1 1

Revenue tax paid -1 0

Cash flow from operations before change in working capital 10 146

CHANGES IN WORKING CAPITAL

Change in current receivables -7 6

Change in current non-interest-bearing liabilities 24 5

Change in working capital 17 11

Cash flow from current operations 27 157

INVESTMENT OPERATIONS

Change in receivables in subsidiaries 127 -447

Change in liabilities to subsidiaries 9 530

Increase in other long-term receivables - 30

Decrease in other long-term receivables -1 -10

Cash flow from investment operations 135 103

Cash flow after investment operations 162 260

FINANCING OPERATIONS

Repurchase of warrants -10 -11

Raising of loans from credit institutions 35 80 -

Amortization of liability to credit institutions 35 -44 -78

Dividend distributed -111 -87

Repurchase of own shares -69 -

Increase in financial liabilities - 12

Cash flow from financing operations -154 -164

Cash flow for the year 8 96

LIQUID FUNDS

Liquid funds on January 1 217 121

Liquid funds on December 31 33 225 217

34

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING PRINCIPLES

GROUP ACCOUNTING PRINCIPLES

Registered office, etc.

Industrial and Financial Systems, IFS AB (publ.), corporate identity

number 556122-0996, has its registered office in Linköping, Sweden,

which is also corporate headquarters. The company’s address is

Teknikringen 5, SE-583 30 Linköping, Sweden.

IFS is a leading supplier of component-based enterprise

applications developed using open standards and service-oriented

architecture (SOA). By offering agile business solutions IFS improves its

customers’ ability to make correct decisions and more efficiently

manage their business.

Conformity with norms and legislation

The consolidated accounts have been prepared in accordance with the

International Financial Reporting Standards (IFRS) issued by the

International Accounting Standards Board (IASB), and the

interpretations issued by the International Financial Reporting

Interpretations Committee (IFRIC) as approved by the European

Commission for application within the European Union. Moreover, the

Swedish Annual Accounts Act and the Swedish Financial Accounting

Standards Council recommendation RFR 1, Supplemental Accounting

Regulations for Groups, have been applied.

The Parent Company has prepared its annual report in accordance

with the Swedish Annual Accounts Act and the Swedish Financial

Accounting Standards Council recommendation RFR 2, Reporting for

Legal Entities. The consolidated accounts have been prepared in

accordance with the acquisition cost method with the exception of

financial assets and liabilities valued at fair value.

The Parent Company applies the same accounting principles as the

Group, except in the cases detailed below in the section entitled “Parent

Company Accounting Principles.” The variations existing between Parent

Company and Group accounting principles are due to the limitations to

applying IFRS in the Parent Company as a result of the Swedish Annual

Accounts Act and the Swedish Act on Safeguarding of Pension

Commitments, and in certain cases for tax reasons.

The annual report and the consolidated accounts were approved for

release by the Board of Directors on February 22, 2016. The

consolidated income statement and balance sheet and the Parent

Company income statement and balance sheet will be presented for

adoption by the annual general meeting of stockholders on March 14,

2016. Unless otherwise stated below, the Group accounting principles

detailed below have been consistently applied throughout the periods

presented in the Group’s financial statements. Group accounting

principles have been consistently applied to the financial statements

and consolidation of the Parent Company, subsidiaries, associated

companies, and joint venture companies.

Functional currency and presentation currency

The functional currency is the currency in the primary financial

environments in which companies that are part of the Group conduct

their business. The companies included in the Group are the Parent

Company, subsidiaries, associated companies, and joint ventures.

The Parent Company’s functional currency is the Swedish krona

(SKr), which is also the presentation currency for the Parent Company

and the Group. Therefore the financial reports are presented in Swedish

krona. All amounts, unless otherwise stated, are rounded off to the

nearest million.

Estimates and critical assumptions in the financial reports

To present the financial reports in accordance with the IFRS, the

management and board of IFS must make certain estimates and

assumptions that affect the application of the accounting principles and

the reported amounts pertaining to assets and liabilities, revenue and

expenses. Actuals may differ from the estimates.

The estimates and assumptions are regularly reviewed. Changes in

estimates are reported in the period in which the change is made if the

change affects only that period, or in the period in which the change is

made and future periods if the change affects both the current and

future periods.

Assessments made by the management related to the application

of the IFRS that have a significant impact on the financial reports and

estimates that may entail significant adjustments in the financial reports

of subsequent years pertain to the following areas:

Revenue recognition. The Group uses the percentage of completion

method of accounting for fixed-price contracts for consulting

projects. The percentage of completion method requires the group

to estimate how much of the services already performed to date as

a proportion of the total services to be performed.

Valuation of bad debts. The Group applies a common model for the

valuation of bad debts. The model entails a write-down of debt

following a matrix in which the percentage write-down is higher the

older the debt is. If a debt is so bad that it is deemed unlikely that it

will ever be paid, the debt is written down by 100 percent regardless

of its age, on the basis of an individual assessment.

Valuation of goodwill and capitalized expenditure for product development.

Each year the Group conducts an impairment test to examine the

need to write-down goodwill, capitalized product development

expenditure and other intangible assets in accordance with Note 23.

The residual value for cash-generating entities has been established

by estimating value in use. To make such estimations, certain

assumptions must be made, see Note 23.

Income tax. Management makes assessments to determine current

tax liabilities and tax receivables, as well as provisions for deferred

tax liabilities and deferred tax receivables. This applies in particular

to the valuation of deferred tax receivables. This process requires

that an assessment be made of the tax outcome in each of the

countries in which the Group does business. The process includes

an assessment of exposure related to current tax and to determine

the temporary differences that arise because certain assets and

liabilities are valued differently in the accounts and in the income

tax returns. Management is also required to assess the probability

that deferred tax receivables can be realized via future taxable

revenue. For further information on deferred tax receivables and tax

liabilities, see Note 29.

Restructuring measures. When major reorganization programs are

launched, provisions are made for restructuring. For such provisions

to be made, a number of criteria must be fulfilled. Among other

things, a detailed formal plan of action must be made. When

provisions are made, the size of the cost of the program must be

assessed. Provisions for restructuring cover only the direct costs

arising from restructuring. The largest and most common item is

35

personnel-related expenses. For information on changes in the

restructuring reserve, see Note 38.

Provisions for pensions. The current value of pension obligations is

dependent on a number of factors that are established on an

actuarial basis with the help of a number of assumptions. Each

change in such assumptions will affect the reported value of the

pension obligations. See Note 37 for further information and a

sensitivity analysis.

Legal disputes. The Group continuously monitors substantial

outstanding disputes top determine the need to make provisions.

Disputes can vary in character, involving customers, suppliers etc.

the estimates made, however, do not necessarily reflect the

outcome of legal disputes, and the difference in outcomes and

estimates can substantially affect the company’s financial position.

For information on the disputes that IFS is involved in, see the Board

of director’s report and the section “Additional information”.

Business combinations. In connection with business combinations,

senior management makes certain assessments and estimates.

Estimates include, among other things, an assessment of the fair

value of the acquired assets and liabilities, and future cash flows.

Uncertainty implies for instance that actual cash flows may differ

from estimated future cash flows, which can lead to impairment

testing in later periods. After initial recognition, the need for

impairment is tested at least annually, or whenever there are

indications that the asset’s value has decreased. For further

information on acquisitions during the fiscal year, see Note 44.

Changes in accounting principles

None of the standards applied by the Group for the first time for the fiscal

year beginning on January 1, 2015 have had any material impact on the

Group’s earnings or position.

New IFRS and interpretations not yet applied

A number of new standards and interpretations have come into force for

the fiscal years beginning after January 1, 2015 and have not been pre-

adopted by the Group. Among the standards and interpretations that

have been published but have not yet come into force, the following have

been deemed to affect the Group.

IFRS 9 Financial Instruments treats the classification, evaluation and

reporting of financial liabilities and assets. The complete version of

IFRS 9 was issued in July 2014 for financial liabilities and replaces

the parts of IAS 39 that relate to classifying and evaluating financial

instruments. According to IFRS 9 financial assets are classified in

three categories: accrued acquisition value, fair value through other

total earnings or fair value through comprehensive income. The

classification is determined when the asset is first reported based

on the company’s business model and characteristic properties in

the contractual cash flows. Investments in own capital instruments

shall be recognized at fair value through comprehensive income. It

is, however, possible to recognize the instrument at fair value

through other total earnings the first time it is recognized. The

instrument will not be reclassified to comprehensive income when it

is divested. IFSR 9 also introduces a new model for estimating credit

loss reserves based on expected credit losses. For financial

liabilities, there is no change in classification and valuation except

when a liability is recognized at fair value through comprehensive

income based on the fair value alternative. Changes in valuation

pertaining to changes in own credit risk shall in such case be

recognized in other total earnings. IFRS 9 lowers the restrictions to

applying hedge accounting by replacing the 80-125 criterion with a

requirement that there be a financial relationship between the

hedging instrument and the item being hedged, and that the hedge

ratio be the same as that used in the economic hedge. Moreover,

hedging documentation is changed somewhat compared with that

required under IAS 39. The standard has not yet been adopted by

the EU. The standard shall be applied for the fiscal year beginning

on January 1, 2018. The Group has not yet assessed the effects of

implementing the standard.

IFRS 15 Revenue from Contracts with Customers specifies how revenue

shall be recognized. The principles on which IFRS is based aim to

provide users of financial reports more informative disclosures on a

company’s revenue. The expanded disclosure requirements entail

that information shall be provided about the nature, timing, and

uncertainties related to revenue recognition and cash flow

pertaining to a company’s customer contracts. According to IFRS 15,

revenue shall be recognized when the customer takes control of a

sold good or service and is able to use or benefit from the good or

service. IFRS 15 enters into force on January 1, 2018. The standard

has not been adopted by the EU. The Group has not yet assessed

the effects of implementing the standard.

IFRS 16 Leases, In January 2016, the IASB issued a new leasing

standard to replace IAS 17 Leases, and related interpretations,

IFRIC 4, SIC-15 and SIC-27. The standard required that assets and

liabilities pertaining to all leasing agreements, with a few

exemptions, be recognized in the balance sheet. Such recognition is

based on the view that the lessee obtains the right to use an asset

for a specific period of time and is liable to pay for this right. For the

lessor, recognition will remain essentially unchanged. The standard

is to be implemented for the fiscal year beginning on January 1,

2019 or later. Earlier implementation is permitted. The EU has not

yet adopted the standard. The Group has not yet assessed the

effects of implementing IFRS 16.

Segment reporting

The Group applies segment reporting that concurs with internal reporting

and which is presented to the chief operational decision-maker. The

chief operational decision-maker is the function responsible for

allocating resources and assessing the earnings of the operational

segments. . The chief operational decision-maker in the Group is senior

management. The primary basis for division is geographical region and

the following-up of their earnings.

Classifications, etc.

Tangible assets and long-term liabilities in the Parent Company and

Group consist in essence of sums that are expected to be recovered or

paid later than 12 months after the balance sheet date. Current assets

and current liabilities in the Parent Company and Group consist in

essence of sums that are expected to be recovered or paid within

12 months of the balance sheet date.

Consolidated accounting principles

Subsidiaries

Subsidiaries are all companies (including structured entities) in which

the Group has a controlling interest. The Group controls a company when

it is exposed to or is entitled to a variable dividend from its holding in the

company and can affect the dividend through its influence in the

company.

The purchase method is used to report on Group subsidiaries. The

consideration paid for acquiring a subsidiary consists of the fair value of

the transferred assets, liabilities and shares issued by the Group. The

consideration also includes the fair value of all assets or liabilities that

result from an agreement in respect of a contingent consideration.

Acquisition-related costs are expensed as they occur. Identifiable

acquired assets and assumed liabilities in a business combination are

initially valued at fair value on the acquisition date. For each acquisition

the Group determines whether the non-controlling interest in an

36

acquired company is valued at fair value or at the non-controlling

interest’s proportional share of the acquired company’s net assets.

The amount by which the consideration, non-controlling interests,

and fair value on acquisition date of previous holdings exceed the fair

value of the Group’s proportion of identifiable acquired assets is to be

reported as goodwill. If the amount is less than the fair value of the

acquired subsidiary’s assets, the difference is reported directly in the

comprehensive income.

The financial reports of subsidiaries are included in the consolidated

accounts as of the day the controlling interest is transferred to the

Group, i.e. on acquisition. They are excluded from the consolidated

accounts as of the day the controlling interest no longer exists.

Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as

transaction with stockholders. In acquisitions from non-controlling

interests, the difference between the consideration paid and the actual

acquired share of the reported value of the subsidiary’s net assets is

reported under stockholders’ equity. Profit and loss on divestments to

non-controlling interests is also reported under stockholders’ equity.

When the Group no longer has a controlling interest, each residual

holding is revalued at fair value and the change in reported value is

shown in the income statement. Fair value is used as the first reported

value and constitutes the basis for the continued reporting of the

residual holding as an associates company, joint venture or financial

asset. All amounts pertaining to the divested entity that were previously

reported under other comprehensive income are reported as if the

Group had directly divested the respective assets or liabilities. As a

result, amounts previously reported in other comprehensive income may

be reclassified as earnings.

If the interest in an associated company is reduced, but a significant

influence remains, only a proportional share of the amount previously

reported in other comprehensive income is reclassified, where relevant,

to earnings.

Associated companies

Associated companies are those in which the Group has a significant,

but not controlling, interest in the operational and financial

management, generally through a holding of 20–50% of the voting

rights. From the point in time at which the significant interest is acquired,

the interest in the associated company is reported in the consolidated

accounts pursuant to the equity method. In the Group income

statement, the Group’s share in the associated companies’ net earnings

after tax, and adjusted for depreciation, write-downs and resolution of

acquired fair value adjustments, is reported under ‘Participations in

associated companies’. Dividends obtained from the associated

company reduce the reported value of the investment.

The Group’s reported valuation of its holding in associated

companies includes goodwill that is identified on acquisition, net after

write-downs that may be required.

When the Group’s share of reported losses in the associated

company exceeds the reported value of the shares in the Group, the

value of the shares is reduced to zero. The equity method is applied until

the significant interest ceases to exist.

Joint ventures

For accounting purposes, joint ventures are companies in which the

Group has entered into collaboration agreements with one or several

parties to share a controlling interest in their operational and financial

management. Holdings in joint ventures are recognized using the equity

method as the proportional consolidation principle is no longer

permitted.

Transactions to be eliminated on consolidation

Intra-Group receivables and payables, revenue or expenses, and

unrealized profits or losses arising from intra-Group transactions

between subsidiaries are eliminated in their entirety when the

consolidated accounts are prepared.

Unrealized profits arising from transactions with associated companies

and jointly controlled companies are eliminated to an extent

corresponding to the Group’s share of the ownership of the company.

Unrealized losses are eliminated in a similar fashion to unrealized

profits, but only if there is no indication that a write-down is required.

Foreign currency

Transactions in foreign currencies

Foreign currency transactions are translated to the functional currency

at the exchange rate applying on the transaction day. Monetary assets

and liabilities in foreign currency are translated to the functional

currency at the rate prevailing on the balance sheet day. Exchange rate

differences resulting from translations are reported in the income

statement. Exchange rate gains/losses on current assets/liabilities are

reported under other revenue/expenses, and exchange rate

gains/losses on financial assets and liabilities are reported under

financial revenue/expenses. Non-monetary assets and liabilities

reported at their historical acquisition value are translated at the

exchange rate applying on the transaction day.

Financial reports in foreign entities

Assets and liabilities in foreign entities, including goodwill and other

corporate fair value adjustments, are translated to Swedish currency at

the rate applying on the balance sheet day. Revenue and expenses in

foreign entities are translated to Swedish currency at the average rate

that constitutes an approximation of the rates applying when the

transaction occurred. Differences that arise when translating currency in

foreign entities are reported immediately against other comprehensive

income. On disposal of a foreign entity, the cumulative translation

difference relating to the entity, after deductions for currency hedges,

where applicable, is realized in the Group’s income statement.

Revenue accounting

All Group revenue is reported at fair value after deductions for discounts,

value-added tax (VAT), etc. License agreements for standard IFS

software and third-party licenses are recognized as revenue when all of

the following requirements are fulfilled:

The license agreement, without termination clauses, has been

signed and delivery has been made.

Price and payment terms are established, and there are no other

commitments apart from the license delivery.

Payment is likely and is due within six months.

License agreements that include undelivered components that are

required for the functionality of the software are recognized in their

entirety when the components have been delivered.

IFS software licenses sold via partners and distributors are

recognized as income when sold to the final customer. The exception is

sales to partners where IFS Applications is included as part of the

partner’s total product offering and where IFS can be considered a

supplier.

Maintenance revenue is the fees IFS customers pay for the right to

upgrade software to new versions of IFS Applications and fees for

customer support. These fees do not include consulting expenses for

installation of updated software. Maintenance revenue is reported

straight-line over the lifetime of the contract.

Consulting services and training related to implementation are

reported separately from license revenue and are recognized as income

as the services are supplied. The stage of completion of such services is

determined by calculating time consumed. If services, such as extensive

37

customization, are a requirement for the functionality of the software,

and if the services are part of the total delivery, license revenue and

revenue from services are recognized as income successively as delivery

is made.

Consulting services are mainly carried out on account, whereby

income is reported as the work is performed. Non-invoiced work is

reported as a current asset under ‘Other receivables’ in the balance

sheet. Work at fixed price is also reported as the work is performed, after

reservation for loss risks.

Revenue from hardware sales is reported on delivery.

Transfer pricing

Fees due from sales companies to the product development company

are based on a transfer pricing model applied for most subsidiaries in

the Group based on the principle that the sales companies achieve a

predetermined profit margin that is normal for comparable companies

in the market. The method, called the Transactional Net Margin Method

(TNMM), is a generally accepted model for transfer pricing. For 2015, a

profit margin spanning 2 – 5% has been set for all subsidiaries. This

principle is based on the fact that the product development company is

the entrepreneur and has the highest risk exposure in the company.

In addition to the product development company in Sweden, there

are several permanent product development centers, in Poland and Sri

Lanka, among others. The product development company covers their

actual expenses plus a general supplement of 5%. In certain projects,

subsidiaries exchange consulting services with each other. These

services are usually priced at a level slightly below the ordinary price a

customer would pay the sales company. In addition to the transfer

pricing described, cost of capital and treasury expenses are invoiced on

intra-Group transactions. Each subsidiary receives or pays interest

based on the respective country’s interest rate, with a supplement of

2.35 percent. Group costs related to treasury are distributed by adding

a supplement of 0.90 percent to the interest expenses and by invoicing

a fee of 0.10 percent of the subsidiaries revenue.

Operating expenses, and financial revenue and expenses

Fees pertaining to operating leases

Fees pertaining to operating leases are reported in the income

statement on a straight-line basis over the period of the lease. Benefits

obtained on signing a lease are reported in the income statement as a

reduction of the leasing fees on a straight-line basis over the term of the

leasing agreement.

Fees pertaining to finance leases

Minimum lease payments are allocated to interest expenses and

amortization of the outstanding liability. Interest expenses are

distributed over the period of the lease so that each accounting period

is charged with an amount corresponding to a fixed rate of interest for

the liability reported in the respective period.

Financial revenue and expenses

Financial revenue and expenses include interest revenue from bank

assets, receivables and interest-bearing securities, interest expenses

related to loans, expenses related to borrowing requirements, exchange

rate gains and losses on financial assets and liabilities, unrealized and

realized gains on financial investments, and derivative instruments used

in financial operations.

Interest revenue from receivables and interest expenses related to

liabilities are estimated using the effective interest method. The

effective interest is the rate that ensures that the present value of all

future receipts or payments during the fixed rate term is the same as the

reported value of the receivable or payable. The interest element of

financial leasing payments is reported in the income statement by using

the effective interest method. Interest revenue includes annualized

amounts of transaction expenses and discounts, where applicable,

premiums and other variations between the original value of the

receivable and the amount received on maturity.

Issue expenses and similar direct transaction expenses related to

borrowing are annualized over the term of the loan. If loans include an

options element, transaction expenses are reported against

stockholders’ equity.

Taxes

Taxes consist of current tax and deferred tax. Taxes are reported in the

income statement except when the underlying transaction is reported in

other comprehensive income or directly against stockholders’ equity, in

which case the related tax effect is reported against other

comprehensive income or directly against stockholders’ equity.

Current tax is tax that is to be paid or received for the current year

by applying the tax rates that are determined, or in practice determined,

on the balance sheet day. This also includes adjustment of current tax

pertaining to previous periods.

Deferred tax is calculated according to the balance sheet method

based on temporary differences between reported and taxable values of

assets and liabilities. The following temporary differences are not taken

into account:

Temporary differences arising when goodwill is first reported.

Temporary differences pertaining to shares in subsidiaries and

associated companies that are not expected to be reversed in the

foreseeable future and where the time at which the temporary

difference is reversed can be controlled by the board.

The valuation of deferred tax is based on how reported values of assets

and liabilities are expected to be realized or paid. Deferred tax is

calculated by applying the tax rates and tax legislation that has been

determined, or in practice determined, on the balance sheet day.

Deferred tax is reported with current tax in the Group’s income

statement. Deferred tax receivables are reported as financial fixed

assets, whereas deferred tax liabilities are reported as long-term

liabilities.

Deferred tax receivables that pertain to temporary differences and

deficit deduction are reported as an asset if it is likely that the deficit

deductions can be set off in coming years.

The value of the deferred tax receivables is based on assessments

of future taxable gains and the related expectations concerning future

use of loss carry-forward.

A current tax rate of 22 percent has been applied on the Swedish

companies. The current tax rate in each country is applied for the

Group’s foreign entities.

Financial instruments

Financial instruments reported as assets in the balance sheet include

the following balance sheet items: shares in other companies, other

long-term receivables, accounts receivable, other receivables, and liquid

assets (including current investments). Liabilities include the following

balance sheet items: liabilities to credit institutions, accounts payable,

and other liabilities.

Recognition and derecognition in the balance sheet

A financial asset or liability is recognized in the balance sheet when the

Company becomes a party to it in accordance with the contractual terms

of the instrument. Accounts receivable are recognized in the balance

sheet when an invoice is issued. Liabilities are recognized when a

counterpart has delivered and a contractual obligation to pay exists,

even if no invoice has been received. Accounts payable are recognized

when an invoice has been received.

A financial asset is derecognized when the entitlements in the

contract are realized, mature, or fall outside the control of the Company.

38

A financial liability is derecognized when the obligations in the contract

are complied with or are extinguished in another manner.

Financial assets and liabilities are set off and recognized as the net

amount in the balance sheet only when the legal right exists to set off

the amounts and if it is intended to settle the items with the net amount

or simultaneously realize the asset and settle the liability.

The acquisition and divestment of financial assets are reported on

the trade date, which is the date on which the company commits itself

to acquiring or divesting the asset.

Classification and valuation

Financial instruments that are not derivatives are recognized initially at

the fair value of the instrument plus transaction expenses for all

financial instruments except those categorized as financial assets

recognized at fair value through the income statement, which are

recognized at fair value excluding transaction expenses.

On initial recognition, a financial instrument is classified according

to the purpose for which the instrument was acquired. The classification

determines how the financial instruments are valued after initial

recognition as described below.

Financial assets valued at fair value through the income statement

This category has two subgroups: financial assets held for trading and

other financial assets that the Company initially chose to include in this

category. A financial asset is classified as being held for trading if it was

acquired for the purpose of being sold in the short term. Stand-alone

derivatives, such as embedded derivatives, are classified as being held

for trading except when used for hedge accounting. Assets in this

category are valued continuously at fair value, with changes in value

being reported in the income statement.

Financial investments are either financial fixed assets or current

investments depending on why they are held. If the term or the expected

period for which they are held is longer than one year, they are financial

fixed assets; if they are to be held for less than one year, they are current

investments.

Financial investments consisting of shares belong either to the

category of financial assets valued at fair value through the income

statement. The change in value is reported in net financial items.

Loans and receivables

Loans and receivable are non-derivative financial assets with fixed

payments or determinable payments, which are not quoted on an active

market. Receivables occur when companies provide money, goods or

services directly to the borrower without intent to trade in receivables.

The category also includes acquired receivables. Assets in this category

are initially valued at fair value and subsequently at the accrued

acquisition value, which is determined based on the effective rate of

interest calculated on acquisition. Hence, fair value adjustments and

direct transaction costs are annualized over the term of the instrument.

Long-term receivables and other receivables are valued at the

accrued acquisition value. If they are expected to be held for longer than

one year, they are deemed long-term receivables.

Accounts receivable are reported when the risk has been

completed, whereby the benefit has been transferred to the customer,

and an invoice has been sent. Accounts receivable are reported initially

at fair value and subsequently at the accrued acquisition value using the

effective interest method. As the term of customer receivables is short,

their value is reported at the nominal amount without discount as the

discount is not significant. Write-downs of accounts receivable are

conducted after individual testing of each customer and are reported in

operating expenses.

Other financial liabilities

Loans (liabilities to credit institutions), accounts payable, and other

liabilities are included in this category. Accounts payable have a short

expected term and are valued without discount at nominal value. Other

liabilities are classified as other financial liabilities, which means that

they are initially reported at fair value and subsequently at the accrued

acquisition value using the effective interest method.

Liquid assets

Liquid assets are cash, immediately available credit in banks and similar

institutions, and current liquid investments with a term of less than three

months from the time of acquisition and which are subject to a low risk

of fluctuations in value.

Derivative instruments and hedging measures

Derivative instruments are reported in the balance sheet as of the

contract day and are valued at their fair value, both initially and on

subsequent revaluation. The method of recognizing profit or loss arising

from revaluation is dependent on whether the derivative instrument was

identified as a hedging instrument an, if so, the nature of the hedged

item.

Fair value hedging

To hedge the fair value of a recognized asset or liability, or a binding

commitment, currency futures and currency options are used. Derivative

instruments are recognized in the balance sheet as of the contract day

and valued at fair value, both initially and on subsequent revaluation.

Derivative instruments held by the Group do not fulfill the criteria for

hedge reporting. Changes in their fair value, therefore, are reported in

the income statement.

All derivative instruments held by the Group are included in the

respective balance sheet items Other receivables and Other liabilities. In

the income statement, derivative instruments are included in Other

revenue, Other expenses, and Financial items.

Hedge accounting

The group designates certain external funding in foreign currency as

hedges of a net investment in a foreign operation (net investment

hedge). The group documents at the inception of the transaction the

relationship between hedging instruments and hedged items, as well as

its risk management objectives and strategy for undertaking various

hedging transactions. The group also documents its assessment, both

at hedge inception and on an ongoing basis, of whether the derivatives

that are used in hedging transactions are highly effective in offsetting

changes in fair values or cash flows of hedged items.

Net investment hedge

Any gain or loss on hedging instrument relating to the effective portion

of the hedge is recognized in other comprehensive income. The gain or

loss relating to the ineffective portion is recognized in the income

statement. Gains and losses accumulated in equity are included in the

income statement when the foreign operation is partially disposed of or

sold.

Tangible fixed assets

Owned assets

Tangible fixed assets are reported as assets in the balance sheet if it is

likely that future financial benefits shall accrue to the Company and the

acquisition value of the asset can be calculated in a reliable manner.

Properties in the Group are business premises used for its own

operations and are amortized over their period of use. The acquisition

value includes the purchase price and expenses directly pertaining to

the asset, such as the cost of delivery and handling, installation, title

deeds, consulting services, and legal services.

39

Leased assets

Most of the lease agreements are considered to be operating leasing as

risks and benefits remain with the lessor, which means that leasing fees

are expensed straight-line during the leasing period. When leasing

contracts are considered to be finance leases, they are reported as

acquisition of tangible fixed assets and as liabilities. Depreciation is

applied in the same manner as if the company owned the assets. In

finance leases, current leasing fees are divided into an interest portion,

which is expensed, and an amortization portion.

Principles for depreciation

Tangible fixed assets are reported at acquisition value after deductions

for accumulated depreciation and write-downs. Assets are depreciated

straight-line across the estimated utilization period of the assets and

based on the acquisition value of the fixed assets. Leased assets are

also depreciated across the estimated utilization period or, if shorter,

across the leasing period.

The Group applies component depreciation, whereby the estimated

utilization period of the individual components forms the basis for

depreciation. The residual value of the assets and the utilization are

tested on each balance sheet day, and assets are written down, when

required, to their recovery value. The estimated periods of depreciation

are:

Buildings 50 years

Certain components for buildings 5–10 years

Equipment 5 years

Servers 5 years

Computers 3 years

Intangible fixed assets

Goodwill

Goodwill corresponds to that part of the cost related to an acquisition

that exceeds the fair value of the Group’s share of identifiable net assets

in the acquired subsidiary on acquisition. Goodwill is valued at the

acquisition value less any accumulated write-downs.

Goodwill arising from acquiring associated companies is included in

the reported value of participations in associated companies. In respect

of business acquisitions in which the acquisition expenses are less than

the net value of the acquired assets, assumed liabilities and contingent

liabilities, the difference is reported directly in the income statement.

Goodwill is reassessed annually and is amortized if the recoverable

value is less than the book value. Goodwill is distributed across cash-

generating entities when the need to amortize is tested. Distribution is

done across the cash-generating entities or groups of cash-generating

entities that can be expected to benefit from the business combination

in which goodwill arose, identified as a business segment.

Research and development

The Group expenses research expenditure. IFS capitalizes product

development expenditure when the following criteria are fulfilled:

It shall be technically feasible to turn the development project into a

marketable or internally usable product.

The resources required to complete the project are available.

The project is likely to entail financial benefits for IFS, either in the

market where the product is to be sold or via internal savings.

It is possible to calculate development expenditure in a reliable

manner.

It must also have been decided that the development project is to be

part of an IFS Applications release or will be used to streamline internal

processes. This means that expenses related to research and support

are not capitalized.

The Group works continuously with a number of product

development projects, most of which focus on standard versions of IFS

Applications. The acquisition value of product development expenditure

mainly consists of personnel-related expenses. In addition, there are

expenses for premises, travel, and office overheads. Borrowing

expenses directly related to product development are included in the

asset’s acquisition value as the Group deems that the asset requires a

substantial amount of time to complete.

Capitalized development expenditure is amortized after the

estimated lifetime of each product. This may not exceed five years.

Continuous assessments are made to determine whether previous

expenditure was validly capitalized and if required, a corresponding

depreciation will be applied.

Other intangible fixed assets

Other intangible fixed assets mainly include customer relations, and

acquired product rights and software licenses. These assets are

reported at acquisition value less accumulated depreciation.

Principles for depreciation

Intangible fixed assets are reported at acquisition value after deductions

for accumulated depreciation and write-downs. Depreciation is reported

in the income statement on a straight-line basis across the estimated

utilization period and is based on the acquisition value of the fixed asset.

Depreciable intangible assets are depreciated as of the date on

which they become available for use on the market. The estimated

utilization periods are:

Capitalized development expenditure 5 years

Acquired product rights 5–10 years

Software 5 years

Customer relations and other intangible fixed assets 2–5 years

Write-downs

Impairment test for tangible and intangible assets

Assets such as goodwill and assets not yet in use, whose utilization

periods cannot be determined, are not written off. Instead they

subjected annually to an impairment test to assess write-down

requirements. The Group also applies an annual impairment test to

capitalized development expenditure and other intangible fixed assets,

despite the fact that their period of use is determinable, as these items

are deemed to have considerable significance for the financial position

of the Group. The test is based on expected future growth and margins

and is mandatory even if there is no indication that a write-down is

indicated. If there is an indication at the end of the fiscal year that a

tangible or intangible fixed asset has decreased in value, the residual

value of the asset is estimated, i.e. the higher of the net realizable value

of the asset and its value in use. When estimating value in use, future

cash flows are discounted using a discount factor that considers the risk-

free interest and the risk associated with the specific asset. If the

estimated residual value is less than the reported value, the asset is

written down to its residual value.

Where goodwill pertains to a group of assets for which a write-down

is required, the amount to be written down is first allocated to goodwill

and subsequently to other assets in proportion to their reported value.

Depending on the asset that is to be written down, the relevant item in

the income statement is charged.

A write-down of an asset is reversed when there is a change in the

assumptions used to establish the residual value of the asset. The

reversed amount increases the reported value of the asset to a

maximum of the value the asset would have had (after deductions for

normal write-downs) if no write-downs had been made.

Write-down of goodwill, however, is never reversed.

On assessing the need to write down an asset, the calculation is

based on the affected cash-generating unit. A cash-generating unit is the

smallest group of assets for which it is possible to establish regular

payments that are largely independent of other assets or groups of

assets.

40

The primary purpose of Group assets and investments is to provide and

implement IFS Applications, which:

Is developed by a central product development organization;

Is sold on the global market, through sales companies in various

countries that collaborate in sales to customers with multinational

operations;

Is supported by a central support organization.

Cash-generating entities in the Group consist of the business segments

as their payment flows are deemed to be essentially independent of

other assets. In the impairment test, consolidated assets and expenses,

apart from capitalized product development expenditure, are distributed

to the segments in proportion to their share of revenue. Capitalized

product development expenditure is not distributed as it occurs in a

central product development organization and is not directly related to

sales of the product in the segments. Capitalized product development

expenditure is tested at Group level.

Impairment testing of financial assets

On each reporting date, the Group evaluates whether there is objective

evidence of impairment for a financial asset. Objective evidence consists

of observable events that have occurred and that have a negative impact

on the ability to recover the acquisition value.

Provisions

Group provisions consist primarily of pension obligations and provisions

for restructuring. Defined-benefits pension plans are reported in the

consolidated accounts according to common principles and calculation

methods. Provisions are reported when the following criteria are fulfilled:

The Group has a legal or constructive obligation as a result of a past

event.

It is more likely than not that an outflow of resources will be required

to settle an obligation.

A reliable estimate can be made of the amount.

Provisions for restructuring are made when a detailed formal plan for

these exists and a valid expectation has been created on the part of

those affected. Provisions are not made for future losses. Residual

provisions for restructuring pertain primarily to rental costs. All

provisions are valued at present value.

Stockholders’ equity

Transaction expenses directly pertaining to the issuance of new shares

or options are reported net after tax in stockholders’ equity as a

deduction from the proceeds of the issue. Share repurchase is reported

against stockholders’ equity.

Stock-related benefits

The Group has a number of incentive programs regulated by means of

warrants. The programs are so constructed that executives purchase

warrants on market terms and receive a maximum of three warrants free

of charge, ‘free warrants’, per warrant purchased. The number of free

warrants received is dependent of the company’s earnings per share.

Free warrants must be retained for a determined period of time—up to

three years—before they may be exercised. If the holder ceases to be

employed by IFS, the company retains the preferential right to purchase

any warrants that have been acquired. Such warrants are repurchased

at market price. In addition, the company will repurchase free warrants

received by the executive for the market price. The total cost, including

the fair value of free warrants that have been distributed, is reported

distributed over the vesting period in such where there is a vesting

period. For programs that do not run with a vesting period the total cost

is reported, including the fair value of the free warrants, distributed over

the period until one of the following occur: the warrants are exercised or

the warrants mature.

When the warrants are exercised, the company issues new shares.

Payments received, after deductions for directly related transaction

costs, are credited to the capital stock (quota value) and Other capital

contributed.

Employee benefits—pension obligations

Defined-contribution plans

Defined-contribution plans are those to which the Company’s obligations

are limited to the contributions the Company has committed itself to pay.

In such cases, the size of an employee’s pension is determined by the

contributions made by the Company to the plan and the return on capital

produced by the contributions. Consequently, the employee carries the

actuarial and investment risks. Group earnings are charged with

expenses as the benefits accrue.

Defined-benefit plans

Defined-contribution and defined-benefit pension plans exist within the

Group. In Sweden, Norway, and France, there are both defined-benefit

and defined-contribution pension plans. In other countries, the

employees are covered by defined-contribution pension plans only.

In defined-benefits plans, employees and former employees receive

benefits based on their salary on retirement and years of service. The

Group undertakes to ensure that benefits are paid. The Group’s

obligation in respect of defined-benefit plans is calculated separately for

each plan by estimating the future payment accrued by employees

though their employment in both current and previous periods.

The defined-benefit pension plans are both funded and unfunded.

Where the plans are funded, the assets have been placed primarily in

pension funds. In the balance sheet, the net sum of the estimated

present value of the obligations and the fair value of the plan assets,

adjusted for possible unreported actuarial profit/loss, is reported as a

pension liability.

Concerning defined-benefit plans, pension expenses and pension

obligations are estimated according to the Projected Unit Credit Method.

The method distributes the pension expenses at the rate employees

perform services for the company that increase their entitlement to

future benefits. The estimates are made annually by independent

actuaries. The Company’s obligations are valued as the present value of

expected future payments using a discount rate corresponding to the

interest rate for first-class corporate bonds or government bonds with a

term corresponding to the obligations in question. The most important

actuarial assumptions are given in Note 37.

When determining the present value of the obligations and the fair

value of the plan assets, actuarial profits and losses may arise, either

because the real outcome deviates from the assumptions made

(experience-based profits or losses) or because the obligation changes.

Actuarial profits and losses are reported in Other comprehensive income

over the employee’s average in the period in which they occur. Expenses

pertaining to employment during previous periods are reported directly

in the income statement.

Interest expense less interest income from plan assets is classified

as a financial expense. Other expense items in pension expenses are

charged to operating earnings.

Cash flow analysis

Cash flow is analyzed according to the indirect method. Reported cash

flow comprises only transactions that entail payments and receipts.

PARENT COMPANY ACCOUNTING PRINCIPLES

The Parent Company accounting principles below have been consistently

applied in all periods presented in the Parent Company’s financial

reports.

41

Conformity with norms and legislation

The Parent Company has prepared its annual report in accordance with

the Swedish Annual Accounts Act and the Swedish Financial Accounting

Standards Council recommendation RFR 2, Reporting for legal entities.

The Parent Company also applies Swedish Financial Accounting

Standards Council statements pertaining to listed companies. RFR 2

entails that, in the annual accounts for the legal entity, the Parent

Company applies all IFRS and statements approved by the EU as far as

possible within the framework of the Swedish Annual Accounts Act and

taking into account the relationship between reporting and taxation. The

recommendation states the exceptions and supplements that shall be

made with respect to the IFRS.

Differences between Group and Parent Company accounting principles

The differences between Group and Parent Company accounting

principles are outlined below. The Parent Company accounting principles

below have been consistently applied in all periods presented in the

Parent Company’s financial reports.

Segment reporting

The Parent Company does not apply segment reporting as the Parent

Company is not part of any of the operational business segments. The

Parent Company is reported as part of the corporate activities in the

Group’s segment reporting.

Participations in subsidiaries

Participations in subsidiaries are reported in the Parent Company

according to the acquisition value method after deduction for any write-

downs. The acquisition value includes acquisition-related expenses and

any additional considerations.

Financial instruments, derivatives, and hedge accounting

Financial assets are classified using a different method in the Parent

Company’s balance sheet than in the Group balance sheet. The notes

on financial assets describe how items in the balance sheet are related

to the classification used in the Group’s balance sheet and in the

Group’s accounting principles. IFS applies valuation at fair value in

accordance with sections 4:14 a-d of the Swedish Annual Accounts Act.

Accordingly, the description of accounting principles for the Group is also

applicable for the Parent Company, except pertaining to the reporting of

impact on profit or loss.

Anticipated dividends

Anticipated dividends from subsidiaries are reported in cases in which

the Parent Company alone is entitled to determine the size of the

dividend and the Parent Company has determined the size of the

dividend before the Parent Company publishes its financial reports.

Tangible fixed assets

Owned assets

The Parent Company reports tangible fixed assets at acquisition value,

less deductions for accumulated depreciation and impairments, where

applicable, in the same manner as in the Group, but with the addition of

revaluation, where applicable.

Leased assets

The Parent Company reports all lease agreements as operating lease

agreements.

Borrowing expenses

Borrowing expenses are charged to earnings for the period to which they

pertain in the Parent Company.

Dividends from subsidiaries

The Parent Company reports dividends from subsidiaries as financial

revenue, regardless of whether they were earned before or after

acquisition.

Employee benefits—pension obligations

The Swedish Act on Safeguarding of Pension Commitments includes

provisions that result in different reporting than that stated in IAS 19,

and the application of the Act is required for eligibility to make tax

deductions. The Parent Company complies with the Act, and its

simplification rules, in RFR 2 IAS 19. The most significant differences in

IAS 19 compared with the provisions of the Act are the way in which the

discount interest rate is determined, that according to IAS 19, the

defined-benefit obligation is estimated based on current salary levels

with assumptions of future salary increases, inflation and personnel

turnover to forecast the Company’s final pension costs, and that

actuarial gains and losses of the plan assets’ fair value or the

obligations’ present value are reported in the income statement under

other comprehensive income.

Group contributions and stockholder contribution

Group contributions made by the Parent Company to subsidiaries are

reported as an increase in Participations in subsidiaries.

Group contributions received by the Parent Company from

subsidiaries are reported according to the same principles as customary

dividends from subsidiaries. Therefore, the group contribution is

reported as financial income.

Stockholder contributions in the Parent Company are reported as an

increase in Participations in subsidiaries in the balance sheet. To the

extent that stockholder contributions pertain to loss coverage, an

assessment is made concerning whether or not the value of the stock

should be impaired.

NOTE 2. SEGMENT REPORTING

Group operations are divided into business segments that coincide with

reportable segments. The segments are identified according to the way

in which the Group’s internal reporting is organized and presented to

Group management. The primary basis for division is geographical areas

and the following up of results from these. Currently, six geographical

segments are reported. The Group operates in various countries either

directly via its own sales companies or indirectly via partners as follows:

Europe North: Denmark, Estonia, Finland, Latvia, Norway, and Sweden

Europe West: France, Spain, Portugal, and the United Kingdom

Europe Central: Germany, Italy, the Netherlands, and Switzerland

Europe East: Cyprus, Czech Republic, Hungary, Kazakhstan, Georgia,

Poland, Romania, Russia, Slovakia, Turkey, and Ukraine

Americas: Argentina, Brazil, Ecuador, Canada, Mexico, and the USA

Africa, Asia, and Pacific: Ethiopia, Kenya, Nigeria, South Africa, Tanzania,

Bangladesh, Botswana, Cameroon, Namibia, Uganda, China, Hong

Kong, India, Indonesia, Japan, Malaysia, Pakistan, Singapore, Sri Lanka,

Taiwan, Thailand, the United Arab Emirates, Australia, and New Zealand

Segment performance is assessed by the management based their EBIT.

This consists of the segment’s operating profit/loss, which includes

among other things operational revenue, direct and indirect expenses,

and sales, marketing and administration expenses. Restructuring

expenses and expenses related to writing down receivables are also

charged directly to the respective segment.

The segments receive most of their revenue from external

customers and refer to services related to IFS Applications software.

Revenue is reported as license revenue, maintenance and support

revenue, and consulting revenue.

42

Sales and other transactions take place between the segments. Transfer

pricing for services between the various Group segments is market-

based. Fees for most of the sales companies are determined by applying

a generally accepted model for transfer pricing—the Transactional Net

Margin Method—which is based on the principle that the sales

companies achieve a predetermined profit margin. For further

information on transfer pricing, see Note 1, Accounting Principles.

Undistributed corporate revenue, expenses, assets and liabilities

include the Group’s product development organization, and the

corporate management, financial, and marketing functions. Product

development is carried out at permanent development centers in Sri

Lanka, Poland, and Sweden. Corporate management, financial and

marketing functions are mainly located in Sweden.

Undistributed revenue and expenses include all the corporate

functions above, interest and dividend revenue, gains from divesting

financial investments, interest expenses, losses on divesting financial

investments, the Group’s portion of earnings in associated companies

and joint ventures consolidated according to the equity method, and tax

liabilities.

Undistributed assets and liabilities include activated product

development expenditure, deferred tax receivables and liabilities,

corporate liquidity, corporate financing and all corporate functions.

Income statement 2015

SKr, million Europe

North

Europe

West

Europe

Central

Europe

East

Americas

Africa, Asia,

and Pacific

Total

segments

Group

items

GROUP

2015

License revenue 183 146 77 42 159 75 682 - 682

Maintenance and support revenue 384 262 116 69 259 84 1,174 - 1,174

Consulting revenue 646 219 186 76 291 106 1,524 - 1,524

Other net revenue 1 3 1 0 0 4 9 0 9

Total external revenue 1,214 630 380 187 709 269 3,389 0 3,389

Internal revenue 21 91 34 22 58 23 249 -249 -

Total revenue 1,235 721 414 209 767 292 3,638 -249 3,389

External operating expenses -718 -475 -297 -172 -525 -245 -2,432 -584 -3,016

Internal operating expenses -108 -49 -31 -5 -32 -17 -242 242 -

Other operating items, net -1 -4 -1 -9 -1 -6 -22 -37 -59

Operating expenses -827 -528 -329 -186 -558 -268 -2,696 -379 -3,075

EBIT 408 193 85 23 209 24 942 -628 314

Other interest income and similar income 6

Interest expenses and similar expenses -14

Profit/loss before tax 306

Tax on profit/loss for the year -92

Profit/loss for the year 214

Other information 2015

SKr, million Europe

North

Europe

West

Europe

Central

Europe

East

Americas

Africa, Asia,

and Pacific

Total

segments

Group

items

GROUP

2015

External assets 416 369 197 63 425 158 1 628 1 503 3 131

Participations in associated companies - - - - - - - 2 2

Total assets 416 369 197 63 425 158 1,628 1,505 3,133

Liabilities 492 249 91 32 216 119 1,199 521 1,720

Investments in fixed assets 2 4 72 2 5 5 90 269 359

Depreciation and write-downs 1 21 2 2 13 2 41 218 259

Average number of employees 466 329 242 206 285 272 1,800 971 2,771

Number of employees at year end 470 340 252 204 294 274 1,834 1,004 2,838

43

Income statement 2014

SKr, million Europe

North

Europe

West

Europe

Central

Europe

East

Americas

Africa, Asia,

and Pacific

Total

segments

Group

items

GROUP

2014

License revenue 149 124 61 29 129 66 558 - 558

Maintenance and support revenue 361 224 98 66 205 83 1,037 - 1,037

Consulting revenue 649 188 178 74 243 98 1,430 -3 1,427

Other net revenue 5 3 2 2 1 3 16 -4 12

Total external revenue 1,164 539 339 171 578 250 3,041 -7 3,034

Internal revenue 21 89 36 21 58 24 249 -249 -

Total revenue 1,185 628 375 192 636 274 3,290 -256 3,034

External operating expenses -719 -415 -269 -163 -435 -211 -2,212 -516 -2,728

Internal operating expenses -105 -40 -24 -3 -29 -11 -212 212 -

Other operating items, net -2 -10 -1 -13 7 -4 -23 -8 -31

Operating expenses -826 -465 -294 -179 -457 -226 -2,447 -312 -2,759

EBIT 359 163 81 13 179 48 843 -568 275

Other interest income and similar income 4

Interest expenses and similar expenses -21

Profit/loss before tax 258

Tax on profit/loss for the year -47

Profit/loss for the year 211

Other information 2014

SKr, million Europe

North

Europe

West

Europe

Central

Europe

East

Americas

Africa, Asia,

and Pacific

Total

segments

Group

items

GROUP

2014

External assets 492 381 125 65 412 136 1 611 1 413 3 024

Participations in associated companies - - - - - - - 4 4

Total assets 492 381 125 65 412 136 1,611 1,417 3,028

Liabilities 481 242 79 46 213 101 1,162 506 1,668

Investments in fixed assets 1 2 4 1 3 3 14 218 232

Depreciation and write-downs 3 22 2 2 12 2 43 199 242

Average number of employees 452 327 212 215 281 257 1,744 901 2,645

Number of employees at year end 465 327 229 208 280 264 1,773 934 2,707

External net sales

GROUP


Sweden 531 455

Rest of the World 2,858 2,579

Total 3,389 3,034

Fixed assets

GROUP


Sweden 803 730

Rest of the World 714 707

Total 1,517 1,437

NOTE 3. LICENSE REVENUE

GROUP


License revenue, IFS 657 511

Third-party license revenue 25 47

Total 682 558

Third-party license revenue includes revenue that accrues when IFS sells

software licenses from third-party suppliers such as Oracle.

NOTE 4. MAINTENANCE AND SUPPORT REVENUE

GROUP


Maintenance and support revenue 1,138 1,005

Third-party maintenance and support revenue 36 32

Total 1,174 1,037

NOTE 5. OTHER REVENUE

GROUP PARENT COMPANY

SKr, million 2015 2014 2015 2014

Hardware 2 3 - -

Parent Company services - - 28 19

Miscellaneous 7 9 - -

Total 9 12 28 19

44

NOTE 6. DEVELOPMENT EXPENDITURE

GROUP


Product development expenditure -339 -304

Amortization of capitalized product development -186 -175

Other amortization -18 -14

Capitalized expenditure for product development 210 190

Total -333 -303

NOTE 7. SALES AND MARKETING EXPENSES

GROUP


Corporate sales and marketing expenses -163 -124

Local sales and marketing expenses -606 -511

Total -769 -635

NOTE 8. OTHER OPERATING INCOME

GROUP


Reversal of unused restructuring reserve 0 2

Rental income 0 1

Miscellaneous 3 1

Total 3 4

NOTE 9. OTHER OPERATING EXPENSES

GROUP


Exchange rate losses, net -26 -24

Restructuring costs -1 -8

Miscellaneous -33 -3

Total -60 -35

NOTE10. TRANSACTIONS BETWEEN SUBSIDIARIES

In the Parent Company, SKr 28 million (19), or 100 percent (100) of the

sales for the year, and SKr 0 million (0), or 1 percent (1) of the purchases

for the year, pertain to subsidiaries in IFS Group.

NOTE 11. OPERATING EXPENSES PER TYPE OF COST

GROUP


Direct costs of goods and services sold -349 -367

Capitalized development cost 210 190

Personnel costs -2,042 -1,771

Travel expenses -147 -135

Costs for rented premises and other property costs -112 -106

External services -126 -102

Marketing and selling expenses -110 -90

Amortization, depreciation, and write-downs -259 -242

Other indirect expenses -81 -105

Total -3,016 -2,728

NOTE 12. AUDITORS’ FEES


SKr, million 2015 2014 2015 2014

PricewaterhouseCoopers

Audit engagement -4 -4 -1 -1

Audit business in addition to the audit

engagement -1 0 - 0

Tax consultancy -5 -4 -2 -1

Other services -1 0 - -

Total -11 -8 -3 -2

Other auditors

Audit engagement -1 -1 - -

Audit business in addition to the audit

engagement 0 0 - -

Tax consultancy -1 -1 0 -

Other services 0 0 - -

Total -2 -2 0 0

Total fees -13 -10 -3 -2

“Audit engagement” refers to the examination of the annual accounts,

the accounting records, and the administration by the Board of Directors

and the President. It also includes other duties that are incumbent on

the company’s auditors, as well as advisory services and other types of

support as a result of observations made through such an examination.

Everything else is considered to be audit business beyond the audit

engagement. This includes, for example, the review of IFS’s interim

report.

NOTE 13. SALARIES, OTHER REMUNERATIONS, AND SOCIAL COSTS


SKr, million 2015 2014 2015 2014

Salaries and other remunerations -1,546 -1,355 -14 -15

Social costs -305 -256 -6 -3

Pension costs, defined benefit plans

(see Note 37) -10 -10 -3 -

Pension costs, defined contribution

plans (see Note 37) -87 -71 -1 -1

Other personnel costs -94 -79 -5 -2

Total -2,042 -1,771 -29 -21

Pension expenses reported as financial

expenses -4 -2 - -

Total -2,046 -1,773 -29 -21

Of the Parent Company’s pension expenses, SKr 0 (198,000) pertained

to the board of directors and CEO. The corresponding amount for the

Group was SKr 3 (3) million.

NOTE 14. REMUNERATIONS PAID TO THE BOARD AND EXECUTIVE

MANAGEMENT

Definitions

Since the AGM held on March 25, 2015, the board has consisted of

Anders Böös (chairman), Gunilla Carlsson, Ulrika Hagdahl, Birgitta

Klasén, Neil Masom, Bengt Nilsson (deputy chairman), and Alastair

Sorbie (president and CEO). In addition to the CEO, executive

management comprises the Company’s CFO Paul Smith, the vice

president of Business Development Fredrik vom Hofe, and the general

counsel Jesper Alwall. Executive management participates in regular

operational reviews under the leadership of the president. ’Other

officers’ means 47 regional and country management as well as group-

level management positions in strategic functions.

45

Remuneration principles

According to the resolution adopted by the AGM, board members

received SKr 3,425,000 in fees during 2015/2016, of which

SKr 1,400,000 was paid to the chairman of the board and SKr 375,000

to each member not employed by the Company. Audit committee work

was remunerated with SKr 100,000 to the chairman and SKr 50,000 to

other member. The board has resolved not to appoint a separate

compensation committee. The president’s salary is determined by the

board. Remuneration of corporate management and senior executives

who report to the president is determined in consultation with the

chairman of the board. The board is continuously informed about salary

levels. Remuneration consists of a basic salary, variable remuneration,

other benefits, and pension contributions.

The relationship between basic salary and variable salary is

proportionate to the executive’s responsibility and powers. For 2015,

variable remuneration shall not exceed 50 percent of the basic salary.

The basis for the variable salary of the CEO and executive management

is established by the board and is based on profitability goals set by the

board for each year.

Pension contributions and other benefits paid to the CEO and

executive management are part of their total remuneration.

Remuneration has not been made in the form of financial instruments.

However, the company’s incentive program does include financial

instruments; see Note 34 for more information.

Remuneration and other benefits during the year

Remuneration of the president and executive management

2015

SKr, thousand

Basic

salary

Variable

remun.

Other

benefits

Pension

benefits

Total

President and CEO 5,767 905 284 - 6,956

Other group management 6,242 2,433 706 1,328 10,709

Total 12,009 3,338 990 1,328 17,665

2014

SKr, thousand

Basic

salary

Variable

remun.

Other

benefits

Pension

benefits

Total

President and CEO 4,680 413 0 198 5,291

Other group management 5,609 2,060 362 1,218 9,249

Total 10,289 2,473 362 1,416 14,540

Comments on the table:

Executive management consisted of four persons during the year.

Other benefits refer primarily to company cars and options.

Holdings in stock and financial instruments

Stockholdings

Series-A

shares, no.

Series-B

shares, no. Options

BOARD OF DIRECTORS

Anders Böös (Chairman) - - -

Gunilla Carlsson - - -

Ulrika Hagdahl - - -

Birgitta Klasén - 11,000 -

Neil Masom - - -

Bengt Nilsson - - -

Alastair Sorbie (CEO) - 8,526 131,025

Total - 19,526 131,025


Jesper Alwall - - 7,716

Fredrik vom Hofe - - 13,644

Paul Smith - - 87,350

Total - 19,526 239,735

Comments on the table:

Holdings of stock and options are reported net after acquisitions and

divestments for the year.

Holdings including family and associated companies.

Stock and options held as of December 31, 2015.

Period of notice and severance pay

If the company terminates the employment, the CEO is to receive twelve

months’ notice; if the CEO terminates the employment, the company is

to receive twelve months’ notice. In addition, the CEO shall receive up to

twelve months’ severance pay if the company terminates the

employment. For executive management, the notification period is

between six to twelve months from the company and three to six months

from the executive.

Pensions

The president is entitled to a premium-based pension, with a premium

corresponding to 20 percent of the basic salary. The retirement age for

the president is 65. Senior executives are included in IFS’s premium-

based special pension plan. The retirement age for other senior

executives is 65. Since the pension contribution for the president has

reached its maximum allowed value in the UK, his pension payments are

treated for payroll purposes as salary.

NOTE 15. TRANSACTIONS WITH RELATED PARTIES

Separate notes contain information about:

Remuneration of the board, CEO, and management Note 14

Shares in subsidiaries Note 26

Participations in associated companies and joint ventures Note 27

Receivables from subsidiaries Note 28

Stockholders’ equity Note 34

Other liabilities Note 39

Pledged assets Note 41

Contingent liabilities Note 42

Bengt Nilsson, member of the board of IFS, is part-owner of Pagero AB,

a partner company of IFS. The volume of transactions with Pagero during

the year amounted to SKr 0 million (0). No important transactions

occurred with related parties during the year besides what is outlined

above and in the notes referred to.

46

NOTE 16. AVERAGE NUMBER OF EMPLOYEES PER COUNTRY


2015 2014 2015 2014

Sweden 444 437 3 3

of whom, women 133 134 - -

Australia 28 23 - -

Brazil 54 55 - -

Canada 10 10 - -

China 41 40 - -

Czech Republic 21 21 - -

Denmark 49 46 - -

Finland 68 68 - -

France 72 70 - -

Germany 168 150 - -

Hungary 19 20 - -

India 56 53 - -

Italy 4 4 - -

Japan 11 11 - -

Kazakhstan 2 2 - -

Malaysia 11 9 - -

Netherlands 58 48 - -

Norway 150 144 - -

Poland 134 140 - -

Russia 22 24 - -

Singapore 10 9 - -

Slovakia 8 8 - -

South Africa 20 21 - -

Spain 30 26 - -

Sri Lanka 782 715 - -

Switzerland 12 10 - -

Thailand 16 15 - -

United Arab Emirates 23 23 - -

United Kingdom* 227 227 - -

United States 221 216 - -

Total, subsidiaries abroad 2,327 2,208 - -


Total 2,771 2,645 3 3



On December 31 2015 2014 2015 2014

Board members 63 62 7 6

of whom, women 13 13 3 2

President and other senior executives 101 96 3 3

of whom, women 23 21 0 0

Other senior executives are those who report to the president and local

managing directors.

NOTE 17. RESULTS FROM PARTICIPATIONS IN SUBSIDIARIES

PARENT COMPANY


Anticipated dividend from subsidiaries - 65

Group contribution received from subsidiaries - 55

Reversal of previous write-down of participation in

subsidiaries 200 -

Write-down of receivables in subsidiaries -1 -2

Total 199 118

NOTE 18. RESULTS FROM PARTICIPATIONS IN ASSOCIATED COMPANIES

GROUP


Share in profit, IFS Retail AB - 0

Share in profit, Application Software IFS South Africa (Pty)

Ltd -2 -

Share in profit, Unitec Kurumsal Bilgi Sistemleri Yazlim Ve

Danismanlika A.S 0 0

Total -2 0

NOTE 19. OTHER INTEREST INCOME AND SIMILAR INCOME


SKr, million 2015 2014 2015 2014

External interest 3 3 1 1

Interest from subsidiaries - - 46 57

Exchange rate gains, net 3 - 3 -

Other financial income - 1 - -

Total 6 4 50 58

NOTE 20. INTEREST EXPENSES AND SIMILAR EXPENSES


SKr, million 2015 2014 2015 2014

External interest costs -7 -8 -7 -8

Interest costs to subsidiaries - - -2 -8

Exchange rate losses, net - -8 - -18

Capitalized interest costs for

development production 0 0 - -

Interest costs for defined-benefit

pension plans -4 -2 0 0

Other financial costs -3 -3 -1 -4

Total -14 -21 -10 -38

NOTE 21. TAXES


SKr, million 2015 2014 2015 2014

Current tax

Current tax -65 -56 -7 -6

Current tax relating to previous years -2 1 - -

-67 -55 -7 -6

Deferred tax

Deferred tax relating to

loss carry forward -17 -9 - -

Deferred tax relating to

temporary differences -8 17 -1 -8

-25 8 -1 -8

Total tax income/expense -92 -47 -8 -14

47


SKr, million 2015 2014 2015 2014

DIFFERENCES BETWEEN REPORTED TAX

EXPENSES AND TAX EXPENSES BASED ON

PREVAILING TAX RATES

Profit/loss before tax 306 258 206 124

Tax according to prevailing rate (22

percent) -67 -57 -45 -27

Not taxable dividend from subsidiaries - - - 14

Non-taxable reversal of write-down of

shares in subsidiaries - - 44 -

Other non-deductible expenses -13 -4 -7 -1

Not taxable income 5 2 0 0

Effect of foreign tax rates -8 -3 - -

Tax relating to previous years -2 1 - -

Capitalized loss carry forward - 20 - -

Reversal of previously capitalized loss

carry forward -12 - - -

Utilized loss carry forward, not

previously accounted for 6 1 - -

Losses for which deferred tax has not

been considered -1 -7 - -

Total -92 -47 -8 -14

NOTE 22. PROFIT AND DIVIDEND PER SHARE

GROUP

2015 2014

Profit for the year allocated to parent company

shareholders, SKr million 211 213

Average no. of shares during the period, thousands 24,706 24,772

Adjustments for options program 501 430

Weighted average no. of outstanding shares after

full dilution, thousands 25,207 25,202

Profit/loss per share before full dilution, SKr 8.54 8.60

Profit/loss per share after full dilution, SKr 8.37 8.45

GROUP

SKr 2015 2014

Dividend per share accounted for during the year 4.50 3.50

Coming years' expected dividend per share - 4.50

Dividends paid during the year amounted to SKr 111,473,000

(86,701,405) on outstanding shares less treasury shares. A dividend

totaling SKr 0 for fiscal 2015 will be proposed at the AGM to be held on

March 14, 2016.

NOTE 23. INTANGIBLE FIXED ASSETS

GROUP INTERNAL DEVELOPMENT PURCHASED

SKr, million

Capitalized

expenditure

for R&D

Capitalized

interest costs

Total

capitalized

expenditure

for R&D

Goodwill

Other

intangible

fixed assets

Total

ACCUMULATED ACQUISITION VALUE

Opening balance Jan 1, 2014 2,021 9 2,030 402 285 2,717

Acquisition of operations - - - - - 0

Purchases 192 0 192 - 0 192

Sales/disposals 0 - 0 - -2 -2

Reclassification - - - - 2 2

Exchange differences during the year 1 - 1 54 18 73

Closing balance Dec 31, 2014 2,214 9 2,223 456 303 2,982

ACCUMULATED DEPRECIATION

Opening balance Jan 1, 2014 -1,416 -7 -1,423 - -148 -1,571

Sales/disposals -12 - -12 - 2 -10

Depreciation during the year -175 -1 -176 - -37 -213

Exchange differences during the year -3 - -3 - -10 -13

Closing balance Dec 31, 2014 -1,606 -8 -1,614 - -193 -1,807

Book value Dec 31, 2014 608 1 609 456 110 1,175

ACCUMULATED WRITE-DOWNS

Opening balance Jan 1, 2014 -13 0 -13 -4 -26 -43

Write-down for the year 12 - 12 - - 12

Closing balance Dec 31, 2014 -1 0 -1 -4 -26 -31

Book value Dec 31, 2014 607 1 608 452 84 1,144

48

GROUP INTERNAL DEVELOPMENT PURCHASED

SKr, million

Capitalized

expenditure

for R&D

Capitalized

interest costs

Total

capitalized

expenditure

for R&D

Goodwill

Other

intangible

fixed assets

Total


Opening balance Jan 1, 2015 2,214 9 2,223 456 303 2,982

Acquisition of operations - - - 56 15 71

Purchases 210 1 211 - 37 248

Sale/disposals -93 - -93 - -86 -179

Exchange differences during the year -1 - -1 4 -3 0

Closing balance Dec 31, 2015 2,330 10 2,340 516 266 3,122


Opening balance Jan 1, 2015 -1,606 -8 -1,614 - -193 -1,807

Sale/disposals 92 - 92 - 65 157

Depreciation during the year -185 0 -185 - -38 -223

Exchange differences during the year -2 - -2 - 4 2

Closing balance Dec 31, 2015 -1,701 -8 -1,709 - -162 -1,871

Book value Dec 31, 2015 629 2 631 516 104 1,251


Opening balance Jan 1, 2015 -1 0 -1 -4 -26 -31

Sale/disposals - - - - 21 21

Closing balance Dec 31, 2015 -1 0 -1 -4 -5 -10

Book value Dec 31, 2015 628 2 630 512 99 1,241

The reported value of goodwill, other intangible fixed assets and

capitalized development costs is tested annually via an impairment

test based on expected future growth and margins. Other intangible

fixed assets consist of product rights, software and customer

relations. Amortization requirements are tested at Group level and

for each cash-generating entity. The cash-generating entities are the

same as the business segments and are identified based on the

structure of the Group’s internal reporting. The basis for division is

primarily by geographic area (see Note 2 for further information).

Goodwill and other intangible assets are allocated to the Group’s

cash-generating entities (business segments). The recovery value of

the cash-generating entities has been estimated by discounting

future cash flows up until the time of estimation. Capitalized

development costs are considered a common asset and are

therefore tested at Group level by estimating the sum of the recovery

value of all cash-generating entities.

The cash flows that are forecast are based on budgets and future

prognoses per business segment. Cash flow beyond the coming five-

year period has been extrapolated by adjusting revenue and

expenses upward by 2 percent per annum. Management has

determined the budgeted gross margin based on previous earnings

and its expectations for market growth. The weighted average rate

of growth that is used concurs with the growth-related expectations

of external parties.

On testing the reported values, the discount rate was set at

10.5 percent (10.5) before tax, corresponding to 8 percent (8) after

tax.

Revenue growth in the forecast period has been presumed to be

4.0–6.0 percent (4.0–6.1) and the EBIT margin has been presumed

to be 11.2–17.9 percent (11.8–19.8).

Sensitivity analysis

A reasonable change in any of the assumptions pertaining to the test

would not result in a need to write down goodwill, other intangible

fixed assets, or capitalized development costs.

For the impairment test the discount rate (after tax) has been

increased by 1.5 percent points as an endurance test for each

operating segment. Such an increase would not result in any

impairment requirement in any of the operating segments.

Goodwill per operating segment

SKr, million

Europe

North

Europe

West

Europe

Central

Europe

East

Americas

Africa, Asia,

and Pacific

Group

items

GROUP

Booked value December 31, 2014 44 121 2 0 264 8 13 452

Booked value December 31, 2015 42 123 56 0 270 8 13 512

49

Depreciation included in the income statement, per function

GROUP


License costs -19 -26

Maintenance and support costs 0 0

Consulting costs 0 0

Research and development expenditure -201 -187

Administration costs -3 0

Total -223 -213

NOTE 24. TANGIBLE FIXED ASSETS

GROUP

SKr, million Buildings

and land

Leasing,

inventories

Computers

Office

equipment

Other

inventories

Total


Opening balance Jan 1, 2014 69 9 162 120 6 366

Purchases 6 0 24 9 1 40

Sales/disposals -1 0 -7 -3 0 -11

Reclassifications - -1 -1 - - -2

Exchange differences during the year 8 0 15 10 1 34

Closing balance Dec 31, 2014 82 8 193 136 8 427


Opening balance Jan 1, 2014 -32 -8 -128 -98 -4 -270

Depreciation during the year -4 0 -16 -8 -1 -29

Sales/disposals 1 0 7 3 0 11

Reclassifications - 1 0 - - 1

Exchange differences during the year -4 0 -13 -8 0 -25

Closing balance Dec 31, 2014 -39 -7 -150 -111 -5 -312

Book value Dec 31, 2014 43 1 43 25 3 115

GROUP


and land

Leasing,

inventories

Computers

Office

equipment

Other

inventories

Total


Opening balance Jan 1, 2015 82 8 193 136 8 427

Acquisition of subsidiary - - - - - 0

Purchases 5 - 26 9 1 41

Sales/disposals -4 -2 -31 -6 0 -43

Reclassifications - - - - 0 0

Exchange differences during the year -1 0 -1 -1 -1 -4

Closing balance Dec 31, 2015 82 6 187 138 8 421


Opening balance Jan 1, 2015 -39 -7 -150 -111 -5 -312

Depreciation during the year -5 0 -21 -9 -1 -36

Sales/disposals 3 2 32 6 0 43

Reclassifications - - - - - 0

Exchange differences during the year 1 0 1 1 0 3

Closing balance Dec 31, 2015 -40 -5 -138 -113 -6 -302

Book value Dec 31, 2015 42 1 49 25 2 119

50

PARENT COMPANY


and land

Leasing,

inventories

Computers

Office

equipment

Other

inventories

Total


Opening balance Jan 1, 2014 - - 1 1 - 2

Closing balance Dec 31, 2014 - - 1 1 - 2


Opening balance Jan 1, 2014 - - -1 -1 - -2

Closing balance Dec 31, 2014 - - -1 -1 - -2

Book value Dec 31, 2014 - - 0 0 - 0


Opening balance Jan 1, 2015 - - 1 1 - 2

Closing balance Dec 31, 2015 - - 1 1 - 2


Opening balance Jan 1, 2015 - - -1 -1 - -2

Closing balance Dec 31, 2015 - - -1 -1 - -2

Book value Dec 31, 2015 - - 0 0 - 0

Category Computers includes computers with a depreciation period of 3 years and servers with a depreciation period of 5 years.

Depreciation in the income statement, per function

GROUP


License costs -2 -1

Maintenance and support costs -2 -2

Consulting costs -5 -4

Development expenditure -3 -2

Administration costs -24 -20

Total -36 -29

Tangible fixed assets do not include any capitalized interest.

Financial-leasing agreements

The Group’s tangible assets include leased items held under the terms

of financial leasing agreements, but they are not of significant value.

NOTE 25. OPERATING LEASE AGREEMENTS

The Group’s operating lease agreements primarily include rented

premises as well as computers, office equipment, and vehicles. No

objects are subleased. The nominal value of future minimum leasing

agreements with respect to non-terminable leasing agreements is

distributed as follows.

GROUP

SKr million 2015 2014

Due for payment within one year 61 65

Due for payment later than one year but within five years 243 270

Due for payment later than five years 32 32

Total 336 367

51

NOTE 26. PARTICIPATIONS IN SUBSIDIARIES

Organization no.

Registered office

Share of

capital/votes

Number of

shares

Book value,

SKr million,

2015

Book value,

SKr million,

2014

IFS Americas, Inc. USA 100% 100 305 105

IFS North America, Inc. USA 100% - -

IFS Industrial & Financial Systems Canada Inc. Canada 100% - -

Metrix LLC USA 100% - -

IFS Europe AB 556139-5541 Sweden 100% 7,500 144 142

IFS Applications Iberica, S.A.U. Spain 100% - -

IFS Benelux B.V. Netherlands 100% - -

IFS Belgium BVBA (in liquidation) Belgium 100% - -

IFS Netherlands B.V. ((in liquidation) Netherlands 100% - -

VisionWaves B.V. Netherlands 100% - -

VisionWaves Inc. United States 100% - -

Industrial and Financial Systems Central and Eastern Europe Sp. z o.o Poland 100% - -

IFS Region RU Russia 100% - -

Industrial and Financial Systems KZ Kazakhstan 100% - -

IFS Czech s.r.o. Czech Republic 100% - -

IFS Hungary Számítástechnikai Kft. Hungary 100% - -

IFS Industrial and Financial Systems Poland Sp. z o.o Poland 100% - -

IFS Slovakia, spol. s r.o Slovakia 100% - -

IFS France France 100% - -

SCI Le Chateau France 100% - -

IFS Italia S.r.l. Italy 100% - -

Industrial and Financial Systems IFS Verwaltungsgesellschaft mbh Germany 100% - -

Industrial and Financial Systems IFS Beteiligungsgesellschaft mbh Germany 100% - -

Industrial and Financial Systems IFS Deutschland GmbH & Co., KG Germany 100% - -

Industrial and Financial Systems, IFS UK Ltd United Kingdom 100% - -

360 Scheduling Ltd United Kingdom 100% - -

360 Scheduling Inc USA 100% - -

360 Scheduling s.a.r.l France 100% - -

Application Software IFS South Africa (Pty) Ltd South Africa 100% - -

IFS Aerospace & Defence Ltd United Kingdom 100% - -

Infiseruo, Serviços Informáticos, Lda. (in liquidation) Portugal 100% - -

IFS Japan, Inc Japan 100% 16,200 0 0

IFS Middle East FZ-LLC United Arab Emirates 100% 100 0 0

IFS Nordic AB 556248-4856 Sweden 100% 1,000 144 144

IFS Danmark A/S Denmark 100% - -

IFS Norge AS Norway 100% - -

IFS Sverige AB 556211-7720 Sweden 100% - -

IFS Finland Oy AB Finland 100% - -

IFS R&D Asia Pacific Sdn. Bhd. Malaysia 100% 2 0 0

Industrial & Financial Systems R&D Ltd Sri Lanka 100% 300,000 0 0

IFS Research and Development (Private) Ltd Sri Lanka 100% - -

IFS Solutions (Singapore) Pte Ltd Singapore 100% 1 0 0

IFS Solutions (Shanghai) Co. Ltd. China 100% - -

IFS Solutions Malaysia Sdn. Bhd. Malaysia 100% - -

IFS Solutions Thai Ltd Thailand 100% - -

IFS Solutions Asia Pacific Pte Ltd Singapore 100% 15,753,417 0 0

IFS Solution Beijing Co. Ltd. China 100% - -

IFS Australia Pty Ltd Australia 100% - -

IFS New Zealand Pty Ltd New Zealand 100% - -

Industrial & Financial Systems Philippines, Inc (in liquidation) Philippines 100% - -

IFS Solution India Private Ltd India 100% - -

IFS Solutions (Thailand) Ltd Thailand 100% - -

Industrial & Financial Systems Sri Lanka Ltd Sri Lanka 50% 149,998 0 0

IFS World Operations AB 556040-6042 Sweden 100% 2,400 589 588

IFS R & D International (Private) Ltd Sri Lanka 100% - -

IFS Retail AB Sweden 100% - -

Torron System AB 556457-8960 Sweden 100% 20 0 0

Vendimo Business Solutions AB 556400-2946 Sweden 100% 1,754,383 15 15

IFS Schweiz AG Switzerland 100% - -

LatinIFS Tecnologia da Informação Ltda Brazil 100% - -

Total book value in the Parent Company 1,197 994

52

PARENT

COMPANY



Opening balance 2,260 2,258

Incentive program for key personnel 3 2

Closing balance 2,263 2,260


Opening balance -1,266 -1,266

Reversal 200 -

Closing balance -1,066 -1,266

Book value 1,197 994

NOTE 27. PARTICIPATIONS IN ASSOCIATED COMPANIES AND JOINT

VENTURES

GROUP


Opening balance 4 3

Share in earnings of associated companies -2 1

Exchange differences 0 0

Closing balance 2 4

Registered office

Net revenue

Earnings

before tax

Assets

Liabilities

Equity

Share of

capital/votes

2015

INDIRECTLY OWNED

IFS Applications Africa (Pty) Ltd South Africa 2 -4 2 6 -4 49.00%

Unitec Kurumsal Bilgi Sistemleri Yazlim Ve Danismanlika A.S Turkey 14 1 8 4 4 25.00%

2014

INDIRECTLY OWNED

IFS Applications Africa (Pty) Ltd United Kingdom 0 0 0 0 0 49.00%

Unitec Kurumsal Bilgi Sistemleri Yazlim Ve Danismanlika A.S Turkey 13 1 9 5 4 25.00%

IFS Retail AB* Sweden 8 0 - - - 49.99%

* Starting October 1, 2014, the company is classified as a subsidiary.

The values in the table are the Group’s share of net sales, earnings before taxes, assets, liabilities, and equity.

NOTE 28. RECEIVABLES IN SUBSIDIARIES

PARENT COMPANY

SKr million 2015 2014

Subordinated receivables 1 2

Other long-term receivables in subsidiaries - 55

Total 1 57

NOTE 29. DEFERRED TAX ASSETS AND TAX LIABILITIES


SKr, million 2015 2014 2015 2014

DEFERRED TAX CLAIMS CONCERNING

Temporary differences 85 83 2 2

Deficit deduction 45 63 - 0

Total 130 146 2 2

DEFERRED TAX LIABILITIES CONCERNING

Temporary differences 33 10 - -

Total 33 10 - -

Deferred tax receipts and tax liabilities are set off when this is legally

possible for particular tax receivables and tax liabilities, and when

deferred taxes refer to the same tax authority. The amounts above have

resulted after such set-offs and are reported in the balance sheet. The

figures in the table below are in gross amounts.

Temporary differences

Temporary differences arise when the reported value and tax value of

assets and liabilities differ. Temporary differences with respect to the

following items resulted in deferred tax liabilities and deferred tax

claims.


SKr, million 2015 2014 2015 2014

DEFERRED TAX LIABILITIES

Fixed assets 9 7 - -

Provisions 0 0 - -

Current claims and liabilities 3 3 - -

Total deferred tax liabilities 12 10 - -

DEFERRED TAX CLAIMS

Fixed assets 13 5 - -

Current claims and liabilities 39 40 1 1

Provisions 12 38 1 1

Fiscal deficit deduction 117 127 - -

Total deferred tax claims 181 210 2 2

Unreported deferred tax claims

concerning deficit deductions and

temporary differences -72 -64 - -

Total unreported deferred tax claims -72 -64 - -

Total deferred tax claims, net 109 146 2 2

Deferred tax claims, net 97 136 2 2

53

Deficit deduction

The total value of the deficit deductions on the balance sheet day can

be utilized no later than during the following years:


SKr, million 2015 2014 2015 2014

2016 (2015) 5 7 - -

2017 (2016) 3 0 - -

2018 (2017) 3 3 - -

2019 (2018) 13 3 - -

2020 (2019) 14 15 - -

Later 62 74 - -

No time limit 18 25 - -

Total 118 127 - -

NOTE 30. OTHER LONG-TERM RECEIVABLES

SKr, million

Deposits

Other

financial

assets

Total

GROUP

Opening balance, Jan 1, 2014 21 2 23

Changes during the year 5 - 5

Closing balance, Dec 31, 2014 26 2 28

Changes during the year -3 0 -3


PARENT COMPANY

Opening balance, Jan 1, 2014 0 2 2

Changes during the year - - -


Changes during the year - - -


NOTE 31. ACCOUNTS RECEIVABLE

GROUP


Accounts receivable, gross 822 848

Provision for doubtful receivables -45 -58

Accounts receivable, net 777 790

AGE ANALYSIS

Accounts receivable, not due 513 519

Due 1–30 days 199 196

Due 31–90 days 33 55

Due >90 days 32 20

Total 777 790

GROUP


On January 1 58 56

Provision for doubtful receivables 14 20

Receivables written off during the year -13 -8

Reversed unused amounts -14 -10

On December 31 45 58

NOTE 32. OTHER RECEIVABLES

GROUP


Receivables, associated companies 15 9

Ongoing assignments 65 57

Accrued license revenue 11 7

Other prepaid expenses 84 76

Other accrued income 46 75

Other receivables 38 38

Total 259 262

NOTE 33. LIQUID ASSETS

The effective interest rate for current investments during 2015 was

7.4 percent. The current investments, located in an overseas territory,

had an average duration of 30 days. Investments have been classified

as liquid assets based on the assumption that:

the risk of value fluctuation is negligible,

they can easily be converted to cash,

they have a duration of not more than three months from the time

of acquisition.


SKr, million 2015 2014 2015 2014

Cash and bank 526 480 225 217

Current investment 7 9 - -

Total 533 489 225 217

NOTE 34. STOCKHOLDERS’ EQUITY

Definition of items in the Group equity statement

GROUP

Capital stock. Refers to the Parent Company’s capital stock.

Other directly contributed capital. Refers to stockholders’ equity that is

contributed by the owners. Provisions made to the share premium

reserve from January 1, 2006 and in the future are reported as directly

contributed capital.

Reserves. This item consists solely of all exchange rate differences arising

on translating financial reports from foreign entities that have prepared

their financial reports in a currency other than that used by the Group

for its financial reports. The Parent Company and Group present their

financial reports in Swedish krona.

Accumulated earnings including earnings for the year. The accumulated

earnings includes earnings for the year and profits carried

forward/accumulated losses in the Parent Company and its subsidiaries,

associated companies, and joint ventures. Previous provisions made to

statutory reserves, excluding share premium reserve carried forward,

are included in this equity item.

PARENT COMPANY

Restricted stockholders’ equity

Capital stock. Refers to the Parent Company’s capital stock.

Reserve fund. Consists solely of amounts transferred to the premium

fund before January 1, 2006.

Unrestricted stockholders’ equity

Premium fund. When shares are issued at a premium, i.e. when the price

paid for shares exceeds their listed price, an amount corresponding to

the amount paid in excess of the listed price shall be transferred to the

54

premium fund. Amounts transferred to the premium fund as of January

1, 2006, are included in unrestricted capital.

Retained earnings. Consist of the previous year’s unrestricted

stockholders’ equity after dividends, if any, have been paid. With

earnings for the year and the premium fund, they constitute the total

amount of unrestricted stockholders’ equity, i.e. the amount available

for dividends to stockholders.

Change in number of shares

Number Series A shares Series B shares Total

Shares on Jan 1, 2014 1,262,445 23,709,385 24,971,830

Conversion of shares from

Series A to Series B -178,342 178,342 -

Shares on Dec 31, 2014 1,084,103 23,887,727 24,971,830

Conversion of shares from

Series A to Series B -54,762 54,762 -

Shares on Dec 31, 2015 1,029,341 23,942,489 24,971,830

Quota value per share, SKr 20.00

Stockholders' equity at end of period, SKr 499,436,600

During the year, 54,762 shares of series A have been converted to series

B. At year-end, the company had 426,600 shares in own custody. The

shares were repurchased in 2012 and 2015.

Number of shares minus treasury shares held by the company

Thousands 2015 2014

At end of period 24,545 24,772

At end of period, after full dilution 25,071 25,177

Average during the period 24,706 24,772

Average during the period, after full dilution 25,207 25,202

Share options

During 2011 the company established an incentive program whereby

senior executives and key personnel (see Note 14) were invited to

acquire, on market terms, warrants in the company. Each warrant

affords the employee the opportunity, under certain conditions related

to the company’s earnings per share in 2011, to receive not more than

a further three warrants free of charge. Under the conditions, one

warrant may be received if 85 percent of targets are achieved; two

warrants if 100 percent of targets are achieved, and three warrants if

115 percent of targets are achieved.

Each warrant entitles the warrant holder to acquire Series B shares

in IFS during the period from the publication of the first quarter earnings

in 2014 up to and including June 29, 2016. The exercise price for the

warrants amounts to SKr 131.90. The price per warrant was SKr 17.87.

The warrants have been evaluated according to the Black & Scholes

method. On calculation, the parameters were a risk-free interest of

3.01 percent and volatility of 25 percent over 12 months, a period of

maturity of 4.74 years and an assumed dividend of SKr 3.55 in 2012,

SKr 4.29 in 2013, SKr 4.90 in 2014, and SKr 5.64 in 2015. The Group

has preferential rights to repurchase the warrants should a holder wish

to divest a holding.

The outcome regarding earnings per share for the year 2011 meant

that two warrants were granted.

During 2012 the company established an incentive program

whereby senior executives and key personnel (see Note 14) were invited

to acquire, on market terms, warrants in the company. Each warrant



















that no warrants were granted.





































method. On calculation, the parameters were a risk-free interest of 1.26

percent and volatility of 18 percent over 12 months, a period of maturity

of 4.8 years and an assumed dividend of SKr 4.50 in 2014, SKr 5.00 in

2015, SKr 5.50 in 2016, SKr 6.05 in 2017 and SKr 6.66 in 2018. The

Group has preferential rights to repurchase the warrants should a holder

wish to divest a holding.



During the year the company established an incentive program





55












maturity of 4.8 years, and an assumed dividend of SKr 5.00 in 2015,

SKr 5.50 in 2016, SKr 5.50 in 2017, SKr 5.50 in 2018, and SKr 5.50 in

2019. The Group has preferential rights to repurchase the warrants

should a holder wish to divest a holding.

The cost of the program has been reported as personnel-related

expenses amounting to SKr 0 million.

In the beginning of 2015, the company issued a time-limited

invitation to redeem outstanding warrants related to programs TO09 and

TO10B that were issued in 2011 and 2012 for cash. The company

repurchased warrants corresponding to 59,481 shares.

Changes in the number of outstanding share options and their weighted

average strike price are as follows:

2015 2014

Average

strike price

Options,

thousands

Average

strike price

Options,

thousands

On January 1 163.09 405 130.01 420

Issued 309.40 239 206.80 239

Exercised - - - -

Bought back 122.85 -59 131.90 -194

Indexation of strike price on

options issues in previous years - - - -

Unallocated 309.40 -60 206.08 -60

On December 31 217.61 525 163.09 405

Outstanding share options at year-end have the following year of

maturity and strike prices:

Options, thousands

Maturity, coming years Strike price 2015 2014

2015–2016 131.90 - 4

2015–2017 122.20 7 62

2016–2018 130.70 160 160

2016–2019 206.80 179 179

2017–2019 309.40 179 -

Total 525 405

NOTE 35. LIABILITIES TO CREDIT INSTITUTIONS


SKr, million 2015 2014 2015 2014

LONG-TERM LIABILITIES

Financial leasing liabilities 0 0 - -

CURRENT LIABILITIES

Bank loan 172 130 172 130

Financial leasing liabilities - 0 - -

Total 172 130 172 130

Granted overdraft facility and line of

credit 575 500 575 500

Unused overdraft facility and line of

credit 403 370 403 370

Used overdraft facility and line of credit 172 130 172 130

During the year, the average rate of interest on liabilities to credit

institutions was 2 percent. For external funding, agreements exist with

respect to interest coverage ratio, net debt in relation to adjusted EBIT,

and the level of stockholders’ equity. For information on pledges to

creditors, see Note 41, Pledged assets.

NOTE 36. RISK STRUCTURE PERTAINING TO INTEREST AND FINANCING

Change of interest in the interval

0–6 MONTHS 7–12 MONTHS 13–60 MONTHS MORE THAN 60

MONTHS TOTAL

Nominal amount 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014

Bank loan 172 130 - - - - - - 172 130

Financial leasing liabilities - - - - 0 0 - - 0 0

Total 172 130 - - 0 0 - - 172 130

Loan and credit maturity in the interval

0–6 MONTHS 7–12 MONTHS 13–60 MONTHS MORE THAN 60

MONTHS TOTAL

Nominal amount 2015 2014 201

5 2014 2015

201

4 2015 2014 2015 2014

Bank loan* - - - 130 172 - - - 172 130

Financial leasing liabilities - - - - 0 0 - - 0 0

Derivatives 3 3 - - - - - - 3 3

Accounts payable and other loans 104 127 - - - - - - 104 127

Total 107 130 - 130 172 0 - - 279 260

* After the ownership change that was made public on November 30, 2015, the Company’s bank announced that it reserved the right to cancel its facility with no less than

five business days’ notice.

56

NOTE 37. PENSION COMMITMENTS

Commitments in the balance sheet

GROUP


Defined-benefit pension plans 106 166

Other pension commitments 3 2

Total 109 168

Provisions for defined-benefit pension plans

The Group has a small number of defined-benefit pension plans,

according to which employees covered by the pension plan are entitled

to benefits in the form of a guaranteed level of pension payments during

their lifetime. The level of the benefit is based on the employees’ final

salary and years of service. The largest plans are in Sweden and Norway.

Most pension plans held by the Group are premium-based.

GROUP


Sweden 90 143

Norway 11 19

Other countries 5 4

Total provisions for pensions 106 166

Defined-benefit pension plans, 2015

The amounts reported in the consolidated balance sheet have been

calculated according to the following:

SKr, million

Sweden

Norway

Other

countries

Total

Present value of funded obligations 466 80 - 546

Fair value of plan assets -376 -69 - -445

Total 90 11 - 101

Present value of unfunded obligations - - 5 5

Total 90 11 5 106

Change in the defined-benefit commitment during the year is as follows:

GROUP


Defined Benefit Obligation (DBO), beginning of the year 596 408

Current Service Cost 10 10

Interest Cost 18 19

Expected benefit paid (pensions payment) -4 -5

Special employer's contribution -1 26


Experience gains / losses 1 -14

Actuarial gain / loss due to change in demographic

assumptions 24 -

Actuarial gain / loss due to change in financial assumptions -84 152

Defined Benefit Obligation (DBO), end of the year 551 596

Change in fair value of plan assets during the year is as follows:

GROUP


Fair value of plan assets, beginning of the year 430 371

Interest income 14 17

Employer contributions 26 35

Benefits paid (pensions payment) -2 -2


Actuarial gain / loss during the period -16 9

Fair value of plan assets, end of the year 445 430

Defined-benefit pension plans, 2015

Specification of the changes in net liabilities recognized in the Group’s

balance sheet:

SKr, million

Sweden

Norway

Other

countries

Total

Net liability at beginning of year 142 19 5 166

Net cost reported in income statement 8 6 - 14

Employer's contributions to funded plans -20 -6 - -26

Pension payments reduced with

compensation -2 - - -2

Special employer's contribution -1 - - -1

Exchange rate differences in

international plans 7 -2 - 5

Experience gains / losses 24 -6 - 18

Actuarial gain / loss due to change in

financial assumptions -68 - - -68

Net liability at end of year 90 11 5 106

Key actuarial assumptions

Sweden Norway

2015 2014 2015 2014

Discount rate 4.0% 3.4% 2.5% 2.3%

Future annual salary increases 3.0% 3.0% 2.5% 2.8%

Future annual pension increases 2.0% 2.0% 0.0% 0.0%

For 2015 and 2014, the discount rate is used as the basis for

establishing the total expected dividends from the plan assets in

accordance with the amended IAS 19. Payment of fees/provisions to

plans for remuneration after terminated employment is expected to

amount to SKr 24 million for fiscal year 2016.

Sensitivity analysis

The current value of the commitment for the Swedish defined-benefits

pension plans amounts to SKr 432 million excluding special payroll tax.

If the discount rate had been one percentage point higher, the liability

would have decreased by SKr 104 million; if it had been one percentage

point lower, the liability would have increased by SKr 137 million. If the

average life expectancy increases by 1 year, the liability will increase by

SKr 18 million; if it decreases by 1 year, the liability would decrease by

SKr 15 million.

The corresponding figures for Norway amount to a present value of

SKr 79 million for the commitment. If the discount rate had been one

percentage point higher, the liability would have decreased by

SKr 6 million; if it had been one percentage point lower, the liability

would have increased by SKr 22 million.

Plan assets

Through its defined-benefit pension plans and healthcare plans when

employment is terminated, the Group is exposed to a number of risks,

the most essential of which are described below.

Asset volatility. The plan’s liabilities are calculated using a discount rate

based on mortgage bonds. If the plan assets fail to return a

corresponding yield, a deficit is incurred. The plan includes investment

that over time are expected to exceed the interest rate on mortgage

bonds, but entail risk and volatility in the short term.

Changes in bond yields. A reduction in yields from mortgage bonds will

entail an increase in plan liabilities, even if such will be outweighed in

part by an increase in the value of the bond holding.

Risk of inflation. Most of the plan’s commitments are related to inflation;

higher inflation leads to higher liabilities.

Life expectancy assumptions. Most of the pension commitments assume

that employees covered by the plan will receive payments as long as they

57

live, which means that higher longevity results in higher pension

liabilities.

Funding policy

The pension liability is secured via IFS Pensionsstiftelse (IFS Pension

Fund), in which assets are managed according to the Fund’s investment

policy. The policy governs the strategic allocation of assets that are to be

managed in such a way as to provide a buffer for the company’s pension

expenses and ensure an overall matching strategy in relation to pension

commitments. The long-term goals of the asset management are

intrinsic annual dividends of 2 percent over rolling five-year periods.

To avoid major negative results in asset management during

particular periods of time, the strategic allocation at each given time

shall be such that risk is limited to a maximum of 10 percent of the

opening value of the portfolio for each year. If the assets in the portfolio

develop negatively such that risk has increased, the proportion of risky

assets shall, insofar as it is possible, be reduced so as not to jeopardize

the lowest safety level. If the assets develop positively such that the

Fund obtains a larger margin to the lowest safety level, the proportion of

risky assets can be increased within the overall limitations of this policy.

When plans are refunded, the Group ensures that the investments

are also managed according to a strategy, whereby assets and liabilities

are matched, which has been developed to achieve long-term

investments that are in line with the commitments of the pension plans.

Within this framework, the Group aims to match assets with the

character of the pension payments. This means that the Fund’s fixed

income portfolio with a high proportion of assets with expected hedges

that follow the Swedish CPI in the long-term to shield the company from

some of the risk that has arisen related to inflation and interest rates. At

the end of the year, 5 percent of the total fixed income portfolio

consisted of real interest bonds of long-term duration.

The weighted average term for pension commitments is 28 years.

The asset plans consist of the following:

2015 2014

Quoted Unquoted Total Quoted Unquoted Total

Share-based investments 22% - 22% 21% - 21%

Structured products - 6% 6% - 12% 12%

Real-interest based

investments - 5% 5% - 10% 10%

Long-term interest-bearing

investments 24% 5% 29% 15% 6% 21%

Short-term investments,

cash, and cash

equivalents 33% - 33% 31% - 31%

Other assets - 5% 5% - 5% 5%

Total 79% 21% 100% 67% 33% 100%

Defined-contribution pension plans 2015

According to such plans, payments made to employees after terminated

employment, such as pensions, healthcare benefits and other

disbursements, are made principally through payments to insurance

companies or institutions, who thereby assume the liability for the

employee. The defined-contribution plans in Sweden are administered

by SPP and Collectum.

In 2015, costs pertaining to defined-contribution plans amounted to


Provisions for defined-benefit pension plans

PARENT COMPANY


Provisions according to the Swedish Act on Income Security -3 0

NOTE 38. OTHER PROVISIONS AND OTHER LIABILITIES

GROUP


Restructuring reserve 2 2

Other provisions 1 2

Total 3 4

Restructuring reserve

SKr, million Group

Opening balance Jan 1, 2014 26

Reversal, restructuring reserve -4

Provision, restructuring reserve 8

Use of restructuring reserve -29

Effects of exchange rate fluctuations 3

Closing balance Dec. 31, 2014 4

Less current portion -2

Restructuring reserve, long term 2014 2

Reversal, restructuring reserve 0

Provision, restructuring reserve 1

Use of restructuring reserve -2

Effects of exchange rate fluctuations 0

Closing balance Dec. 31, 2015 3

Less current portion -1

Restructuring reserve, long term 2015 2

NOTE 39. OTHER LIABILITIES

GROUP


Deferred maintenance revenue 502 478

Deferred license- and consulting revenue 27 26

Accrued consulting expenses 30 39

Advances from customers 1 6

VAT liabilities 88 103

Accrued payroll expenses 255 240

Accrued pension cost, defined contribution plans 25 22

Accrued social security contributions 82 73

Retained preliminary tax for employees 35 33

Liabilities to employees 4 5

Accrued expenses, third-party suppliers 26 27

Accrued interest expenses 1 1

Liabilities to associated companies 1 1

Derivatives held for trading 3 3

Miscellaneous other liabilities 12 6

Other accrued expenses 124 109

Other prepaid revenue 5 4

Total 1,221 1,176

58

NOTE 40. ACCRUED EXPENSES AND PREPAID INCOME

PARENT COMPANY


Accrued interest expenses 1 1

Accrued social security contributions 1 2

Accrued payroll expenses 1 2

Supplier invoices not yet received 27 -

Other accrued expenses 1 3

Total 31 8

NOTE 41. PLEDGED ASSETS


SKr, million 2015 2014 2015 2014

Chattel mortgages - 141 - 4

Blocked bank accounts 7 7 - -

Shares in subsidiaries - - - 979

Net assets in subsidiaries - 736 - -

Other 16 19 - -

Total 23 903 - 983

Mortgages and shares in subsidiaries have been pledged as security for

bank loans. During the year, a new loan agreement was signed by which

the former pledged assets were returned. Liabilities to credit institutions

are detailed in Note 35. Net assets in subsidiaries pertain to the

corporate net assets.

NOTE 42. CONTINGENT LIABILITIES


SKr, million 2015 2014 2015 2014

Sureties, external 25 17 23 15

General surety for subsidiaries - - 14 11

Parent Company guarantees - - 1 5

Total 25 17 38 31

NOTE 43. ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW


SKr, million 2015 2014 2015 2014

Depreciation 258 242 - -

Restructuring costs, net -2 -22 - -

Provisions for pensions -26 -12 4 1

Bad debts 2 8 0 -

Exchange rate gains/losses, net 28 38 1 21

Write-down of financial assets 0 0 1 2

Reversal of write-down in participations

in subsidiaries

- - -200 -

Interest costs for the year 14 13 8 9

Interest income for the year -3 -3 -1 -1

Other adjustments -2 0 0 -3

Total 269 264 -187 29

NOTE 44. BUSINESS COMBINATIONS

During the year, the remaining outstanding shares in IFS Region RU have

been acquired. The acquisition had a marginal effect on the financial

statements.

On July 6, IFS acquired 100 percent of the capital stock in

VisionWaves B.V. (Netherlands, reg. no. 30165276) for a total

consideration of SKr 113 million. Of this, SKr 8 million is contingent on

achievement of license revenue targets in full-year 2015 and full-year

2016. All of the consideration is payable in cash. Excluding excess

working-capital, the equivalent enterprise value is SKr 107 million,

including SKr 8 million being the fair-value of the contingent

consideration.

The fair value of identified net assets and liabilities in VisionWaves

B.V. amounts to SKr 58 million, including SKr 37 million in software,

SKr 14 million in customer relationships, SKr 2 million in non-compete

and SKr 13 million in deferred tax liabilities. The remaining

SKr 55 million represents group goodwill. The goodwill recognized for the

acquisition corresponds to the company’s market position and technical

skills in enterprise operational intelligence.

The purpose of the acquisition of VisionWaves is to strengthen IFS

products, leveraging VisionWaves’ ability to map, monitor, and manage

end-to-end business processes across multiple business units, data

sources, and applications, to enable IFS customers globally, across all

IFS focus industries, to accelerate strategy realization and boost

business performance. Based in the Netherlands and with a subsidiary

in the United States, the company is recognized by key industry analysts

as a leader in enterprise operational intelligence.

The acquired businesses contributed revenue of SKr 19 million and

an EBIT of SKr -4 million to the Group during the year. Acquisition-related

expenditure amounts to SKr 2 million and is recognized as other

operating expenses in the consolidated earnings. The prepared

acquisition analysis is preliminary.

If the acquisition had been made on January 1, 2015, Group

revenue would have amounted to SKr 3,417 million, with EBIT for the

year of SKr 325 million.

Acquisition analysis

Company

SKr, million

Fair value reported in

Group value

2015 2014

Intangible fixed assets 53 -

Tangible fixed assets 0 -

Accounts receivable 26 -

Liquid assets, net 1 -

Accounts payable and other liabilities -9 -

Deferred tax liabilities -13 -

Fair value of net assets 58 -

Group goodwill 55 -

Total purchase consideration 113

Transferred compensation: fair

value of share in subsidiaries -113 -

Liquid assets in the acquired

companies 2 -

NOTE 45. NET ACQUISITION OF TANGIBLE FIXED ASSETS

GROUP


Investments for the year, net -40 -40

Total -40 -40

NOTE 46. FINANCIAL RISK MANAGEMENT AND DERIVATIVES

Via its business operations, the Group is exposed to a number of

financial risks, including fluctuations in earnings, balance sheet, and

cash flow resulting from changes in exchange rates, rates of interest,

and risks related to refinancing and credit. Group financial policy for risk

management, determined by the board, is a framework of guidelines and

59

regulations in the form of risk mandates and limits for financial

operations.

The board of directors has the overall responsibility for the

management of financial risks, which is delegated to the chief executive

officer, the chief financial officer and a board director.

The IFS Group has centralized financial management, which means

that the chief responsibility for financial management resides with the

Parent Company. The overall objective for the finance department is to

minimize the negative effects of market fluctuations on Group earnings

and stockholders’ equity and to provide cost-effective financing.

Risk is managed by a central finance department (Group Finances)

according to principles approved by the board. Group Finances shall

identify, evaluate, and hedge against financial risks in close

collaboration with operational units within the Group. The board

establishes a financial policy for overall risk management and for

specific areas that include risks related to exchange rates, interest rates,

credit on investment in financial instruments, financing, and liquidity.

Exchange rate risks

Exposure to exchange rate fluctuation arises when the Group carries out

a large number of business transactions in foreign currency in

connection with its business operations. Such exposure derives among

others from business transactions between operational units within the

Group that have different currencies as their functional currency as well

as from sales in currencies other than the individual companies’

functional currency. Most of the costs are in the functional currency of

the business units. The most significant exposures refer to Norwegian

kroner (NOK), the euro (€), the pound sterling (£), and the U.S. dollar ($),

a reflection of the fact that a considerable amount of Group revenue and

payments is carried out in these currencies. The Group hedges these

exchange rate risks, where possible by trading in currency futures and

currency options in a number of currencies, including NOK, the euro, the

pound sterling, and the Polish zloty.

The Parent Company trades in currency futures and currency option

contracts to match expected cash flows that derive from the Group’s

international business units. On December 31, 2015, the Group had

outstanding foreign exchange contracts in the following currencies

(nominal values):

Currency futures contracts, nominal values in SKr million


AED 3 -

AUD 13 13

BRL 2 5

CAD 1 -

CHF 10 10

CZK 1 7

DKK 37 11

EUR 66 69

GBP 35 41

JPY 15 12

NOK 87 21

PLN 15 76

SGD 39 38

USD - 12

ZAR 0 3

Total 324 318

Moreover, the group uses option instruments that, depending on the

spot price on the date of expiry, enable the Group to sell currencies. On

December 31, 2015, the Group had outstanding currency options for the

sale of £ 1.15 million and NKr 50 million.

Currency option contracts, nominal values in SKr million

2015 Maturity

SKr, million within 3

months

3–6

months

6–12

months

GBP Outflow (GBP) 0.3 0.3 0.6

Inflow (SEK) 3.3 3.8 7.6

NOK Outflow (NOK) 40.0 10.0 -

Inflow (SEK) 42.0 10.8 -

2014 Maturity

SKr, million within 3

months

3–6

months

6–12

months

EUR Outflow (EUR) 0.5 - 0.4

Inflow (SEK) 4.4 - 3.6

GBP Outflow (GBP) 0.5 0.3 0.5

Inflow (SEK) 5.4 2.8 5.7

NOK Outflow (NOK) 45.0 - -

Inflow (SEK) 47.0 - -

All profits and losses on foreign exchange contracts constitute financial

hedging and have been reported in the income statement. The Group

has a number of investments in foreign operations, whose net assets

are exposed to foreign currency translation risk. In isolated cases

funding in matching currency is identified as hedging instruments in

formal hedge relations. The effective portion of gains and losses on

these currency exposures are recognized in other comprehensive

income.

Foreign currency sensitivity analysis

A sensitivity analysis, considering the unhedged foreign currency

exposure on December 31, 2015, shows the effect on earnings after tax

of a 10 percent change in the exchange rate between the U.S. dollar and

the Swedish krona, the euro and the Swedish krona, the Pound Sterling

and the Swedish krona, and the Norwegian krone and the Swedish krona

according to the table below. It presumes that all other variables,

including interest rates and other foreign currencies, remain constant.

Currency exposure sensitivity analysis

Increase/decrease

of rate on balance

sheet day

Profit/loss


USD 10% -3.2 -0.4

-10% 3.2 0.4

EUR 10% 1.7 -0.1

-10% -1.7 -1.1

GBP 10% 1.4 3.0

-10% -0.5 -3.0

NOK 10% 1.6 1.7

-10% 3.2 -2.7

Interest rate risks

The Group is exposed to interest rate risks in respect of liquid assets on

deposit and bank loans with floating interest rates. The Group’s liquid

assets are held in interest-bearing accounts and in deposits of short

duration. The Groups borrows at floating interest rates that are normally

set for periods to three or six months. The interest rate risk is managed

by using interest rate instruments for interest rate hedging, such as

swaps, to replace floating interest rates with fixed rates, which offers

protection against large interest rate increases. On December 31, 2015,

the company held no interest rate swaps. A sensitivity analysis shows

that if the floating interest rate had increased/decreased by

1 percentage point earnings would have been SKr 1 million

lower/higher.

60

Credit risk

The Group’s principal financial assets are liquid assets, accounts

receivable, and other receivables. Counterparties for liquid assets are

governed by the finance policy, which limits the size of the credit

exposure in respect of financial institutions. The Group deals only with

recognized creditworthy customers and offers normal credit terms and

conditions in its ordinary operations after preliminary credit checks have

been performed. The Group has no substantial concentration of credit

risks. Rather, exposure is distributed over a number of counterparties

and a large number of customers in several different geographical

regions. For the valuation of doubtful receivables, the Group applies a

model where the provision of the trade receivables is calculated

according to a matrix, where the percentage used to calculate the

provision is higher the older the receivables are. If a receivable is

uncertain and the assessment is made that payment is not going to

occur it is written down by 100 percent regardless of age. Accounts

receivable are reported net of provisions in the consolidated balance

sheet. See Note 31 for additional information pertaining to accounts

receivable and related regulations for bad debts.

Financing risks

The Group shall avoid having too much credit due for payment in the

same 12-month period. The Group shall strive to ensure that a maximum

of 25 percent of contracted loans and credit limits falls due in the same

12-month period. During 2015, the Group entered into a new financing

agreement with a duration of 3 years. Under the terms of the agreement,

the company shall not take new local operating capital facilities in

subsidiaries. At year-end, the average term of contracted loans and

credit facilities was 29 months (6 months). 100 percent of the loan

portfolio matures within 30 months.

Liquidity risk

The Group manages liquidity risks by retaining sufficient liquidity to

provide for the needs of the business. The process is monitored via the

Group’s short-term, 0–3 months, and medium-term, up to 12 months,

cash flow forecasts. Moreover, the Group ensures that it always has

access to sufficient agreed credit facilities. See Note 36 for a maturity

analysis of the loan portfolio.

Fair value estimation

Accounts receivable, other receivables, accounts payable and other

liabilities

For receivables and payables with a remaining term of less than one

year, the reported value constitutes the fair value. Other receivables and

payables are estimated at present value with a discount rate

corresponding to that used to estimate interest-bearing liabilities. There

are no significant differences between fair value and reported value.

Currency forward contracts

The fair value of financial instruments not traded on an active market is

established with the help of a fair value hierarchy. The fair value

hierarchy consists of the following levels:

Level 1: Quoted prices (not adjusted) on an active market for similar

instruments.

Level 2: Directly (e.g. prices) or indirectly (e.g. derived from prices)

observable market inputs for the instrument other than the quoted price.

Level 3: Inputs for financial instrument for which the asset or liability is

not based on observable market data.

To this end, market information is used to the greatest possible extent

when this is available. The currency forward contracts held by the Group

are valued according to the Level 2 classification by using the market

prices that apply on the balance sheet day.

Financial assets and liabilities 2015

December 31,

2015

SKr, million

Fair value

hierarchy

Financial

assets valued

at fair value

on balance-

sheet day

Accounts- and

other

receivables

Of which

current

Of which

non-current

Financial assets 2015

Investments Level 3 2 - - 2

Other long-

term

receivables

and other

interests - 23 - 23

Accounts receivable - 777 777 -

Other receivables - 299 299 -

Derivatives Level 2 7 - 7 -

Cash and cash equivalents - 533 533 -

Total 9 1,632 1,616 25

December 31,

2015

SKr, million

Fair value

hierarchy

Financial

liabilities

valued at fair

value on

balance-sheet

day

Other financial

liabilities

Of which

current

Of which

non-current

Financial liabilities 2015 Liabilities to credit

institutions - 172 172 0

Accounts payable - 104 104 -


Total 3 276 279 0

Financial assets and liabilities 2014

December 31,

2014

SKr, million

Fair value

hierarchy

Financial

assets valued

at fair value

on balance-

sheet day

Accounts- and

other

receivables

Of which

current

Of which

non-current

Financial assets 2014

Investments Level 3 2 - - 2

Other long-

term

receivables

and other

interests - 26 - 26

Accounts receivable - 790 790 -

Other receivables - 310 310 -


Cash and cash equivalents - 489 489 -

Total 4 1,615 1,591 28

December 31,

2014

SKr, million

Fair value

hierarchy

Financial

liabilities

valued at fair

value on

balance-sheet

day

Other financial

liabilities

Of which

current

Of which

non-current

Financial liabilities 2014 Liabilities to credit

institutions - 130 130 -

Accounts payable - 127 127 -


Total 3 257 260 -

Liabilities to credit institutions

The fair value is based on discounted future cash flows in respect of the

principal and interest. There are no significant differences between fair

value and reported value. See Note 36 for maturity analysis.

Capital structure

IFS defines capital as stockholders’ equity including non-controlling

interests in accordance with the information presented in the balance

sheet and the capital accounts. Capital on December 31, 2015,

amounted to SKr 1,413 million (1,360). IFS aims to have a capital

61

structure that leads to an efficient, weighted cost of capital and a credit

score that takes into account the needs of the business and enables

future acquisitions.

IFS reviews its capital structure and amends it when required. To

maintain or amend the company’s capital structure, the company can

adjust the level of dividends to stockholders, repurchase shares, issue

shares, or sell assets.

NOTE 47. CONVERSION RATES

Rate at year end Average rate

2015 2014 2015 2014

EUR 9.14 9.52 9.36 9.10

GBP 12.38 12.14 12.90 11.29

NOK 0.96 1.05 1.05 1.09

PLN 2.15 2.21 2.24 2.17

USD 8.35 7.81 8.44 6.86

NOTE 48. INFORMATION ABOUT THE PARENT COMPANY

Industrial and Financial Systems, IFS AB, is a Swedish registered

company headquartered in Linköping, Sweden. The company is listed on

the Nasdaq Stockholm Mid-Cap list. The visiting address of the head

office is Teknikringen 5, Linköping, Sweden; its postal address is Box

1545, SE-581 15 Linköping, Sweden.

The consolidated accounts for 2015 are reported for the Parent

Company and its subsidiaries, which together comprise the Group. The

Group also includes shares owned in associated companies and a joint

venture company.

62

The consolidated accounts and the annual report have been prepared in accordance with the international accounting standards referred to in

Regulation (EC) No. 1606/2002 of the European Parliament and Council of July 19, 2002, on the application of international accounting standards

and generally accepted accounting principles. They give a true and fair view of the financial position and results of the Group and Parent Company. The

board of directors’ report for the Group and Parent Company gives a true and fair view of Group and Parent Company operations and financial position,

and describes the essential risks and uncertainties to which the Group and Parent Company are exposed.

Linköping, February 22, 2016

Anders Böös Gunilla Carlsson Ulrika Hagdahl Birgitta Klasén CHAIRMAN OF THE BOARD BOARD MEMBER BOARD MEMBER BOARD MEMBER

Neil Masom Bengt Nilsson Alastair Sorbie BOARD MEMBER BOARD MEMBER BOARD MEMBER

VICE CHAIRMAN PRESIDENT AND CEO

As indicated above, the annual report and the consolidated accounts were approved for publication by the board of directors on March 4, 2015. The

consolidated income statement and balance sheet and the income statement and balance sheet for the Parent Company will be the subject of adoption

at the Annual General Meeting on March 14, 2016.

Our audit report was submitted on February 22, 2016.

PricewaterhouseCoopers AB

Nicklas Kullberg AUTHORIZED PUBLIC ACCOUNTANT

63

AUDITOR’S REPORT

To the annual meeting of the shareholders of

Industrial and Financial Systems, IFS AB (publ.)

Corporate identity number 556122-0996

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS

We have audited the annual accounts and consolidated accounts of

Industrial and Financial Systems, IFS AB (publ.) for the year 2015,

except for the corporate governance statement on pages 20–25. The

annual accounts and consolidated accounts of the company are

included in the printed version of this document on pages 14–63.

Responsibilities of the Board of Directors and the Managing Director

for the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for

the preparation and fair presentation of these annual accounts in

accordance with the Annual Accounts Act and of the consolidated

accounts in accordance with International Financial Reporting

Standards , as adopted by the EU, and the Annual Accounts Act, and

for such internal control as the Board of Directors and the Managing

Director determine is necessary to enable the preparation of annual

accounts and consolidated accounts that are free from material

misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these annual accounts

and consolidated accounts based on our audit. We conducted our

audit in accordance with International Standards on Auditing and

generally accepted auditing standards in Sweden. Those standards

require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the

annual accounts and consolidated accounts are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the annual accounts and

consolidated accounts. The procedures selected depend on the

auditor’s judgement, including the assessment of the risks of material

misstatement of the annual accounts and consolidated accounts,

whether due to fraud or error. In making those risk assessments, the

auditor considers internal control relevant to the company’s

preparation and fair presentation of the annual accounts and

consolidated accounts in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the company’s internal

control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by the Board of Directors and the Managing Director,

as well as evaluating the overall presentation of the annual accounts

and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the annual accounts have been prepared in

accordance with the Annual Accounts Act and present fairly, in all

material respects, the financial position of the parent company as of

December 31, 2015 and of its financial performance and its cash

flows for the year then ended in accordance with the Annual Accounts

Act. The consolidated accounts have been prepared in accordance

with the Annual Accounts Act and present fairly, in all material

respects, the financial position of the group as of December 31, 2015

and of their financial performance and cash flows for the year then

ended in accordance with International Financial Reporting

Standards, as adopted by the EU, and the Annual Accounts Act. Our

opinions do not cover the corporate governance statement on pages

20–25. The statutory administration report is consistent with the

other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of

shareholders adopt the income statement and balance sheet for the

parent company and the group.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In addition to our audit of the annual accounts and consolidated

accounts, we have also audited the proposed appropriations of the

company’s profit or loss and the administration of the Board of

Directors and the Managing Director of Industrial and Financial

Systems, IFS AB (publ.) for the year 2015. We have also conducted a

statutory examination of the corporate governance statement.

Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for

appropriations of the company’s profit or loss, and the Board of

Directors and the Managing Director are responsible for

administration under the Companies Act and that the corporate

governance statement on pages 20–25 has been prepared in

accordance with the Annual Accounts Act.

Auditor’s responsibility Our responsibility is to express an opinion with reasonable assurance

on the proposed appropriations of the company’s profit or loss and on

the administration based on our audit. We conducted the audit in

accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ proposed

appropriations of the company’s profit or loss, we examined whether

the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in

addition to our audit of the annual accounts and consolidated

accounts, we examined significant decisions, actions taken and

circumstances of the company in order to determine whether any

member of the Board of Directors or the Managing Director is liable to

the company. We also examined whether any member of the Board of

Directors or the Managing Director has, in any other way, acted in

contravention of the Companies Act, the Annual Accounts Act or the

Articles of Association.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our opinions.

Furthermore, we have read the corporate governance statement

and based on that reading and our knowledge of the company and

the group we believe that we have a sufficient basis for our opinions.

This means that our statutory examination of the corporate

governance statement is different and substantially less in scope than

an audit conducted in accordance with International Standards on

Auditing and generally accepted auditing standards in Sweden.

Opinions We recommend to the annual meeting of shareholders that the profit

be appropriated in accordance with the proposal in the statutory

administration report and that the members of the Board of Directors

and the Managing Director be discharged from liability for the

financial year.

A corporate governance statement has been prepared, and its

statutory content is consistent with the other parts of the annual

accounts and consolidated accounts.

Stockholm, February 22, 2016


Nicklas Kullberg AUTHORIZED PUBLIC ACCOUNTANT

64

BOARD OF DIRECTORS

ANDERS BÖÖS Chairman of the board

Principal occupation: directorships.

Other assignments: member of the board of

Investment AB Latour, Stronghold Invest AB,

Newsec AB, and Tundra Fonder AB.

Work experience: chairman of the board of

Cision AB; CEO of Drott AB and H&Q AB.

Born 1964. Elected 2003.

Anders Böös is considered independent in relation to the

company, its management, and its major stockholders.

GUNILLA CARLSSON Board director

Principal occupation: international assignments

within global health, global development, and

policy reforms.

Other assignments: board director of NGS Group AB;

GAVI (Geneva); member of the advisory boards of

the Bill and Melinda Gates Foundation Europe

and Eurasia Foundation (Washington); member of

the European Center for Foreign Relations

(London).

Education: accounting and auditing courses,

studies in political science, Linköping University.

Work experience: Swedish minister for International

Development Cooperation (2006–2013); member

of the Swedish Parliament (2002–2013); member

of the European Parliament (1995–2002);

political advisor for the Swedish Moderate Party;

deputy party leader of the Swedish Moderate

Party; financial manager of New World

International AB / Sesam Production AB;

accountant, Wänström Revision AB.

Born 1963. Elected: 2015.

Gunilla Carlsson is considered independent in relation to

the company, its management, and its major

stockholders.

ULRIKA HAGDAHL Board director


Other assignments: member of the board of Beijer

Electronics AB and HiQ International AB.

Education: M.Sc. in Engineering Physics from the

Royal Institute of Technology, Stockholm

Work experience: founder of Orc Software AB; CEO

and member of the board of Orc Software AB;

member of the board of Strålfors AB and Protect

Data AB.

Born 1962. Elected: 2003.

Ulrika Hagdahl is considered independent in relation to


stockholders.

BIRGITTA KLASÉN Board director

Principal occupation: senior IT advisor for Swedish

and international corporate management.

Other assignments: member of the board of Assa-

Abloy AB, Acando AB, and Avanza AB.

Education: M.Sc. in applied physics from the Royal

College of Technology, Stockholm, B.A. from

Stockholm University (business economics,

psychology, and sociology) and management

training courses (Ruter Dam, IFS, and IMD).

Work experience: member of the board of OMX AB

and Telelogic AB; CIO at EADS, Pharmacia &

Upjohn, and Telia. Prior to this, a long period that

included various management positions at IBM,

including deputy CEO of IBM’s wholly-owned

outsourcing subsidiary, Responsor AB.


Birgitta Klasén is considered independent in relation to


stockholders.

NEIL MASOM OBE Board director



WYG plc, UK Information Commissioner Office,

UK Foreign & Commonwealth Office Services

AgencyHigh Speed Two (HS2) Ltd, CQC Holdings

Ltd, and Solutions SK Ltd.

Education: B.Sc.(Eng) Hons. Imperial College,

London.

Work experience: chairman of the board of

IFS Defence Ltd and CEO for Logistics and

Information Systems in BAE Systems plc.


Neil Masom is considered independent in relation to the

company, its management, and its major stockholders.

BENGT NILSSON Deputy chairman of the board

Principal occupation: president, and CEO of

Pagero AB.


GreenTrade AB, Greenfield AB, Pagero AB, Hikka

Group AB, Hikkadua Investments AB, Homes and

Villas Ltd, Ides AB, Norelia AB, Proxio AB, and

Pocket Mobile AB.

Education: studies at Linköping Institute of

Technology.

Work experience: one of the founders of IFS, and of

European Flight Service & European Maintenance

Service; president and CEO of IFS.


Bengt Nilsson is considered independent in relation to


stockholders.

ALASTAIR SORBIE Board director, president, and CEO

Principal occupation: president and CEO of IFS AB.

Education: B.Sc. (Hons), University of London.

Work experience: managing director of IFS EMEA,

sales director at Avalon Software UK, services

director application products at Computer

Associates, services director at Pansophic

Systems, and director of Insight Applications

division of Hoskyns Group.

Born: 1953. Elected: 2006.

Alastair Sorbie is not considered independent in relation

to the company and its management, but independent in

relation to the major stockholders in the company.

66

http://www.ifsworld.com/includes/showimage.asp?img=/binaries/birgitta_big_tcm31-79455.jpg

http://www.ifsworld.com/includes/showimage.asp?img=/binaries/Neil Masom Adj_tcm31-81114.jpg


ALASTAIR SORBIE

President and CEO

Born 1953

Employed by IFS since 1997

PAUL SMITH

Chief financial officer

Born 1963


FREDRIK VOM HOFE

Senior vice president, Business Development

Born 1966


AUDITORS


Auditors since 2001

NICKLAS KULLBERG

Authorized public accountant and Auditor in charge

Born 1970

JESPER ALWALL

General counsel

Born 1969


Holdings in stock and financial instruments December 31, 2015

Stockholdings

Series-A

shares, no.

Series-B

shares, no. Options

BOARD OF DIRECTORS

Anders Böös (Chairman) - - -

Gunilla Carlsson - - -

Ulrika Hagdahl - - -

Birgitta Klasén - 11,000 -

Neil Masom - - -

Bengt Nilsson - - -

Alastair Sorbie (CEO) - 8,526 131,025

Total - 19,526 131,025


Jesper Alwall - - 7,716

Fredrik vom Hofe - - 13,644

Paul Smith - - 87,350

Total - 19,526 239,735

For information concerning stock and options held by members of the board and

executive management, see note 14.

67

FINANCIAL TREND

FROM THE INCOME STATEMENTS SKr, million 2011 2012 2013 2014 2015

License revenue 431 467 535 558 682

Maintenance & support revenue 823 909 902 1,037 1,174

Consulting revenue 1,311 1,283 1,256 1,427 1,524

Other net revenue 11 17 11 12 9

Net revenue 2,576 2,676 2,704 3,034 3,389

Capitalized work for own use 164 182 188 190 210

Operating expenses -2,316 -2,478 -2,373 -2,676 -2,967

EBITDA before other operating items 424 380 519 548 632

Other revenue 8 42 16 4 3

Other expenses -27 -23 -121 -35 -60

Result from associated companies and joint venture - - 59 - -2

EBITDA 405 399 473 517 573

Depreciation, amortization, and write-downs -172 -199 -212 -242 -259

EBIT 233 200 261 275 314

Financial revenue 6 4 3 4 6

Financial expenses -21 -14 -21 -21 -14

Profit/loss before tax 218 190 243 258 306

Taxes -62 -52 -41 -47 -92

Profit/loss for the year 156 138 202 211 214

FROM THE BALANCE SHEETS SKr, million Dec 31, 2011 Dec 31, 2012 Dec 31, 2013 Dec 31, 2014 Dec 31, 2015

Intangible fixed assets 953 1,061 1,103 1,144 1,241

Other fixed assets 286 269 254 293 276

Accounts receivable 701 718 740 790 777

Other current assets 245 242 238 312 306

Liquid assets 374 316 354 489 533

Total assets 2,559 2,606 2,689 3,028 3,133

Stockholders' equity including non-controlling interests 1,302 1,137 1,237 1,360 1,413

Long-term liabilities 89 215 91 182 145

Accounts payable 94 93 111 127 104

Current interest-bearing liabilities 51 178 197 130 172

Other current liabilities 1,023 983 1,053 1,229 1,299

Total stockholders' equity and liabilities 2,559 2,606 2,689 3,028 3,133

FROM THE CASH FLOW STATEMENTS SKr, million 2011 2012 2013 2014 2015

Cash flow from operations before change in working capital 406 363 336 450 544

Change in working capital -96 -80 70 51 2

Cash flow from current operations 310 283 406 501 546

Cash flow from investment operations -216 -324 -284 -232 -350

Cash flow after investment operations 94 -41 122 269 196

Cash flow from financing operations -163 -7 -13 -164 -151

Cash flow for the year -69 -48 109 105 45

Liquid funds on January 1 445 374 253 354 489

Exchange rate differences in liquid funds -2 -10 -8 30 -1

Liquid funds at end of period 374 316 354 489 533

68

KEY FIGURES1 2011 2012 2013 2014 2015

Revenue indicator

Net revenue growth % 0% 4% 1% 12% 12%

Net revenue outside Sweden % 80% 82% 84% 85% 84%

Net revenue per employee SKr, '000 948 946 1,006 1,147 1,223

Expense and expenditure indicator

Total product development SKr, million 257 290 295 318 338

of which, capitalized SKr, million 164 182 188 190 210

Development expenditure/net revenue % 10% 11% 11% 10% 10%

Development expenditure/license revenue % 60% 62% 55% 57% 50%

Product development expenses/net revenue % 9% 10% 10% 10% 10%

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

Personnel expenses per employee SKr, '000 600 607 605 670 737

Margin indicators

Gross margin % 48% 49% 51% 51% 54%

License margin % 94% 94% 93% 91% 95%

Maintenance & support margin % 67% 69% 72% 75% 75%

Consulting margin % 22% 18% 19% 20% 21%

Operating margin % 9% 7% 7% 9% 9%

Profit margin % 8% 7% 7% 9% 9%

Return on average operating capital % 26% 22% 19% 24% 29%

Capital indicators

Return on capital employed % 17% 15% 15% 17% 13%

Return on stockholders' equity % 12% 11% 12% 16% 15%

Equity ratio % 51% 44% 46% 45% 45%

Interest coverage ratio times 37.3 24.7 19.4 33.2 39.2

Working capital SKr, million -171 -116 -186 -254 -320

Accounts receivable (avg 12 mth)/Net revenue (rolling 12 mth) % 20% 19% 19% 18% 18%

Liquidity indicators

Net liquidity SKr, million 322 137 157 359 361

Debt/equity ratio times 0.1 0.2 0.2 0.2 0.2

Net debt SKr, million -273 50 -118 -191 -252

Employees

Average number of employees 2,716 2,830 2,688 2,645 2,771

Number of employees at the end of the period 2,821 2,829 2,616 2,707 2,838

Stock

Average number of shares million 25,690 24,988 24,772 24,772 24,706

Number of shares at the end of the period million 25,313 24,772 24,772 24,772 24,545

Key data per share2

Profit/loss, before dilution SKr 6.07 5.52 5.81 8.60 8.54

Stockholders' equity SKr 51.44 50.76 49.94 54.90 57.55

Cash flow after investment operations SKr 3.66 -1.66 4.84 10.86 7.93

Market price at end of accounting period SKr 88.00 103.25 154.00 239.09 364.50

Market price/stockholders' equity times 1.7 2.0 3.1 4.4 6.3

Net turnover SKr 100.27 108.24 110.61 122.48 137.17

Market price/net turnover times 0.9 1.0 1.4 2.0 2.7

Dividend3 SKr 3.50 3.50 3.50 4.50 -

1 For definitions of key ratios see page 70.

2 In accordance with IAS 33, dilution is not estimated when it improves earnings.

3 Dividend for 2015 refers to proposal from the Board.

69

DEFINITIONS

adjusted EBITDA. EBIT before depreciation, net of capitalized product

development and adjusted for non-recurring items.

average number of shares. Average of the number of shares outstanding

during the year.

capital employed. Total assets less non-interest-bearing liabilities and

deferred tax liabilities.

cash flow per share. Cash flow after investment operations in relation to

the average number of shares.

consulting margin. Consulting revenue minus consulting expenses in

relation to consulting revenue.

days of Sales Outstanding (DSO). Accounts receivables, adjusted for value

added tax, in relation to net revenue.

debt/equity ratio. Interest-bearing provisions and liabilities at year-end in

relation to stockholders’ equity.

earnings per share. Net profit/loss for the year in relation to the average

number of shares.

equity/assets ratio. Stockholders’ equity and minority interest at year-end

in relation to total assets.

gross margin. Gross earnings in relation to net revenue.

interest coverage ratio. Profit/loss before tax adjusted for interest expense

in relation to interest expense.

license margin. License revenue minus license expenses, in relation to

license revenue.

maintenance and support margin. Maintenance and support revenue minus

maintenance and support expenses in relation to maintenance and

support revenue.

market price. The market price of the shares has been established in

relation to the number of outstanding Series A and Series B shares,

respectively, and the share price of these shares at year-end.

market price/net revenue per share. The market price in relation to net

revenue per share.

market price/stockholders’ equity per share. The market price in relation to

stockholders’ equity per share.

net debt. Interest-bearing provisions and liabilities at year-end, less liquid

assets.

net liquidity. Liquid assets less liabilities to credit institutions at year-end.

net revenue growth. Net revenue for the year minus net revenue for the

previous year in relation to net revenue for the previous year.

net revenue outside of Sweden. Net revenue minus net revenue in Sweden,

in relation to net revenue.

net revenue per share. Net revenue in relation to the average number of

shares.

net revenue per employee. Net revenue in relation to the average number

of employees.

operating margin. EBIT in relation to net revenue.

profit margin. Profit/loss before tax in relation to net revenue.

return on average operating capital. EBIT in relation to average operating

capital.

return on capital employed. Profit before tax plus financial expenses in

relation to average capital employed. Capital employed refers to total

assets less non-interest-bearing liabilities and deferred tax liability.

return on stockholders’ equity. Profit/loss for the year in relation to average

stockholders’ equity.

stockholders’ equity per share. Stockholders’ equity, including minority

interest, in relation to the number of outstanding shares at year-end.

working capital. Accounts receivable and other current receivables,

excluding liquid assets, less accounts payable and other short-term, non-

interest-bearing liabilities.

GLOSSARY

application. A program that helps a user deal with a specific task, e.g.

purchasing, employee development or accounting.

architecture. Describes the manner in which the hardware, system

software, and applications software integrate to achieve a desired result.

business applications. A set of applications that covers all internal as well

as external business processes a company is involved in.

component-based architecture. Refers to the design of any system

composed of separate components that can be connected together. The

benefit of component-based architecture is that you can replace or add

any one component without affecting the rest of the system. The

opposite of a component-based architecture is an integrated

architecture, in which no clear divisions exist between components.

enterprise asset management (EAM). A concept in the software industry to

describe one or several applications designed to improve/optimize how

a company utilizes its business processes and facilities. The designation

is common in the asset-intensive industry.

enterprise resource planning (ERP). A method of planning that originally

comprised all internal business processes, such as financials,

manufacturing and distribution, but which has been extended to cover a

range of other functions from contact with suppliers to maintenance of

delivered products.

maintenance, repair, and overhaul (MRO). A concept used in the software

industry to describe software used in the maintenance of a company’s

equipment and facilities so as to maximize availability and efficiency.

outsourcing. The procuring of services or products from an outside

supplier or manufacturer.

platform. Component-based products or services require a platform that

defines valid interfaces and common services to ensure maximum

flexibility and configurability for the product/service without sacrificing

economies of scale or recycling capabilities. This is necessary for

managing internal dependencies and complexity in the product

development of component-based products/services.

utility. An organization of company that provides some form of

infrastructure in a society, such as heating, electricity, or water.

70

ABOUT IFS

IFS™ is a globally recognized leader in developing and delivering enterprise software

for enterprise resource planning (ERP), enterprise asset management (EAM) and

enterprise service management (ESM). IFS brings customers in targeted sectors

closer to their business, helps them be more agile and enables them to profit from

change. IFS is a public company (XSTO: IFS) founded in 1983 and currently has over

2,800 employees. IFS supports more than 1 million users worldwide from its

network of local offices and through a growing ecosystem of partners.

www.IFSWORLD.com

THIS DOCUMENT MAY CONTAIN STATEMENTS OF POSSIBLE FUTURE FUNCTIONALITY FOR IFS’S SOFTWARE

PRODUCTS AND TECHNOLOGY. SUCH STATEMENTS OF FUTURE FUNCTIONALITY ARE FOR INFORMATION

PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS ANY COMMITMENT OR REPRESENTATION. IFS

AND ALL IFS PRODUCT NAMES ARE TRADEMARKS OF IFS. THE NAMES OF ACTUAL COMPANIES AND

PRODUCTS MENTIONED HEREIN MAY BE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS.

©2016 IFS AB

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