Annual Report 2017 - Vitec Software · companies such as Hufvudstaden and Atlas Copco for...

Annual Report 2017

2 Vitec Annual Report 2017

ContentsTHE GROUP’S OPERATIONS

This is Vitec 2

2017 in brief 3

CEO’s comments 4

Our position 6

Business model and growth strategy 7

Our Business Areas 9

Sustainability Report 12

History 18

The share and the shareholders 20

ANNUAL REPORT

Administration Report 24

Corporate Governance Report 30

- Chairman’s comments 30

- Members of the Board 33

- Members of Group management 37

Multi-year summary 39

Proposed allocation of profits 40

Financial statements 42

- Consolidated income statement 42

- Consolidated statement of comprehensive income 42

- Consolidated statement of financial position 44

- Consolidated statement of changes in equity 46

- Consolidated statement of cash flows 47

Income statement, Parent Company 49

Balance sheet, Parent Company 50

- Changes in equity, Parent Company 52

- Cash flow statement, Parent Company 54

Notes 57

Signatures 88

Auditor’s Report 89

Auditor’s report on the statutory sustainability report 92

Key performance indicator definitions 93

Shareholder information 95

This is Vitec

MissionEnabling customers to maximize their opportuni-ties to develop and secure their business through business critical software.

Core valuesOur corporate culture has become a central part of the Group’s management, with continuous dialog on our value-generating KPIs, focus on the development of standard products, regular best practice meetings and our fundamental core values.

Text and production: Vitec.Images: Photographer Edel Puntonet, except for the picture of Tom-Arild Bonnegolt on page 14, which is taken by Knut Neer-land, and the pictures on pages 18 and 30, which are taken by Magnus Svensson. The people shown in the pictures are Vitec employees, except for page 10.Cover photo: Åsa Rosén and Johan Hammarlund, Stockholm.Printing: TMG Tabergs.Paper: Munken, eco-labelled.

Our products - our foundationVertical Market Software

Keep it simpleSimple solutions succeed

Trust and transparencyCollaboration and commitment favor fortune

Vitec is the market leading software company in Vertical Market Software in the

Nordic region. We develop and supply standard programs for various niches,

our growth takes place through acquisitions of well-managed and established

software companies. The Group’s overall processes together with the employees’

in-depth knowledge of the customer’s business create good conditions for deve-

lopment and continued innovation.

Vitec Annual Report 2017 3

2017 IN BRIEF

2017 in brief

600Employees

200Denmark

2017 2016

Net sales (TSEK) 855,029 675,414

Operating profit (TSEK) 106,702 88,305

Profit after financial items (TSEK) 98,127 81,942

Operating margin (%) 12 13

Return on equity (%) 22 22

Return on capital employed (%) 14 14

Equity/assets ratio (%) 32 30

Adjusted equity per share (SEK) 13.34 11.37

Earnings per share (SEK) 2.70 2.27

Dividend per share (SEK) Proposed dividend 2018 SEK 1.10 per share 1.00 0.90

Average number of employees 540 467

Sales per market

Most significant events

Key figures

Other countries 1 %Nordic region 2 %Europe 4 %

USA 17 %

Sweden 76 %

SEK kurs Antal

Omsättning fördelning marknad

Europe 1 %

Norway 21 %

Finland 20 %

Sweden 33 %

Denmark 26 %

%

Nonrenewable

Renewable

59 %

Förnyelsebara energikällor

0

5

10

15

20

25

30

20172016201520142013

0,0

0,5

1,0

1,5

2,0

2,5

3,0Vinst per aktie

20172016201520142013

SEK

� Vitec share was moved from Small Cap to Mid Cap on Nasdaq Stockholm.

� We increased our credit facility for acquisition with SEK 200 million.

� We invested around SEK 100 million in our own software.

� Vitec acquired the Danish software company MV-Nordic.

� We decided on a convertible program for the employees of Vitec.

Viktor Naeslund, Birgitta Knutsson-Hjelmze, Ida Eriksson and Mahmoud Oubaid,

Stockholm

100Norway

200Sweden

100Finland


CEO’s comments


CEO'S COMMENTS

Continued growth with focus on corporate culture and efficiencyVitec continues to grow and 2017 was no exception from pre-vious years. Cash flow is growing strongly. Earnings, however, are also improving, but are not in pace with cash flow.

The highlights of 2017 were the move to the Stockholm Stock Exchange’s Mid Cap list, almost doubling the acquisi-tion facility by SEK 200 million to a total of SEK 450 million and the acquisition of MV-Nordic in Denmark. Risk diversi-fication in the Group continued to improve in 2017. Sales of SEK 855 million are now distributed over 15 operating units, each of which account for no more than 18 percent of total sales.

Corporate cultureWith 600 employees in four countries in nearly 20 offices, our internal communication has become ever more impor-tant. Continuously discussing our value-generating KPIs, focusing on the development of standard products, regu-larly identifying best practices and making reality out of our fundamental core values: “Our products - our foundation”, “Keep it simple” and “Transparency and trust”. All of this has made our work with the corporate culture a central part of managing the Group. Our brand promise “To rely on – Today and Tomorrow” together with the core values and our central KPIs give us the right ingredients to build a strong corporate culture. This also makes it possible to keep our decentralized model while maintaining high growth. A strong corporate culture, decentralized decisions, motivated employees and a well-defined business model help us strengthen our competi-tiveness for the future.

EfficiencyWith Vitec’s niche-oriented business in relatively mature markets, demand is both long term and sustainable. In these markets, efficiency and focus are central prerequisites for strong and growing profitability. Major unexpected shifts in the market are rare, however, meaning that the company’s growth is largely up to us. Focus and efficiency will therefore always be central issues for our business.

Recurring revenue accounts for 70 percent of the Group’s total revenue. Vitec continues to convert to a steadily incre-asing share of Software as a Service (SaaS) agreements in new sales or when existing customers upgrade. The customer benefits of the SaaS model are becoming increasingly well known as digitalization gains speed, a general trend that strengthens our specific possibilities of transforming our business model.

Higher dividend for the 16th consecutive yearThe proposed dividend for the year of SEK 1.10 is an increase of 10 percent, making 2017 the 16th year in a row that our dividend has increased. Vitec is now mentioned among companies such as Hufvudstaden and Atlas Copco for consistently increasing dividends. Still, there is a long way to go to be called a dividend aristocrat, which means 25 years of continuous increases in the dividend.

Acquisition strategyThe number of active acquisition dialogues remains high and we continuously devote resources to maintaining and furthe-ring these dialogues. Our financial position and preparedness for future acquisitions is strong, and we see good possibilities for continued acquisition-based growth.

Sustainable profitable growthA clear shift from traditional license sales to subscriptions of cloud-based systems which reduces dependence on indivi-dual license sales, improves the long term ability to manage the business. Combined with our employees’ tremendous capacity for renewal and integrating acquisitions, this offers an excellent footing for long-term development throughout our entire organization. Backed by acquisitions of well-esta-blished companies and a growing share of recurring revenue, Vitec continues on the path to act in several independent and specialized niches to achieve sustainable and profitable growth.

Lars Stenlund, CEO


Our position on the software market

Vitec focuses on vertical marketsVitec is the market leader in Vertical Market Software in the Nordic region. We develop and supply standard products for various niches. This means that our offering is tailored to the unique needs and requirements of companies within a specific sector in order to manage and develop their business activities.

Vitec offers standardized productsOur standardized products are cost-effective for our custo-mers since they can assimilate developments and upgrades made for the entire industry. In this way, we provide our customers with maximum opportunities to develop and futu-re-proof their business.

Vitec has a high proportion of proprietary productsWe are specialists in the circumstances and needs of the various industries. The Group’s overall processes together with the employees’ many years of experience and in-depth

knowledge of the customers’ business create good conditions for development and continued innovation. Product develop-ment based on real customer benefits provides supportive and sustainable software over time.

A position with high barriers to entryEach individual vertical requires a high level of specialization. This requires large investments for a new player to establish itself and often long lead times in product development. At the same time, the vertical markets are relatively small and the replacement cost for the customer is high, which reduces the chance for a new player to achieve a return on investments made. Within each vertical, there are often a few smaller players specializing in industry specific software. The more general software usually provides less cost-effective solutions for the unique needs of vertical markets. We always strive for a leading position in the verticals we are active in. This provides significant economies of scale that enable long-term profitability.

Micael Stark, Annica Karlsson and Jennie Holm, Kalmar


STRATEGIES

Business model and growth strategyHigh proportion of recurring revenueOur business model is based on a high proportion of recur-ring revenue. This gives us stable and predictable cash flows that create opportunities to act on a long term basis. It also makes the Group less sensitive to temporary declines in indi-vidual companies. The software is increasingly delivered as a cloud-based subscription. For our customers, this means low investment costs and that costs for development, operation, maintenance, upgrading and support are included in the ongoing agreement. They receive a secure overall offering at a known cost.

Change in the type of revenue

Growth through acquisitionVitec is an industrial player that has a long-term perspective. We are mainly growing through acquisitions of well-managed software companies in vertical markets in Nordic countries. We acquire established companies with well-known products in mature markets, which means that the Group’s organic growth is relatively low. The acquisition work is governed by a number of specific criteria that entirely determine if the companies are a good fit with Vitec.

AcquireIn Vitec, we have many years of experience and a high level of expertise in the development, sales and support of niche software. This makes it possible for us to identify acquisi-tion targets that are fully in line with our strategy based on

a number of important aspects. One decisive factor is that the acquisition must contribute to increasing the Group’s earnings per share. Good profitability and positive cash flows are therefore important.

The acquisitions made in our existing verticals contribute to increased market share, while acquisitions in new sectors leads to increased risk diversification. We continuously have a hundred interesting software companies on the prospect list. Before we decide for an acquisition, we spend a great deal of time and commitment in personal meetings with people in the companies. It is important that we agree on fundamental values, the business model and strategies since the acquisi-tions take place based on the companies staying in the Group.

RefineThe acquired companies are profitable and well-managed companies. Therefore, it is important to maintain the smooth functioning of the business and the important local industry knowledge after the acquisition. The local management is supported by processes and infrastructure that exist in the Group. All companies are followed up with common key figures that govern the strategic direction towards a high pro-portion of recurring revenue and focus on good cash flows. In the Group, we have common principles for how the product development should be planned and implemented to ensure that our offering is relevant in the future. The decentralized management requires that all managers have understood and act on the basis of the Group’s strategy and corporate culture.

Acquired sales

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17151311090705030199

0

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1000

Other incomeServices revenueLicence revenueReccuring revenue

201720152013201120092007200520032001

MSEK

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2 500

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100

2012 2013 2014 2015 2016 2017

Number of shares traded per month TSEK OMX SEK Vitec SEK

SEK share priceNumber,

TSEK

The acquired companies’ collective annual sales at the time of the respective acquisition.

0

50

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17151311090705030199

0

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201720152013201120092007200520032001

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2012 2013 2014 2015 2016 2017



TSEK


Strategy for brands and products in acquisitions

All operations within the Group contribute to strengthening the Vitec brand. We put Vitec in front of the name of the acquired company and gradually change over to Vitec as the only logo. We retain the names of the products, which are communicated to the market together with the brand Vitec. Acquisitions may mean that we offer products in an industry with partly overlapping functionality or even competing products. In such cases, we make no immediate changes, but instead evaluate in upcoming new development if there is a possibility to create components with support for all product lines. In this way, work begins that future-proofs the products and creates a new, joint product line for all customers within the specific industry.

Our suppliersOur main purchases concern such areas as offices, data cen-ters, electricity supply, information services, travel, electro-nics, computers, telephony, office supplies and software components. A well-functioning purchasing process is impor-tant to achieve cost-efficient purchases and to ensure that the suppliers meet our sustainability requirements. Among those that meet the requirements, the choice is then based on business grounds. Purchasing also takes place in a way that does not lock us into specific suppliers, but allows us to change to an alternative supplier without major disruptions in the operations.

Arne Huisman-Aase and Øystein Hodne, Stavanger

Katja Broch, Lars Christoffersen and Anette Juul Larsen, Odense


STRATEGIES

Business Area AutoVitec develops software for the automotive and machine-ry sector in Denmark, Finland, Norway and Sweden. The products support work processes, including vehicle sales, workshops, tire storage and distribution of auto parts.

The business area increased profit and sales compared with 2016. In Denmark, we launched a few complementa-ry products that strengthen our offering. In Finland, our cloud-based offering had a positive effect in 2017. In Norway, the companies Vitec Autodata AS and Vitec Infoeasy AS created a common offering to the market since their products complement each other in a positive way.

Examples of customers: Nelleman and Terminalen in Denmark, Incar, Autoklinikka and Firststop in Finland, Meko-nomen, Nettbuss and Torghatten ASA in Norway and KG Busservice in Sweden.

Business Area EnergyIn Business Area Energy, Vitec develops advanced forecas-ting systems for electricity traders, as well as calculation and map systems for owners of electricity and district heating networks. The geographic market comprises the Nordic countries, the Baltic states, the rest of Europe and the Middle East.

In 2017, the business area had largely unchanged sales and a higher operating profit compared with 2016. Our ef-forts on the European energy market that began a few years ago has been successful. With a high pace in our production development, we have continued to have considerable demand for our Aiolos forecast system, which is now at the customers in more than 20 European countries, even if the volumes are still relatively low.

Examples of customers: Fingrid, Svenska kraftnät and Vattenfall.

Business Area Real Estate Vitec develops software for the construction and real estate sector in Norway and Sweden. This includes comprehensive business systems for e.g. leasing, sales, customer service, finance, technical management and energy monitoring.

The business area increased profit and sales compared with 2016. The integration of Norwegian Plania AS went as planned and the business had a stable development during the year. In Sweden, sales were high with an increase in cloud-based deliveries and recurring revenue. Vitec has also developed unique software that provides real estate compa-nies in Sweden the ability to publish available rental apart-ments on the marketplace boplatssverige.se. Development was positive during the year here as well.

Examples of customers: Statens vegvesen, Avinor, Norsea Group AS , Universitetssykehuset Nord-Norge in Norway and Botkyrkabyggen, PEAB, and Rikshem in Sweden.

Business Area Finance & InsuranceIn Business Area Finance & Insurance, Vitec develops softwa-re for banks, financial institutions and insurance companies in Denmark, Norway and Sweden.

The business area increased profit and sales compared with 2016. The organization in our Danish operation was fine-tuned during the year to provide existing customers even better service. We made several large customer deals during the year and our standardized product that facilitates the in-troduction of the new financial regulations MiFID 2 was also well-received by our customers. In Norway, we lost one major customer during the year, which had an impact in the third quarter. In Sweden, we had major focus on new products and Capitex Asset Planning evoked considerable interest in the market. Fredrik Glifberg joined as new CEO for the Swedish business in January 2017.

Examples of customers: Danske Bank, EIKA Boligkreditt, Nordea and Pension Danmark in Denmark, Eika in Norway and PayDrive, Länsförsäkringar Fondliv, Min Pension, Nordea and SEB in Sweden.

Our Business Areas Our business areas support business processes for the vertical they are operating

in, and yet they share logic and conditions for the production of software. Niches

in the same vertical or that otherwise belong together are reported together as

a business area on a Nordic level. No business area represents more than 22 % of

sales resulting in a healthy risk diversification within the Group.


Business Area EnvironmentVitec develops market leading products in private and munici-pal waste and resource management in Finland. The products manage the entire chain from weighing waste and driving schedules to billing, accounting and reporting.

The business area increased profit and sales compared with 2016. In 2017, we delivered a solution that made our products even more mobile, which increased flexibility for our customers. We had a strong demand for our products during the year.

Examples of customers: Lakeuden Etappi, Jätekukko and Remeo.

Business Area Estate AgentsVitec develops software for estate agents in Norway and Sweden. Our products support estate agents in all stages throughout the business process.

The business area had decreased profit and sales com-pared with 2016. Both in Sweden and Norway, we are in the middle of a generational change to new modern versions of our applications for estate agents. The new web-based applications were well-received in the market and in Sweden more than 50 percent of the active estate agents already use our new product. Norway is slightly behind in the developme-nt process, but in 2017 we signed contracts with some of the major players in the market. Both of the countries are now entering a consolidation phase with extensive opportunities for rationalization in the transition to one platform instead of several in each country.

Torbjörn Abrahamsson joined as new CEO for the Swedish business in October 2017.

Examples of customers: DNB Eiendom and Eiendomsmeg-ler Krogsveen in Norway and Husman Hagberg, Länsförsäk-ringar Fastighetsförmedling and SkandiaMäklarna in Sweden.

Business Area Education & HealthBusiness Area Health changed name to Education & Health in connection with the acquisition of the Danish company MV-Nordic A/S. The company develops software for people with reading and writing difficulties in Denmark, Norway and Sweden. The products are used by both public and private education companies. The business area also includes the de-velopment of software for healthcare companies in Finland. The products are completely web-based and are used by medical centers, hospitals, physiotherapy and rehabilitation centers, as well as occupational health services and public sector organizations.

The business area increased profit and sales compared with 2016. MV- Nordic is included as of the third quarter. In Finland, the large installation projects we were working on throughout 2016 were completed. Demand for our cloud-ba-sed product remained high.

Examples of customers: In Education, we have customers such as the Ministry of Education in Denmark and Malmö Municipality in Sweden. In Health, Orton, the Finnish Student Health Service, as well as Tampere and Helsinki municipali-ties’ occupational health services are examples of a few of our customers.

Visiting one of our customers in Finland


STRATEGIES

Net Sales Share of net sales

Omsättning, fördelning AOMSEK

156Education & Health 18 %

Estate Agents 16 %

Environment 5 %

Finance &Insurance 17 %

Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO

Education & Health 10 %

Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning

Andel repetitiva intäkter av omsättningen

Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5



Estate Agents 16 %

Environment 5 %


Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO


Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning


Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5

Operating profit Share of operating profit



Estate Agents 16 %

Environment 5 %


Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO


Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning


Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5



Estate Agents 16 %

Environment 5 %


Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO


Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning


Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5

Operating margin Share of recurring revenue



Estate Agents 16 %

Environment 5 %


Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO


Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning


Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5



Estate Agents 16 %

Environment 5 %


Auto 18 %

Energy 3 %

Real Estate 22 %

26

190

142

44

138

44

RR, fördelning AO


Estate Agents 5 %

Environment 5 %


Auto 18 %

Energy 7 %

Real Estate 29 %

Rörelseresultat

Nettomsättning


Rörelsemarginal

19,5

8,0

32,2

29,0

11,2

5,5 5,5

MSEK

0

5

10

15

20

25

30

35

Education& Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

0

50

100

150

200

Education & Health

EstateAgents

Environ-ment

Finance & Insurance

RealEstate

EnergyAuto

156 158

0 5 10 15 20 25 30 35

Education &Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 12 %

31 %

17 %

20 %

7 %

12 %

4 %

0 20 40 60 80 100

Education & Health

Estate Agents

Environment

Finance & Insurance

Real Estate

Energy

Auto 82 %

74 %

57 %

73 %

53 %

74 %

96 %

5,5


With a focus on sustainable business, every day and in every relationship we generate opportunities to meet our brand promise:

To rely on – Today and Tomorrow Lars Stenlund, CEO

In our sustainability work, we have six prioritized focus areas in social, financi-

al and ecological sustainability. They are developed by Group management in

dialog with the business area managers and based on the Group’s mission and

brand promise. On the next few pages, the focus areas are described in more

detail.

Our productsOur products are the most important contribution in our sustainability work. The products are our foundation and core business, that´s why we don´t handle them as a separate focus area. They contribute to sustainability by supporting necessary functions in society and enabling more efficient processes. One of our many examples is our product for en-ergy follow-up, which creates conditions for property owners to streamline the energy use in their properties. Another example is the product JHL, which administers waste and resource management where a map system with real-time data transfer shows the trucks the most efficient route based on destination, type of waste, etc. A third example is the products IntoWords and CD-Ord. These two products are modern digital tools that make work and school possible for those with reading and writing difficulties. IntoWords and

CD-Ord are used both in grade school and college. Many of our products also support digital signing and e-invoicing. Read more about our products at vitecsoftware.com.

Decentralization and management by objectivesJust like other operating activities, the sustainability work is conducted locally in respective business area. The busi-ness area managers report to Group management and the sustainability work is followed up based on the common focus areas. The CEO has the overall responsibility for the sustainability work and reports to the Board. Read more about our risk and uncertainty factors in the Administration Report on page 24.

Sustainability Report

Our office in Kalmar


SUSTAINABILITy REPORT

With a focus on sustainable business, every day and in every relationship we generate opportunities to meet our brand promise:

To rely on – Today and Tomorrow Lars Stenlund, CEO

Our focus areasSocial sustainability

Our internal and external relationships are based on transparency and trust. In 2017, we began working on a common Code of Conduct for the entire Group, which will be adopted in 2018. We have clear ethical frameworks and approaches for our operations and towards the parties we cooperate with. They are gover-ned by our Code of Conduct and guidelines in the areas of human rights, anti-corruption, environment, per-sonnel-related issues and the prudence principle. The Code of Conduct gives us an ethical framework, rooted in our values, on which we will base our decisions and behavior in the daily work.

Focus area 1: Employee responsibilityVitec is constantly growing. In 2017, we welcomed 140 new employees in connection with our corporate acquisitions and recruitments. At the end of the year, we were around 600 employees throughout the Nordic region.

Focus area 2: Customer responsibility Our products are business critical for the customers. Our most important customer responsibility is that the products are accessible and process the customers’ information in a secure and reliable manner.

Focus area 3: Supplier responsibility For our business to be sustainable in every phase, we choose suppliers that act professionally, sustainably and ethically correct based on human rights and anti-corruption, among others.

Financial sustainability

The Group’s overall processes together with the employees’ in-depth knowledge of the customer’s business create good conditions for development, continued innovation and long-term sustainable pro-duct development. One of our core values is to keep it simple. Not complicating matters and instead striving to keeping it simple contributes to a cost awareness of each employee.

Focus area 4: Long-term sustainable profitabilityOur business model is based on offering software according to a subscription model. It is a financially sustainable business model that provides the conditions on a long term basis.

Ecological sustainability

We have a responsibility for our operations having as little negative impact on the environment as possible. Our assessment is that the areas in which Vitec has the largest negative impact on the environment are through emissions and waste. The emission come indirectly through electricity consumption in data centers and offices and through the personnel’s busi-ness travel. Waste is mainly in the form of electronics scrap.

Focus area 5: Reduced energy consumptionTo continuously reduce our energy consumption, we work to improve the efficiency of our data centers and offices. We have also begun work to transition to 100 % renewable energy sources in our electricity subscriptions.

Focus area 6: Reduced waste and more recyclingWe have begun work on a Group-wide standard for re-use and recycling.

”


Employee responsibility

Vitec is constantly growing. In 2017, we welcomed 140 new employees in connection with our corporate acquisitions and recruitments. At the end of the year, we were around 600 employees throughout the Nordic region.

Respect and satisfactionThe individual companies in the Group are relatively small and consequently, every employee’s contribution is central to the Group’s success. Our foremost employee responsibility is therefore to recruit and retain employees who have the right expertise and who share our values. To be an attractive employer both today and tomorrow, it is important to have focus on a sustainable work environment. The work climate must be based both on respect for each other’s competence and for each other as individuals.

Our employees’ health and safety are prioritized when we e.g. design workplaces, choose equipment, create job descriptions and plan skills development. As an employer, we also encourage the employees to have a healthy lifestyle. We do so mainly by creating opportunities for a good balance between working life and private life. Within the Group, there is a voluntary health initiative, ActiVitec, which is driven by employees to inspire exercise and movement.

Linda Ångman System Developer in Real Estate in Sweden

Tom-Arild Bonnegolt System Consultant in Finance & Insurance in Norway

“I began at Vitec in Umeå in 2005. For 12 years, I have focused and specialized in vertical systems for energy follow-up and technical property management. My unique industry knowledge gives me the possibility to fundamentally understand the customer’s flows and processes. The result is that we can improve the efficiency of the customer’s business through user friendly products. I love solving problems and the best thing about my job is that I get to solve complex problems and get immediate feedback every day. I am driven by our customers’ gaining a simpler workday by using our products; the key words are user friendliness and usability. What I appreciate most about Vitec as an employer is the stability and security.”

“I have worked here for 17 years and I began as a system developer. Today, I work between the develop-ment department and the customers. My job is about understanding the customers’ needs and translating that into technical solutions. I am driven by helping the customers and making their workday easier. To achieve a high level of quality in my work, I meet the customers at personal meetings to set the right expectations and capture the needs. A good customer dialog builds on transparency and trust. In my years here, I have developed a dual competence with the development of software and business knowledge in the insurance industry. My job satisfaction comes from my collea-gues and the combination of flexibility and extensive responsibility for keeping our customers happy.”

Recruitment and developmentRecruitment, salaries and development opportunities are affected by the individuals qualifications, such as education, experience, competence, ability and performance. We work to promote diversity from several aspects in the Group. Examp-les of such measures are adaptation of job ads and greater awareness in recruitment. In 2017, we increasingly used an internal HR specialist in recruitment to ensure that we have the right focus throughout the process. Salary and develop-ment talks are held between managers and employees every year. These are important talks for feedback and to talk about future development based on the company’s needs and the employee’s desire for development. As an employer, Vitec has the task of continuously developing the employees; for example, our managers are often recruited internally.

Value-guided leadershipOur managers are central bearers of the company culture who contribute to understanding of and support for our core values. Experienced managers help employees to grow, and ensure that the focus is on those tasks that create value. In 2017, we held two networking meetings for business area and staff managers and we introduced an introduction program for new CEOs. We also implemented Leadership training, a recurring training program for managers throug-hout the Group. The speakers on such occasions are mainly people from Group management.



Here, conditions are created to build important networks for the exchanges that are of benefit to the whole Group. We also recruited an HR manager with a Nordic perspective to increase the management support throughout the Group.

Every employee also has a responsibility to follow our common corporate culture. Once a year, we gather our new employees where they receive an introduction by Group management. Knowledge about the Group, the corporate culture and fundamental values is on the agenda.

Convertible program With the aim of providing our employees the possibility of long term part-ownership in Vitec, we implemented our ninth convertible program in 2017. The program applies with the same terms to all employees in Vitec. This way, all employees, regardless of role, gain the possibility to share in the value growth in Vitec at the same time that the consequences of a possible negative price trend can be minimized.

Total number % women % men

Group 573 30 70

Under 30 64 38 62

30-50 345 29 71

Over 50 164 27 73

Of whom are managers 93 32 68

Under 30 1 0 100

30-50 63 37 63

Over 50 29 24 76

Total number % women % men

Number of new employees

Total 54 33 67

Under 30 13 38 62

30-50 34 29 71

Over 50 7 43 57

Number who left

Total 24 8 92

Under 30 2 0 100

30-50 13 8 92

Over 50 9 11 89

Total Women Men

Group 44 43 44

Age distribution 2017

Average age 2017

Personnel turnover 2017

Customer responsibility

Our products are business critical for the customers. Every vertical in which we work requires us to be specialists and have good knowledge of the industry’s conditions and needs. This gives us the possibility to offer products where the development is driven by customer benefit and time and en-ergy is spent on what really makes a positive difference and streamlines the customer’s processes. Our most important customer responsibility is that the products are accessible and process the customers’ information in a secure and reliable manner. We do annual audits based on our security policy to be able to take possible steps early on.

Supplier responsibility

For our business to be sustainable in every phase, we choose suppliers that act professionally, sustainably and ethically correct based on human rights and anti-corruption, among others. Even if purchasing constitutes a very limited part of the Group’s operations, it is important to ensure that we choose suppliers based on our core values. In 2017, we have therefore begun work on common guidelines and templates for procurements and purchasing where we clearly state what we expect of our suppliers for them to be approved according to our Code of Conduct.


Long-term sustainable profitability

Our business model is based on offering software according to a subscription model, which provides stable and predicta-ble cash flows with recurring revenues. It is a financially sus-tainable business model that provides the conditions to act long term. It also makes the Group less sensitive to temporary

declines in individual companies. Growth in the Group mainly takes place through business acquisitions; a crucial parameter is that the earnings per share will be impacted positively by the acquisition.

We have also chosen to not have bonus systems for senior executives; this is to ensure that the company is managed long term and to avoid short-term actions.

TargetOperating margin of at least 15 %.

TargetAt least 33 % of the profit is paid out to the shareholders.

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Rikke Wohlleben, Louise Juul and Kristina Hussak,

Odense



TargetContinuously improve efficiency of energy consumption in our data centers and offices.

Target100 % renewable energy sour-ces in our electricity contracts.

Energy consumption data centers 2017:

403 kWh/processor core

Energy consumption offices 2017:

1,386 kWh/employee

2017:

In 2017, we decided to follow our energy consumption in relation to the number of employees at our offices and the processing capacity of our

data centers and how much of our consumption comes from renewable energy sources. These are new measurements and therefore we don´t

have comparative figures from earlier years.

Reduced energy consumption

To continuously reduce our energy consumption, we work to improve the efficiency of our data centers and offices. We use so-called free cooling, which means that the natural cold in the outdoor air can be used to reduce the temperature in the data centers. In cooperation with the landlords, excess heat from our data centers is used for heating other parts of the properties. For one of our data centers, we have our own solar panels that produce 25 % of the electricity used by that one server hall. When new hardware is bought, we require it to be an energy-efficient alternative. In 2017, we also began

work to transition to 100 % renewable energy sources in our electricity subscriptions. We also work to minimize the amount of business travel by creating conditions for efficient digital meetings through our common IT infrastructure.

Reduced waste and more recycling

In 2017, we began work on a Group-wide standard for electronics waste that enables measurement and follow-up of re-use and recycling. We also began a standard for follow-up of what waste should be recycled in our offices.


USA 17 %

Sweden 76 %

SEK kurs Antal


Europe 1 %

Norway 21 %

Finland 20 %

Sweden 33 %

Denmark 26 %

%

Nonrenewable

Renewable

59 %


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One of our offices in Odense


Vitec has been in constant growth and profitable every year. Below are a few

events that have been important and critical to our success over the years.

History

Milestones

1985Vitec was founded by Lars Stenlund and Olov Sandberg. The first software was a product for monitoring energy usage in properties.

1990 The operation was scaled up and the Board of Directors was strengthened with external members.

1991 The company was named Vitec. The invented name Vitec won the voting among the employees.

1992 Vitec moved into the energy sector with a software for calcu-lating short-term forecasts for energy requirements in large energy systems.

1998 Vitec was listed on Innovationsmarknaden.

1999Vitec was listed on AktieTorget. A number of acquisitions were conducted in Sweden.

2002Vitec paid a dividend for the first time. This was unique among IT-companies in Sweden, the year when the IT-bubble burst.

2003An analysis of how the existing business had grown profitably through the years resulted in the acquisition-driven growth strategy that still applies today.

2005 Business Area Media was established when Vitec acquired the company Veriba AB, whose product was mainly targeted at newspaper publishers. Vitec also acquired IBS Vertex and became the most dominant software supplier in the real estate sector.

Lars Stenlund and Olov Sandberg


HISTORy

2007Vitec acquired Svensk FastighetsData, the market leading software supplier for estate agents in Sweden, resulting in the establishment of Business Area Estate Agents.

2010 Business Area Finance & Insurance was established when Vitec acquired Capitex AB. They developed software for calculating estimates for banks and insurance companies, as well as software for estate agents and the real estate industry.

2011 Vitec was listed on Nasdaq Stockholm. The Business Area Estate Agents added operations in Norway through the acqui-sition of IT Makeriet A/S, the first acquisition outside Sweden.

2012The listed subsidiary 3L System AB (publ) was acquired, the-reby being delisted from First North.

2013 Business Area Health was formed in connection with the ac-quisition of the Finnish company Acute FDS Oy with software for Finnish healthcare companies.

2014Business Area Auto was formed through the acquisition of AutoData Norge AS with software for the Norwegian auto-parts market. Business Area Finance & Insurance extended to Denmark with the acquisition of the Danish company Aloc A/S.

2015During the year Vitec acquired two companies in Business Area Auto; the Norwegian software company Infoeasy AS and the Danish company Datamann A/S. Business Area Finance & Insurance was supplemented with operations in Norway when the Norwegian company Nice AS was acquired.

2016Business Area Media was wound up when Vitec Veriba AB was sold to XLENT Consulting Holding AB. The new Business Area Environment was added with the acquisition of the Finnish company Tietomitta Oy. FuturSoft Oy in Finland and Plania AS in Norway were also acquired, supplementing the business areas Auto and Real Estate.

2017Vitec is moved from Small Cap to Mid Cap on Nasdaq Stock-holm. The Danish software company MV-Nordic A/S with products for reading and writing difficulties was acquired and the Business Area Health changed name to Education & Health. Olov Sandberg, one of the founders of Vitec, wrapped up his final operating assignments in the company to retire. Olov remains as one of the company’s main owners.

Net Sales

Claus Hermansen, Dorrit Moll

and Jan Modberg , Odense

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In January 2017, Vitec moved from Small Cap to Mid Cap at Nasdaq Stockholm.

During the year, the share price increased by 15.2 % to SEK 87.00. The total

market cap was SEK 2,596 million at year-end. For the 16th consecutive year,

the Board is proposing to increase the dividend, the proposal to the AGM is a

dividend of SEK 1.10.

Turnover and price trendDuring 2017, shares were traded at a total value of SEK 304.5 million. The average turnover per trading day amoun-ted to 15,991 shares at a value of SEK 1.2 million. The closing price for the year was SEK 87.00 and the total market value amounted to SEK 2,596 million at year-end. For the share, the highest price paid was SEK 91.50 on December 5 and the lowest SEK 65.00 on April 3.

Class A and B sharesIn September, 150,000 Class A shares were converted to Class B shares in accordance with the conversion provision mentioned in the Articles of Association, §5 Share type. After reclassification, the number of Vitec Class A shares amoun-ted to 3,350,000. In December, personnel convertibles were converted to 442,210 new Class B shares. The number of Class B shares then amounted to 26,488,900. The total num-

ber of shares in Vitec at the end of the financial year amounted to 29,838,900. A preemptive rights clause exists for the Class A shares. The share capital amounts to approximately SEK 3.0 million and the nominal value is SEK 0.10 per share.

Convertibles 2018-2020At the Extraordinary General Meeting held on November 1 2017, a resolution approved a convertible program for employees. The subscription amount became SEK 20.8 million with a conversion price of SEK 104. At full conver-sion, this corresponds to a dilution of the share capital in an amount of 0.68 % and 0.34 % of the number of votes.

Stock marketThe Class B shares in Vitec Software Group AB are listed on Nasdaq Stockholm. The shares have the ticker Vit B and

The share and the shareholders

Linda Ångman and Maja Jonsson, Umeå


THE SHARE AND THE SHAREHOLDERS

Styrelsearbetets årscykel

Kv1Board meetingEarningsYear-end-reportAudit CommitteeEvaluation of the BoardDocuments for the AGM

Kv2Kv3

Kv4

Board meetingInterim report Q2

AGM and constituent meeting Company signatories appointedInterim report Q1Audit CommitteeBudget directiveInstructions for the CEO

Strategy meetingStrategic planOperating planFinancial goalsShareholders directivesProduct investments

Board meetingInterim report Q3Audit committee

Board meetingBudget

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Share price and turnover 2012-2017

ISIN code SE0007871363. The minimum trade is one (1) Class B share. In January 2017, the Vitec share was moved from Small Cap to Mid Cap.

Dividend policyThe shareholders of Vitec have received a dividend every year since 2003. Our goal is for the dividend to be at least one third of profit after tax. However, an assessment is always made considering the company’s financial position.

DividendThe Board proposes to the Annual General Meeting that a dividend of SEK 1.10 per share shall be paid, which corres-ponds to 41 % of the profit after tax for 2017.

Information to shareholdersVitec aims to provide consistent, detailed and timely informa-tion about the Group's development and financial position to shareholders and the stock market. Our website vitecsoftware.com is the primary channel for information. There, we publish financial information, and other information that may be price sensitive, immediately after being made public. On the website, there are also presentations and films from AGMs, information on the company and share, financial calendar and information on corporate governance. There is also a possibi-lity to order a subscription by e-mail to our press releases and reports and printed versions of our financial statements.

Analyses of VitecDuring the year Vitec was monitored by ABG Sundal Collier and Remium.

Dividend per share

Heidi Marie Taksdal, Stavanger

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Share capital development

Year Transaction

Total share capital

Total no. of Class

A-shares

Total no. of Class

B-shares

1985 Company founded 50,000 500 -

1990 Bonus issue 100,000 1,000 -

1990 Issue of new shares, incentive program 140,000 1,000 400

1990 Issue of new shares 156,000 1,160 400

1995 Issue of new shares, incentive program 164,000 1,160 480

1997 Bonus issue/split 328,000 23,200 9,600

1997 Issue of new shares, incentive program 340,000 23,200 10,800

1997 Split 340,000 4,640,000 2,160,000

1997 Conversion of Class A shares 340,000 4,000,000 2,800,000

1997 Bonus issue 850,000 10,000,000 7,000,000

1997 Private placement Innovationsmäklarna AB and Innovationsmarknaden AB 900,000 10,000,000 8,000,000

1998 Issue of new shares at introduction on Innovationsmarknaden 1,500,000 10,000,000 20,000,000

1998 Non-cash issue at acquisition of Bra Administration AB (now Vitec Energy AB) 1,641,000 10,000,000 22,820,000

1999 Reverse share split at listing on Aktietorget 1,641,000 1,000,000 2,282,000

2000 Non-cash issue at acquisition of Minator AB (now Vitec Fastighetssystem AB) 1,732,000 1,000,000 2,464,000

2004 Conversion of personnel convertibles 1,786,100 1,000,000 2,572,200


2008 Non-cash issue in connection with acquisition of Vitec Mäklarsystem AB 1,883,000 1,000,000 2,766,000

2008 Conversion of Class A shares 1,883,000 800,000 2,966,000

2009 Conversion of convertible from acquisition of Vitec Veriba AB 1,916,350 800,000 3,032,700

2010 Conversion of convertible from acquisition of Vitec Mäklarsystem AB 2,025,725 800,000 3,251,450

2010 Private placement Avanza 2,125,725 800,000 3,451,450

2011 Conversion of personnel convertibles 2,183,538 800,000 3,567,075


2012 Non-cash issue in connection with acquisition of outstanding shares in 3L System AB 2,574,164 800,000 4,348,327

2013 Conversion of convertible from acquisition of Capitex AB 2,654,164 800,000 4,508,327

2014 Conversion of convertible from acquisition of IT-Makeriet AS 2,674,164 800,000 4,548,327

2014 Private placement (Book-building) 2,899,164 800,000 4,998,327


2015 Split 2,939,669 4,000,000 25,396,690

2016 Conversion of Class A shares 2,939,669 3,500,000 25,896,690

2017 Conversion of Class A shares 2,939,669 3,350,000 26,046,690


Quick facts2017 2016

Class B shares, quantity 26,488,900 25,896,690

Highest price, SEK 91.50 76.00

Lowest price, SEK 65.00 55.75

Closing price, SEK 87.00 75.50

Average daily trade, TSEK 1,213 1,039

Average daily trade, quantity 15,991 16,231

Stock market value, MSEK 2,596 2,219

Stock market Nasdaq Stockholm Nasdaq Stockholm

Segment Mid Cap Small Cap

Ticker Vit B Vit B

ISIN code SE0007871363 SE0007871363


THE SHARE AND THE SHAREHOLDERS

Foreign owned shares Largest shareholders 12/31/2017

No. of Class A shares

No. of Class B shares Capital % Votes %

Lars Stenlund* 1,570,000 177,280 5.9 26.5

Olov Sandberg* 1,420,000 124,565 5.2 23.9

Jerker Vallbo* 360,000 126,405 1.6 6.2

Mawer Investment Management 1,863,278 6.2 3.1

Thomas Eklund 1,746,440 5.9 2.9

SEB fonder 1,395,051 4.7 2.3

Didner & Gerge fonder 1,267,000 4.2 2.1

Martin Gren (Grenspecialisten Förvaltning AB)

1,161,135 3.9 1.9

Utah Retirement Systems 1,105,026 3.7 1.8

Nils-Eric Öquist* 980,000 3.3 1.6

Others 16,542,720 55.4 27.6

3,350,000 26,488,900 100.0 100.0

*Including family and/or ownership through companies


USA 17 %

Sweden 76 %

SEK kurs Antal


Europe 1 %

Norway 21 %

Finland 20 %

Sweden 33 %

Denmark 26 %

%

Nonrenewable

Renewable

59 %


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Shareholders

Shareholder list by geographic area

Shareholders by size of holding

Holding No. of sharehol-ders

No. of Class A shares

No. of Class B shares

Holding % Votes %

1-500 2,734 372,414 1.25 0.62

501-1,000 438 369,896 1.24 0.62

1,001-5,000 721 1,692,120 5.67 2.82

5,001-10,000 132 981,968 3.29 1.64

10,001-15,000 45 569,401 1.91 0.95

15,001-20,000 39 684,424 2.29 1.14

20,001- 137 3,350,000 21,818,677 84.35 92.21

Total 12/31/2017 4,246 3,350,000 26,488,900 100.00 100.00

Share data

Earnings per share2017 2016 2015 2014 2013

Adjusted equity per share (SEK) 13.34 11.37 9.24 8.85 6.39

Earnings per share (SEK) 2.70 2.27 2.66 1.75 1.16

Earnings per share after dilution (SEK) 2.70 2.25 2.64 1.68 1.09

Dividend paid per share (SEK) 1.00 0.90 0.67 0.55 0.50

Cash flow per share (SEK) 6.78 5.20 5.09 4.40 1.97

P/E ratio 32.23 33.22 28.20 15.12 15.31

P/Adjusted equity per share 6.52 6.64 8.12 2.99 2.77

Market valueSEK million 2017 2016 2015 2014 2013

Market value at the end of the year* 2,596 2,219 2,205 779 470

* Market value is calculated as the total number of issued Class A and B shares on the closing data times the share price on Nasdaq Stockholm at year-end.


USA 17 %

Sweden 76 %

SEK kurs Antal


Europe 1 %

Norway 21 %

Finland 20 %

Sweden 33 %

Denmark 26 %

%

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Sweden 76 %

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Europe 1 %

Norway 21 %

Finland 20 %

Sweden 33 %

Denmark 26 %

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Administration Report

The Board of Directors and CEO of Vitec Software Group AB (publ), corp. ID no. 556258-4804, with its registered office in Umeå, hereby submit the annual report, sustainability report and consolidated financial statements for the 2017 financial year.

This English version of the annual report is a translation of the original Swedish version. In the event of differences, the Swedish version shall take precedence over the English trans-lation. In accordance with Chapter 6 Section 11 of the Annual Accounts Act, Vitec has chosen to prepare the statutory sus-tainability report as a report separate from the annual report, the content of which is presented on pages 12-17.

The BusinessVitec is a software manufacturer that designs industry-speci-fic business applications for the Nordic market. The company, with operations in Sweden, Norway, Finland and Denmark, is growing in the mature part of the software industry by conso-lidating vertical software segments. Our customers include real estate agents, construction firms, real estate companies, banks, insurance companies, energy providers, healthcare providers, auto part dealers and waste management speci-alists. The Group has around 600 employees who generate annual sales of SEK 950 million. Vitec is listed on the Nasdaq Stockholm Stock Exchange:

� Business Area Auto – In Business Area Auto, Vitec offers software for the automotive and machinery sector in Den-mark, Finland, Norway and Sweden. The products support work processes, including vehicle sales, workshops, tire storage and distribution of auto parts.

� Business Area Energy – Vitec develops advanced fore-casting systems for electricity traders, as well as calcula-tion and map systems for owners of electricity and district heating networks. The geographic market for the business area comprises the Nordic countries, the Baltic states, the rest of Europe and the Middle East.

� Business Area Real Estate – Vitec offers software for the construction and real estate sector in Sweden and Nor-way. This includes comprehensive business systems for e.g. leasing, sales, customer service, finance, technical ma-nagement and energy monitoring.

� Business Area Finance & Insurance – In Business Area Fi-nance & Insurance, Vitec delivers software to banks, fi-nancial institutions and insurance companies in Denmark, Norway and Sweden.

� Business Area Environment – Vitec develops market le-ading products in private and municipal waste and resour-ce management in Finland. The products manage the enti-re chain from weighing waste and driving schedules to bil-ling, accounting and reporting.

� Business Area Estate Agents – Vitec develops softwa-re for estate agents in Norway and Sweden. Our products support estate agents in all stages throughout the busi-ness process.

� Business Area Education & Health – Vitec develops software for people with reading and writing difficulties in Denmark, Norway and Sweden. The products are used by both public and private education companies. In this busi-ness area, Vitec also develops software for healthcare pro-viders in Finland. The products are completely web based and are used by medical centers, hospitals, physiotherapy and rehabilitation centers, as well as occupational health services and public sector organizations.

Vitec has a growth-oriented strategy and is constantly on the lookout for new acquisitions. The objective is to be the mar-ket leader within the niche markets in which Vitec operates. The current market is made up of Sweden at 33.4 percent, Denmark 25.6 percent, Finland 19.8 percent, Norway 20.5 percent and other countries 0.7 percent.

Net sales and earningsThe Group’s net sales totaled SEK 855.0 million (675.4) in 2017, an increase of 27 percent compared to 2016. The increased net sales are primarily attributable to acquisitions. Organic growth adjusted for acquisitions is 1.3 percent.

Operating profit amounted to SEK 106.7 million (88.3), which corresponded to an operating margin of 12 percent (13). The operating profit included depreciation and impair-ments totaling SEK 126.9 million (114.3).

Net financial items were negative, amounting to SEK -8.6 million (-6.4). Financial income amounted to SEK 0.3 million (0.8) and comprised interest on bank accounts. Financial expense amounted to SEK -8.9 million (-7.1) and comprised interest on credit facilities and convertible bonds.

Profit for the year after tax amounted to SEK 79.4 million (66.8), of which SEK 79.4 million (66.8) was attributable to the Parent Company’s shareholders.


ADMINISTRATION REPORT

Development of Business AreasThe Group’s operations are organized into and managed based on the segments (business areas) Auto, Energy, Real Estate, Finance & Insurance, Environment, Estate Agents and Education & Health.

External net sales Growth

Operating profit before and after acquisition-

related costs

Operating margin before and after acquisition-

related costs

SEK million 2017 2016 2017 2017 2016 2017 2016

Auto 155.9 119.2 31 % 19.5 19.2 12 % 16 %

Energy 25.7 25.9 -1 % 8.0 7.3 31 % 28 %

Real Estate 190.1 158.4 20 % 32.2 29.8 17 % 19 %

Finance & Insurance 142.3 126.6 12 % 29.0 20.3 20 % 16 %

Environment 44.1 23.0 - 5.5 3.4 12 % 15 %

Estate Agents 138.0 155.3 -11 % 5.5 11.1 4 % 7 %

Education & Health 157.9 66.2 139 % 11.2 1.9 7 % 3 %

Joint 1.0 1.0 3 % 0.0 0.0 0 % 0 %

Group 855.0 675.4 27 % 110.9 93.1 13 % 14 %

Acquisition-related costs -4.2 -4.8

Operating profit after acquisition-related costs

106.7 88.3 12 % 13 %

Due to non-recurring acquisition-related costs, development is difficult to follow. For this reason, the operating profit above is described before and after acquisition-related costs.

Business Area Auto This segment includes Vitec Autodata AS, Vitec Datamann A/S, Vitec Infoeasy AS and FuturSoft Oy. The operations in FuturSoft were consolidated as of September 7, 2016. Total revenues amounted to SEK 155.9 million (119.2). Recur-ring revenues increased by 33 percent to SEK 128.6 million (96.8), the license revenues increased by 100 percent to SEK 6.1 million (3.0) and services increased by 15 percent to SEK 16.3 million (14.1). Recurring revenues decreased by 4 percent to SEK 5.0 million (5.2). Recurring revenues as a per-centage of sales was 82 percent (81). The operating margin was 12 percent (16).

Business Area EnergyThis segment includes Vitec Energy AB. Total revenues amounted to SEK 25.7 million (25.9), a decrease of 1 percent. Recurring revenues increased by 4 percent to SEK 19.1 million (18.4). Service revenues decreased by 12 percent to SEK 6.5 million (7.4). Recurring revenues as a percentage of sales was 74 percent (71). The operating margin increased to 31 percent (28).

Business Area Real EstateThis segment includes Vitec Förvaltningssystem AB, Vitec Fastighetssystem AB, Vitec Capifast AB, Vitec Software AB, Vitec AB and Vitec Plania AS. Operations in Plania were consolidated as of December 5, 2016. Total revenues amounted to SEK 190.1 million (158.4), an increase of 20 percent. License revenues decreased by 25 percent to SEK 8.6 million (11.5). Recurring revenues increased by 22 per-cent to SEK 108.8 million (89.2). Service revenues increased by 26 percent to SEK 69.8 million (55.2). Recurring revenues as a percentage of sales was 57 percent (56). The operating margin decreased to 17 percent (19).

Business Area Finance & InsuranceThis segment includes Vitec Capitex AB, the corporate group Vitec Aloc A/S and Vitec Nice AS. Total revenues amounted to SEK 142.3 million (126.6), an increase of 12 percent. Re-curring revenues increased by 5 percent to SEK 104.4 million (99.7). License revenues increased by 24 percent to SEK 7.5 million (6.1). Service revenues increased by 47 percent to SEK 29.9 million (20.3). Recurring revenues as a percentage of sales was 73 percent (79). The operating margin increased to 20 percent (16).

Business Area EnvironmentThis segment includes Tietomitta Oy, which was consolidated as of 5 July 2016 and 3L Media AB. In July 2016, the Veriba AB corporate group was divested. Veriba and 3L Media for-med the earlier Business Area Media. As of 2017, the remai-ning operations in 3L Media are included in the Environment segment. Total revenues amounted to SEK 44.1 million (23.0). Recurring revenues amounted to SEK 32.6 million (14.3), corresponding to 74 percent of sales. The operating margin was 12 percent. In comparative figures for 2016, SEK 4.6 million pertains to sales and SEK 1.0 million pertains to profit in Media. Sales and earnings for Media amounted to SEK 0.5 million in 2017.

Business Area Estate AgentsThis business area includes Vitec Mäklarsystem AB, Capitex AB, Vitec Megler AS, Vitec Megler AB and ADservice Scan-dinavia AB. Total revenues amounted to SEK 138.0 million (155.3), a decrease of 11 percent. License revenues decre-ased to SEK 0 million (1.8). Recurring revenues decreased by 9 percent to SEK 132.5 million (145.1). Service revenues decreased by 35 percent to SEK 5.1 million (7.8). Recurring revenues as a percentage of sales was 96 percent (93). The operating margin was 4 percent (7).


Business Area Education & HealthThis segment includes the Group AcuVitec Oy and the Group Vitec MV A/S. The operations in Vitec MV are consolidated as of July 6, 2017. Total revenues amounted to SEK 157.9 million (66.2). Recurring revenues increased to SEK 83.7 million (54.6), services increased to SEK 12.2 million (11.2) and license revenues increased to SEK 13.8 million (0). Other revenues increased to SEK 48.2 million (0.3) and consist of product sales in Vitec MV A/S. Recurring revenue as a per-centage of sales was 53 percent (83). The operating margin was 7 percent (3).

Acquisitions and changes to the legal structure during 2017On January 1, 2017, the three companies in Business Area Estate Agents in Norway, Vitec IT-Makeriet AS, Vitec Fox AS and Vitec Megler AS, were merged. The merger means that Vitec Megler AS has taken over the submitting companies book keeping and tax position together with assets, rights and obligations.

One acquisition was conducted during 2017, resulting in changes to the legal structure. On July 6, the Danish software group MV-Nordic A/S was consolidated.

ObjectivesVitec has a growth-oriented strategy and is constantly on the lookout for new acquisitions. Historic growth has amounted to 18 percent per year on average. The Board of Directors has set the financial target of achieving an operating margin of 15 percent and to continue the work of focusing on conti-nual growth.

OUTCOME

Average 2017 2016 2015 2014 2013

Sales growth 18 % 27 % 9 % 26 % 32 % -5 %

Operating margin 13 % 12 % 13 % 16 % 14 % 11 %

Important events in 2017Q1Vitec was moved from Small Cap to Mid Cap on Nasdaq Stock-holmVitec Software Group AB’s Class B shares (VIT B) were moved from the Small cap segment to the Mid Cap segment at Nasdaq Stockholm as a result of Nasdaq’s annual review of the market values for the Nordic markets. The share is traded in the Mid Cap segment as of January 2, 2017.

New Head of Finance & Insurance in SwedenIn January, Fredrik Glifberg began as the new Head of Busi-ness Area Finance & Insurance.

Vitec named Patrik Fransson the new IR DirectorOlov Sandberg, who founded Vitec in 1985 together with Lars Stenlund, left his operating role in the company to retire. However, he is staying on as one of the main owners of the company. Olov Sandberg’s role as the IR Director was assu-med by Patrik Fransson as of 27 February 2017.

Vitec signed a multi-year agreement with VäsbyhemVitec signed a six-year agreement with the municipal housing company AB Väsbyhem regarding delivery of a new cloud-ba-sed accounting and property system.

Q2SkandiaMäklarna chose Vitec after extensive procurementSkandiaMäklarna extended their cooperation with Vitec. Of the 20 largest national estate agent chains, 16 chose Vitec as the supplier of business systems.

Vitec expanded its acquisition credit facilityThe existing acquisition credit facility in Nordea was increa-sed by SEK 200 million. This credit will be used for acquisi-tions and will be gradually used.

Q3 Vitec acquired the software company MV-Nordic in DenmarkOn July 6, Vitec Software Group AB (publ) signed an agre-ement on the acquisition of all shares in the Danish software company MV-Nordic A/S. The company offers software to the education sector in Denmark, Norway and Sweden. The main product is a cloud-based service for people with reading and writing difficulties. MV-Nordic has annual sales of around MDKK 110 with an EBITDA of around MDKK 11.

Increased international ownership in VitecThe main owners of Vitec, Olov Sandberg and Lars Stenlund, sold 300,000 Class B shares to a few institutional investors. The sale was made at equal parts by both of the main owners and at the current market price.

Q4Vitec signs agreement with Danish SDCDanish SDC chose to replace its current software for portfo-lio management with Vitec’s product PORTMAN.

New Head of Estate Agents in SwedenIn October, Torbjörn Abrahamsson took office as the new Business Area Manager for Estate Agents in Sweden.

Decision on convertible program for employeesOn November 1, an Extraordinary General Meeting in Vitec Software Group AB (publ) was held and resolved to approve a convertible program for employees of no more than SEK 25,000,000. The subscription amount was SEK 20,830,000 with a conversion price of SEK 104. At full conversion, this corresponds to a dilution of the share capital in an amount of 0.68 percent and 0.34 percent of the number of votes.

Personnel convertibles 2015/2017 were converted in their entiretyConvertible bonds directed at employees of Vitec with a term of January 2015 – December 2017 were converted to Class B shares. The conversion meant that the number of Class B shares in Vitec increased by 442,210.

Important events after the end of the periodCFO utilizes options and buys 50,000 sharesCFO Maria Kröger increased her shareholdings by 50,000



Class B shares on January 4, 2018. The acquisition was made through the redemption of personal options that Lars Sten-lund and Olov Sandberg issued in January 2015.

Liquidity, cash flow and financial statusThe Group’s cash and cash equivalents, including short-term investments, amounted to SEK 57.9 million (80.9) at the end of the period. In addition to these cash and cash equivalents there was a bank overdraft facility of SEK 20.0 million, and SEK 178.6 million as an unused portion of a credit facility totaling SEK 450.0 million.

� Cash flow from operating activities was SEK 187.6 million (158.5).

� Cash flow from investing activities was SEK -198.1 million (-244.7), divided between the acquisition of subsidiaries at SEK -88.8 million (-156.1), the sale of subsidiaries at SEK 0 million (4.2), intangible assets including capitalized work at SEK -101.5 million (-83.8) and investments in tangible as-sets at SEK -7.8 million (-9.0).

� The cash flow from financing activities amounted to SEK -15.5 million (109.1), divided between new bank loans at SEK 109.1 million (185.5), dividends at SEK -29.4 million (-26.5) and loan amortization at SEK -95.3 million (-49.9).

Total interest-bearing liabilities amounted to SEK 406.1 million (383.5) on December 31, 2017, distributed between long-term interest-bearing liabilities at SEK 374.9 million (339.4) and short-term interest-bearing liabilities at SEK 31.2 million (44.1). During the year, the credit facility was incre-ased by SEK 200 million. In conjunction with the acquisition of MV-Nordic A/S, SEK 87.7 million was used from the credit facility. SEK 65.5 million was repaid for earlier acquisitions. In conjunction with the acquisition of MV-Nordic A/S, a convertible of SEK 20.0 million was issued. After the calcula-tion of option elements and interest, the convertible liability is valued at SEK 19.1 million. A convertible loan directed at employees at a value of SEK 14.0 million was converted to Class B shares. A new convertible program for employees was issued in an amount of SEK 20.8 million. After the calculation of option elements, the convertible liability is valued at SEK 19.7 million. During the period, the additional purchase prices for FuturSoft and Fox Publish were reclassified from long-term to short-term liabilities as the maturity date is within 12 months. The additional purchase price for Fox Publish was adjusted downwards by SEK 1.3 million after an agreement was signed on final settlement. The Group's net interest-be-aring assets and interest-bearing liabilities amounted to SEK -348.2 million (-302.6).

Equity attributable to Vitec’s shareholders amounted to SEK 398.2 million (334.2). The equity/assets ratio was 32 percent (30). The payment of dividends after the Annual Ge-neral Meeting in May 2017 amounted to SEK 1.00 per share, totaling SEK 29.4 million (26.5).

InvestmentsInvestments amounted to SEK 101.5 million in intangible assets, divided between capitalized work at SEK 97.2 million, software at SEK 1.5 million and product rights at SEK 2.8 mil-

lion. SEK 7.8 million was invested in tangible assets. Through the acquisition of MV-Nordic A/S, SEK 142.8 million was invested in product rights, brands, customer agreements and goodwill. A correction of the acquisition of Plania AS contri-buted SEK 0.8 million in goodwill.

Research and developmentVitec develops and supplies niche-oriented software and Internet services. An aggressive development operation is an essential part of our strategy and a condition for long-term survival. Strategically focused development strengthens the existing operation and makes it possible for new products and services to be launched. This development comprises ongoing improvements within existing product areas. These impro-vements will benefit existing customers via maintenance agreements and SaaS agreements.

Intangible assetsThe Group’s intangible assets comprise goodwill, product rights, brands and customer agreements that arise through acquisitions as well as capitalized costs and software. As of December 31, 2017, the carrying amount of goodwill was SEK 282.6 million (240.4), product rights SEK 290.7 million (266.9), capitalized development costs SEK 197.9 million (150.5), customer agreements SEK 94.8 million (77.8), brands SEK 74.3 million (70.1) and software SEK 4.0 million (4.0).

EquityTotal equity amounted to SEK 398.2 million (334.2) as of December 31, 2017. Equity attributable to shareholders amounted to SEK 398.2 million (334.2).

As of December 31, there were two ongoing convertible programs totaling SEK 38.8 million, which can be converted to a maximum of 434,605 Class B shares and increase the share capital by SEK 0.04 million.

EmployeesDuring 2017, Vitec had an average of 540 employees (467), of whom 144 (126) were women. At the end of the year, the number of employees totaled 573 (507).

Parent CompanyThe Parent Company's net sales amounted to SEK 79.9 million (69.9) and essentially comprised invoicing to subsidi-ary companies for executed intra-Group services in the form of premises, data communication and telephony, financial reporting, HR and management/business development. Profit after tax amounted to SEK 64.9 million (56.9), including anti-cipated dividends from subsidiaries.

The Parent Company’s cash and cash equivalents amounted to SEK 51.6 million (60.6). Cash and cash equiva-lents comprise a Group currency account where the Parent company has the highest level account in relation to the bank. The subsidiaries’ cash and cash equivalents consequently comprise receivables/liabilities in relation to the Parent Company. The Parent Company has a bank overdraft facility


of SEK 20 million (20) and a credit facility for acquisitions of SEK 450 million, of which SEK 178.6 million was unused on the balance sheet date.

Investments amounted to SEK 0.9 million (1.5) in intan-gible assets, SEK 0.5 million (0.0) in tangible assets and SEK 109.1 million (209.0) in shares in subsidiaries. The value of shares in subsidiaries has been adjusted down by SEK 1.3 million during the year, in respect of the conditional purchase price for Fox Publish AS. Short-term, non-interest bearing liabilities have decreased to a corresponding extent.

Long-term interest-bearing liabilities amounted to SEK 374.6 million (338.9) in the form of bank loans at SEK 335.8 million (338.9) and convertible debentures at SEK 38.8 mil-lion (0). Short-term interest-bearing liabilities amounted to SEK 31.2 million (44.1) in the form of bank loans at SEK 31.2 million (30.3) and convertible debentures at SEK 0 million (13.8). During the year, new loans have been taken out at a value of SEK 88.3 million.

In May, a share dividend of SEK 29.4 million (26.5) was paid out.

Risks and uncertaintiesThrough its operations, the Group is exposed to various risks, both in the form of risks in the business and in the form of financial risks. Below is a description of the most critical factors. The Corporate Governance Report on pages 35-36 describes our internal controls and risk management.

Business-related risksEmployees and recruitmentThe Group is heavily dependent on skilled labor and speci-alist expertise. By being a modern employer that provides the opportunity for interesting work duties, flexible working hours, preventive health care, supplementary salary in the event of parental leave, development and career opportuni-ties within the Group, etc., Vitec is able to attract and retain qualified employees. However, there is a risk that this will not be able to take place on acceptable terms, despite market-le-vel remuneration, as there is stiff competition for experienced employees from other software and product development companies. Thanks to the Group’s geographic spread, various positions can be located based on conditions on the labor market in various locations around the Nordic region.

Customer-dependenceVitec has entered into agreements with a large number of customers. The Board of Vitec considers that the Group is not dependent to a decisive extent on any one single custo-mer. However, the customer structure can be more or less concentrated within the Group’s various business areas. Within the business areas Finance & Insurance, Education & Health and Estate Agents, there are individual major custo-mers as well as framework agreements with customers on behalf of franchisees, which mean that customer-dependence can be considered higher than for the Group as a whole. No single customer is responsible for more than 7 percent of the Group’s sales.

Supplier-dependenceVitec purchases bandwidth from telecom operators. The-se telecom operators are important to Vitec to be able to

conduct its business. Vitec also purchases support services that are integrated in the business systems, and such support services mainly comprise property-related information or the transfer of such information by text message. Vitec has al-ternative supplier solutions, but despite this is dependent on its suppliers’ delivery reliability in order to avoid operational disruptions that could entail negative consequences for profit and financial status.

IT infrastructureThe IT infrastructure in the Group is centralized. Considera-ble emphasis is placed on organization and prevention with regard to this infrastructure, as operating outages can entail negative consequences to financial position and performance. The operation of the IT infrastructure is secured through redundancy and the geographic spreading of risks. An opera-tional disruption procedure has been adopted by the Group management. In this, processes and information pathways have been determined in order to manage operational disrup-tions and disaster recovery. Training exercises are conducted once a year.

Acquisition and integration of implemented acquisitionsVitec has conducted a number of acquisitions over the years. To varying extents, acquisition situations always entail risks that can have significant negative effects for the acquiring party. Risks linked to acquisitions include financial, legal and operational risks. There are many financial risks, but one particularly significant risk is the risk of paying too high a purchase sum. There are also risks that arise when financing the purchase sum, which can involve taking out or taking over an interest-bearing loan that adversely impacts on the Group’s profit and financial status. There are many legal risks, but one particularly high risk is linked to the assumption of liability for the acquired company’s or the acquired asset’s commitments and historic operations, as well as the tax situation. The operational risks largely relate to integrating the acquired company or asset while retaining profitability. There are no guarantees that the prior anticipated positive operational or financial effects that normally give rise to an acquisition will actually be realized, or that it will not result in a negative impact on the Group’s profits and financial status. Neither is there any guarantee that the Group’s implemented acquisitions will result in positive effects for the Group. An assessment of the need for impairment is performed annually for acquired goodwill, brands, customer agreements and product rights. If these are not considered to have been cor-rectly valued during such an assessment, this can result in an impairment, which could have a negative impact on results.

Investments in product developmentEvery year, Vitec invests significant resources in the develop-ment of new and existing products, which is a precondition for Vitec continuing to supply competitive business and operational systems.

It is extremely important for Vitec to be able to finance and achieve a return on the results of its product developme-nt. In order to plan, implement and follow up the Group’s pro-duct development more successfully, the Group has a product investment plan that is adopted in the budget process each year and followed up monthly for each business area.



Fixed price projectsThe business areas within the Group occasionally enter into agreements with customers regarding undertakings in pro-ject form at a predetermined fixed price, known as fixed price projects. Fixed price projects can result in significant losses if the work resources actually used exceed the work resources that were estimated to be required at the time of the tender. Companies in the Group may continue to take on fixed price projects, and there are no guarantees that such fixed price projects will not result in losses, which can have a negative impact on the Group’s profits and financial status.

Environmental risksOur assessment is that the areas in which Vitec has the largest negative impact on the environment are through emissions and waste. The emissions come indirectly through electricity consumption in server halls and offices and through the personnel’s business travel. Waste is mainly in the form of electronics scrap. Our sustainability report on pages 12-17 describes our work to reduce the negative environmental impact.

Industry and market-related risksEconomic situationThe Group’s development and financial status are partially dependent on outside factors over which Vitec has no influ-ence, such as the general economic situation, its customers’ market conditions and the occurrence of new, competing products and services. Vitec offers operational systems that are often central and prioritized by customers. However, both the renewal of annual agreements and new sales are affected by the commercial sector in general reducing its investments during economic downturns. Future economic downturns can consequently have a negative effect on the Group’s opera-tions, growth, profits and financial status.

Technical developmentTechnical and market development are ever-present within the software industry. It is important for Vitec to be able to predict changes in our customers’ needs and adapt our offer accordingly if we are to continue to develop according to plan.

Intellectual property rightsDevelopment-intensive software companies always run the risk of new or existing competitors copying developed solu-tions. For this reason, Vitec stores source codes for proprie-tary and acquired software in a secure manner.

Product liabilityAny faults that may arise in the products could lead to claims for liability and damages. In projects relating to processes that are vital for our customers, test runs are performed in test environments at the customer before the start of pro-duction. Vitec also offers test operation in certain cases. All the companies in the Group have current insurance cover for product liability, so the direct risk is limited.

Other disputesDisputes can arise in all commercial operations, for example as a result of parties’ differing perceptions as regards liabi-lity, interpretations of liability, etc. As far as possible, Vitec

employs industry-standard agreements with fines up to a limited amount. Major agreements that deviate from the standard are approved by the Group management and/or the Board of the Parent Company, along with insurance and legal experts. Vitec or its subsidiaries are currently not involved in any disputes, legal processes or arbitration processes.

Financial risksVitec’s exposure to financial risks and the handling of such risks is described in Note 20.

Sensitivity analysisBelow is a presentation of how profit and earnings per share are altered by various factors.

� Vitec purchases services, subscriptions and statistical in-formation from external suppliers to the value of SEK 100.8 million annually. A change of 1 percent would affect profits by around SEK 0.8 million.

� Personnel costs represent the largest cost item in the Group, amounting to SEK 446.9 million. A change of 1 per-cent would affect profits by around SEK 3.5 million.

� Acquisitions are financed to a large extent by loans from banks or through convertible bonds. The interest rate is often variable. A change to the interest rate of one percen-tage point for existing interest-bearing liabilities as of De-cember 31, 2017 would affect profits by SEK 2.9 million.

� Vitec’s involvement in foreign subsidiaries is increasing, which entails increased currency and translation risks. The Group’s current structure entails currency exposure in Norwegian kroner, Danish kroner and in relation to the euro. A 5 percent change to the exchange rate for these currencies this year would have affected the Group’s pro-fits by approx. SEK 2.0 million.

Impact on profit, TSEK

Impact on profit, SEK/share

Influencing factorsChange, % 2017 2016 2017 2016

Subcontractors and subscriptions

+/- 1

790 635 0.03 0.02

Personnel costs +/- 1 3,478 2,940 0.12 0.10

Loan interest (change percentage point on loan interest)

+/- 1

2,863 3,125 0.10 0.11

Exchange rate change NOK, DKK and EUR

+/- 5

1,961 2,044 0.07 0.07


Corporate governance

Corporate governance defines and allocates responsibilities and roles between shareholders, directors, management and other stakeholders.

Chairman’s commentsThe Board of Directors of Vitec consists of five members, two women and three men. The various areas of expertise and varying professional experience of the Board members pro-vide a solid foundation for dynamic and active Board work. In 2017, the Board held nine meetings, of which some were phone conferences and one was a strategy meeting. With a few exceptions, all members were present at all meetings. The meeting calendar is primarily linked to the quarterly interim reports, the year-end report and the Annual General Me-eting. In addition to this, it is most often decisions regarding acquisitions or financing that give rise to additional Board meetings. The agenda has a fixed reporting component plus specific issued that require discussion and decisions.

Vitec has a well-established growth strategy based on acquisitions. The Board continuously reviews the criteria that govern the selection of acquisition candidates and studies the “prospect list” current at every occasion. The company has a

strong cash flow, but also needs external financing to carry out acquisitions. In 2017, one acquisition was carried out and a large part of the Board’s work involved the implementation and follow-up of the acquisition process, as well as issues of relevant financing.

At the annual strategy meeting, which was held in Norway in 2017, a review is done of the companies acquired and addi-tions to the acquisition strategy when necessary. Continuous-ly new operations and strong growth are accompanied by a need to organize and adapt the Group. Organizational and recruitment issues are often recurring items on the Board’s agenda.

Remuneration and audit issues are handled by the Board as a whole. Every year, the Chairman performs an evaluation of the Board’s work and presents the results to the Nomina-tion Committee.

Crister Stjernfelt, Chairman of the Board of Vitec.

Crister Stjernfelt


CORPORATE GOVERNANCE REPORT

Corporate governance in Vitec

Regulatory frameworkThe corporate governance of Vitec is based on Swedish legis-lation. The external framework mainly includes:

� The Swedish Companies Act � The Annual Accounts Act � regulations for issuers at Nasdaq Stockholm � Swedish Code of Corporate Governance.

The most important internal control instruments are the Articles of Association adopted by the Annual General Me-eting, followed by the Board of Directors' rules of procedure and the Board's instructions for the CEO In addition, the Board has established a number of policies, guidelines and instructions that are binding and that apply to the operations of the entire Group.

The Swedish Code of Corporate Governance is based on the "comply or explain" principle, which means that it is pos-sible to deviate from the regulations, provided the company provides an explanation for the deviation and also presents the selected alternative. Vitec complies with the provisions, with the sole exception that the composition of the Nomina-tion Committee does not follow the code (points 2.3 and 2.4). The Nomination Committee has appointed Olov Sandberg as Chairman of the Committee, as this can be deemed a natural choice bearing in mind the Vitec's ownership structure. The influence of the main owners is also so important that we have decided to allow them to be included in the Nomination Committee. The Nomination Committee's members consi-der that accepting this assignment does not give rise to any conflicts of interest.

The share and shareholdersThe Class B shares in Vitec Software Group AB (publ) are listed on Nasdaq Stockholm. At the end of 2017, Vitec had 4,246 shareholders. Lars Stenlund and Olov Sandberg were the largest owners, with 5.9 percent of the capital and 26.5 percent of the votes and 5.2 percent of the capital and 23.9 percent of the votes respectively. In total, the company's three largest owners owned 100 percent of the Class A shares and 2.0 percent of the Class B shares, while the 10 largest owners owned 37.5 percent of the Class B shares. At the same time, the total stock market value amounted

to SEK 2,596.0 million. The number of shares amounted to 29,838,900, of which 26,488,900 were Class B shares and 3,350,000 were Class A shares.

Annual General MeetingThe Annual General Meeting (AGM) is the company's highest decision-making body. At the AGM, all shareholders are given the opportunity to exercise the influence over the company represented by their respective shareholding. Each Class A share represents ten votes and each Class B share repre-sents one vote. Shareholders who are registered in Euroclear Sweden's share register on the closing day, and who have applied to participate on time, are entitled to participate and vote at the Meeting. Shareholders who cannot attend have the opportunity to be represented by proxy. The AGM must be held within six months following the end of the financial year. Mandatory tasks at the AGM include adopting the balance sheet and income statement, as well as handling the results for the year. The AGM also decides on remuneration principles for senior executives and on discharge from liability for the Board members and the CEO. Following proposals from the Nomination Committee (see below), the AGM elects Board members up until the end of the next AGM. The Articles of Association may be amended by a resolution at the AGM in accordance with the rules set out in the Swedish Companies Act. The AGM is conducted in Swedish and will be broadcast live via our website, vitecsoftware.com.

2017 Annual General MeetingThe Annual General Meeting was held on April 25 at Väven in Umeå. The company's Board, management, Nomination Com-mittee and auditor were present at the Meeting.

115 shareholders representing 67.0 percent of the votes were present. The minutes from the Annual General Meeting can be found on our website, vitecsoftware.com.

2018 Annual General MeetingThe 2018 Annual General Meeting will be held at 5:30 pm on April 23 at Väven in Umeå. Information regarding application can be found on our website, vitecsoftware.com.

Vitec’s shareholders

Annual General

Meeting

Nomination

Committee

External frameworkThe Companies Act, the Annual Accounts Act, Rule Book for Issuers, the Swedish Cor-porate Governance Code and other relevant rules and laws.

Board of Directors

and committeesAuditors

CEOInternal frameworkMission, goals and strategies, the Articles of Association, the Board of Directors’ rules of procedure, the Board’s instructions for the CEO, policies and values. Group management


Nomination CommitteeThe Nomination Committee's main task is to propose to the AGM candidates for election to the Board of Directors and the Chairman of the Board, as well as to propose candida-tes for selection as auditors in consultation with the Audit Committee. The work of the Nomination Committee must be characterized by openness and discussion in order to achieve a well-balanced Board. The the Nomination Committee applied rule 4.1 of the Swedish Corporate Governance Code as a diversity policy in the preparation of the proposal on the Board, with the aim of achieving a well-functioning Board composition regarding diversity and breadth, in terms of gen-der, nationality, age and industry experience. The Nomination Committee’s ambition is to propose a Board composition where the Board members complement each other with their respective experience and expertise in a way that provides the Board a possibility to contribute to a positive develop-ment in the company. The Nomination Committee always focuses on diversity to ensure that the Board obtains diffe-rent perspectives of the Board work and the considerations made. The Nomination Committee also takes into account the need for renewal, and carefully investigates whether or not the proposed Board members have the possibility of devoting enough time and care to the Board work. All shareholders have the possibility of turning to the Nomination Committee with proposals of Board members.

The Nomination Committee has studied the Board evalu-ation that has been conducted. The Nomination Committee is also tasked with proposing a Chairman for the AGM, proposing the fees for the Board of Directors as well as any fees for committees, in addition to fees for the auditors. The 2017 AGM resolved that the three largest shareholders would each appoint one member of the committee. It was also decided that the Nomination Committee shall consist of the Chairman and three members. The Nomination Committee's members ahead of the AGM on April 23, 2018 are:

� Lars Stenlund, CEO Vitec. Holder of 1,570,000 Class A shares and 177,280 Class B shares (incl. family).

� Crister Stjernfelt, Chairman of the Board of Vitec. Holder of 8,000 Class B shares.

� Olov Sandberg. Holder of 1,420,000 Class A shares and 124,565 Class B shares (incl. family).

� Jerker Vallbo, CIO/CTO Vitec. Holder of 360,000 Class A shares and 126,405 Class B shares (incl. family).

The Nomination Committee has held one meeting prior to the 2018 AGM. No remuneration has been paid for work in the Nomination Committee.

Articles of AssociationThe Articles of Association stipulate that Vitec is a public limi-ted company, whose operations involve purchasing, managing and selling fixed and loose property as well as conducting compatible operations. The share capital shall amount to a mi-nimum of SEK 1,600,000 and a maximum of SEK 6,400,000. The company's shares shall be able to be issued in two series, Series A and Series B. During voting at the AGM, Series A shares (Class A shares) shall entail 10 votes and Series B shares (Class B shares) one vote. If shares of both types are issued, the number of shares of each series may amount to a maximum of ninety-nine hundredths of the entire number of shares in the company. Read the full Articles of Association on our website, vitecsoftware.com.

Board of DirectorsThe task of the Board of Directors is to manage the com-pany's affairs on behalf of the owners. The Board's work is governed by applicable laws and recommendations as well as by the Board's rules of procedure, which include rules regarding the division of work between the Board and the CEO, financial reporting, investments and financing. The rules of procedure are determined annually at the statutory Board meeting, held in conjunction with the AGM.

Board of Directors' responsibilitiesThe Board of Directors has overall responsibility for the Group's organization and management, as well as for en-suring that guidelines for the management of the company's funds are structured appropriately. The Board is responsible for ensuring that Vitec is governed according to applicable laws and ordinances, and that it complies with the regula-tions for issuers that include the Swedish Code of Corporate Governance, as well as that the Group's established internal regulations are followed. The Board is also responsible for developing and following up the Group's strategies through plans and goals, for decisions regarding the acquisition and sale of operations, for major investments, for additions to and replacements for the Group management, and for continually monitoring operations during the year. Ever year, the Board adopts the annual accounts, the applicable business plan, business-related policies and the CEO's rules of procedure. The Board must also determine the required guidelines for the company's actions in society, with the aim of safeguarding long-term value creation and ensuring that ethical guidelines are established for the company's behavior.

CompositionAccording to the Articles of Association, the Board of Directors of Vitec must comprise between three and seven members with a maximum of three deputies. The Board com-prises five regular members and no deputies, and none of the Board members are employees of the company. The Board members are appointed by the shareholders at the AGM with a term of office of one year. The CEO is not included in the Board of Directors, but does attend all Board meetings to present reports, except on occasions when the work of the CEO is being evaluated. The CEO reports to the Board regar-ding the operational work in the Group, and ensures that the Board receives objective and relevant decision-making data.

The Board composition meets the requirements of Nas-daq Stockholm and the Swedish Corporate Governance Code concerning independent directors. For further information about each Board member, go to our website, vitecsoftware.com, Investor Relations, Corporate Governance.

Chairman of the BoardThe Chairman of the Board of Directors, Crister Stjernfelt, leads the Board's work to ensure it is conducted in accor-dance with laws and regulations. The Chairman monitors the operation in dialog with the CEO, and is responsible for ensuring that other Board members receive the information that is necessary for high-quality discussions and decisions. The Chairman is also involved in evaluation and development issues in respect of the Group's senior executives.



Members of the BoardCrister StjernfeltChairman since 2013, Director since 2009. Born 1943.Economics Studies at Stockholm University.Other assignments/positions: Chairman of the Boards of AcelQ AB and Umeå Datakonsulter AB. Director of Carmen-ta AB. Previously CEO of WM-Data AB and CEO of Logica AB.Holdings in Vitec: 8,000 Class B shares, no convertibles.

Anna Valtonen Director since 2012. Born 1974. PhD. Department of Indu-strial and Strategic Design, Helsinki, 2007Other assignments/positions: Currently Dean of the Aalto University School of Arts, Design and Architecture in Helsin-ki, Finland and Vice President of Aalto University. Previously professor and President of the Umeå Institute of Design (2009-2014) and industry design in Nokia (1997-2009) e.g. Head of Design Research & Foresight. Also several interna-tional assignments and board positions. Holdings in Vitec: No shares, no convertibles.

Birgitta Johansson-HedbergDirector since 2011. Born 1947. BA, Psychology Degree, Lund University 1972.Other assignments/positions: Chairman of Sörmlands Spar-bank. Director of Copenhagen Economics A/S and Hedberg

Ekologkonsult AB. Former CEO of Lantmännen, Förenings-sparbanken and Liber.Holdings in Vitec: 7,500 Class B shares, no convertibles.

Jan Friedman Director since 2010. Born 1952. MBA, Stockholm School of Economics 1978.Other assignments/positions: Chairman of Sportamore AB (publ), Nordic Public Affairs AB, Moment Group AB, Grönk-littsgruppen AB and Ticmate AB. Director of Malux AB. Many years’ experience as CEO, board member and consultancy assignments.Holdings in Vitec: 258,650 Class B shares through compa-nies, no convertibles.

Kaj Sandart Director since 1998. Born 1953.Master of Civil Engineering, KTH Royal Institute of Techno-logy 1977.Other assignments/positions: Director of Hallvarsson & Halvarsson Group and deputy at Milox AB. Director of Baltic Sea Action Group Sweden. Previously Communications Ma-nager at ÅF and CEO of Svensk Energiförsörjning.Holdings in Vitec: 121,000 Class B shares (including family), no convertibles.

Kaj Sandart, Anna Valtonen, Crister Stjernfelt, Birgitta Johansson-Hedberg and Jan Friedman


Work of the Board of DirectorsDuring a business year, Vitec holds at least five regular Board meetings as well as a statutory meeting directly in conjunc-tion with the AGM. Extraordinary Board meetings are held if necessary. A total of nine Board meetings have been held during 2017, including the statutory meeting. All members elected by the AGM were present at all Board meetings, except for Board members Jan Friedman and Birgitta Johans-son-Hedberg who did not participate on two occasions and Anna Valtonen on one occasion.

At the Board's minuted meetings, the Group's profits and status have been covered and interim reports and the annual report have been approved for publication. Future matters such as market assessments, potential acquisitions, the focus of business activities and organizational issues have been dealt with. All the meetings have followed an approved agen-da that, together with supporting data for each item on the agenda, has been distributed to all Board members approx-imately one week before the meeting. The minutes have been sent to the members in accordance with the Swedish Code of Corporate Governance. The work of the Board of Directors was evaluated at the end of the year.

EvaluationThe work of the Board is evaluated once a year by the Board members answering a number of predefined questions rela-ting to both formal and collaboration-oriented circumstances. The Chairman compiles the answers, including comments, and presents this material to the Nomination Committee. The evaluation of the 2017 business year indicates a well-func-tioning collaboration and good efficiency within the work of the Board. All members are positive with regard to continued involvement.

Important decisionsIn June, Vitec increased its existing acquisition credit facility with Nordea by SEK 200 million. The facility is used as financing for acquisitions and provides Vitec the possibility to continue growing through acquisitions of vertically niched software companies.

In July, Vitec made its only acquisition for the year when 100 % of the shares in the Danish group MV-Nordic A/S were purchased. MV-Nordic offers software to the education sector in Denmark, Sweden and Norway. The software is specially developed for people with reading and writing diffi-culties, as well as dyslexia. Rolling 12-month sales are around SEK 140 million with an EBITDA of around SEK 14 million. 65 people work at MV-Nordic’s headwaters in Odense.

The Board's rules of procedureThe Board of Directors' rules of procedure were adopted on April 25, 2017 and must be revised annually at the statutory Board meeting, besides being revised when required. The ru-les of procedure include the Board's responsibilities and work duties, the duties of the Chairman of the Board, audit issues, as well as specifying which reports and financial information the Board must procure prior to each regular Board meeting. The rules of procedure also include instructions for the CEO. Furthermore, the rules of procedure prescribe the Board's work as a remuneration committee.

Audit and Remuneration CommitteeThe Board of Directors as a whole acts as both an Audit and a Remuneration Committee. The description of the duties as regards the work as an Audit Committee is established as an appendix to the applicable rules of procedure. The work as a Remuneration Committee is regulated in the applicable rules of procedure. The rules of procedure and the appendix were adopted at the statutory Board meeting on April 25, 2017. During 2017, the Audit Committee held three meetings and the Remuneration Committee held meetings in conjunction with regular Board meetings.

Annual cycle of Board work

Styrelsearbetets årscykel

Kv1Board meetingEarningsYear-end-reportAudit CommitteeEvaluation of the BoardDocuments for the AGM

Kv2Kv3

Kv4

Board meetingInterim report Q2

AGM and constituent meeting Company signatories appointedInterim report Q1Audit CommitteeBudget directiveInstructions for the CEO

Strategy meetingStrategic planOperating planFinancial goalsShareholders directivesProduct investments

Board meetingInterim report Q3Audit committee

Board meetingBudget

Jan

Feb

Okt

Sep

Aug

Jul Jun

May

Apr

Mar

Nov

Dec

* Föreslagen utdelning

0,0

0,2

0,4

0,6

0,8

1,0

1,2

18171615141312111009080706050403

*

Kr* Proposed dividend

0,0

0,2

0,4

0,6

0,8

1,0

1,2

18171615141312111009080706050403

*

SEK



CEO and Group managementThe CEO is appointed by the Board of Directors. Lars Sten-lund is the company's CEO and Lars Eriksson (M&A) and Patrik Fransson (IR Director) have both been appointed as Vice Presidents. The CEO is responsible for the day-to-day administration of the company's and the Group's opera-tions according to the Board of Directors’ instructions and directives. For example, this entails responsibility for financial reporting, the production of information and decision-making data, as well as ensuring that agreements and other measures are not in conflict with applicable laws and regulations.

The Chairman of the Board holds annual evaluation dis-cussions with the CEO in accordance with the CEO's instruc-tions and the applicable specification of requirements.

The Group management works alongside the CEO, and together they are responsible for day-to-day operations. The Group management comprises the CEO, CFO, M&A and IR Director. The Group management normally meets every month to go through the previous month's results, to update plans, guidelines and applicable decisions, and to discuss strategic issues. An extended strategy meeting is held with the Board of Directors every year, and other meetings are held as necessary.

The Group management decides jointly, in accordance with the guidelines determined by the Board of Directors in the instruction regarding the division of work between the Board and the CEO, on issues that are long-term and stra-tegic in nature, such as corporate development, marketing, financing, investments and environmental issues. The Group management also prepares issues that have to be decided by the Board. The table on page 37 presents the members of the Group management and their positions, etc.

AuditorsThe AGM annually elects one or two auditors or one or two registered auditing firms, with more than two deputies. The auditors review the company's annual report, financial state-ments and the Board's and CEO's management. At the 2017 AGM, PricewaterhouseCoopers AB was appointed with Niklas Renström as the auditor with overall responsibility.

The Group's auditors participate in all Audit Commit-tee meetings and in particular report their observations in respect of internal control, the general review of the third quarter's interim accounts as well as the closing accounts.

Internal controlThe Board of Directors is responsible for internal control in accordance with the Swedish Companies Act and the Swedish Code of Corporate Governance. The report regarding internal control and risk management in respect of financial reporting for the 2017 financial year has been prepared and submitted by the Board of Directors in accordance with Chapter 6 §6 of the Annual Accounts Act as well as section 7.4 of the Swedish Code of Corporate Governance.

The Board of Directors is responsible for the work in respect of corporate governance within Vitec, and consequ-ently for the work with internal control. The overall purpose is to protect the Group's assets and thereby the sharehol-ders' investments. The Board is also responsible for ensuring that financial reporting is drawn up in accordance with the

applicable law. Quality assurance of the Group's financial reporting takes place by means of the Board handling all critical accounting issues as well as the financial reports that the Vitec submits. This presupposes that the Board handles issues regarding internal control, compliance with regulations, significant uncertainties in reported values, any uncorrected errors, events after the closing date, changes to estimates and assessments, any observed irregularities and other circumstances that affect the quality of the financial statements.

Control environmentActive, committed Board work is the foundation for good internal control. The Board has established clear working processes and rules of procedure for its work. An important part of the Board's work is to draw up and approve a number of fundamental policies, guidelines and frameworks related to financial reporting. The company's steering documents are the "Board of Directors' rules of procedure" and the "CEO's instructions". The purpose of these rules of procedure and policies is, in part, to create the foundations for good internal control. Following up and revision are performed continually, and are communicated to all employees who are involved in the financial reporting. The Board continually evaluates the business's performance and results through an appropri-ate package of statements, including an income statement and key figures, as well as other significant operational and financial information. The Board of Directors in its entirety functions as the Audit Committee. During 2017, the entire Board has consequently monitored the systems for risk ma-nagement and internal control. These systems are intended to ensure that the business is conducted in accordance with laws and ordinances and is effective, and that the financial reporting is reliable. The Board has studied and evaluated the procedures for accounting and financial reporting, as well as following up and evaluating the work, qualifications and inde-pendence of the external auditors. Other established policies that form the foundation for internal control within Vitec are the Finance policy, the Information policy, the Information security policy and the IT policy.

All the business areas work within, or are about to start working within, the same structures, financial systems, account plans and policies, which facilitates the creation of suitable procedures and control systems Each business area has a Board and rules of procedure determined by the Group management.

Risk assessmentVitec applies a method for risk management and risk assess-ment to ensure that the risks to which the company is expo-sed, and which can influence internal control and financial reporting, are handled within the processes that have been adopted. Significant risks that are taken into consideration are operational risks such as risks associated with acquisi-tions, product development and sustainability risks, as well as risks that affect financial reporting. A systematic, documen-ted updating of all identified risks is performed annually.

Vitec works continually and actively with risk analysis, risk assessment and risk management, to ensure that the risks to which the company is exposed are handled in a suitable man-ner within the frameworks that have been established. For example, the risk assessment looks at the company's adminis-


trative procedures in respect of invoicing and contract ma-nagement. Significant risks that can affect financial reporting are items that are based on estimates and assessments, such as ongoing development projects, goodwill, etc.

Risk managementThe risks are followed up in various ways and at various levels. At every meeting, the Board of Vitec receives a presentation of the Group's position and performance, liquidity, KPIs, etc. Group management jointly goes through all reporting units’ results every month. All investments in the Group are managed by the Group management, with product investment being the largest single item. Product investments have a separate process both in the budget work and in the following up such work. Monthly reporting is conducted monthly and is documented. Where required, a board is appointed for selected business areas. Such a board has at least one member of the group management team and meets 2-4 times a year; the Board meetings are minuted. Group ma-nagement and the Group's controller have a close dialog with each business area manager, and each month they conduct detailed reviews of major projects, product development, out-standing accounts receivable, etc. The handling of financial risks such as liquidity, currency, credit and refinancing risks is performed by the Group management, where the finance policy adopted by the Board is the governing factor.

Control activitiesControl activities are used to handle the risks that the Board and the Group management deem to be significant for the business, the internal control and the financial reporting. Control structures are designed to handle the risks that the Board deems to be significant for the internal control of the financial reporting. These control structures comprise in part an organization with a clear division of responsibilities, clear procedures and clear work roles. Examples of control activities include reporting decision-making processes and arrangements for significant decisions (such a new, large customers, investments, agreements, etc.) as well as exami-ning all financial statements that are presented. An ongoing analysis of the financial reporting, along with the analysis that is performed at Group level, is a very important element in ensuring that the financial reporting is free from material misstatements.

According to the Swedish Companies Act, the Board of Directors must appoint an Audit Committee. The Board has found it appropriate for the entire Board to make up the Audit Committee. The fact that the Board is relatively small is considered to make this work easier. Several of the Board's members possess auditing expertise.

Information and communicationVitec's steering documentation, in the form of policies, gui-delines and manuals relating to internal and external commu-nication, is continually updated and communicated internally via relevant channels, such as internal meetings, internal news mails and the Group’s intranet. For communication with external parties, there is a clear established information policy specifying all the guidelines as to how information is to be provided. The purpose of the policy is to ensure that all in-formation obligations according to the applicable regulations for issuers are complied with correctly and in full.

Information and communication of the policies, guidelines and manuals for Vitec are available on the intranet. There is also information about financial reporting in the form of instructions, manuals, schedules and checklists. The Group's accounting handbook is also a central part of the financial reporting and it is also available on the intranet and is conti-nuously updated with the new applicable regulations, such as IFRS and Nasdaq Stockholm.

Following up and monitoringEvery month, the segments are followed up by the respective business area management or similar. For some operating units, Group management has appointed an internal board. For strategically important issues, projects are established where Group management participates in the steering com-mittee. Group management analyses the Group’s outcome compared with the previous year, budget and expectations. The Group management's analyses and conclusions are sub-mitted to the Board at each regular meeting.

The company continually evaluates the internal controls in respect of the financial reporting, and ensures that reporting to the Board is working successfully. This is achieved above all by asking questions and looking at the work of the CFO. The company's auditors take part on three occasions per year, notifying their observations about the company's internal procedures and control systems, and the Board's members have the opportunity to ask questions. Every year, the Board adopts a position regarding significant risk areas and evalua-tes the internal control.

Internal auditGiven the size and complexity of the operation, in combina-tion with existing Board reporting and reporting to the Audit Committee, the Board has judged that it is not financially justifiable to establish a separate internal audit function. The internal control presented above is deemed to be sufficient to safeguard the quality of the financial reporting.

Guidelines regarding remuneration to senior executivesAt the 2017 AGM, guidelines were established regarding remuneration to the CEO and other senior executives in Vitec. The decision by the AGM corresponds with previously applied principles for remuneration. The guidelines apply to agreements that are entered into after the 2017 AGM or where subsequent changes are made regarding remunera-tion. The Board of Directors has not appointed a Remune-ration Committee, but instead the Board as a whole handles issues relating to remuneration and other employment condi-tions. The AGM decided that remuneration to senior executi-ves should comprise fixed salary and pension. Pensions must be defined-contribution. The combined remuneration should be at the market-going rate and competitive, and should be in relation to responsibilities and authorization. When determi-ning salaries, the individual's areas of responsibility, expertise and experience must be taken into account, and as a general rule these must be reassessed once a year. The Board may deviate from the guidelines if there is a particular reason to do so in an individual case.

Prior to the 2018 AGM, the Board has proposed unchang-ed conditions as regards guidelines for remuneration to the company's CEO and other senior executives.



Members of Group managementLars StenlundCEO and founder of Vitec together with Olov Sandberg. Lars has been a Board member at Vitec during the period 1985-2009. Employed since 1985. Born 1958.Ph.D in Applied Physics (1987) at the University of Umeå.Board member of the University of Umeå, Umeå Universitet Holding AB, Algoryx Simulation AB and C4 Contexture AB.Previous experience: Worked at University of Umeå.Holdings in Vitec: 1,570,000, Class A shares, 177,280 B sha-res (including family). No convertibles. No options.

Lars Eriksson Vice President, M&A and Business development. Employed since 2011. Born 1955.MSc, Industrial Economics, Linköping 1979. Director of Affärskonsulting Lars Eriksson AB.Previous experience: CEO and director of Företagsbyrån i Stockholm AB.Holdings in Vitec: 25,640 Class B shares. 2,403 convertibles 1801. No options.

Maria KrögerCFO. Employed since 2011. Born 1968.MBA, University of Umeå 1990.Previous experience: Authorized Public Accountant EyHoldings in Vitec: 16,590 Class B shares (including family). 2,403 convertibles 1801. Options: 50,000 shares (which were exercised on January 4, 2018).

Patrik Fransson Vice President, IR Director. Employed since 2011. Born 1966.Computer Science, Umeå University 1990, MBA Executive program, Stockholm School of Economics. Previous experience: Outsourcing Director Logica, CIO H&M and CEO CodeFactory AB.Holdings in Vitec: 109,431 Class B shares. 2,403 convertibles 1801. No options.

Lars Stenlund, Patrik Fransson, Maria Kröger and Lars Eriksson


The share and the ownership structureAt the end of the financial year, the total number of issued shares totaled 29,838,900, of which 3,350,000 are Class A shares (33,500,000 votes) and the remaining 26,488,900 are Class B shares (26,488,900 votes). The share capital amounts to approximately SEK 3.0 million and the nominal value is SEK 0.10 per share. The ownership structure and the Board’s sha-reholding relate to the holding on December 31, 2017, to the best of Vitec’s knowledge. There were 4,246 shareholders.

In September, 150,000 Class A shares were converted to Class B shares in accordance with the split conditions mentio-ned in the Articles of Association, §5 Share type. In Decem-ber, personnel convertibles were converted into 442,210 new Class B shares.

There is a pre-emption reservation for Class A shares, although there are no other provisions limiting the right to transfer shares. There are no limits regarding how many votes each shareholder may exercise at the AGM. Board members and any deputies are appointed at the AGM for the period up to the next AGM. There are no provisions in the Articles of Association regarding the appointment and dismissal of Board members. Vitec Software Group AB (publ) has not entered into any agreements that will be affected by a possible purchase offer. Vitec Software Group AB (publ) does not hold any of its own shares.

Employees in Vitec Software Group AB (publ) do not hold shares where the voting rights for such shares cannot be exercised directly by the employees. On November 1, 2017,

the Extraordinary General Meeting resolved to approve the issue of convertible bonds to employees in the Vitec Group. On December 15, convertibles at a value of SEK 20.8 million had been subscribed for by employees in the Group. The personnel convertibles registered at the Swedish Companies Registration Office on January 27, 2018 can be converted to a maximum of 200,288 Class B shares. Otherwise, there are no on-going convertible programs for employees.

There is authorization from the 2017 AGM that entitles the Board, on one or more occasions up to and including the next AGM, to decide on the issue of up to 2,500,000 Class B shares deviating from the shareholders’ preferential right. The reason why the Board might deviate from the sharehol-ders’ preferential right is to facilitate financing during the acquisition of companies or product rights in a cost-effective manner. The Board of Directors used the authorization in the acquisition of Vitec MV A/S in July through the issue of convertible bonds at a value of SEK 20.0 million, which can be converted into a maximum of 234,317 shares.

Vitec is listed on Nasdaq Stockholm, on the Mid Cap list. The share price on December 31, 2017 was SEK 87.00 (75.50). Total stock market value of the shares issued at year-end amounted to SEK 2,596.0 million (2,219.5).

The share is traded in the Mid Cap segment as of January 2, 2017. The Mid Cap segment includes companies with a stock market value between EUR 150 million and EUR 1 billion.

Ann Petersson, Annica Karlsson and Marcus Nilsson, Kalmar


MULTI-yEAR SUMMARy

Multi-year summary2017 2016 2015 2014 2013 2012 2011

Net sales (TSEK) 855,029 675,414 618,385 491,956 371,631 389,200 359,598

of which Business Area Auto (TSEK) 155,920 119,171 71,082 28,302 - - -

of which Business Area Energy (TSEK) 25,721 25,872 24,114 22,672 19,849 21,327 19,286

of which Business Area Real Estate (TSEK) 190,111 158,357 142,557 134,315 130,718 120,086 120,140

of which Business Area Finance & Insurance

(TSEK) 142,293 126,567 101,219 55,004 13,704 12,950 14,208

of which Business Area Environment (TSEK) 44,051 22,990 10,547 21,759 26,128 65,233 70,583

of which Business Area Estate Agents (TSEK) 138,019 155,285 207,011 185,750 181,152 168,785 135,306

of which Business Area Education & Health

(TSEK) 157,944 66,203 61,492 43,627 - - -

of which Common (TSEK) 969 969 363 527 80 819 75

Growth (%) 27 9 26 32 -5 8 15

Profit after financial items (TSEK) 98,127 81,942 94,686 64,545 38,069 40,130 35,693

Profit for the year (TSEK) 79,426 66,814 78,191 49,065 30,229 31,984 26,061

Profit attributable to Parent Company shareholders (TSEK) 79,426 66,814 78,191 49,065 30,229 31,183 24,654

Profit growth to Parent Company shareholders (%) 19 -15 59 62 -3 26 75

Profit margin (%) 9 10 13 10 8 8 7

Operating margin (%) 12 13 16 14 11 11 11

Total assets (TSEK) 1,261,970 1,096,691 872,019 772,901 387,981 429,133 327,743

Equity/assets ratio (%) 32 30 31 34 44 36 40

Equity/assets ratios after full conversion (%) 35 32 33 37 48 41 49

Debt/equity ratio (times) 2.22 2.25 2.09 1.70 1.53 1.66 1.60

Return on capital employed (%) 14 14 21 18 16 20 21

Return on equity (%) 22 22 29 23 19 24 25

Sales per employee (TSEK) 1,584 1,445 1,465 1,430 1,332 1,297 1,236

Value added per employee (TSEK) 1,258 1,198 1,212 1,164 1,052 985 915

Personnel cost per employee (TSEK) 828 813 797 801 793 732 706

Average number of employees (people) 540 467 422 344 279 300 291

Adjusted equity per share (SEK) 13.34 11.37 9.24 8.85 6.39 5.92 5.36

Earnings per share (SEK) 2.70 2.27 2.66 1.75 1.16 1.30 1.21

Earnings per share after dilution (SEK) 2.70 2.25 2.64 1.68 1.09 1.16 1.04

Dividend paid per share (SEK) 1.00 0.90 0.67 0.55 0.50 0.40 0.25

Cash flow per share (SEK) 6.78 5.20 5.09 4.40 1.97 2.25 2.17

P/E ratio 32.23 33.22 28.20 15.12 15.31 10.89 9.75

P/Adjusted equity per share 6.52 6.64 8.12 2.99 2.77 2.33 2.08

P/S 3.04 3.29 3.57 1.58 1.26 0.91 0.68

Calculation basis:

Profit when calculating earnings per share (TSEK) 79,426 66,814 78,191 49,065 30,229 31,183 24,654

Cash flow when calculating cash flow per share (TSEK) 199,612 152,757 149,751 123,220 51,505 55,243 46,787

Average quantity of shares (weighted average) (quantity) 29,424,555 29,396,690 29,396,690 28,003,405 26,141,635 24,604,375 21,546,315

Average quantity of shares after dilution (quantity) 29,538,825 29,838,900 29,788,016 29,431,975 28,175,425 27,338,170 24,172,025

Number of shares issued as of closing date (number) 29,838,900 29,396,690 29,396,690 29,396,690 26,541,635 25,741,635 21,835,375

Share price at respective year-end (SEK) 87.00 75.50 75.00 26.50 17.70 13.80 11.16

Definitions, see Key performance indicator definitions on page 93.


Proposed allocation of profits

THE FOLLOWING AMOUNTS ARE AT THE DISPOSAL OF THE ANNUAL GENERAL MEETING:

Profit brought forward 143,989,527

Share premium reserve 126,637,558

Profit for the year 64,945,008

335,572,093

THE BOARD PROPOSES THAT THE PROFIT BE ALLOCATED AS FOLLOWS:

To be distributed to shareholders at SEK 1.10 per share

32,822,790

To be carried forward to the share premium reserve

126,637,558

To be carried forward 176,111,745

335,572,093

Board’s statement according to Chapter 18 §4 of the Swedish Companies Act (2005:551)The Board proposes that shareholders at the AGM on April 23, 2018 should decide on a dividend payment amounting to a maximum of SEK 32,822,790. This statement has been produced in accordance with the provisions in Chapter 18 §4 of the Swedish Companies Act, and constitutes the Board’s assessment of whether the proposed dividend is justifiable bearing in mind that specified in Chapter 17 §3 paragraphs 2 and 3 of the Swedish Companies Act.

The Board’s assessment is that the size of the proposed dividend constitutes a satisfactory balance between the Group’s capital structure and future growth opportunities. In the Board’s opinion, the proposed dividend does not prevent the company or other companies included in the Group from fulfilling their obligations in the short and long term, and is thereby justifiable bearing in mind the Swedish Compa-nies Act’s ‘precautionary rule’ (Chapter 17 Section 3 of the Swedish Companies Act 2005:551).


Juuso Pitkänen and Anita van Gils, Tampere


Consolidated income statement

Note 2017 2016

OPERATING INCOME (1, 2)

Recurring revenue 609,970 518,512

License revenues 39,563 24,789

Service revenues 145,672 121,116

Other 59,824 10,997

Net sales 855,029 675,414

Capitalized development costs 97,213 82,262

Other operating income (5) 1,343 22,695

TOTAL REVENUE 953,585 780,371

OPERATING EXPENSES

Goods for resale -48,394 -12,284

Subcontractors and subscriptions -100,791 -82,024

Other external expenses (7, 23) -124,761 -97,681

Personnel costs (6, 21) -446,917 -380,023

Depreciation, amortization and impairment (12) -126,882 -114,256

Other operating expenses (5) 862 -5,798

TOTAL EXPENSES -846,883 -692,066

OPERATING PROFIT 106,702 88,305

Financial income 328 773

Financial expense -8,903 -7,136

NET FINANCIAL ITEMS (8) -8,575 -6,363

PROFIT BEFORE TAX 98,127 81,942

Tax (10) -18,701 -15,128

PROFIT FOR THE YEAR 79,426 66,814

Profit for the year attributable to:

Parent Company shareholders 79,426 66,814

Earnings per share: (11)

Before dilution 2.70 2.27

After dilution 2.70 2.25

Average number of shares 29,424,555 29,396,690

Number of shares after dilution 29,538,825 29,838,900


FIANCIAL STATEMENTS

Consolidated statement of comprehensive income

Note 2017 2016


OTHER COMPREHENSIVE INCOME

Items that may be reclassified to the income statement

Translation of net investment in foreign operations 4,383 28,257

Hedging net investment in foreign operations -7,993 -7,999

Deferred tax on hedging of net investment in foreign operations 1,758 1,760

-1,852 22,018

Items that may not be reclassified to the income statement

Change in the value of net pension obligation -563 395

Deferred tax on net pension obligation 129 -95

-433 300

TOTAL OTHER COMPREHENSIVE INCOME -2,285 22,318

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 77,141 89,132

Total comprehensive income attributable to:

Parent Company shareholders 77,141 89,132


Consolidated statement of financial position

Note 12/31/2017 12/31/2016

ASSETS

Fixed assets (3, 12)

Intangible assets

Goodwill 282,612 240,444

Capitalized development costs 197,907 150,480

Software 4,041 3,971

Brands 74,280 70,097

Product rights 290,650 266,863

Customer agreements 94,837 77,757

944,327 809,612

Tangible assets

Buildings 8,676 8,813

Investments in leased premises 2,819 3,659

Equipment 26,461 21,795

37,956 34,267

Financial assets

Other long-term receivables 1,791 950

Deferred tax (10) 6,714 4,185

8,505 5,135

Total fixed assets 990,788 849,014

Current assets

Inventories (15)

Goods for resale 3,619 1,031

3,619 1,031

Current receivables

Accounts receivable (16) 172,450 137,336

Current tax 9,008 5,079

Other receivables 841 5,299

Prepaid expenses and accrued income (17) 27,296 18,012

209,595 165,726

Short-term investments 44 43

Cash and cash equivalents (18) 57,924 80,877

Total current assets 271,182 247,677

TOTAL ASSETS 1,261,970 1,096,691

Note 12/31/2017 12/31/2016

EQUITY AND LIABILITIES

Equity (19)

Share capital 2,984 2,940

Other contributed capital 121,963 121,963

Reserves -5,852 -3,567

Retained profits including profit for the year 279,069 212,877

Equity attributable to shareholders of the Parent Company 398,164 334,213

Long-term liabilities

Convertible debentures (20) 38,789 -

Liabilities to credit institutes (20) 336,129 339,396

Remuneration to employees after completed employment (21) 8,225 7,679

Other long-term liabilities (20) 3,270 28,765

Deferred tax (10) 135,844 120,684

Total long-term liabilities 522,257 496,524

Short-term liabilities

Convertible debentures (20) - 13,786


Accounts payable 31,902 21,153

Tax liabilities 8,961 11,175

Other liabilities 77,122 47,115

Accrued expenses and prepaid income (22) 192,384 142,385

Total short-term liabilities 341,549 265,954

TOTAL EQUITY AND LIABILITIES 1,261,970 1,096,691

Pledged assets (24) 350,975 354,891

Contingent liabilities - -


FIANCIAL STATEMENTS

Note 12/31/2017 12/31/2016


Equity (19)


Other contributed capital 121,963 121,963

Reserves -5,852 -3,567

Retained profits including profit for the year 279,069 212,877

Equity attributable to shareholders of the Parent Company 398,164 334,213

Long-term liabilities

Convertible debentures (20) 38,789 -


Remuneration to employees after completed employment (21) 8,225 7,679

Other long-term liabilities (20) 3,270 28,765

Deferred tax (10) 135,844 120,684






Tax liabilities 8,961 11,175

Other liabilities 77,122 47,115




Pledged assets (24) 350,975 354,891



Consolidated statement of changes in equity

Share capitalOther contribu-

ted capital Reserves* Retained profits

Total equity attributable to

Parent Company shareholders

OPENING EQUITY 1/1/2016 2,940 121,963 -25,885 172,520 271,538

Profit for the year - - - 66,814 66,814

Other comprehensive income - - 22,318 - 22,318

Comprehensive income for the year 2,940 121,963 -3,567 239,334 360,670

Dividend -26,457 -26,457

CLOSING EQUITY 12/31/2016 2,940 121,963 -3,567 212,877 334,213


Other comprehensive income - - -2,285 - -2,285

Comprehensive income for the year 2,940 121,963 -5,852 292,303 411,354

Option element convertible bonds - - - 2,221 2,221

Redemption of bonds 44 - - 13,942 13,986

Dividend - - - -29,397 -29,397

CLOSING EQUITY 12/31/2017 2,984 121,963 -5,852 279,069 398,164

* Reserves are made up actuarial changes of pension liabilities and translation differences when translating foreign operations as well as hedge accounting of these.


FIANCIAL STATEMENTS

Consolidated statement of cash flows2017 2016

OPERATING ACTIVITIES

Operating profit 106,702 88,305

Adjustments for items not included in cash flow

Other operating income -1,343 -22,695

Depreciation, amortization and impairment 126,882 114,256

Unrealized exchange rate differences 862 5,798

233,103 185,664

Interest received 328 117

Interest paid -8,438 -5,553

Income tax paid -25,381 -27,471

CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 199,612 152,757

Changes in working capital

Increase/decrease in inventories 8,836 95

Increase/decrease in accounts receivable -20,754 2,659

Increase/decrease in operating receivables 2,233 1,265

Increase/decrease in accounts payable 6,839 3,534

Increase/decrease in operating liabilities -9,136 -1,860

CASH FLOW FROM CURRENT OPERATIONS 187,630 158,450

INVESTING ACTIVITIES

Acquisition of subsidiaries (net impact on liquidity)* -88,826 -156,112

Sales of subsidiaries - 4,217

Acquisition of intangible assets and capitalized development costs -101,500 -83,763

Acquisition of tangible assets -7,750 -9,046

CASH FLOW FROM INVESTING ACTIVITIES -198,076 -244,704

FINANCING ACTIVITIES

Dividend to shareholders of the Parent Company -29,397 -26,457

New loans 109,129 185,466

Amortization of loans** -95,275 -49,865

CASH FLOW FROM FINANCING ACTIVITIES -15,543 109,144

CASH FLOW FOR THE YEAR -25,989 22,890

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 80,920 60,268

Exchange rate change in cash and cash equivalents 3,037 -2,238

CASH AND CASH EQUIVALENTS AT YEAR-END*** 57,968 80,920

*Disbursement regarding acquisitions of subsidiaries during the period was comprised of payment for MV-Nordic A/S. Net cash outflow amounted to SEK 86.7 million. The acquisition related to the entire outstanding share capital and meant that control was obtained. Additionally, a promissory note signed in connection with the acquisition of Nice AS in an amount of SEK 2.1 million was dissolved. The disbursement did not entail any change in control or the total number of shares.

*Disbursement regarding acquisitions of subsidiaries in 2016 was comprised of payment for Tietomitta Oy, FuturSoft Oy and Plania AS. Net cash outflow amounted to SEK 141.2 million. All acquisitions related to the entire outstanding share capital and meant that control was obtained in all companies. In addition, SEK 2.9 million was paid out for Fox Publish and SEK 11.9 million for AcuVitec Oy, which did not entail any change in controlling influence or share capital.

**Amortization consists of amortization of bank loans SEK 29.8 million (32.9) and repayment of credit facility SEK 65.5 million (17.0).

***Cash and cash equivalents are defined as funds for which there is an insignificant risk of value fluctuations and that can easily be converted to cash at a known amount. Short-term investments comprises funds that can be converted to cash at a known amount within one banking day.


CHANGE IN LIABILITIES IN FINANCING ACTIVITIES, GROUP

Long-term liabilities to credit institutions

Short-term liabilities to credit institutions

Convertible bonds

2017 2016 2017 2016 2017 2016

OPENING BALANCE 339,396 193,709 30,340 33,845 13,786 13,513

Cash flow 44,280 135,602 -51,256 - 20,830 -

Non-cash changes:

Exchange-rate changes 4,342 5,306 208 1,337 - -

Acquisition financing - - - - 20,008 -

Conversion - - - - -13,994 -

Other - -344 - -174 -1,841 272

Reclassification long/short -51,889 4,668 51,889 -4,668 - -

CLOSING BALANCE 336,129 338,941 31,180 30,340 38,789 13,786


FIANCIAL STATEMENTS

Income statement, Parent Company

Note 2017 2016

OPERATING INCOME

Net sales (4) 79,868 69,923

Other operating income (5) 31,208 28,414

OPERATING EXPENSES (4)

Other external expenses (7, 23) -75,112 -69,891

Personnel costs (6, 21) -30,200 -29,430

Depreciation and amortization (13) -2,628 -2,543

OPERATING PROFIT 3,136 -3,527

PROFIT FROM FINANCIAL ITEMS: (8)

Income from shares in Group companies 64,898 58,335

Interest income and similar profit/loss items 231 737

Interest expenses and similar expense items -8,289 -6,382

NET FINANCIAL ITEMS 56,840 52,690

PROFIT AFTER FINANCIAL ITEMS 59,976 49,163

Appropriations (9) 4,912 7,781

PROFIT BEFORE TAX 64,888 56,944

Tax (10) 57 -9



Balance sheet, Parent Company

Note 12/31/2017 12/31/2016

ASSETS

Fixed assets

Intangible assets (13)

Software 3,301 3,850

Product rights - 92

3,301 3,942

Tangible assets (13)

Buildings 8,609 8,795

Investments in leased premises 641 828

Equipment 2,182 2,392

11,432 12,015

Financial assets (13, 14)

Shares in subsidiaries 972,519 864,833

Receivables from Group companies 7,702 8,968

Deferred tax 57 -

980,278 873,801

Total fixed assets 995,011 889,758

Current assets

Current receivables

Receivables from Group companies 81,349 75,280

Current tax 4,687 -

Other receivables 1,011 3,391

Prepaid expenses and accrued income (17) 3,549 4,039

90,596 82,710

Cash and bank 51,616 60,557

Total current assets 142,212 143,267

TOTAL ASSETS 1,137,223 1,033,025


FIANCIAL STATEMENTS

Note 12/31/2017 12/31/2016


Restricted equity (19)


Statutory reserve 14,917 14,917

Total restricted equity 17,901 17,857

Unrestricted equity (19)

Share premium reserve 126,638 110,475

Profit brought forward 143,990 116,451

Profit for the year 64,945 56,935

Total unrestricted equity 335,572 283,861

Total equity 353,473 301,718

Untaxed reserves (26, 27) 2,429 2,341

Long-term liabilities (20)

Convertible debentures 38,789 -

Liabilities to credit institutes 335,822 338,941

Other long-term liabilities - 28,765






Liabilities to Group companies 338,228 306,365

Current tax liabilities - 2,097

Other short-term liabilities 27,217 1,329




Pledged assets (24) 337,445 358,844



Changes in equity, Parent Company

Share capitalStatutory

reserveShare premi-

um reserve

Profit brought forward and

profit for the year Total equity

EQUITY 1/1/2016 2,940 14,917 110,475 142,908 271,240

Dividend - - - -26,457 -26,457


EQUITY 12/31/2016 2,940 14,917 110,475 173,386 301,718

Option element convertible bond - - 2,221 - 2,221

Conversion of bonds 44 - 13,942 - 13,986

Dividend - - - -29,397 -29,397


EQUITY 12/31/2017 2,984 14,917 126,638 208,935 353,473


FIANCIAL STATEMENTS

Anette Juul Larsen, Rasmus Grinderslev and

Line Aalykke, Odense


2017 2016

OPERATING ACTIVITIES

Operating profit 3,136 -3,527

Adjustments for items not included in cash flow

Depreciation and amortization 2,628 2,543

5,764 -984

Received dividend subsidiaries 56,811 40,924

Interest received 231 737

Interest paid -7,909 -6,071

Income tax paid -6,789 -1,370

CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 48,108 33,237

Changes in working capital

Increase/decrease in operating receivables 7,732 -11,006

Increase/decrease in operating liabilities 44,438 81,382

CASH FLOW FROM CURRENT OPERATIONS 100,278 103,613

INVESTING ACTIVITIES

Acquisition of subsidiaries* -91,169 -200,357

Sales of subsidiaries - 4,293

Acquisition of intangible assets -881 -1,475

Acquisition of tangible assets -523 -18

Change in long-term receivables -1,265 51

CASH FLOW FROM INVESTING ACTIVITIES -93,838 -197,506

FINANCING ACTIVITIES

Paid dividend -29,397 -26,457

New loans 109,129 185,466

Amortization of debt** -95,113 -49,864

CASH FLOW FROM FINANCING ACTIVITIES -15,381 109,144

CASH FLOW FOR THE YEAR -8,941 15,251

Cash and cash equivalents at the beginning of the year 60,557 45,306

CASH AND CASH EQUIVALENTS AT YEAR-END*** 51,616 60,557

*Disbursement regarding acquisitions of subsidiaries in 2017 was comprised of payment for MV-Nordic A/S. Payment made amoun-ted to SEK 88.8 million. The acquisition related to the entire outstanding share capital and meant that control was obtained. Addi-tionally, a promissory note signed in connection with the acquisition of Nice AS in an amount of SEK 2.1 million was dissolved. The disbursement did not entail any change in control or the total number of shares. Legal fees for acquisitions from earlier years were paid in an amount of SEK 0.3 million.

*Disbursement regarding acquisitions of subsidiaries in 2016 was comprised of payment for Tietomitta Oy, FuturSoft Oy and Plania AS. Payments amounted to SEK 185.5 million. All acquisitions related to the entire outstanding share capital and meant that control was obtained in all companies. In addition, SEK 11.9 million was paid out for the acquisition of AcuVitec Oy and SEK 2.9 million for Fox Publish AS, which did not entail any change in controlling influence or share capital.

**Amortization consists of amortization of bank loans SEK 29.6 million (32.9) and repayment of credit facility SEK 65.5 million (17.0).

***Cash and cash equivalents are defined as funds for which there is an insignificant risk of value fluctuations and that can easily be converted to cash at a known amount. Short-term investments comprises funds that can be converted to cash at a known amount within one banking day.

Cash flow statement, Parent Company (indirect method)


FIANCIAL STATEMENTS

CHANGE IN LIABILITIES IN FINANCING ACTIVITIES, PARENT COMPANY

Long-term liabilities to credit institutions

Short-term liabilities to credit institutions

Convertible bonds

2017 2016 2017 2016 2017 2016

OPENING BALANCE 338,941 193,709 30,340 33,331 13,786 13,513

Cash flow 44,442 135,602 -51,256 - 20,830 -

Non-cash changes:

Exchange-rate changes 4,328 5,306 208 1,337 - -

Acquisition financing - - - - 20,008 -

Conversion - - - - -13,994 -

Other - -344 - 340 -1,841 272

Reclassification long/short -51,889 4,668 51,889 -4,668 - -

CLOSING BALANCE 335,822 338,941 31,180 30,340 38,789 13,786


Jonas Norberg, Umeå


NOTES

NOTE 1 ACCOUNTING AND VALUATION PRINCIPLES

GeneralThe consolidated financial statements have been prepared in accordance with the Annual Accounts Act, International Financial Reporting Standards (IFRS) issued by the Inter-national Accounting Standards Board (IASB), as well as the interpretations issued by the International Financial Re-porting Interpretations Committee (IFRIC) as approved by the European Commission for application within the EU. The Swedish Financial Reporting Board’s recommendation, RFR 1 Supplementary rules for consolidated financial statements, is also applied.

The Parent Company applies the same accounting princip-les as the Group, except in those cases specified below under the section "Parent Company's accounting principles".

The Annual Report and the consolidated financial state-ments have been approved for publication by the Board of Directors on March 26, 2018. The consolidated statement of comprehensive income and financial status, as well as the Parent Company’s income statement and balance sheet, will be subject to adoption at the Annual General Meeting on April 23, 2018.

Preconditions for preparation of the statements Functional currency and presentation currencyThe Parent Company's functional currency is the Swedish krona, which is also the presentation currency for the Parent Company and the Group. Financial statements are consequ-ently presented in Swedish kronor. All amounts are rounded to the nearest thousand kronor (SEK thousand) unless other-wise indicated.

Valuation grounds Assets and liabilities are valued at their historic acquisition values. No financial assets or liabilities are reported at a value that differs significantly from the fair value as of December 31, 2017.

Assessments and estimatesPreparing financial statements in accordance with IFRS en-tails the use of important accounting estimates. The Board of Directors and the management make certain assessments in the application of the company's accounting principles. These assessments and assumptions are based on historic expe-riences as well as other factors that are deemed reasonable under the prevailing circumstances. The actual results can differ from these assessments if other assumptions are made or other conditions exist. Principles for assumptions and assessments are reviewed regularly. Up until the submission of the Annual Report, nothing has occurred that gives rise to any amendments.

The areas where assumptions and assessments are of particular importance for Vitec's consolidated accounts are:

� Capitalized development costs, product rights, customer agreements, brands and goodwill. This relates primari-ly to recovering the value of the development work, pro-duct rights and customer agreements, as well as impair-ment testing of brands and goodwill. The estimates and as-

sumptions that entail a risk of significant adjustments in reported values for assets and liabilities over the next fi-nancial year are discussed below under the heading Intan-gible assets.

� Defined-benefit pension plans. This relates primarily to a pension plan in Norway and the actuarial assumptions that are used in the calculation. The assumptions are presen-ted in Note 21, Pensions.

� Additional purchase prices when acquiring companies. This relates to acquisitions where the purchase price is di-vided into two or more parts. One part that is paid in con-junction with the acquisition and other parts that are paid if certain conditions are satisfied within a certain period of time after the acquisition. This may for example involve profit growth, improved percentage of recurring revenues and/or guarantee commitments. The purchase price is re-cognized at fair value on the acquisition date. The acqui-sition analysis must be adopted within 12 months. After this, adjustments to the purchase price are recognized via profit for the year. As of December 31, 2017, there are two purchase prices in the balance sheet that are subject to assessments:

� Fox Publish AS, a purchase price that will generate a payment in the first quarter of 2018.

� FuturSoft Oy, a purchase price that can generate a pay-ment in the first quarter of 2018.

Significant applied accounting principlesThe accounting principles described below have been applied consistently in the financial statements that have been sub-mitted, unless otherwise indicated.

New or altered accounting principles, 2017 onwardsNo accounting principles have been altered as of January 1, 2017. No changes by IFRS have had any significant impact on the Group's accounts.

New or revised accounting principles in 2018 and onwards A number of new or revised standards enters into effect beginning in 2018. These have not been applied in ad-vance by Vitec. To the extent the anticipated effects of these are not described below, they are not expected to have any significant effect on the Group's accounts.

IFRS 15 Revenue from Contracts with Customers enters into effect in 2018 and affects when and how a company recognizes revenue. Vitec will apply the new standard as of January 1, 2018.

Upon implementation of IFRS 15, a five-step model is used to analyze the revenues.

1. Identify contracts with customers2. Identify separate performance obligations3. Determine the transaction price.4. Allocate the transaction price5. Recognize the revenueA project for IFRS 15 was conducted where we reviewed

all invoicing units’ revenue recognition and analyzed them based on the five steps. We have chosen to group our con-


tracts in a number of standard portfolios that contain the same components, and where the revenue is recognized in the same way. The largest portfolios are license sales with traditional support and maintenance contracts, cloud service SaaS, subscriptions, service sales and information services. We have then identified separate performance obligations in these portfolios. Our performance obligations are support and maintenance, time-limited right to access and hos-ting, perpetual right of use, services, information services, third-party perpetual right of use, third-party maintenance and other. The cloud service and subscription portfolio includes components with multiple performance obligations. Where applicable, calculations have been done to calculate stand-alone selling price. The method for this has been either market price or estimated cost with a surcharge. Adaptations in our accounting system are made to enable follow-up by performance obligation and in 2018, revenue recognition will take place per obligation.

According to IFRS 15, the revenue is recognized when the customer obtains control over the service and when the per-formance obligation is fulfilled. Our analysis of our contracts has not arrived at any significant differences based on how we recognize the revenue today. We deem that our current revenue recognition agrees well with IFRS 15. Our recurring revenues are recognized evenly distributed over the term of the contracts as the customer receives control over the servi-ce and the performance obligation is completed. Our licenses are recognized at a given point in time, our service revenues are recognized continuously as the services are rendered and the customer receives control and benefit of them. No adjustment of the opening balance will therefore be made. A company can choose between applying the new standard with full retroactivity or with prospective application with further disclosures. We will choose retroactive application.

IFRS 9 Financial Instruments enters into effect in 2018 and addresses the recognition of financial assets and liabilities. Vitec will apply the new standard as of January 1, 2018. The standard has different measurement categories for financial assets and a new model for impairment testing. The primary impact of the standard pertains to a partly new process regarding credit losses. Vitec will apply the transition prospectively and has taken into account historical bad debt losses over an economic cycle and can thereafter confirm that the new standard will not have any material effect on the Group’s accounts.

IFRS 16 Leasing. This standard means that the difference between financial and operational leasing is removed. All lea-ses exceeding 12 months must be recognized in the balance sheet. The standard will principally affect the reporting of future rental contracts for premises. It becomes effective on January 1, 2019.

On the balance sheet date, the Group’s future commit-ments in the form of non-cancellable contracts amounted to SEK 50.6 million; see Note 23. The leases are all future rental contracts concerning premises. The Group has not yet evaluated the extent to which they will be recognized as an asset and liability and how this will affect the Group’s profit and classification of the cash flows.

Classification of short-term and long-term itemsLong-term receivables and liabilities are essentially the amounts that are expected to be due for payment later than one year from the end of the reporting period. Current receivables and liabilities are due for payment within one year from the end of the reporting period.

Operating segment reportingThe operations in Vitec are organized into and managed based on segments that are reported to the highest decision makers within Vitec, which are comprised of Group mana-gement, which evaluates the results and allocates resources to the operating segments. For more information about operating segments, see Note 2 Information about operating segments.

Consolidated financial statementsThe Group covers all companies (including structured compa-nies) over which the Group has control. The Group controls a company when it is exposed to or is entitled to a variable return from its holding in the company, and has the potential to affect the return through its influence in the company. Subsidiaries are included in the consolidated accounts from the day on which control is transferred to the Group. They are excluded from the consolidated financial statements from the day on which control ceases.

The acquisition of a subsidiary is viewed as a transaction through which the Group indirectly acquires the subsidiary's assets and assumes its liabilities. In the acquisition analysis, the fair value of the acquired assets and transferred liabilities on the acquisition date is determined. In addition, the value of any holdings without control is determined. Transaction char-ges that arise are recognized directly in profit for the year.

In the event of the acquisition of an operation where the transferred payment, any holding without control and the fair value of a previously owned share (in the case of acqui-sitions in stages) exceed the fair value of the acquired assets and transferred liabilities that are recognized separately, the difference is recognized as goodwill. When this difference is negative, referred to as an acquisition at a low price, this is recognized directly in profit for the year. The transferred payment in conjunction with the acquisition does not include payments relating to the regulation of previous business con-nections. This type of settlement is recognized in the profit.

Conditional transferred payments/additional purchase prices are recognized at their fair value at the time of the acquisition. In cases where the conditional transferred payment is classified as an equity instrument, no revaluation is performed and settlement is recognized directly against equity. For other conditional transferred payments, these are revalued at each reporting occasion and the change is recognized in profit for the year. Acquisitions from holdings without control are recognized as a transaction within equity, i.e. between the Parent Company's owners (within retained profits) and holdings without control. The change of holdings without control is based on their proportional share of net assets. For this reason, goodwill does not occur in these transactions. Goodwill is not amortized, but is tested annually


NOTES

for any impairment. Subsidiaries’ financial statements are in-cluded in the consolidated financial statements from the time of acquisition until the date when the control ceases.

Internal Group assets and liabilities, income and expenses, as well as unrealized gains and losses between Group com-panies, are eliminated. Unrealized losses are eliminated in the same way as unrealized gains, although only to the extent there is no impairment requirement. The Group's equity only includes that part of the subsidiaries' equity that has been added after the acquisition.

Internal pricingWhen invoicing between Group companies, prices are set based on business terms in cases when the end customer is external. In cases where invoicing refers to internal Group services within the same country, invoice takes place at cost price. Decisions regarding which prices are to apply are taken by the Group management. Upon invoicing foreign subsidia-ries or between foreign subsidiaries, the cost plus method is preferably applied.

Revenue recognitionRecurring revenueRecurring revenue principally comprises annual agreements regarding SaaS, maintenance, support, operation and infor-mation services. Income recognition of information services takes place on delivery, while income recognition of other agreements takes place linearly over time.

There are seasonal variations in the recurring revenue. This relates primarily to transaction-based income, which varies during the year.

License revenuesLicense revenues comprise one-off charges in conjunction with sales of software licenses. The precondition for income recognition of the sale of a software license is that installation must have taken place. At this point, income recognition is performed for the entire license.

Service revenuesThe service revenues comprise consultancy services on an ongoing basis and consultancy services at a fixed price. Consultancy services on an ongoing basis are subject to income recognition at their earned value in line with the provision of the services. Income that is not invoiced to the customer is recognized as accrued income in the balance sheet. Consultancy services at a fixed price are subject to income recognition with regard to the degree of completion of the assignment, also taking into account the amount of resources that are required to complete the assignment. The degree of completion is assessed according to the propor-tion of the agreed delivery that has been completed, based on agreed and completed functionality, as well as actual time spent in relation to calculated time. Income that is not invoiced to the customer is recognized as accrued income in the balance sheet. If the invoiced amount exceeds the earned value determined in the final accounts, the excess invoicing is recognized as prepaid income. When it is probable that the total expenditure for completing the assignment will exceed

the total revenues, the loss is recognized immediately.

OtherOther comprises mainly product sales of goods for resa-le, such as hardware and third party software, excluding third-party licenses which are recognized as license revenues. Income recognition takes place on delivery.

Other operating income Other operating income consists mainly of adjustments of conditional supplemental purchase prices entered as liabi-lities. They are recognized in accordance with IFRS 3:58 as other operating income.

Leasing, rental agreements and other non-cancellable contractsOperational leasing agreements, rental agreements, etc. Costs in respect of operational leasing agreements are recognized in profit for the year linearly over the leasing period. Benefits obtained in conjunction with entering into an agreement are recognized in profit for the year as a decrease in leasing charges straight-line over the term of the lease. Variable charges are expensed in the periods in which they arise. In addition to these, there are future commitments in the form of non-cancellable contracts. These are comprised of rental agreements for premises.

Financial leasing agreements The obligation to pay future leasing charges in respect of tan-gible financial leasing agreements is recognized as long-term and short-term liabilities in those cases where the amounts are significant. The leased assets are depreciated over the relevant asset's useful life, whereas the leasing payments are recognized as interest and repayment of the liabilities. The minimum leasing charges are distributed between interest expense and repayment of the outstanding liability. The inte-rest expense is spread over the leasing period, so that each accounting period is subject to an amount corresponding to a fixed interest rate for the liability recognized during the relevant period. Variable charges are expensed in the periods in which they arise.

Financial income and expensesFinancial income comprises exclusively interest income on fi-nancial investments in the form of fixed interest investments, as well as dividends in the Parent Company. Dividends are recognized when the entitlement to receive a dividend has been established. Anticipated dividends are recognized in the Parent Company only when the company issuing the dividend is a wholly owned subsidiary. Financial expenses comprise interest expenses on loans and accounts payable. Loan costs are recognized in the results with the application of the ef-fective interest method, except in those cases where they are directly attributable to the purchase, design or production of a qualified asset as they are included in the asset's acquisition value. Any gain or loss upon the divestment of subsidiaries is recognized as a financial income or expense when the amount is material.


Receivables and liabilities in a foreign currencyOperating receivables and operating liabilities in a foreign currency are translated at the exchange rate at the end of the reporting period, and exchange rate differences are recogni-zed in operating profit.

TaxThe Group's total tax comprises current tax and deferred tax. Tax is recognized in profit for the year, except when under-lying transactions are recognized in other comprehensive income or in equity, whereupon the associated tax effect is recognized in other comprehensive income or in equity. Current tax is tax that is to be paid or received with regard to the current year. This also includes the adjustment of current tax attributable to previous periods. Deferred tax is calcu-lated according to the balance sheet method on the basis of temporary differences between recognized and taxable values of assets and liabilities. The amounts are calculated based on how the temporary differences are expected to be evened out, and with the application of the tax rates and tax rules that have been decided or notified at the end of the reporting period. Temporary differences are not taken into account in consolidated goodwill, nor in differences attribu-table to shares in subsidiary and associated companies that are not expected to be taxed within the foreseeable future. Deferred tax receivables in deductible temporary differences and deficit deductions are only recognized to the extent it is likely that these will entail lower tax payments in future.

Deferred tax receivables and liabilities are offset when there is a legally enforceable right to do so for the tax receiva-bles and tax liabilities in question, and when the deferred tax receivables and tax liabilities refer to tax charged by the same tax authority and relate either to the same taxable entity or different taxable entities, where the intention exists to settle the balances through net payments.

Intangible and tangible assetsIntangible assetsGoodwillIn the event of an acquisition, goodwill is recognized in those cases where the transferred payment exceeds the actual value of identifiable acquired assets and transferred liabili-ties. As regards goodwill attributed to acquisitions before 1 January 2004, Vitec has elected not to apply IFRS retroacti-vely.

Goodwill is valued at acquisition value less any accumu-lated impairment. Goodwill is distributed to cash-generating units and is assessed at least once a year for impairment, see heading Impairment of non-financial assets on page 62. The assessment is based on assumptions and estimates which are associated with an amount of uncertainty.

Capitalized development costsCosts for software development are capitalized when it is probable that the project can become successful bearing in mind its commercial and technical potential, and when the costs can be reliably estimated. The development work comprises research and development. Only costs for deve-

lopment are capitalized as an asset in the balance sheet. The acquisition value of the asset comprises salaries and other costs that are directly related to its development. Capitalized development costs obtained until December 31, 2016 are written off over an estimated useful life of five years. Capi-talized development costs obtained as of January 1, 2017 are written off over an estimated useful life of ten years. Assessment of the asset's value takes place continually and per development project, after which impairment is perfor-med if required. The asset is recognized at the acquisition value less accumulated amortization and any impairment. The assessment is based on assumptions and estimates which are associated with an amount of uncertainty.

SoftwareThe asset comprises the right of usage of standard software in the form of business systems, group accounting systems, development environments and other administrative sys-tems. The asset is written off over five years and recognized at the acquisition value less accumulated amortization and any impairment.

BrandsBrands are normally deemed to have an indefinite useful life. Brands are valued at acquisition value less any impairment. Brands are distributed to cash-generating units and are assessed at least once a year for impairment. The assessment is based on assumptions and estimates which are associated with an amount of uncertainty. The Group only includes brands that have been identified in acquisition analyses.

Product rightsProduct rights principally comprise acquired source code. These are written off over 5-10 years. Amortization takes place according to a declining balance model for acquisitions as of the fourth quarter of 2016. For acquisitions before this, amortization takes place straight-line. The asset is recognized at the acquisition value less accumulated depreciation and any impairment. Assessment of the asset's value is perfor-med through estimates of future discounted cash flows. This assessment is based on assumptions and estimates which are associated with an amount of uncertainty.

Customer agreementsAcquired customer agreements are written off over 8-10 years and recognized at the acquisition value less accumu-lated amortization and any impairment. Amortization takes place according to a declining balance model for acquisitions as of the fourth quarter of 2016. For acquisitions before this, amortization takes place straight-line.

Tangible assetsTangible assets are recognized in the statement of financial position when it is probable that future economic benefits will flow to the company and the acquisition value of the asset can be calculated reliably. The tangible assets are recognized at the acquisition value after deductions for accumulated depreciation and any impairment. The acquisition value includes the purchase price and direct costs attributable to the asset for transporting it to site and in a condition that


NOTES

it can be utilized in the operation. Gains or losses that arise when disposing of or divesting tangible assets comprise the difference between the sale price and the recognized value, less direct sales expenses. The profit item is recognized as other operating revenue/expenses.

Depreciation of tangible assets has been based on the assets’ depreciable amounts, which correspond with the original acquisition value, and constitutes 20-33 percent annually for computers and 10-20 percent annually for other equipment. Depreciation on investments in rented premises is written off over the remaining rental period. The Parent Company owns a condominium that is depreciated at 2 % per year.

Leased assetsLeasing agreements, where essentially all risks and benefits associated with ownership fall to the lessor, are classified as operational leasing. Leasing agreements, where risks and benefits associated with ownership essentially fall to the lessee, are classified as financial leasing. When reporting tangible finance leases, the asset is recognized as a fixed asset in the consolidated statement of financial position, valued at the present value of the minimum leasing charges when the agreement was entered into. The asset is written off over its useful life. Obligations regarding future leasing charges are recognized as short-term and long-term liabilities.

Financial instrumentsFinancial instruments that are recognized in the statement of financial position include interest-bearing receivables, other receivables, accounts receivable as well as cash and cash equivalents on the asset side. Accounts payable, accrued expenses and loans can be found on the liability side.

Reporting financial assets and liabilitiesA financial asset or liability is included in the statement of financial position when the company becomes a party to the instrument’s contractual terms and conditions. A receivable is included when the company has acted and there is a con-tractual liability for the other party to pay, even if the invoice has not yet been sent. Accounts receivable are included in the statement of financial position when the invoice has been sent. Liabilities are included when the other party has acted and there is a contractual liability to pay, even if the invoice has not yet been received. Accounts payable are included when the invoice has been received. A financial asset is remo-ved from the statement of financial position when the rights in the agreement are realized, fall due or the company loses control of them. The same applies to a part of a financial asset. A financial liability is removed from the statement of financial position when the obligation in the agreement is fulfilled or ceases in some other way. The same applies to a part of a financial liability.

Classification and valuation (see Note 28 for the categories' values)Financial instruments are initially recognized at the acqui-sition value corresponding to the instrument's fair value plus transaction costs, except for derivative instruments for which transaction costs are expensed immediately. A financial instrument is classified when recognized for the first time, in-cluding on the basis of the purpose for which the instrument was acquired. All financial assets and liabilities are classified in the following categories:

� Financial assets and liabilities valued at fair value via the income statement. Additional purchase prices in conjunc-tion with acquisitions are included in this category.

� Investments that are held to maturity. Vitec has no financi-al instruments in this category.

� Loans receivable and accounts receivable. Vitec's ac-counts receivable, other receivables as well as cash and cash equivalents are included in this category.

� Financial assets that can be sold. Vitec has no financial as-sets in this category.

� Financial liabilities valued at their accrued acquisition value. Vitec's accounts payable, other liabilities, accrued expenses and loans are included in this category.

Loans receivable and accounts receivableLoans receivable and accounts receivable are financial assets that are not derivatives, that have determined or determi-nable payments and that are not listed on an active market. These assets are valued at their accrued acquisition value. On each reporting occasion, an evaluation is carried out as to whether there are objective indications that a loan receiva-ble is in need of impairment. Loan receivables are assessed individually. Impairment of loan receivables is recognized as other operating expenses.

Accounts receivable are recognized at the amount that is expected to be received after deductions for doubtful receivables. A provision regarding reduction in value is made when the receivable is more than 90 days old, or earlier if the amount that is expected to be paid, after individual assess-ment, is below the asset's reported value. The anticipated duration of accounts receivable is short, which is why the value is recognized without discounting. When an account re-ceivable cannot be collected, it is written off against the value reduction account for accounts receivable. Impairment of accounts receivable is recognized as other external expenses. The recovery of amounts that have previously been written off is recognized as an income in profit or loss.

Cash and cash equivalentsThe Parent Company's and the Group's cash and cash equi-valents include the Group's balance in Group accounts and other bank accounts, including currency accounts and money in transit. Cash and cash equivalents are valued at their accru-ed acquisition value. The Group's cash and cash equivalents are exposed to the risk of exchange rate fluctuations, but can always be converted easily to cash at a known amount.


Short-term investmentsShort-term investments comprise fixed interest investments or investments in money market funds. The investments can be converted to cash at a known amount within one banking day.

Financial liabilities valued at their accrued acquisition valueAccounts payable and loans are classified in the category other financial liabilities. Accounts payable have a short anticipated duration and are valued without discounting at a nominal amount. Loans are classified as other financial liabi-lities, which means that they are recognized at their accrued acquisition value according to the effective interest method.

Convertible debenturesConvertible debentures are reported both as a financial liability and as equity. The various parts are distributed after a valuation conducted in conjunction with a share issue. The interest expense is spread over the expected term of the loan.

Hedging net investment in foreign operationsThe Group has taken out loans in foreign currencies (EUR, NOK and DKK) to hedge investments in foreign subsidiaries. The loans are valued at the exchange rate on the balance sheet date. The Group recognizes exchange rate differences directly to equity, after adjustment for the tax element. Any ineffective element of the exchange rate difference is recog-nized directly in the income statement as a financial item.

ProvisionsA provision is recognized in the balance sheet when there is a formal or informal commitment as a result of a event that has occurred, and where it is probable that an outflow of resources is required to settle the commitment and a reliable estimate of the amount can be made. In cases where some or all of the amount that is required to settle a provision is expected to be paid by a third party, the reimbursement is recognized when, and only when, it is as good as certain that it will be received if the obligation is settled. The reimburse-ment is recognized as an asset in its own right in the balance sheet. The amount that is recognized for the reimbursement cannot exceed the provision. The cost for a provision is recog-nized in the income statement net following deductions for any reimbursement from a third party.

Contingent liabilitiesA contingent liability is recognized where there is a possible commitment deriving from events that have occurred, and whose occurrence is confirmed only by one or more uncer-tain future events that do not lie entirely within the compa-ny’s control occurring or failing to occur, or when there is a commitment that derives from occurred events but that has not been recognized as a liability or provision due to it being unlikely that an outflow of resources will be required to settle the commitment, or that that size of the commitment cannot be calculated with sufficient accuracy.

InventoriesInventories are valued at the acquisition value or the net sales value, whichever is the lowest, and only exist to a minor extent.

Impairment of non-financial assetsThe value of capitalized development costs, product rights, customer agreements, brands and goodwill is tested to deter-mine any need for impairment. Goodwill and brands with an indeterminate useful life are assessed annually. This assess-ment takes place by means of the recognized value being compared with the recovery value, where the recovery value is defined as the asset's fair value (minus sales expenses) or the value in use, whichever is the higher. The value in use is calculated by discounting the future cash flows the asset is expected to generate, in perpetuity, by an interest rate based on the market's assessment of risk-free interest and risk. The cash flows are based on budgets/forecasts determined by Group management.

In the calculation, the assets are referred to the smallest cash-generating unit where an independent cash flow can be determined. The smallest cash generating unit is a business area. The discount rate after tax amounts to 8.97-9.77 per-cent, and is based on a risk-free bond yield with a duration of 10 years with an addition for assessed risk. The assessment is based on assumptions and estimates which are associated with an amount of uncertainty. An impairment is recognized when an asset’s or cash-generating unit’s recognized value exceeds the recovery value. An impairment is recognized as a cost in profit for the year. When the impairment requirement has been identified for a cash-generating unit, the impairment amount is distributed in the first instance to goodwill. After this, a proportional impairment of other assets included in the unit is performed. Vitec’s most recent assessment was conducted in conjunction with the preparation of the final accounts for 2017.

Remuneration to employeesShort-term remuneration is calculated without discounting, and is reported when the services are received. Costs for bonuses and other variable salary portions are recognized when a legal or informal obligation exists for the company to pay remuneration and the payment can be calculated reliably.

Pensions and other remuneration after completed employment can be classified as defined-contribution plans or defined-benefit plans. The majority of the Group's pension commitments comprise defined-contribution plans that are fulfilled through continual payments to independent authorities or bodies. Obligations in respect of fees for defined-contribution plans are recognized as a cost in the income statement when they arise. There are a small number of employees with defined-benefit ITP plans with continual payments to Alecta. These are recognized as defined-contri-bution plans since Alecta does not supply the information that is required. As a result, we do not have the information that is required to recognize the plan as a defined-benefit plan. However, there is nothing to indicate any significant commitments exceeding that which is paid to Alecta. There


NOTES

are also a smaller number of employees in Norway who are associated with a defined-benefit plan.

Remuneration on termination of employment is recogni-zed as a provision in conjunction with staff being given notice only if the company is demonstrably obliged to terminate an employment before the normal time, or when remuneration is paid as an incentive to encourage voluntary departure. When remuneration is paid as an incentive to encourage voluntary departure, a cost and a provision are recognized if it is likely that the offer will be accepted and if the number of employ-ees who will accept the offer can be estimated reliably.

Parent Company's accounting principlesThe Parent Company complies with the Annual Accounts Act and the Swedish Financial Reporting Board’s recommen-dation, RFR 2 Reporting of legal entities. The application of RFR 2 means that the Parent Company must apply the same accounting principles as the Group as far as possible within the framework of the Annual Accounts Act, the Act on Safe-guarding of Pension Commitments, and with respect to the correlation between accounting and taxation.

There have been no changes in the Parent Company’s accounting principles. The differences between the Parent Company’s and the Group’s accounting principles are set out below.

� For the Parent Company, an income statement is presen-ted. For the Group, a statement of comprehensive income

is presented. For the Parent Company, the designations balance sheet and cash flow statement are used for the re-ports that, for the Group, have the titles statement of fi-nancial status and statement of cash flows. For the Parent Company, the income statement and balance sheet are set out in accordance with the schedules in the Annual Ac-counts Act, while the statement of comprehensive income, the statement of changes in equity and the cash flow sta-tement are based on IAS 1 Presentation of Financial State-ments and IAS 7 Statement of Cash Flows. The differences compared to the Group's reports that apply in the Parent Company's income statement and balance sheet principal-ly comprise the recognition of equity and the occurrence of provisions as a separate heading in the balance sheet.

� Shares in subsidiaries are recognized in the Parent Com-pany according to the acquisition value method, and con-ditional purchase prices are valued on the basis of the li-kelihood that they will be paid. In the consolidated financi-al statements, conditional purchase prices are recognized at fair value with value changes through profit. For the Pa-rent Company, transaction charges are included in the re-cognized value, which does not apply to the Group.

� In the Parent Company, untaxed reserves are recognized inclusive of deferred tax. In the Group, untaxed reserves are split into deferred tax and shareholders' equity.

� The anticipated dividend from subsidiaries is reported in those cases where the Parent Company has the sole right to decided on the size of the dividend.


NOTE 2 INFORMATION ABOUT OPERATING SEGMENTS

The Group management follows up and distributes resources based on operating segments. The Vitec Group’s grounds for division in 2017 are the segments Auto, Energy, Real Estate, Finance & Insurance, Environment, Estate Agents and Educa-tion & Health.

� Auto – Software for the automotive and machinery indu-stry.

� Energy – Advanced forecasting systems for electricity traders, and calculation and map systems for owners of electricity and district heating networks.

� Real Estate – Software for the construction and real esta-te industries.

� Finance & Insurance – Software for banks, financial insti-

tutions and insurance companies. � Environment – Products in private and municipal waste

and resource management. � Estate Agents – Software for real estate agents. � Education & Health – Software for healthcare companies

and the education sector.

Geographic markets based on customers' registered officesThe following table shows the Group’s net sales converted to SEK million for the period January - December in 2017 as well as 2016 based on our customers’ registered offices. The distribution of tangible and intangible assets is also presented by geographic market.

MARKET

Net sales Fixed assets

2017 2016 2017 2016

Sweden 285.8 284.7 178.5 175.1

Denmark 218.9 154.6 316.1 160.2

Finland 169.6 106.0 234.5 242.1

Norway 175.2 119.5 253.1 266.5

Rest of Europe 4.9 10.4 - -

Rest of the world 0.7 0.2 - -

855.0 675.4 982.3 843.9

OPERATING SEGMENT

Auto Energy Real EstateFinance and

insurance Environment

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Per operating segment (SEK million)

Recurring revenues 128.6 96.8 19.1 18.4 108.8 89.2 104.4 99.7 32.6 14.3

Licenses 6.1 3.0 - - 8.6 11.5 7.5 6.1 3.5 2.4

Service revenues 16.3 14.1 6.5 7.4 69.8 55.2 29.9 20.3 5.7 5.0

Other 5.0 5.2 0.1 0.1 2.9 2.5 0.5 0.6 2.2 1.4

Internal sales 0.3 2.2 - - - 0.2 1.6 2.2 0.6 0.2

Net sales 156.2 121.3 25.7 25.9 190.1 158.5 143.9 128.8 44.7 23.2

Capitalization, own work 14.0 13.0 2.9 2.4 19.0 13.3 20.3 19.9 2.3 1.5

Depreciation and amortization -20.4 -14.7 -2.1 -1.9 -16.7 -11.9 -20.8 -17.4 -3.2 -1.3

Operating profit 19.5 19.2 8.0 7.3 32.2 29.8 29.0 20.3 5.5 3.4

Financial items, net - - - - - - - - - 0.2

Consolidated profit before tax

Other information

Investments in fixed assets 16.2 125.0 2.9 2.4 19.9 67.9 20.6 20.8 2.3 34.8

Closing balance Goodwill 64.8 64.4 - - 40.2 40.5 32.5 32.0 11.2 11.0

Closing balance Other tangible and intangible assets 165.3 168.4 6.3 5.5 58.1 73.5 129.4 104.3 25.1 25.5

None of the Group’s customers are responsible for more than 7 % of income.


NOTES

OPERATING SEGMENTS, CONT.

Estate Agents Education & Health Group-Common Eliminations Total

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Per operating segment (SEK million)

Recurring revenue 132.5 145.1 83.7 54.6 0.2 - - - 609.9 518.1

Licenses - 1.8 13.8 - - 0.4 - - 39.6 25.2

Service revenues 5.1 7.8 12.2 11.2 0.2 0.2 - - 145.7 121.1

Other 0.4 0.5 48.2 0.3 0.5 0.4 - - 59.8 11.0

Internal sales 4.6 3.1 3.5 0.5 110.0 97.7 -120.7 -105.9 0.0 0.0

Net sales 142.6 158.3 161.5 66.7 111.0 98.6 -120.7 -105.9 855.0 675.4

Capitalization, own work 22.7 25.0 16.0 7.2 - - - - 97.2 82.3

Depreciation -28.8 -26.5 -25.3 -12.4 -8.4 -5.5 0.3 0.1 -125.5 -91.5

Operating profit 5.5 11.1 11.2 1.9 -4.2 -4.8 - - 106.7 88.3

Financial items, net - - -0.4 -0.3 -8.2 -6.3 - - -8.6 -6.4

Consolidated profit before tax 98.1 81.9

Other information

Investments in fixed assets 23.6 27.2 169.5 7.2 11.5 7.0 - - 266.5 292.2

Closing balance Goodwill 90.8 92.5 43.2 - - - - - 282.6 240.4

Closing balance Other tangible and intangible assets 90.6 107.7 198.2 96.9 26.5 21.6 - - 699.7 603.4

Ann Petersson and Henrik Hilmansson, Kalmar


NOTE 3 ACQUISITIONS

Acquisition of MV-Nordic A/SOn July 6, all shares and votes in the Danish software group MV-Nordic A/S were acquired. The company offers software to the education sector in Denmark, Norway and Sweden. The main product is a cloud-based service for people with reading and writing difficulties.

The corporate group is consolidated as from the acquisi-tion date. The goodwill is not tax-deductible and is deemed to be attributable to the expected profitability, complementary expertise as well as anticipated synergies in the form of the joint development of our products. The acquisition-related costs amount to SEK 3.9 million as of December 31, and are recognized as other external expenses through comprehen-sive income. As of the acquisition date until December 31,

the revenues in the acquired group amounted to SEK 89.0 million and profit before tax was SEK 8.1 million. Due to the application of other accounting principles and the broken financial year, information on revenues and earnings from the beginning of the year are deemed to not provide an accurate view. The inventories are valued at book value when it is considered to agree with fair value. The majority of the inven-tories were sold shortly after the acquisition at book value.

There are items in the acquisition analysis that may be revalued once the MV Group has been in our possession for a short time. These are brands, product rights, customer agreements and goodwill. For this reason, the acquisition analysis is preliminary until 12 months have passed since the acquisition date.

PRELIMINARY ACQUISITION ANALYSIS

MV-Nordic A/SFair value, adjust-

ment

Fair value recognized in the

Group

Brands - 3,374 3,374

Product rights - 67,510 67,510

Customer agreements - 29,676 29,676

Intangible assets 5,345 - 5,345

Tangible assets 3,679 - 3,679

Deposits 1,261 - 1,261

Inventories 11,424 - 11,424

Current receivables 24,471 - 24,471

Cash and cash equivalents 1,678 - 1,678

Deferred tax liabilities 3,212 -22,123 -18,911

Short-term liabilities -50,392 -11,395 -61,787

Long-term liabilities -1,522 - -1,522

Net identifiable assets and liabilities -845 67,041 66,196

Goodwill on consolidation 42,235

Total 108,431

The Group’s acquisition value 108,431

Calculation of net cash outflow Fair value

The Group’s acquisition value -108,431

Convertible bonds 20,008

Acquired cash and cash equivalents 1,678

Net cash outflow -86,745

The term of the convertible bond is July 6, 2017 – December 30, 2020, and the interest rate is Stibor 180. The conversion price is SEK 85.00. Conversion may be requested during the period January 1, 2019 to June 30, 2020. On conversion, the share capital may increase by a maxi-mum of SEK 23,432.


NOTES

NOTE 4 INCOME AND EXPENSE BETWEEN GROUP COMPANIES

The Parent Company’s net sales include invoicing to Group companies at 100 percent (100) and in operating expenses it stands at 2 percent (0).

NOTE 5 OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

The expensed conditional purchase price for Fox Publish AS has been adjusted downwards by SEK 1.3 million. This correction was recognized as other operating income in accordance with IFRS 3:58. At the same time, an impairment of intangible assets was applied.

Other operating expenses refer in their entirety to exchange rate differences attributable to operating receivables and liabilities.

The Parent Company's other operating income comprises in its entirety unrealized exchange rate differences.

NOTE 6 EMPLOYEES, PERSONNEL COSTS AND REMUNERATION OF SENIOR EXECUTIVES

AVERAGE NUMBER OF EMPLOYEES

Women Men Total

2017 2016 2017 2016 2017 2016

Parent Company

Sweden 17 16 8 8 25 24

Subsidiaries

Sweden 41 47 146 139 187 186

Denmark 38 18 97 80 135 98

Finland 22 17 69 48 91 65

France 1 1 5 5 6 6

Norway 25 27 71 61 96 88

Group, total 144 126 396 341 540 467

At the end of the year, the number of employees totaled 573 (507).

GENDER DISTRIBUTION AMONG SENIOR EXECUTIVES

The Board of the Parent Company comprises five members, two of whom are women. The Group's management team comprises four individuals, one of whom is a woman. The

business area managers and presidents of subsidiaries are 16 men.

SALARIES AND OTHER REMUNERATION

Salaries and other remuneration Social security costs (of which pension premiums)

2017 2016 2017 2016 2017 2016

Parent Company 18,785 18,143 9,542 9,674 3,064 * 3,336 *

Subsidiaries 303,080 253,987 86,668 76,091 33,510 25,984

Group, total 321,865 272,130 96,210 85,765 36,574 ** 29,320 **

*Of the Parent Company’s pension premiums, SEK 1,669 thousand (1,616) refers to senior executives. *Of the Group’s pension premiums, SEK 3,958 thousand (3,559) refers to senior executives.


SALARIES AND OTHER REMUNERATION DIVIDED BETWEEN BOARD MEMBERS, SENIOR EXECUTIVES AND OTHER EMPLOYEES

Senior executives (of which bonuses etc.) Other employees

2017 2016 2017 2016

Parent Company 8,119 7,302 (0) 10,666 10,841

Subsidiaries 19,220 14,337 (0) 283,860 239,650

Group, total 27,339 21,639 (0) 294,526 250,491

Senior executivesSenior executives in the Parent Company comprise the Board and the Group management team. Senior executives in sub-sidiaries consist of business area managers and presidents in the subsidiaries that form their own reporting units.

Remuneration to Board members and senior executives in the Parent CompanyAll remuneration is deemed to be at the market-going rate. External members receive Directors' fees. There is no variab-le remuneration. No consultancy agreements exist with any Board member or senior executive.

Board fees – Payment has taken place in accordance with the decision of the Annual General Meeting. The Chairman of the Board receives a fee of SEK 250 thousand per year. The other four Board members who are not employees of the company receive a combined fee of SEK 500 thousands per year. In both cases, the remuneration level applies as from the date of the AGM.

The CEO’s salary amounted to SEK 2,448 thousand, with no Board fee. The CEO's pension solution from the compa-ny includes the entitlement to an annual premium payment amounting to 35 per cent of salary. In the event of notice from the company's side, salary will be payable for the notice period of 6 months, as well as a severance payment totaling 18 months' salary. The severance payment is offset against remuneration from another employer.

The pension plans are defined-contribution and are based on a retirement age of 65. The notice period set out in appli-cable legislation or an applicable collective bargaining agre-ement normally applies between Vitec and other senior exe-cutives. In the event of notice from Vitec's side, Maria Kröger and Patrik Fransson are entitled to 6 months' severance pay and Lars Eriksson is entitled to 9 months' severance pay.

There is an ongoing convertible program for employees and senior executives in the form of convertible debentures. The share issues have been implemented on market terms, which is why there is no benefit to be recognized as share-re-lated remuneration. Board members' and senior executives' holdings of shares and convertible bonds can been seen in the Corporate Governance Report.

Salary/Board fees Other benefits Pension premiums Total

2017 2016 2017 2016 2017 2016 2017 2016

Chairman of the Board, Crister Stjernfelt 250 250 - - 250 250

Board member, Kaj Sandart 125 125 - - 125 125

Board member, Jan Friedman 125 125 - - 125 125

Board member, Birgitta Johansson Hedberg 125 125 - - 125 125

Board member, Anna Valtonen 125 125 - - 125 125

CEO, Lars Stenlund 2,448 1829 - 640 649 3,088 2,478

*Other senior executives, Parent Company4,921 4723 13 13 1,029 967 5,963 5,704

Total 8119 7302 13 13 1669 1616 9801 8931

* Other senior executives in the Parent Company refer to Patrik Fransson, Lars Eriksson and Maria Kröger. Kaj Sandart and Jan Friedman have invoiced their fees plus payroll overheads and VAT via companies. This procedure is cost-neutral for Vitec.


NOTES

NOTE 7 FEES AND REIMBURSEMENT OF COSTS TO AUDITORS

Group Parent Company

2017 2016 2017 2016

PwC, auditing assignment 2,032 1,409 731 643

PwC, other statutory assignments 125 269 50 -

PwC, tax consultancy 64 13 - -

PwC, other assignments 92 117 17 117

Other auditors, auditing assignments 363 - - -

Other auditors, other statutory assignments - - - -

Other auditors, tax consultancy and other assignments 94 - - -

Total audit fees 2,770 1,808 798 760

PwC Sweden accounts for SEK 731 million of audit assignments, SEK 50 million of other statutory assignments, SEK 0 million of fees for tax consultancy and SEK 17 million of other assignments.

NOTE 8 NET FINANCIAL ITEMS


2017 2016 2017 2016

Interest income 328 773 231 737

Dividend, subsidiaries - - 64,898 58,335

Other financial expenses -63 -40 - -

Interest expenses -8,840 -7,096 -8,289 -6,382

Net financial items -8,575 -6,363 56,840 52,690

The Parent Company has booked a receivable for anticipated dividends from subsidiaries. This amounts to a total of SEK 64.9 million, divided between: FuturSoft Oy SEK 9.8 million, Tietomitta Oy SEK 3.9 million, Vitec Datamann A/S SEK 2.6 million, AcuVitec Oy SEK 2.5 million, Vitec Capitex AB SEK 5.0 million, Capitex AB SEK 2.4 million, 3L Media AB SEK 6.9 million, 3L System AB SEK 7.7 million, Capifast AB SEK 3.5 million, Vitec Förvaltningssystem AB SEK 7.7 million, Vitec Mäklarsystem AB SEK 4.2 million, Vitec Fastighets-system AB SEK 2.8 million and Vitec Energy AB SEK 5.8 million.

NOTE 9 APPROPRIATIONS

2017 2016

The difference between booked depreciation and depreciation according to plan -88 -119

Received Group contributions 5,000 7,900

Total 4,912 7,781


NOTE 10 TAX


2017 2016 2017 2016

Current tax

Current tax on profit for the year -21,277 -14,643 - -9

Adjustment of current tax from previous years -267 83

-21,544 -14,560 - -9

Deferred tax

Deferred tax in respect of temporary differences 1,655 -1,126 57 -

Revaluation of deferred tax due to changed tax rates 1,188 559 - -

2,843 -567 57 -

Total recognized tax expense -18,701 -15,127 57 -9

RECONCILIATION BETWEEN APPLICABLE TAX RATE AND EFFECTIVE TAX RATE


2017 2016 2017 2016

Recognized profit before tax 98,127 81,942 64,888 56,944

Of which in Sweden 41,959 46,219 - -

Of which in Finland 13,963 4,598 - -

Of which in Norway 7,749 18,138 - -

Of which in Denmark 34,456 12,983 - -

Tax according to applicable tax rate -21,524 -18,549 -14,275 -12,528

Tax effect of:

- non-deductible expenses -571 -395 -135 -117

- non-taxable income 2,109 255 14,278 12,834

- change in non-capitalized loss carry-forwards 189 -189

- tax attributable to previous years 82 345 -9

- effect of changed tax rates 1,203 3,218 - -

Recognized effective tax -18,701 -15,127 57 -9

RECOGNIZED DEFERRED TAX RECEIVABLES


2017 2016 2017 2016

Deferred tax for tax loss carry-forwards 6,297 1,871 57 -

Differences between booked value and taxable value of fixed assets 417 2,314 - -

Closing balance 6,714 4,185 57 -

RECOGNIZED DEFERRED TAX LIABILITIES


2017 2016 2017 2016

Product rights, customer agreements and brands 95,303 86,643 - -

Capitalized development costs 43,010 32,997 - -

Pension liability -1,892 -1,843 - -

Untaxed reserves -577 2,887 - -

Deferred tax liabilities 135,844 120,684 0 0


NOTES

CHANGES IN DEFERRED TAX LIABILITY IN TEMPORARY DIFFERENCES

1/1/2017

Recognized in comprehensi-ve income for

the year

Recognized in other com-

prehensive income

Recognized in equity 12/31/2017

Acquired net assets 84,241 -9,181 606 15,988 91,664

Effect of altered tax rate 559 1,188 - - 1,747

Hedge accounting - 1,758 - -1,758 0

Accumulated excess depreciation 2,887 -3,464 - - -577

Capitalized development costs 32,997 10,013 - - 43,010

120,684 314 606 14,240 135,844

All deferred tax assets regarding tax loss carry-forwards have been activated.

CHANGES IN DEFERRED TAX ASSETS IN TEMPORARY DIFFERENCES

1/1/2017

Recognized in comprehensi-ve income for

the year

Recognized in other com-

prehensive income

Recognized in equity 12/31/2017

Accumulated excess depreciation 4,185 2,529 - - 6,714

4,185 2,529 0 0 6,714

NOTE 11 EARNINGS PER SHARE

Earnings per share amounted to SEK 2.70 (2.27). Earnings per share after dilution amounted to SEK 2.70 (2.25). The financial instruments that can produce future dilution effects

are made up entirely of the convertible debentures presented in Note 20.

12/31/2017 12/31/2016

Earnings per share before dilution 2.70 2.27

Profit when calculating earnings per share 79,426 66,814

Average number of shares (weighted average) 29,424,555 29,396,690

Earnings per share after dilution 2.70 2.25

Profit when calculating earnings per share after dilution 79,814 67,086

Average number of shares after dilution 29,538,825 29,838,900


NOTE 12 FIXED ASSETS, GROUP

INTANGIBLE ASSETS (SEK MILLION)

Goodwill

Capitalized development

costs Software Brands Product rightsCustomer

agreements Total

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Opening acquisition value 273.6 216.7 312.4 229.5 21.0 19.4 70.1 10.1 397.7 325.9 105.5 75.1 1180.4 876.9

Purchases* 42.6 55.0 97.2 82.3 1.5 1.5 3.8 59.7 70.3 55.3 29.7 26.0 245.1 279.7

Divestments/disposals - -4.9 -85.1 -0.6 -0.9 - - - -4.8 -2.3 - - -90.8 -7.8

Acquisition of operations - - - - - - - - 5.3 1.4 - - 5.3 1.4

Translation difference -0.4 6.7 -0.5 1.2 - 0.1 0.4 0.4 1.2 17.4 0.8 4.4 1.4 30.2

Closing accumulated acquisition values

315.8 273.6 323.9 312.4 21.7 21.0 74.3 70.1 469.7 397.7 136.0 105.5 1341.5 1180.4

Opening amortization -33.2 -14.6 -161.8 -120.3 -17.1 -15.6 -0.1 -1.3 -130.9 -96.9 -27.8 -12.8 -370.8 -261.5

Divestments/disposals - - 87.4 0.4 0.9 - - - - 2.3 - - 88.2 2.7

Translation difference - -1.3 0.3 -0.4 0.0 -0.1 - 1.3 0.9 -3.9 - -0.9 1.2 -5.3

Amortization and impair-ment for the year - -17.3 -51.9 -41.5 -1.5 -1.4 0.0 0.0 -49.0 -32.4 -13.3 -14.1 -115.7 -106.6

Closing accumulated amortization -33.2 -33.2 -126.0 -161.8 -17.7 -17.1 0.0 -0.1 -179.0 -130.9 -41.1 -27.8 -397.1 -370.8

Closing book value 282.6 240.4 197.9 150.5 4.0 4.0 74.3 70.1 290.7 266.8 94.8 77.7 944.4 809.6

*Goodwill, brands, customer agreements and product rights are attributable to acquisitions, whereas capitalized development costs are attri-butable to in-house time spent and, to a lesser extent, purchased consultancy services. Software is attributable to purchases.

Impairment testing of goodwill and brandsGoodwill is not amortized continuously, but the value is tested at least annually in accordance with IAS 36. The tes-ting was last done in December 2017. Goodwill is allocated to cash-generating units, which for Vitec are the same as operating segments, which match Vitec’s business areas. The recoverable amount was calculated based on the value in use and proceed from the current assessment of the cash flows for the upcoming five-year period. Assumptions have been made regarding revenue growth, gross margins, expense increases, working capital requirements and investment requirements. The parameters have been set to match the budgeted profit for the 2018 financial year. In the remainder of the five-year period, a growth rate has been assumed of 2 percent (2) per year except for the Real Estate segment where the growth rate has been assumed to be 4 percent (2) per year. For cash flows beyond the five-year period, the growth rate has been assumed to be 2 percent (2). Cash flows have been discounted at a weighted average cost of capital (WACC) that corresponds to 10.9-12.2 percent before tax and 8.97-9.77 percent after tax. The weighted cost of capital has been adapted to the prevailing interest rate situation and the market risk premium in the Swedish stock market.

The calculation shows that the value in use exceeds the carrying amount at a segment level. A sensitivity analysis shows that the goodwill values are justifiable even if the discount interest rate were to be increased by one percenta-ge point or if the sustained growth rate (beyond the five-year period) were to decrease to zero percent. The impairment testing resulted in no impairment requirement being identi-fied for any of the segments.

In 2017, the conditional purchase price for Fox Publish AS booked as a liability were adjusted down by SEK 1.3 million. This resulted in an other operating income and an impairment of product rights.

GoodwillGoodwill amounts to SEK 282,612 thousand (240,444). Goodwill is divided between the business areas Auto SEK 64,798 thousand (64,380), Real Estate SEK 40,194 thou-sand (40,548), Finance & Insurance SEK 32,470 thousand (32,011), Environment SEK 11,220 thousand (10,968), Estate Agents SEK 90,761 thousand (92,537) and Education & Health SEK 43,170 thousand (0).

Capitalized development costs Capitalized development costs comprises in-house time spent on product development, as well as external consul-tancy services to a smaller extent. Amortization is initiated cautiously when the capitalization is entered. The amortiza-tion period is 5-10 years.

SoftwareSoftware comprises acquired right of usage/program licen-ses, for example the Group’s business systems and Group accounting systems as well as other administrative systems. The asset is written off over 5 years.


NOTES

BrandsBrands amount to SEK 74,281 thousand (70,097). The item brands is divided between the business areas Auto SEK 45,988 thousand (44,774), Real Estate SEK 492 thousand (17,267), Finance & Insurance SEK 19,438 thousand (2,995), Environment SEK 400 thousand (478), Estate Agents SEK 2,402 thousand (2,530) and Education & Health SEK 5,561 thousand (2,054). All brands are identified in the prepared acquisition analyses. The brands are deemed to have an indeterminate useful life, as they enjoy high recognition and have been established for a long time. There are currently no known legal, contractual or competitive factors that will limit the useful life. Every year, brands are impairment tested at a segment level according to the same principles and at the same time as in the review of goodwill.

Customer agreementsCustomer agreements are identified in acquisition analyses. The amortization period is 8-10 years. The useful life for customer agreements is based on the length of time net pay-ments are expected to be received from these agreements, bearing in mind legal and economic factors. Amortization ta-kes place according to a declining balance model for acquisi-tions as of the fourth quarter of 2016. For acquisitions before this, amortization takes place straight-line.

The customer agreements’ acquisition values, residual values and remaining depreciation period amount to:

CUSTOMER AGREEMENTS

Acquisition value (TSEK)

Residual value (TSEK)

Remaining amortization

period (years)

Auto

Autodata 10,950 5,409 4.3

Infoeasy 1,378 976 7.5

Datamann 11,472 9,205 7.5

FuturSoft 14,277 13,048 8.7

Real Estate

Plania 6,761 5,491 8.9

Finance & Insurance

Aloc 8,550 5,157 4.5

Nice 4,435 3,487 7.9

Environment

Tietomitta 4,936 4,395 8.5

Estate Agents

Megler 11,284 5,745 7.2

Adservice 204 146 7.2

Education & Health

AcuVitec 26,807 14,213 4.2

MV 30,320 27,563 9.5

Product rightsProduct rights comprise acquired product rights. The depreciation period is 5-10 years. The previously assumed useful lives for the product rights of five years are deemed to not provide an accurate view. Our history shows useful lives that exceed 10 years, but we have found that a uniformity between our proprietary software/capitalized developme-nt costs and the software/product rights we acquire are logical and have therefore chosen 10 years as the amorti-zation period for both classes of assets. Amortization now takes place according to a declining balance model, which is deemed to reflect the actual use in a more relevant way as the product rights consist of several components and where each component can be presumed to have a life expectancy from three to 20 years. The declining balance model entails a higher amortization at the beginning of the useful life. The declining balance amortization method has been applied as of the fourth quarter of 2016. For acquisitions before this, amortization takes place straight-line.

The acquisition values, residual values and remaining amortization period for product rights of significant value amount to:

PRODUCT RIGHTS

Acquisition value (TSEK)

Residual value (TSEK)

Remaining amortization

period (years)

Auto

Autodata 17,873 10,322 4.3

Infoeasy 10,879 7,744 7.5

Datamann 31,843 25,797 7.5

FuturSoft 21,377 16,797 8.7

Real Estate

Vitec Software 6,051 - 0

Plania 15,889 11,253 8.9

3L System 13,573 2,760 2

Capitex 5,859 1,465 2.5

Finance & Insurance

Capitex 8,091 2,023 2.5

Aloc 47,914 33,395 6.5

Nice 15,019 11,808 7.9

Environment

Tietomitta 18,981 17,001 8.5

Estate Agents

Mäklarsystem 15,700 - 0

Capitex 13,950 3,488 2.5

Megler 55,880 24,851 7.2

Education & Health

AcuVitec 72,758 57,468 6.2

MV 70,749 64,478 9.5


TANGIBLE ASSETS (SEK MILLION)

BuildingsInvestments in

leased premisesEquipment,

vehicles Equipment* Equipment, art Total

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Opening acquisition value 9.6 9.6 8.5 7.7 4.6 2.1 50.9 41.7 0.2 0.2 73.7 61.3

Purchases 0.1 - 0.6 0.6 0.5 - 11.3 8.4 - - 12.5 9.0

Divestments/disposals -0.1 - -0.1 - -1.6 - -8.0 -1.7 -0.2 - -10.0 -1.7

Acquisition of operations - - - - - 2.3 12.5 1.1 - - 12.5 3.4

Translation difference - - 0.1 0.2 0.1 0.1 -0.3 1.3 - - -0.1 1.7

Closing accumulated acquisi-tion values

9.6 9.6 9.0 8.5 3.6 4.6 66.3 50.9 0.0 0.2 88.6 73.7

Opening depreciation -0.9 -0.6 -4.8 -3.3 -2.3 -1.3 -31.0 -26.8 -0.4 -0.4 -39.3 -32.4

Divestments/disposals 0.2 - 0.1 - 1.0 1 6.9 2.5 0.4 - 8.7 2.5

Acquisition of operations - - - - - -0.5 -8.8 -0.5 - - -8.8 -1.0

Translation difference - - - - - - - -0.7 - - -0.1 -0.7

Depreciation and impairment for the year -0.2 -0.2 -1.4 -1.5 -0.5 -0.5 -8.9 -5.5 - - -11.0 -7.7

Closing accumulated depreci-ation

-0.9 -0.9 -6.2 -4.8 -1.7 -2.3 -41.8 -31.0 0.0 -0.4 -50.6 -39.3

Closing book value 8.7 8.7 2.8 3.6 1.9 2.3 24.6 19.9 0.0 -0.2 38.0 34.3

* Equipment also includes computers.

The item equipment includes leasing objects that the Group holds under finance leases with the following amounts: (see Note 23 for further information)

LEASED ASSETS

2017 2016

Opening acquisition value 0.0 0.0

Purchases 4.8 -

Acquisition of operations 4.8 -

Closing accumulated acquisition values 9.5 -

Opening depreciation 0.0 -

Acquisition of operations -2.5 -

Depreciation and impairment for the year -2.2 -

Closing accumulated depreciation -4.7 -

Closing book value 4.8 -


NOTES

NOTE 13 FIXED ASSETS, PARENT COMPANY

INTANGIBLE ASSETS (SEK MILLION)

Software Product rights Total

2017 2016 2017 2016 2017 2016

Opening acquisition value 8.9 7.4 9.7 9.7 18.6 17.1

Purchases 0.9 1.5 - - 0.9 1.5

Closing accumulated acquisition values 9.7 8.9 9.7 9.7 19.5 18.6

Opening amortization -5.0 -3.8 -9.7 -9.6 -14.7 -13.3

Amortization for the year -1.4 -1.3 -0.1 -0.1 -1.5 -1.4

Closing accumulated amortization -6.4 -5.0 -9.7 -9.7 -16.2 -14.7

Closing book value 3.3 3.8 0.0 0.1 3.3 3.9

TANGIBLE ASSETS (SEK MILLION)

BuildingsInvestments in leased

premises Equipment* Total

2017 2016 2017 2016 2017 2016 2017 2016

Opening acquisition value 9.3 9.3 2.5 2.5 3.6 3.6 15.4 15.3

Purchases - - 0.4 - 0.1 - 0.5 -

Closing accumulated acquisi-

tion values 9.3 9.3 2.8 2.5 3.7 3.6 15.9 15.4

Opening depreciation -0.5 -0.3 -1.6 -1.0 -1.2 -0.8 -3.3 -2.2

Depreciation for the year -0.2 -0.2 -0.6 -0.6 -0.3 -0.4 -1.1 -1.2

Closing accumulated depre-

ciation

-0.7 -0.5 -2.2 -1.6 -1.5 -1.2 -4.4 -3.3

Closing book value 8.6 8.8 0.6 0.8 2.2 2.4 11.4 12.0

* Equipment also includes computers.

FINANCIAL ASSETS (SEK MILLION)

Shares in subsidiaries 2017 2016

Opening acquisition value 864.8 685.9

Acquisitions during the year 109.1 209.0

Adjustment of purchase price -1.3 -22.7

Divested - -7.3

972.5 864.8

Other financial assets

Deferred tax 0.1 -

Other financial receivables 7.7 9.0

7.8 9.0

Closing book value 980.3 873.8


NOTE 14 SHARES IN SUBSIDIARIES

Subsidiaries

Acqui-sitions,

year%

Capital

% Voting rights

Number of shares

Book value 12/31/2017

Book value 12/31/2016

Adjusted equity

12/31/2017

Vitec MV A/S Software company, Parent Company of Vitec MV AS and Vitec MV AB 2017 100 % 100 % 600 108,797 - 87

Vitec Plania AS Software company 2016 100 % 100 % 330 54,190 53,980 9,245

FuturSoft Oy Software company 2016 100 % 100 % 100 109,305 109,305 28,545

Tietomitta Oy Software company 2016 100 % 100% 7,922 46,179 46,183 25,748

Vitec Nice AS Software company 2015 100% 100% 40,000 26,045 26,045 7,017

Vitec Infoeasy AS Software company 2015 100% 100% 1,000 16,930 16,849 3,913

Vitec Datamann A/S Software company 2015 100% 100% 3,000 56,714 56,714 15,135

ADservice Scandinavia AB Software company 2015 100% 100% 1,000 400 400 1,916

Vitec Aloc A/S Software company, Parent Company of Aloc AS. 2014 100% 100% 20,000 88,658 88,658 46,070

Vitec Autodata AS Software company 2014 100% 100% 30,000 37,010 37,285 20,877

IMHO Oy Holding company, owns 47% of the shares in AcuVitec 2014 100% 100% 19,800 34,411 34,282 4,223

AcuVitec Oy Software company, Parent Company of Acute France SARL 2014 100% 100% 85,714 38,804 38,658 14,313

Vitec Megler AS Software company, Parent Company of IT-Drift AS and Vitec Megler AB 2012 100% 100% 3,256,596 120,548 121,947 28,592

Vitec Capitex AB Software company 2011 100% 100% 1000 8,289 8,289 5,549

Capitex Software company 2010 100% 100% 5,000 17,527 17,527 3,184

3L System AB Holding company, Parent company of 3L Media, Vitec Förvaltningssystem and Vitec Capifast 2009 100% 100% 2,350,400 121,751 121,751 64,289

Vitec Mäklarsystem AB Software company 2007 100% 100% 1,000 68,083 68,083 10,754

Vitec Software AB Dormant company 2005 100% 100% 2,000 999 999 806

Vitec AB Dormant company 2003 100% 100% 18,000 2,654 2,654 3,046

Vitec Fastighetssystem AB Software company 2000 100% 100% 200,000 12,665 12,665 6,362

Vitec IT-Drift AB Responsible for internal IT 1999 100% 100% 1,000 1,008 1,008 2,965

Vitec Energy AB Software company 1998 100% 100% 1,000 1,551 1,551 6,211

Total 972,519 864,833 308,847

Vitec continually acquires companies and operations, which either become separate business areas or are incorporated in existing business areas. The acquisitions are restructured from time to time, for example by means of the operations in two separate companies in the same business area being merged in one of the companies. On such occasions, the above book values may be corrected through the movement of assets identified at the time of the acquisition, in the form of goodwill, product rights, customer agreements and brands. When this occurs, it is described in the Annual Report. On January 1, 2017, the three companies in Business Area Estate Agents in Norway, Vitec IT-Makeriet AS, Vitec Fox AS and Vitec Megler AS, were merged. The merger means that Vitec Megler AS has taken over the submitting companies book keeping and tax position together with assets, rights and obligations. Via subsidiaries, Vitec Software Group AB owns

the following companies: � Via 3L System AB – 3L Media AB, Vitec Förvaltningssys-

tem AB and Vitec Capifast AB (all are software compa-nies).

� Via Vitec Megler AS - Vitec IT Drift AS (responsible for server operation in Norway) and Vitec Megler AB (pro-duct development on behalf of the parent company Vitec Megler AS).

� Via AcuVitec Oy – Acute France Sarl (product developme-nt on behalf of the parent company AcuVitec).

� Via IMHO Oy – AcuVitec Oy (holding company). � Via Vitec Aloc A/S – Vitec Aloc AS (sales company) � Via Vitec MV A/S – Vitec MV AB (sales company) and Vi-

tec MV AS (sales company).


NOTES

INFORMATION ABOUT THE SUBSIDIARIES' CORPORATE REGISTRATION NUMBERS AND REGISTERED OFFICES:

Corporate identity number Registered office

Vitec MV A/S 15314400 Odense, Denmark

Vitec MV AS 981205308 Oslo, Norway

Vitec MV AB 556438-3080 Malmö, Sweden

Vitec Plania AS 841239172 Stavanger, Norway

FuturSoft Oy 14942533 Espoo, Finland

Tietomitta Oy 9060034 Espoo, Finland

Vitec Nice AS 844699832 Oslo, Norway

Vitec Infoeasy AS 981875923 Bergen, Norway

Vitec Datamann A/S 59943510 Søborg, Denmark

ADservice Scandinavia AB 556659-1466 Stockholm, Sweden

Vitec Megler AB 559035-4816 Kalmar, Sweden

Aloc AS 976876768 Oslo, Norway

Aloc A/S 14788484 Odense, Denmark

Autodata AS 817159362 Oslo, Norway

IMHO Oy 25351376 Tampere, Finland

Acute France Sarl 483949459 Valbonne, France

AcuVitec Oy 18369420 Tampere, Finland

Vitec IT Drift AS 986363238 Oslo, Norway

Vitec Megler AS 944507302 Oslo, Norway

Vitec Capitex AB 556875-8105 Umeå, Sweden

Vitec Capifast AB 556844-4110 Stockholm, Sweden

Capitex AB 556197-8437 Kalmar, Sweden

3L System AB 556321-2546 Stockholm, Sweden

3L Media AB 556584-9931 Stockholm, Sweden

Vitec Förvaltningssystem AB 556591-2101 Stockholm, Sweden

Vitec Mäklarsystem AB 556367-6500 Umeå, Sweden

Vitec Software AB 556443-2200 Umeå, Sweden

Vitec AB 556571-5090 Umeå, Sweden

Vitec Fastighetssystem AB 556563-7773 Umeå, Sweden

Vitec IT-Drift AB 556459-9347 Umeå, Sweden

Vitec Energy AB 556347-7073 Umeå, Sweden

NOTE 15 INVENTORIES

Inventories have been valued according to the lowest value principle. Inventories comprise goods for resale and exist to a minor extent. The value as of December 31, 2017 amounted to SEK 3,619 thousand (1,031).


NOTE 16 ACCOUNTS RECEIVABLE

The Group’s accounts receivable as of December 31, 2017 amounted to SEK 172,450 thousand. Accounts receivable are initially recognized at fair value and thereafter at accrued acquisition value with the application of the effective interest method, less any provision regarding reduction in value. A provision regarding reduction in value is made when the

receivable is more than 90 days old, or earlier if the amount that is expected to be paid, after individual assessment, is below the asset's reported value. The provision for doubtful accounts receivable amounts to SEK 669 thousand (1,542). The Group's established customer losses amount to SEK 595 thousand (219) for 2017.

AGE ANALYSIS IN RESPECT OF PROVISION FOR DOUBTFUL RECEIVABLES

2017 2016

Due in less than 3 months 113 188

Due in 3-6 months 86 747

Due in more than 6 months 470 607

669 1542

AGE ANALYSIS IN RESPECT OF DUE BUT NOT RESERVED ACCOUNTS RECEIVABLE

2017 2016

Due in less than 3 months 16,843 10,721

Due in 3-6 months 2,630 1,990

Due in more than 6 months -222 1,136

19,251 13,847

NOTE 17 PREPAID EXPENSES AND ACCRUED INCOME


12/31/2017 12/31/2016 12/31/2017 12/31/2016

Accrued income 6,673 4,788 - -

Prepaid rent 4,307 2,977 2,062 2,035

Prepaid insurance premiums - 703 - 233

Other prepaid expenses 16,316 9,544 1,487 1,771

Total 27,296 18,012 3,549 4,039

NOTE 18 CASH AND CASH EQUIVALENTS

Cash and cash equivalents are defined as funds for which the-re is an insignificant risk of fluctuations in value. The Group’s cash and cash equivalents amount to SEK 57,924 thousand in

the form of bank balances and cash. The Group has a Group currency account.

NOTE 19 SHAREHOLDERS’ EQUITY

Registered share capital on December 31, 2017 amounts to SEK 2,983,890 and comprises: Class A shares, 3,350,000 shares (33,500,000 votes), and Class B shares, 26,488,900 shares (26,488,900 votes). During the financial year, a dividend has been paid at SEK 1.00/share, totaling SEK

29,396,690. The proposed, although not yet adopted, divi-dend amounts to SEK 1.10/share, totaling SEK 32,822,790. The dividend is recognized as a liability after it has been approved by the AGM.


NOTES

TYPES OF SHARES

2017 2016

Shares at the start of the year

Vitec Class A 3,500,000 4,000,000

Vitec Class B 25,896,690 25,396,690

Total at the start of the year 29,396,690 29,396,690

Restamping of Class A to Class B -150,000 -500,000

Restamping of Class A to Class B 150,000 500,000

Conversion of bonds Vitec Class B 442,210 -

Shares at the end of the year 29,838,900 29,396,690

Shares at the end of the year 2017 2016

Vitec Class A 3,350,000 3,500,000

Vitec Class B 26,488,900 25,896,690

Total at the end of the year 29,838,900 29,396,690

The management of shareholders’ equity has the objective of safeguarding Vitec’s financial stability, handling financial risks and ensuring the Group’s short-term and long-term need for capital. Except for short periods, Vitec’s indebtedness must not be so high that further financing cannot be arranged. The Group's capital structure is managed and adjusted in line with changes in economic conditions. The Group monitors capital usage with the aid of various key figures, such as net

liability, return on capital employed and equity/assets ratio. Vitec’s dividend policy means that the company’s goal must be to distribute at least a 1/3 of profits after tax annually. When assessing the scope for this, however, consideration must always be given to the company’s need for financing, its capital structure and its status otherwise. Vitec encourages employees to become shareholders by issuing convertible bonds. See also the Administration report for further details.

NOTE 20 FINANCIAL RISKS AND THE HANDLING OF SUCH RISKS

The Group's policy for handling financial risks is based on profits being generated by the operating business and not through investments in financial instruments. Only low-risk investments are permitted. Financial activities are tasked with supporting the operating business as well as identifying and optimally limiting the financial risks. Financial activities are conducted in the Parent Company. Through centraliza-tion and co-ordination, economies of scale are made possible in respect of obtained conditions for financial transactions and financing. The financial risks are handled according to the finance policy adopted by the Board.

Liquidity and financing risksThe Group’s cash and cash equivalents amounted to SEK 77.9 million as of December 31, 2017, including unutilized overdraft facility. In addition, there is the unutilized portion of a credit facility for acquisitions, amounting to SEK 178.6 million. Vitec's finance policy specifies guidelines regarding how the Group's liquidity is to be managed. A low risk profile is sought, which entails investing in Swedish banks that have been granted permission by the Swedish Financial Supervi-sory Authority to conduct banking operations, or in foreign banks with similar permission. Investments in securities must take place in treasury bills, money market funds or in K1 rated interest-bearing securities. Liquidity must not be below two month’s salary costs, and it must be possible to liquidate investments within one month.

Vitec has historically financed, and intends to continue fi-

nancing, a certain part of the acquisitions through loans from credit institutes. Loan agreements may contain terms invol-ving restrictions for Vitec (known as covenants). Today, there is such an agreement with the Group’s bank. At December 31, all covenants were met in their entirety. Borrowing entails certain risks for Vitec’s shareholders. For example, in the event of dramatically altered circumstances on our markets, the company might experience problems obtaining new credit facilities and consequently might need to use a larger share of the cash flow for interest payments and repayments. This could have an adverse effect on Vitec.

Managing capital

Risk managementThe Group's objectives in respect of the capital structure are to safeguard the Group's ability to continue its business, so that it can continue to generate a return for the shareholders and benefit for other stakeholders, as well as to achieve an optimum capital structure in order to keep the costs for the capital down. The Group assesses the capital on the basis of the debt/equity ratio, in the same way as other companies in the sector. This key figure is calculated as net debt divided by total capital. Net debt is calculated as total borrowing (en-compassing the entries Short-term borrowing and Long-term borrowing in the Group's balance sheet) less cash and cash equivalents. Total capital is calculated as Equity in the Group's balance sheet plus net liability.


Vitec does not have any absolute measure of the debt/equity ratio, but the Group’s guidelines state that indebtedness, except for short periods, must not be so high that further financing cannot be arranged in order to act quickly on invest-

ment opportunities that may arise.The debt/equity ratio at December 31, 2017 and 2016

were as follows:

DEBT/EQUITY RATIO

12/31/2017 12/31/2016

Total borrowing 406 384

Deduction, cash and cash equivalents -58 -81

Net liability 348 303

Total equity 398 334

Total capital 746 637

Debt/equity ratio, %* 47 48

*The debt/equity ratio in the multi-year summary in the Administration Report is calculated differently, see Note 30.

DIVIDEND

2017 2016

Dividend paid amounted to SEK 1.00 per share (0.90) 29,397 26,457

Total expensed or paid dividends 29,397 26,457

For the 2017 financial year, the Board proposes a dividend of SEK 1.10 per share (1.00). The total amount of the proposed dividend is not recognized as a liability as of December 31, 2017, but is expected to be settled with retained profits in April 2018. 32,823 29,397

32,823 29,397

Credit riskAccounts receivable are associated with a certain credit risk. Vitec's business model often entails prepayments and credit controls. Vitec has no significant concentration of credit risks in its accounts receivable. In the event Vitec’s customers cannot pay their invoices on time, or at all, Vitec is at risk of in-curring credit losses. It cannot be guaranteed that the credit losses will not increase, which can have a negative impact on Vitec's business, financial status and profits. The maximum exposure to credit risk corresponds to the Group’s recogni-zed value for receivables, which amounted to SEK 172,450 thousand on December 31, 2017 after provisions for estimated losses. For further information regarding accounts receivable, refer to Note 16. The Parent company does not have any external credit risks at the end of the year.

Currency risksCurrency risks can be divided into transaction exposure and translation risk. Via ownership of foreign subsidiaries in Nor-way, Denmark and Finland, and via transactions in Vitec Ener-gy AB, Vitec's operations entail sales in various currencies to a certain extent, and hence transaction exposure principally in relation to Norwegian kronor, Danish kronor and the euro. The Group has not performed any currency hedging in 2017.

Translation risk arises when translating subsidiaries' income statements and balance sheets to Swedish kronor from other currencies. As the subsidiaries report in their local currency, the Group is exposed to exchange rate fluctuations when consolidating these companies. The acquisitions of AcuVitec Oy, Autodata AS, Aloc A/S, Datamann A/S, Tieto-

mitta Oy, FuturSoft Oy, Plania AS and MV-Nordic A/S were financed through loans in the local currencies in order to reduce the translation exposure.

In the event of currency translation of balance sheet items on the balance sheet date, December 31, 2017, the following exchange rates have been used:

NOK 1.0010

DKK 1.3228

EUR 9.8497

A 5 percent change in the value of foreign currencies in 2017 would have affected the profit and equity for the year by app-rox. SEK 2.0 million, divided between NOK 0.1 million, DKK 0.9 million and EUR 1.0 million.

Interest riskVitec's interest risk for interest-bearing assets is settled by means of cash and cash equivalents being invested in such a way that the maturity date for the fixed interest term and the investment matches known outflows and/or the amorti-zation of liabilities. Long-term financing takes place through loans from banks and financing institutes, as well as through convertible bonds. The interest rate for loans from banks and financing institutes is variable, while interest for convertible bonds is usually tied for 180-day intervals or fixed in excep-tional cases. A change of 1 percent in the interest rate for the existing loan portfolio would affect the profit and equity for the year by approximately SEK 2.9 million.


NOTES

TERM ANALYSIS


2017 2016 2017 2016

Long-term interest-bearing liabilities

Liabilities to credit institutes 336,129 339,396 335,822 338,941

Convertible bonds 38,789 - 38,789 -

Total long-term interest-bearing liabilities 374,918 339,396 374,611 338,941

Long-term non interest-bearing liabilities

Other liabilities 3,270 28,765 - 28,765

Total long-term non interest-bearing liabilities 3,270 28,765 - 28,765

Total long-term liabilities 378,188 368,161 374,611 367,706

Short-term interest-bearing liabilities

Liabilities to credit institutes 31,180 30,340 31,180 30,340

Convertible bonds - 13,786 - 13,786

Total short-term interest-bearing liabilities 31,180 44,126 31,180 44,126

Total interest-bearing liabilities 406,098 383,521 405,791 383,066

Short-term non interest-bearing liabilities

Accounts payable 31,902 21,153 3,872 2,467

Other liabilities 27,773 182 26,121 182

Accrued expenses 54,869 41,236 4,769 3,418

Total short-term non interest-bearing liabilities 114,544 62,571 34,762 6,067

Total financial liabilities 523,912 474,858 440,553 417,899

Term analysis

Long-term and short-term interest-bearing liabilities excluding convertible bonds (Capital amount)

Within 1 year after the balance sheet date 30,863 30,795 30,556 30,340

Longer than 1 year but within 3 years after the balance sheet date 48,377 58,324 48,377 58,324

Longer than 3 years but within 5 years after the balance sheet date 5,936 30,788 5,936 30,788

Longer than 5 years after the balance sheet date 282,133 249,829 282,133 249,829

*Convertible bonds (Capital amount)

Convertible bonds within 1 year after the balance sheet date - 13,786 - 13,786

Convertible bonds longer than 1 year but within 3 years after the balance sheet date

38,789 - 38,789 -

**Interest rates




Longer than 5 years after the balance sheet date 904 961 904 961

Non interest-bearing liabilities

Within 1 year after the balance sheet date 27,773 182 26,121 182

Longer than 1 year but within 3 years after the balance sheet date 3,270 28,766 - 28,766

Total capital and interest




Longer than 5 years after the balance sheet date 283,037 250,790 283,037 250,790

*The above assumptions regarding capital amounts are based on no conversions taking place. **The above assumptions regarding interest payments are based on an average interest rate of 1.96 percent (1.89). Interest on the unutilized component of the credit facility for acquisitions is included. Principal SEK 178.6 million, interest 0.69 percent.


Convertible debenturesLoan 1707 (convertible loan acquisition MV-Nordic), long-term liabilityConvertible debenture 1707 amounts to a nominal SEK 20,008 thousand. The option element in the convertible loan is calculated at SEK 1,043 thousand. The option element is recognized as equity in accordance with IAS 32. The remain-der of the loan, including interest (SEK 172 thousand) is recognized as a long-term liability. The term of the loan is July 6, 2017 – June 30, 2020, and the interest rate is Stibor 180. The conversion price is SEK 85.00. Conversion may be reque-sted during the period January 1, 2019 to June 30, 2020. On conversion, the share capital may increase by a maximum of SEK 23,432. At full conversion of loan 1707 convertible loan acquisition MV, the dilution amounts to approx. 0.8 percent of the capital and 0.4 percent of the votes. The share issue has been conducted on market terms.

Loan 1801 (Convertible program, personell), long-term liabilityConvertible debenture 1801 amounts to a nominal SEK 20,830 thousand. The option element in the convertible loan

is calculated at SEK 1,178 thousand. The option element is recognized as equity in accordance with IAS 32. The remain-der of the loan is recognized as a long-term liability. The term of the loan is January 1, 2018 – December 31, 2020, and the interest rate is Stibor 180. The conversion price is SEK 104.00. Conversion may be requested during the period November 1 – November 30, 2020. On conversion, the share capital may increase by a maximum of SEK 20,029. At full conversion of loan 1801 convertible program, personell, the dilution amounts to approx. 0.7 percent of the capital and 0.3 percent of the votes. The share issue has been conducted on market terms. In our assessment, therefore, there is no benefit for the participants in the convertible program. The convertible program was registered by the Swedish Compa-nies Registration Office on January 27, 2018.

In order to establish the value of the option element, the loan amount is discounted to the applicable interest rate and the market rate. The value of the option element comprises the difference between the two calculations. The interest rate at the time of the share issue has been used.

NOTE 21 PENSIONS

Vitec has both defined-contribution and defined-benefit pension plans. Defined-benefit plans are used in Sweden and Norway. The Swedish defined-benefit pension plan is safeguarded through an insurance policy with Alecta. For the 2017 financial year, the company has not had access to the information that would make it possible to report this plan as a defined-benefit plan. The pension plan according to Alecta ITP2 that is secured through an insurance policy with Alecta is therefore recognized as a defined-contribution plan. The premiums for the defined-benefit retirement and family pen-sion are individually calculated and are among other things dependent on the salary, previously vested pension and anti-cipated remaining service. Expected fees in the next reporting period for ITP2 insurance taken out with Alecta amount to SEK 2,612 thousand (2,398). The collective solvency level for Alecta amounted to 154 percent in 2017 (149).

Defined-contribution plansDefined-contribution pension plans entail that the company makes periodic payments to separate authorities or funds, and the remuneration level is dependent on the return achieved on these investments. The charges for the year for defined-contribution pension insurance, including Alecta ITP2, amounted to SEK 34,976 thousand (28,102).

Defined-benefit plansThe pension plans refer to parts of the Norwegian subsidi-aries and cover retirement pension in companies acquired during 2014. The employee must be affiliated to the plan for a certain number of years in order to achieve full entitlement to retirement pension. The funded pension obligations are secured by management assets. The contributions for the year for defined-benefit pensions amounted to SEK 1,174 thousand. The charges for 2018 are expected to amount to SEK 1,201 thousand.

OBLIGATIONS RESPECT OF EMPLOYEES, DEFINED BENEFIT PLANS

Group

12/31/2017 12/31/2016

Other pension commitments, Norway 8,225 7,679

Total defined-benefit plans 8,225 7,679

DEFINED-BENEFIT OBLIGATIONS AND THE VALUE OF PLAN ASSETS

Group

12/31/2017 12/31/2016

Present value of funded, defined-benefit obligations in Norway 20,926 21,046

Plan assets' fair value, Norway -13,718 -14,316

Net 7,209 6,730

Estimated employer’s contributions 1,016 949

Net liability funded obligations, Norway 8,225 7,679


NOTES

RECONCILIATION OF NET AMOUNT FOR PENSIONS IN THE BALANCE SHEET

Group

12/31/2017 12/31/2016

Opening balance 7,679 8,033

Net pension expense for the year 1,710 71

Investments in pension funds incl. employer’s contributions -1,340 -1,682

Actuarial changes recognized in other comprehensive income 563 -395

Translation difference -387 1,651

Total defined-benefit plans 8,225 7,679

CHANGES IN THE OBLIGATION FOR DEFINED-BENEFIT PLANS RECOGNIZED IN THE BALANCE SHEET

Group

12/31/2017 12/31/2016


Actuarial changes -391 -5,170

Interest and fees 1,527 1,563

Pension payments for the year -197 -291

Translation difference -1,058 1,335

20,926 21,046

CHANGE IN PLAN ASSETS

Group

12/31/2017 12/31/2016


Actuarial changes -885 -3,410

Interest and fees -48 -49

Investments in pension funds 1,174 1,474

Pension payments for the year -197 -291

Change in value 77 138

Translation difference -719 -204

13,718 14,316

ACTUARIAL ASSUMPTIONS

Group

% 12/31/2017 12/31/2016

Discount rate 2.30 2.10

Anticipated return on the pension funds' assets 2.30 2.10

Future wage increases 2.50 2.25

Future increases in pensions 2.25 2.00

Future increases in income base amount 2.25 2.00

Personnel turnover 0.00 0.00

Payroll tax 14.10 14.10


NOTE 22 ACCRUED EXPENSES AND PREPAID INCOME


12/31/2017 12/31/2016 12/31/2017 12/31/2016

Accrued salaries 37,590 32,101 2,385 2,241

Accrued special payroll tax 3,662 5,169 695 755

Prepaid income 117,061 81,259 - -

Accrued social security contributions 16,792 14,756 749 704

Other prepaid expenses 17,279 9,100 2,384 1,176

Total 192,384 142,385 6,213 4,876

NOTE 23 LEASES AND SIMILAR FUTURE COMMITMENTS

Financial leasing agreementsLeases regarding tangible assets, where the Group receives the financial benefits and has the significant risks classified as financial leasing. The Group leases a large computer in Norway and a number of vehicles and other items in Den-

mark. The leases expire in two to four years and their carrying amount is SEK 4.8 million. According to the terms in the lea-ses, the Group has the possibility of buying the leased assets at a low residual value.


2017 2016 2017 2016

Fees within one year 2,588 - - -

Fees later than one year but within five years. 2,351 - - -

Fees later than five years - - - -

Total minimum leasing fees 4,939 - - -

Future financial expenses for finance leases -255 - - -

Present value of liabilities for finance leases 4,684 - - -

Present value of finance lease liabilities is as follows:

Within one year 2,434 - - -

Later than one year but within five years 2,250 - - -

Later than five years - - - -

Total minimum leasing fees 4,684 - - -

Operational leasing agreements and future commitments in the form of non-cancellable contracts There are currently no operational leasing agreements. Futu-re assumptions in the form of non-cancellable contracts are comprised of local contracts. Variable charges and sub-letting

to not occur. No agreements include the potential to acquire the objects. All agreements can be extended. Index clauses are included in the premises contracts. There are no res-trictions resulting from agreements entered into regarding dividends, loan options and further leasing agreements.


2017 2016 2017 2016

Fees for the period 18,733 17,940 8,349 8,254

Fees within one year 18,783 17,858 8,182 7,419

Fees later than one year but within five years. 31,845 39,392 7,506 9,915

Fees later than five years - - - -


NOTES

NOTE 24 PLEDGED ASSETS, GROUP AND PARENT COMPANY

PLEDGED ASSETS CONCERNING OWN LIABILITIES AND PROVISIONS


12/31/2017 12/31/2016 12/31/2017 12/31/2016

Business mortgages 39,000 39,000 39,000 39,000

Shares in subsidiaries 311,975 315,891 298,445 319,844

Total 350,975 354,891 337,445 358,844

NOTE 25 RELATED PARTIES

There are no outstanding loans, guarantees or sureties from Vitec to the benefit of Board members, senior executives or auditors in Vitec. None of the Board members, senior executives or auditors in Vitec have had any direct or indirect involvement in business transactions with Vitec that are or were unusual in nature or with respect to their terms. The following related party transactions are reported.

� Senior executives are covered by convertible programs in the form of convertible debentures, which are taken out on market terms. The following senior executives are ta-

king part in the ongoing convertible program 1801: Patrik Fransson SEK 250 thousand, Lars Eriksson SEK 250 thou-sand and Maria Kröger SEK 250 thousand.

� All Swedish companies in the Group lease premises from the Parent Company through customary leasing agre-ements. All the companies that lease premises from the Parent Company are 100 per cent owned by Vitec. In addi-tion to costs for premises, the Parent Company also invoi-ces for intra-group services.

NOTE 26 UNTAXED RESERVES

12/31/2017 12/31/2016

The difference between booked depreciation and depreciation according to plan 2,429 2,341

Total 2,429 2,341

NOTE 27 DEFERRED TAX

Deferred tax at 22 percent (22) in the Parent Company’s untaxed reserves amounts to SEK 534 thousand (515).

NOTE 28 FINANCIAL INSTRUMENTS

Classification and valuationFinancial instruments are initially recognized at their acqui-sition value corresponding to the instrument's fair value plus transaction costs. A financial instrument is classified when recognized for the first time, including on the basis of the purpose for which the instrument was acquired. All financial assets and liabilities are classified in the following categories:

� Financial assets and liabilities valued at fair value via the income statement. Additional purchase prices in conjunc-tion with acquisitions are included in this category.

� Investments that are held to maturity. Vitec has no financi-al instruments in this category.

� Loans receivable and accounts receivable. Vitec's ac-counts receivable, other receivables as well as cash and cash equivalents are included in this category.

� Financial assets that can be sold. Vitec has no financial as-sets in this category.

� Financial liabilities valued at their accrued acquisition value. Accounts payable, other liabilities, accrued expen-ses and loans are included in this category.


VALUATION CRITERIA ACCORDING TO IAS 39

NoteLoans receivable and ac-

counts receivableFinancial liabilities valued at

fair value

Financial liabilities valued at their accrued acquisition

value

2017 2016 2017 2016 2017 2016

Financial assets

Accounts receivable 16 172,450 137,336 - - - -

Other receivables - 841 5,299 - - - -

Cash and cash equivalents 18 57,968 80,920 - - - -

Financial liabilities

Convertible debentures (long-term) 20 - - - - 38,789 -

Convertible debentures (short-term) 20 - - - - - 13,786

Liabilities to credit institutes (long-term) 20 - - - - 336,129 339,396

Liabilities to credit institutes (short-term) 20 - - - - 31,180 30,340

Other liabilities (long-term) - - - 28,765 3,270 -

Other liabilities (short-term) - - 25,925 - 1,848 182

Accounts payable - - - - 31,902 21,153

Accrued expenses 22 - - - - 54,869 41,236

Total 231,259 223,555 25,925 28,765 497,987 446,093

Financial assetsReceivablesThe Group’s receivables principally comprise accounts receivable. Payment terms are normally 30 days net. Other receivables consist of tax accounts, current receivables from employees and other current receivables.

Cash and cash equivalents The Group’s cash and cash equivalents have been invested in banks or money market funds during the year.

Financial liabilitiesSupplier creditSupplier credit comprises normal accounts payable with payment terms of 30 days net.

LoansThe Group's loans comprise liabilities to credit institutes and convertible debentures. Some of the Group’s borrowing in EUR, DKK and NOK, amounting to SEK 338,742 thousand, is identified as hedging of the net investment in the Group’s subsidiaries in Norway, Finland and Denmark. The exchange rate loss from the translation of the borrowing to Swedish kronor amounts to SEK 4,424 at the end of the reporting pe-riod, and is recognized in other comprehensive income after deductions for deferred tax.

Convertible debenturesIn July 2017 in connection with the acquisition of MV-Nordic A/S, the Parent Company issued 2,000 convertible bonds at SEK 10,000 each, with a nominal value of SEK 20,008 thousand. Conversion may be requested during the period January 1, 2019 to June 30, 2020. The conversion price is SEK 85.00.

In December 2017, the Parent Company issued 2,083 convertible bonds at SEK 10,000 each, with a nominal value of SEK 20,830 thousand. Conversion may be requested during the period November 1-30, 2020. The conversion price is SEK 104.00.

Convertible bonds are recognized in the balance sheet as follows.

Nominal value of convertible bonds 40,838

Equity component -2,221

Total 38,617

Interest expense* 172

Interest paid

Liability share 38,789

*The interest expense is calculated by multiplying the estimated market interest rate (1.8 percent) by the liability component.

Other short-term liabilities Parts thereof.

Accrued expensesSalary liabilities and parts of other accrued expenses.


NOTESNOTES

Financial assets and liabilities valued at fair valueAccording to IFRS 7, information must be provided about the fair value of each financial asset and financial liability, irre-spective of whether they are reported in the balance sheet or not. Vitec judges that the fair value of the financial assets/liabilities is close to the book value reported in the Annual Report.

According to the standard, financial assets and liabilities that are valued at fair value must be split into three levels.

Level 1: Fair value of financial instruments that are traded on an active market.

Level 2: Fair value of financial instruments that are not tra-ded on an active market, but that have been established with the aid of valuation techniques based on market information.

Level 3: In cases where one or more items of essential

input data are not based on observable market information.All of the company's financial instruments that are subject

to valuation at fair value are classified as level 3. The change for the year in respect of financial instruments at level 3 refers primarily to additional purchase prices for acquisi-tions. Conditional purchase prices are valued at fair value based on available data, such as contractual terms, as well as relevant assessments in respect of anticipated fulfillment of conditions. When calculating fair value, an assumed interest rate of 0.9 percent has been used. As the difference between fair value and book value is marginal, no correction has taken place.

The following table shows the difference between fair value and book value.

RECURRING VALUATIONS AT FAIR VALUE, AS AT DECEMBER 31, 2017

(TSEK) Level 1 Level 2 Level 3 Book value

Additional purchase price Fox Publish AS 1,301 1,301

Additional purchase price FuturSoft Oy 24,624 24,624

Total - - 25,925 25,925

RECURRING VALUATIONS AT FAIR VALUE, AS OF DECEMBER 31, 2016

(TSEK) Level 1 Level 2 Level 3 Book value

Additional purchase price Fox Publish AS 2,710 2,740

Additional purchase price FuturSoft Oy 23,651 23,917

Residual purchase price Nice AS 2,102 2,108

Total - - 28,463 28,765

NOTE 29 EVENTS AFTER THE BALANCE SHEET DATE

CFO utilizes options and buys 50.000 sharesCFO Maria Kröger increased her shareholdings by 50,000 Class B shares on January 4, 2018. The acquisition was made through the redemption of personal options that Lars Sten-lund and Olov Sandberg issued in January 2015.


Umeå, March 26, 2018

Crister Stjernfelt Chairman of the Board of Directors

Anna Valtonen Board member

Birgitta Johansson-Hedberg Board member

Jan Friedman Board member

Kaj Sandart Board member

Lars Stenlund CEO

Our audit report has been submitted on March 29, 2018

PriceWaterhouseCoopers ABNiklas Renström

Authorized Public AccountantAuditor-in-charge

Proposed allocation of profits

THE FOLLOWING AMOUNTS ARE AT THE DISPOSAL OF THE ANNUAL GENERAL MEETING:

Profit brought forward 143,989,527

Share premium reserve 126,637,558

Profit for the year 64,945,008

335,572,093

With reference to that stated above and that which has otherwise come to the attention of the Board, it is the opinion of the Board that a comprehensive assessment of the compa-ny's and the Group's financial status entails that the dividend is justifiable with reference to those requirements that the business's nature, scope and risks business stipulate regar-ding the size of the company's and the Group's equity, as well as the company's and the Group's consolidation requirement, liquidity and status otherwise.

The consolidated financial statements and the Annual Report have been prepared in accordance with the interna-tional accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards and good accounting practice, and provide a fair

view of the Group's and the Parent Company's position and results. The Directors' Report for the Group and the Parent Company provide a fair overview of the Group's and the Parent Company's operations, position and results, as well as describing significant risks and uncertainties facing the Parent Company and the companies included in the Group. As can be seen from Note 1, the Annual Report, the sustaina-bility report and the consolidated financial statements have been approved for issue by the Board of Directors on March 26, 2018. The consolidated statement of comprehensive income and the statement of financial status, as well as the Parent Company’s income statement and balance sheet, will be subject to adoption at the Annual General Meeting on April 23, 2018.

THE BOARD PROPOSES THAT THE PROFIT BE ALLOCATED AS FOLLOWS:

To be distributed to shareholders at SEK 1.10 per share

32,822,790

To be carried forward to the share premi-um reserve

126,637,558

To be carried forward 176,111,745

335,572,093


AUDITOR´S REPORT

Auditor´s report

Report on the annual accounts and consolidated accountsOpinionsWe have audited the annual accounts and consolidated ac-counts of Vitec Software Group AB (publ) for the year 2017 except for the corporate governance statement on pages 30-38. The annual accounts and consolidated accounts of the company are included on pages 24-29 and 42-88 in this document.

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 parent company as of 31 December 2017 and its financial perfor-mance and cash flow 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 31 December 2017 and their fi-nancial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance state-ment on pages 30-38. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of sha-reholders adopts the income statement and balance sheet for the parent company and the consolidated statement of profit or loss and the consolidated balance sheet the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company’s Board of Directors in accordance with the Audit Regulation (537/2014) Article 11.

Basis for OpinionsWe conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those stan-dards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsi-bilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohi-bited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled compa-nies within the EU.

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

Our audit approachAudit scopeVitec has an expressed growth strategy whereby growth is primarily achieved through the acquisition of mature softwa-re companies in the Nordic region. Through these acquisi-tions, Vitec secures, amongst other things, client relationships and established brands and software specific to certain industries. Company management works on an ongoing basis with the identification and evaluation of appropriate acquisi-

tion targets on the basis of a clearly defined specification of requirements. As at year-end, 31 December 2017, the group was comprised of 30 subsidiaries within 7 segments. Of the subsidiaries, there are four companies reporting net sales in excess of MSEK 70 and which, in total, represent approx-imately 50 % of the group’s net sales. Vitec’s business model is based, primarily, on the sale of subscription agreements which are recognized in income on a straight-line basis over the tenor of the agreement, so-called recurring revenues. In 2017, recurring revenues accounted for 71 percent of the group’s reported net sales.

In addition to four larger subsidiaries, the audit of the consolidated accounts has included, this year, the parent com-pany, Vitec Software Group AB and the larger subsidiaries in Sweden, Norway and Denmark, equivalent to approximately 75 percent of the group’s total external sales.

We designed our audit by determining materiality and assessing the risks of material misstatement in the consolida-ted financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addres-sed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.

MaterialityThe scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assu-rance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the econo-mic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to deter-mine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of missta-tements, both individually and in aggregate on the financial statements as a whole.

Key audit mattersKey audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.


Key audit matter How our audit addressed the key audit matter

AcquisitionsDuring the year, Vitec completed the acquisition of the Danish com-pany, MV Nordic A/S and its subsidiaries in Norway and Sweden.

For each business combination, company management prepa-res an acquisition analysis in which the difference between the net assets in the acquired company and the purchase price is allocated to identify intangible assets in the acquired company. The intangible fixed assets in acquired companies are comprised of product rights, client relationships and brands. Any excess value which does not refer to intangible assets is reported as goodwill. When the acquisition of MV Nordic was completed, the calculation was, still, preliminary which is the reason that an updating of the acquisition analysis was undertaken in conjunction with book closing.

In order to determine the value of e identified intangible assets, company management is required to undertake estimations and fo-recasts regarding the future development of the acquired companies. Client relationships and product rights are written off, in contrast to goodwill and brands, over their expected lifetimes. An incorrect allocation of the excess value in an acquisition analysis can, consequ-ently, have a major impact on the financial reporting.

The company acquisitions are complex in nature and the reporting of these is dependent on the manner in which the acquisition agre-ement is formulated, and the reporting involves significant estima-tions on behalf of management. This is the reason we have deemed that the preparation of the acquisition analyses is a key audit area.

As regards the above-stated accounting principles, refer to page 72 and Note 1 in the 2017 annual report.

We have examined and evaluated the acquisition analyses with a special focus on the manner in which company management identify goodwill and other intangible assets, such as brands and product rights. We have undertaken this by, amongst other things, performing the following audit activities:

� Obtaining copies of the acquisition agreements and evaluating the terms of those agreements from an accounting perspective.

� Confirmed the paid purchase price against bank account excerpts.

� Assessed the company’s methods and assump-tions to identify intangible assets, such as pro-duct rights, brands and goodwill, and examined the allocation of the excess values of these items.

� Checked acquisition-related costs against under-lying invoices.

� Verified the digressive model for depreciation against historical product lifetimes.

� Examined the updated acquisition analysis on the basis of Vitec’s accounting principles through checking the calculation and reconciliation of these amounts against underlying client agre-ements.

Based on materiality, we have confirmed that app-ropriate disclosures regarding the acquisition have been provided in the annual report.

NedskrivningsprövningThe group’s balance sheet reports acquisition-related excess values and goodwill in a total amount of MSEK 746.Goodwill and acquisition-related excess values are equivalent to the difference between the value of net assets and the purchase price paid for the acquisition. In contrast with other fixed assets, there is no write-down of goodwill and brands, rather these items are tested annually for impairment or when there is an indication of an impair-ment requirement. Other acquisition-related fixed assets are written off over their calculated useful lifetimes. Testing, and thereby the reported values, are dependent on the Board of Directors’ and management’s assessments and assumptions regarding, amongst other things, growth and future profitability, and as regards the discount rate. Further events and new information can change these assessments and estimations and it is, therefore, particularly important that company management evaluates, on an ongoing basis, the reported value of acquisition-related intangible assets to ensure that such values can be motivated in consideration of any new information or circumstances. Company management’s calculation of the useful lifetimes of the assets is based on the forth-coming year’s budget and forecasts for the subsequent four years. A closer description of these assumptions is found in Note 12.Impairment testing involves, naturally, a large component of estima-tions and judgments on behalf of company management, which is the reason we have deemed this to comprise a key audit matter in our audit. As regards the above-stated accounting principles, refer to page 72 and Note 1 in the 2017 annual report.

In our audit, we have placed a special focus on the manner in which the company management’s tes-ting of impairment requirements has been perfor-med.Amongst other things, we have executed the fol-lowing audit activities:• We have evaluated Vitec’s process for testing

any impairment requirement of goodwill.• We have examined the manner in which

company management identified cash genera-ting units and compared them with how Vitec follows up goodwill internally.

• We evaluated the reasonability of the applied assumptions and executed sensitivity analyses as regards changed assumptions.

• We compared the calculated value in use with the stock exchange value as at 31 December 2017.

• We evaluated management’s forecast capacity through comparing previously undertaken forecasts against actual outcome.

Based on materiality, we confirmed that sufficient disclosures had been provided in the Notes in the Annual Report.


AUDITOR´S REPORT

Other Information than the annual accounts and consolidated accountsThis document also contains other information than the annual accounts and consolidated accounts and is found on pages 2-23 and 39-41. The Board of Directors and the Mana-ging Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the infor-mation is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this infor-mation, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing DirectorThe Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concer-ning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from mate-rial misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilityOur objectives are to obtain reasonable assurance about

whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assuran-ce, but is not a guarantee that an audit conducted in accor-dance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report

Report on other legal and regulatory requirementsOpinionsIn addition to our audit of the annual accounts and consoli-dated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Vitec Software Group AB (publ) for the year 2017 and the propo-sed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the propo-sal in the statutory administration report and that the mem-bers of the Board of Directors and the Managing Director be discharged from liability for the financial year.

A separate list of loans and collateral has been prepared in accordance with the provisions of the Companies Act.

Basis for OpinionsWe conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these require-ments.

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

Responsibilities of the Board of Directors and the Managing DirectorResponsibilities 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. At the propo-sal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’ equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company´s organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. [The Managing Director shall manage the ongoing administration according to the Board of Directors’ guideli-


Auditor’s report on the statutory sustainability report

To the general meeting of the shareholders in Vitec Software Group AB (publ), corporate identity number 556258-4804

Engagement and responsibilityIt is the board of directors who is responsible for the stat-utory sustainability report for the year 2017 on pages 12-17 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the auditOur examination has been conducted in accordance with FAR’s auditing standard RevR 12 The auditor’s opinion regarding the statutory sustainability report. This means that

our examination of the statutory sustainability report is sub-stantially different and less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.

OpinionA statutory sustainability report has been prepared.

Stockholm den 29 mars 2018PricewaterhouseCoopers ABNiklas RenströmAuthorized Public Accountant

nes and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.]

Auditor’s responsibilityOur objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

� has undertaken any action or been guilty of any omission which can give rise to liability to the company, or

� in any other way has acted in contravention of the Com-panies Act, the Annual Accounts Act or the Articles of As-sociation.Our objective concerning the audit of the proposed

appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the compa-ny’s profit or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report.

The auditor’s examination of the corporate governance state-mentThe Board of Directors is responsible for that the corporate governance statement on pages 30-38 has been prepared in accordance with the Annual Accounts Act.

Our examination of the corporate governance statement is conducted in accordance with FAR’s auditing standard RevU 16 The auditor’s examination of the corporate gover-nance statement. This means that our examination of the corporate governance statement is different and substanti-ally less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examina-tion has provided us with sufficient basis for our opinions.

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act/ the Annual Accounts Act for Credit Institu-tions and Securities Companies/ the Annual Accounts Act for Insurance Companies.

PricewaterhouseCoopers AB, Torsgatan 21, 1139 97 Stockholm, was appointed auditor of Vitec Software Group AB (publ) by the general meeting of the shareholders on the 25 April 2017 and has been the company’s auditor since the 6 May 2015.

Stockholm 29 March 2018PricewaterhouseCoopers ABNiklas RenströmAuthorized Public Accountant


KEy PERFORMANCE INDICATOR DEFINITIONS

Key performance indicator definitionsIn this annual report, a number of financial measurements are referred to that are not defined under IFRS, so-called alternative performance measures according to ESMA’s guidelines. These measurements provide the management and investors with valuable information to analyze trends in the company’s business operations. The alternative performance measures are not always comparable with measures used by other companies. They are intended to supplement, not replace, financial measure-ments presented in accordance with IFRS. Key performance indicators that are presented in the multi-year summary on page 39 are defined as follows:

Non-IFRS perfor-mance measures

Definition Description of use

Recurring revenues Recurring, contractual revenues where there is no direct connec-tion between our work input and agreed price. The agreed amount is usually invoiced in advance and the revenue is booked during the contract period.

Key performance indicators for management of the operating activities.

Portion of recurring revenue

Recurring revenues in relation to net sales. Key performance indicators for management of the operating activities.

Growth Development of the company’s net sales in relation to the same peri-od of the previous year.

Used to monitor the company’s sales growth.

Organic growth Development of the company’s net sales, excluding companies ac-quired during the year, in relation to the same period of the previous year.

Used to monitor the company’s sales growth.

Profit growth to Parent Company shareholders

Development of the company’s profit after tax in relation to the same period of the previous year.

Used to monitor the company’s profit growth.

Profit margin The period’s profit after tax in relation to net sales. Used to monitor the company’s profit growth.

Operating margin Operating profit in relation to net sales. Used to monitor the company’s profit growth.

EBITDA The profit for the period before net financial items, tax and deprecia-tion/amortization.

Shows the company’s operating profit before depreciation/amortization and interest.

Equity/assets ratio Shareholders' equity, including equity attributable to non-controlling interests, in relation to total assets.

The measure shows the compa-ny’s financial stability.

Equity/assets ratios after full conversion

Equity and convertible debentures in relation to total assets. The measure shows the compa-ny’s financial stability.

Debt/equity ratio Average liabilities in relation to average shareholders' equity and non-controlling interests.

The measure shows the compa-ny’s financial stability.

Average equity Average of the period’s equity attributable to the Parent Company shareholders and the previous period’s equity attributable to the Parent Company shareholders.

The underlying measure used for the calculation of other key performance indicators.

Return on capital employed

Profit after financial items plus interest expenses in relation to aver-age capital employed. Capital employed is defined as total assets less non interest-bearing liabilities and deferred tax.

This measure shows the com-pany’s profitability. Indicates the company’s profitability in relation to externally financed capital and equity.

Return on equity Reported profit after tax in relation to average shareholders’ equity attributable to Parent Company shareholders.

The measure shows the compa-ny’s profitability and is a measu-re of the return on equity.

Sales per employee Net sales in relation to average number of employees. Used to assess the company’s efficiency.

Value added per employee

Operating profit, plus depreciation and personnel costs in relation to the average number of employees.

Used to assess the company’s efficiency.

Personnel cost per employee

Personnel costs relative to the average number of employees Key ratio to measure efficiency in operating activities.

Average number of employees

Average number of employees in the Group during the financial year. The underlying measure used for the calculation of other key performance indicators.


Adjusted equity per share

Equity attributable to Parent Company shareholders in relation to the number of shares issued at the closing date.

The measure shows equity per share on the balance sheet date.

Cash flow per share Cash flow from operating activities before the change in operating capital in relation to the average number of shares

Used to monitor the company’s development of cash flow per share.

P/E ratio Share price on the closing date in relation to earnings per share. Generally accepted measure to measure the share’s price com-pared with profit after tax.

P/Adjusted equity per share

The share price on the closing date multiplied by the number of sha-res issued on the closing date in relation to the equity.

Generally accepted measure to measure the share’s price com-pared with adjusted equity.

P/S The share price on the closing date multiplied by the average number of shares in relation to net sales.

Generally accepted measure to measure the share’s price compared with sales.

Average number of shares after dilution

Average number of shares during the period with addition of the number of shares added after full conversion of convertibles.

The underlying measure used for the calculation of other key performance indicators.

IFRS performance measures

Definition Description of use

Earnings per share Profit after tax attributable to the Parent Company’s shareholders in relation to the average number of shares during te period.

IFRS KPI

Earnings per share after dilution

Profit after tax attributable to Parent Company shareholders plus interest expenses regarding convertible debentures, in relation to average number of shares after dilution.

IFRS KPI

Calculations

Organic growth

2017 2016

Net sales 855.0 675.4

Not included:

Sales for the year of previous year’s acquired companies, the months where corresponding sales in 2016 are unavailable.

-85.7

Sales for the year, companies acquired this year -89.0

Sales, divested operations -3.7

Net sales, net of acquisitions 680.3 671.7

Organic growth 1.3 %

Average number of shares (weighted average)Number of

daysNumber of

sharesWeighted

value

Number of shares, beginning of the year 342 29,396,690 27,544,296

12/08/2017 Conversion of bonds 23 29,838,900 1,880,259

Average number of shares 29,424,555

Average number of shares after dilutionNumber of

daysNumber of

sharesWeighted

value

Number of shares, beginning of the year 342 29,396,690 27,544,296

12/08/2017 Conversion of bonds 23 29,838,900 1,880,259

7/6/2017 Dilution Convertibles 178 234,317 114,270

Average number of shares after dilution 29,538,825

Profit when calculating earnings per share after dilution

Profit for the year 79,426

Interest expenses, convertible debentures 388

79,814


SHAREHOLDER INFORMATION


Shareholder informationOur website vitecsoftware.com is the main channel for information to shareholders and the stock market. There, we publish financial information, and other informa-tion that may be price sensitive, immediately after being made public.

Financial calendar

Annual General Meeting 4/23/2018

Interim report January-March 4/23/2018

Interim report April-June 7/12/2018

Interim report July-September 10/18/2018

Investor information on vitecsoftware.comOn vitecsoftware.com, there is also a possibility to order a sub-scription by e-mail of our press releases and printed versions of our financial statements, where there is also information prior to our General Meetings and much more.

If you have any questions, you are welcome to contact me. Patrik Fransson, Investor Relations [email protected] +46 76 942 85 97


Sent by: Vitec, Tvistevägen 47 A, 907 29 Umeå

Tel +46-90-15 49 00 vitecsoftware.com

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