Vitec Software Group B — Annual Report 2018

Mar 19, 2019

2018 Annual Report

Contents

GROUP OPERATIONS

This is Vitec	3
2018 in brief	4
Comments from the CEO	6
Our position	8
Business model and growth strategy	9
Our segments	11
Sustainability Report	14
Our history	24
Shares and shareholders	26

Text and production: Vitec.
Images: Photographer Edel Puntonet, except for the pictures
of Irene Appenholm and Bettina Bredkjær Hansen on page
19 taken by Pierre Bendayan and Steffen Stamp. The individ
uals depicted in the images comprise Vitec employees or their
children.

Cover image: Frode Knudsen and Jarle Osvik, Stavanger. Printing: Arkitektkopia, Umeå. Paper: Munken, eco-labeled.

ANNUAL REPORT

Administration report	30
Corporate governance report	36
- Message from the Chairman of the Board	36
- Board members	39
- Members of Group Management	43
Multi-year overview	45
Proposed appropriation of profits	46
Financial statements	48
- Consolidated statement of profit/loss	48
- Consolidated statement of comprehensive income	49
- Consolidated statement of financial position	50
- Condensed consolidated statement of changes in equity	52
- Consolidated cash flow statement	53
- Parent Company income statement	54
- Parent Company balance sheet	56
- Parent Company changes in shareholders' equity	58
- Parent Company cash flow statement	59
Notes	60
Signatures	100
Auditor's report	101
Auditor's statement regarding the statutory sustainability report	104
Definitions of key indicators	105
Shareholder information	107

This is Vitec

Vitec is the Nordic market leader in Vertical Market Software. We develop and deliver standardized software aimed at various niche markets and our growth is driven by acquisitions of well-managed and established software companies. The Group's overall processes, combined with the in-depth knowledge of our employees regarding our customers' local markets, create the conditions for improvement and continuous innovation.

Business concept

Denmark

Stavanger Sandnes

employees

locations

in 20

200

To offer customers business-critical and proprietarily developed software, and thus provide them with the best conditions to develop and secure their operations.

Gävle

Bergen Espoo

Västerås Örebro

Linköping

Kalmar

Gothenburg

Malmö

Copenhagen Fredericia Odense

Oslo

Stockholm

Finland 100 Sweden 250 Norway 100 650 Umeå Östersund Tampere Lahti

Corporate culture

Within the framework of our decentralized organization, corporate culture plays a significant role in corporate governance. We maintain a continuous dialog concerning our values, brand promise and value-generating key metrics.

Our brand promise:

To rely on – Today and Tomorrow

Our values:

Our products our foundation

Vertical Market Software

Trust and transparency

Collaboration and commitment favor fortune

Keep it simple

Simple solutions succeed

2018 in brief

Significant events in 2018

Pyri Leppänen, Raidi Rannama, Heli Leppähaara, Hanna Blomqvist and Mats Forsgård, Espoo

• We acquired the following software companies:
• PP7 Affärssystem AB
• Agrando AS
• Cito IT A/S
• Significant events Smart Visitor System AB.
• We completed a directed new share issue of 2,500,000 specially designated Class B shares.

2018 i korthet

We passed the SEK 1 billion mark in sales. SEK kurs Antal

Sales by market Key indicators

	2018	2017
Net sales (SEK million)	1,017	855
Operating profit (SEK million)	128	107
Profit after financial items (SEK million)	117	98
Operating margin (%)	13	12
Return on equity (%)	18	22
Return on capital employed (%)	13	14
Equity/assets ratio (%)	40	32
Adjusted equity per share (SEK)	20.71	13.34
Earnings per share (SEK)	3.23	2.70
Dividend per share (SEK) The proposed dividend for 2019
is SEK 1.20 per share	1.10	1.00
Average no. of employees	613	540

Comments from the CEO

Sales in the billions

In conjunction with the closing of our books for the year-end, we surpassed two significant milestones: SEK 1,000 million in sales and SEK 100 million in profit before tax. Looking back ten years ago, we passed the SEK 100-million mark in sales and SEK 10 million in profits. Our performance has been favorable and our business model has proven to be robust.

During the fourth quarter, we designated a directed new share issue to several major institutional investors, increasing our shareholders' equity by nearly SEK 200 million. The placement is a building block for our continued growth and will provide us with financial vigor for the next few years.

During the year, we completed four acquisitions – two in Sweden, one in Norway and one in Denmark. The acquired companies have demonstrated solid profitability and a high percentage of recurring revenues, and collectively contributed more than SEK 110 million in sales.

Growth in recurring revenues

We are prioritizing growth in recurring revenues, to reduce our dependency on one-off license revenues and volatile service revenues. In 2018, our total growth in recurring revenues was 21.9 percent. Furthermore, we can confirm that organic growth in recurring revenues was slightly above 6 percent. This organic growth in recurring revenues represents a greater contributor to earnings than other revenue types, and has provided consistent support to our business model.

Vertical software companies

Vitec is the Nordic market leader in Vertical Market Software, which supports the business processes of specific niche markets. According to the renowned US consultancy firm Gartner, vertical software comprises the largest segment of the overall software industry by far, accounting for more than 25 percent. Most vertical software companies are relatively unknown and have fewer than 50 employees, and few are located within major IT clusters, and as a consequence, are seldom mentioned. Vertical software companies are characterized by cost efficiency, precision and a well-defined market. Consequently, while the overall market for vertical software is sizeable, individual vertical markets are relatively small.

Acquisition objects

To appreciate the potential of continued acquisitions, we continuously survey the market for vertical software companies in the Nordic region. Our current assessment is that the range of available companies matching our acquisition criteria is somewhat greater than we had previously anticipated. For the past four years, Vitec has accounted for merely 10 percent of the acquisitions of vertical software companies in the Nordic region. The rest of the acquisitions were implemented by a large number of buyers of varying profiles, from purely financial players to major industrial enterprises in the process of acquiring suppliers. The competition for acquisition objects is thus fragmented. Vitec is the player with the most distinctive strategy. Market awareness of this fact has increased by the year, and we now have opportunities to target far more potential acquisition objects than five years ago.

Corporate culture and product investments

We consistently invest in our corporate culture, such as by arranging three annual orientation seminars aimed at managers and new employees. These events are named CEO@Vitec, Leader@Vitec and New@Vitec, and are arranged in-house, featuring members of our management team as lecturers. Our objective is to develop and nurture an understanding of a culture that supports our continued growth and our delegated decision-making structure. We also invested more than SEK 125 million in our product portfolio in 2018. We will continue to match these investment levels to ensure that we are a reliable and future-proofed supplier for our customers. This, combined with our employees' capacity to persistently renew themselves and our business, will enable us to live up to our brand promise: "To rely on – Today and Tomorrow."

Sustainable profitable growth

The number of active acquisition dialogs remains high, and we are continuously allocating resources to stay abreast of and advance these dialogs. Our financial position is solid and we are well prepared for future acquisitions and for continued acquisition-based growth. Supported by our acquisition of well-established companies and a high and increasing percentage of recurring revenues, Vitec will stay its course – to be a vertical software company with excellent risk diversification and sustainable, profitable growth – and thereby increase our dividends for the seventeenth consecutive year.

Lars Stenlund, CEO

Our position in the software market

Vitec focus on vertical markets

Vitec is the Nordic market leader in Vertical Market Software. We develop and deliver standardized software aimed at various niche markets. This entails adapting our offering to the unique needs and requirements of companies operating within specific niche markets, to enable the management and development of their business operations. Some of our software products comprise complete enterprise systems, while others provide support for specific aspects of our customers' operations.

Vitec offers standardized products

Our standardized products are cost-efficient for our customers, as they allow for the assimilation of developments and upgrades by all users. This enables us to provide our customers with the optimal conditions to develop and future-proof their operations.

Vitec has a high percentage of proprietary development

We are specialized in adapting to the conditions and requirements of various industries. The Group's overall processes,

combined with the longstanding in-depth knowledge of our employees with regard to our customers' operations, create conditions favorable to improvement and continuous innovation. Genuine customer-centric product development generates long-term value and software sustainability.

A position with significant obstacles to market penetration

Each individual vertical market imposes stringent demands on specialization. The establishment of a new player requires major investments and frequently involves protracted lead times in product development. At the same time, vertical markets are relatively small and involve considerable yield costs for customers, which diminishes opportunities for new players to generate returns on their investments. Within each vertical market, there are usually a few minor players who specialize in industry-specific software. Generic software generally provides less cost-efficient solutions to the unique requirements of vertical markets. Vitec always strives to achieve a leading position within its vertical markets.

Business model and growth strategy

High percentage of recurring revenues

Our business model is based on a high percentage of recurring revenues. Software is delivered through the Internet, by means of a subscription. This provides us with stable and predictable cash flows that create the prerequisites for a long-term approach. It also makes the Group less sensitive to temporary declines within individual business units. For customers, this entails minimal investment costs, ease with which to set up and start using our software, and the longterm security of having quick access to upgrades and new functions.

Growth by acquisition

Vitec is an industry player with a long-term outlook. Our growth is mainly achieved through company acquisitions within the Nordic region. The companies we acquire are well-managed vertical software companies with products established in mature markets. Our acquisition work is governed by specific criteria that wholly determine whether a company is suitable for Vitec. One example of such criteria is that the company must offer software in the form of standardized proprietarily developed products aimed at a particular vertical market. Another example is that the acquisition must directly contribute to an increase in the Group's earnings per share. Consequently, it is vital that the company demonstrate solid profitability and positive cash flows at the acquisition date. We do not invest in future expectations. Our continuous list of prospects comprises some 100 software companies of interest. Affärsmodell och tillväxtstrategi

Acquire

At Vitec, we have longstanding experience and vast expertise in the development, sale and support of vertical software. This enables us to identify acquisition targets that are fully in line with our strategy, based on our criteria. Acquisitions implemented within our existing verticals contribute to increased market share, while acquisitions within new sectors increase our risk diversification. Before deciding on an acquisition, we invest a considerable amount of time and involvement in personal meetings with the people working at the company. It is crucial that we agree on fundamental values, business models and strategies, as our acquisitions are implemented with the aim of retaining the acquired companies within the Group. Affärsmodell och tillväxtstrategi

Improve

The companies we acquire are profitable and well-managed. They have well-functioning operations and valuable industry know-how within their niche. We introduce post-acquisition changes at an appropriate pace, in close dialog with local management, who are supported by the Group's processes and infrastructure. All of the companies are monitored using shared key metrics that steer their strategic focus toward a high percentage of recurring revenues and an emphasis on robust cash flow. We also apply Group-wide principles on how to plan and implement product development, so as to ensure that our offering will remain relevant in the future. Decentralized decision-making requires that all managers understand and act in accordance with the Group's strategies and corporate culture. 200 400 600 800 1000 MSEK Business model aimed at high percentage of recurring revenues

Change in revenue type Acquired revenue

Strategy for acquisition-related brands and products

All of the Group's operations contribute to the strengthening of the Vitec brand. We add "Vitec" to the legal corporate names of acquired companies and gradually switch to using the Vitec logotype exclusively. We retain the product names, which are then communicated to the market in tandem with the Vitec brand. Acquisitions may result in our offering products with partly overlapping functionalities, or even competing products, within a particular niche market. In these cases, we do not introduce any immediate changes, but assess, in conjunction with the development of new products, whether components can be created to support all of the product lines. This allows us to commence work on future-proofing the products and creating a new shared product line for all of our customers within the particular niche market.

Our suppliers

A well-functioning procurement process is the key to cost-efficient purchasing and ensuring that suppliers live up to our requirements on corporate social responsibility. Our Code of Conduct, which encompasses matters such as anticorruption, human rights and conflicts of interest, serves as a guide to our relationships with suppliers. We choose between the suppliers that meet these requirements, based on business reasons. Read more about our supplier responsibilities in the sustainability report on pages 14-23.

Our segments

Vitec develops and delivers software aimed at various niche markets. Some of our software products comprise complete enterprise systems, while others provide support for specific aspects of our customers' operations. We report our operations under seven segments. These segments in turn comprise 18 independent business units – none of which account for more than 17% of sales, this providing the Group with excellent risk diversification.

Auto

The Auto segment includes our software for the automotive industry and machinery sector in Denmark, Finland, Norway and Sweden.

Our products support work processes, such as vehicle sales, vehicle service centers, tire storage and the distribution of auto components. In Finland, our AutoFutur software is undergoing modernization, with the gradual introduction of updates, so as to maximize the benefits and minimize the risks for our customers. In Norway, we launched our new mobile client for workshop reporting and commenced the transition to a new optimized operating platform, which will result in a more open and flexible product for our customers. In Denmark, Stefan Hestbæk retired as CEO and was replaced by Henrik Johnsen, who formerly served as the acting CEO of MultiQ and Cleradium. In Denmark, we closed our office in Fredericia in order to concentrate our development resources in Søborg. The change will enhance the efficiency of our product development.

Energy

The Energy segment includes our advanced forecasting systems for electricity traders, as well as calculation and mapping systems for owners of electricity and district-heating grids. In 2018, the fine-tuning of our Aiolos product's forecast modeling achieved positive results, with every unit in precision gained generating significant benefit for our customers. There continued to be considerable interest in our products, including from countries beyond the Nordic region, and we secured new customers in Italy, Germany, Slovenia and France. We also conducted a customer seminar in Belgium, which helped to secure new customers.

Real Estate

The Real Estate segment was expanded during the year through the acquisition of PP7 Affärssystem AB, which develops software for project management companies in the Swedish construction and installation market. Its main product is cloud-based software for project and business support that optimizes project flows and procedures. The integration of PP7 Affärssystem proceeded according to plan during the year. The segment also includes complete enterprise systems for the construction and real estate sectors in Norway and Sweden, covering aspects such as leasing, sales, customer service, accounting, technical property management and energy-consumption monitoring. There was considerable demand for our products in Sweden during the year, as well as a notable increase in demand in Norway, where we signed new customer agreements. Recurring revenues were also increased in 2018 through a continued focus on our subscription-based business model and an ever-higher degree of automation.

Finance & Insurance

The Finance & Insurance segment includes our software for banks, financial institutions and insurance companies in Denmark, Norway and Sweden. Major installation projects that were undertaken in 2017 within our Danish operations sharply increased our service revenues. In 2018, these installations began to generate new recurring revenues. In Norway, we signed several new customer agreements that partly replaced the revenue drain stemming from a departing major customer in 2017. In Sweden, we established a third product area during the year with the launch of "Företagskalkyler".

Environment

The Environment segment includes our software for private and municipal waste-and-resource processing in Finland. The products are used to manage the entire chain, from the weighing of waste and driving schedules, to invoicing, accounting and reporting. The Environment segment continued its transition toward a higher share of recurring revenues in 2018. CEO Timo Sivula retired during the year and was replaced by Tuomas Tokola. Tuomas has been an employee of the company for many years and was most recently in the role of COO.

Estate Agents

The Estate Agents segment includes our software for real estate agents in Norway and Sweden. Our products support estate agents at every step of their business process, from the registration of an object, to marketing, viewing, bidding, sale and contract. In Norway, we continued intensive work to develop and roll out our latest product, Next. The project has met with success and several customers have upgraded to Next. We were also entrusted with delivery to Norway's market-leading realtor. The sales successes have resulted in several major installation projects and service revenues have risen to higher-than-usual levels. Essentially all of our Swedish customers have now been upgraded to our most recent product, Vitec Express. Following several years of intense development work, we returned to more normal levels in 2018. Consequently, our focus during the year was on continuous improvements and new sales, and on supplementing our offering with features such as a robust CRM function and integrated publishing. The sales scenario has been positive and we welcomed several new users.

Education & Health

The Education & Health segment was expanded with three new operations in 2018, through the acquisition of the companies, Agrando AS, Cito IT A/S and Smart Visitor System AB. Agrando develops software for churching operations in the Nordic region, with its primary markets comprising Norway and Sweden. The product is a complete enterprise system for individuals working within churching activities.

Cito develops software for the pharmacy market in Denmark. Its main product is an enterprise system for managing the entire chain of the Danish pharmacy workflow. Our company, Smart Visitor System, develops specific software for municipal leisure and cultural departments in Norway and Sweden.

This segment comprises software designed for individuals with reading and writing difficulties, and are used by public and private education companies in Denmark, Norway and Sweden. It also comprises software for healthcare companies in Finland, which are wholly web-based enterprise systems used by district healthcare centers, hospitals, physiotherapy and rehabilitation facilities, as well as occupational health services and public organizations. Our Danish operations with software for reading and writing difficulties, accounts for a higher share of hardware sales than the Group in general. Our Finnish operations closed their office in France in order to concentrate development work in Finland.

Sales Sales per segment Omsättning, fördelning AO

Rörelseresultat 10

Operating profit Operating profit by segment Education & Health 7% RR, fördelning AO Real Estate 20% Finance & Insurance 10%

3% Education & Real Estate 10%

Operating margin Percentage of recurring revenues 3% Estage Agents 15% Real Estate

Education &

200 170

0 20 40 60 80 100

Vitec Annual Report 2018 13

88%

Odense office

Sustainability Report

Our sustainability efforts are based on our brand promise, "To rely on – Today and Tomorrow," as well as on social, economic and ecological sustainability. We satisfy the needs of today without jeopardizing the opportunities of future generations. We draw our inspiration from the UN's 17 Sustainable Development Goals and strive to achieve these goals. Our route to a sustainable society is through our employees and our products.

Decentralization and management by objectives

As with our other operating activities, our sustainability work is decentralized. In order to focus our sustainability efforts on areas that we deem to be of the greatest significance to our operations, Group management prepares a series of focus areas every year. They are inspired by the UN's 17 Sustainable Development Goals and based on our own risk analyses. Read more about our risks and uncertainties in the Administration Report, on pages 30-35. Sustainability is included in the owner directives issued to the business units, and each business unit CEO is responsible for prioritization

and pursuing activities that fulfill the Group's overall focus areas and objectives. Sustainability efforts are monitored by Group Management, with the CEO holding overall responsibility for the work and reporting to the Board of Directors. In October 2018, the Board of Directors adopted an updated Group-wide Sustainability Policy. In the course of developing the policy, we consulted external experts to orient ourselves and check that we were indeed focused on the most essential aspects. Our Sustainability Policy is available at our website, vitecsoftware.com.

" Our route to a sustainable society is through our employees and our products.

Our focus areas within sustainability

1. Employee responsibility

Recruit and retain employees with the right competencies who share our values.

3. Supplier responsibility

Choose suppliers that act professionally, sustainably and ethically.

4. Long-term sustainable profitability

Create the prerequisites for a long-term approach with a financially sustainable business model.

2. Customer responsibility

Ensure accessible products that process our customers' data in a secure and reliable manner.

5. Reduced energy consumption

Optimize energy-saving in server rooms and office premises.

6. Reduced waste and increased recycling

Implement our standard for reuse and recycling.

Social responsibility

Our internal and external relationships are based on trust and transparency. In 2018, we completed work on a Group-wide Code of Conduct, which was adopted by the Board of Directors in December 2018 and is available for your perusal at our website, vitecsoftware.com. The Code of Conduct provides us with an ethical framework supported by our foundational values, on which we are to base our decisions and behavior in the course of our day-to-day work. The Code of Conduct was introduced to all of our operations by the Group's CEO in December 2018. The crucial work of creating awareness and understanding among all of our employees is ongoing in 2019.

Focus area 1: Employee responsibility

The Vitec Group is in a state of continuous growth. In 2018, we welcomed 163 new employees in connection with corporate acquisitions and recruitment efforts. By year-end, we had approximately 650 employees throughout the Nordic region. The foundation of our operations is our products. They characterize our culture and our perspective on leadership and teamwork. Our product lifecycles and rhythms generate conditions conducive to planning horizons, which in turn provide the prerequisites for employees to spend their energy wisely, and to nurture and develop their expertise, while maintaining balance in their lives.

Respect and job satisfaction

The Group's individual business units are relatively small, which makes the contributions of each and every employee significant to the Group's success. Consequently, our

foremost employee responsibility is to recruit and retain employees with the right competencies who share our values. To encourage employees to stay with us, it is vital that we are an attractive employer with a focus on a sustainable work environment, both today and tomorrow. Our workplace climate is based on respect for each other's expertise and for each other as individuals. All of Vitec's workplaces are to offer a work environment that is conducive to good health and growth, and which is not detrimental to physical or mental wellbeing. Our employees' health and safety must be prioritized when we, for example, design workplaces, choose equipment, create job positions and plan competence development. As an employer, we encourage our employees to adhere to a healthy lifestyle. We achieve this primarily by creating opportunities for a healthy balance between work life and private life. We also have a a voluntary preventive healthcare venture, ActiVitec, which is managed by employees, to inspire movement and exercise.

	Total	Percentage of women	Percentage of men
Group	643	30	70
Under 30 years old	52	31	69
30-50 years old	376	29	71
Over 50 years old	215	32	68
Of which managers	103	29	71
Under 30 years old	2	50	50
30-50 years old	62	31	69
Over 50 years old	39	26	74

Age distribution, 2018

	Employee turnover in 2018
--	---------------------------	--

	Total	Percentage Percentage of women of men
No. of new employees
Total	85	39	61
Under 30 years old	10	40	60
30-50 years old	69	35	65
Over 50 years old	6	83	17
Number of departures
Total	83	30	70
Under 30 years old	13	38	62
30-50 years old	54	33	67
Over 50 years old	16	13	87

Average age

	2018	2017
Group	45	44

The average age was the same for women and men in 2018.

Corporate culture on the agenda

New@Vitec

Annual introduction event in Umeå. Lecturers primarily comprise members of Group management.

Participants: Employees who were recruited in the past year.

Purpose: to create an overall understanding of Vitec and its history. To create and establish an understanding of our corporate culture and to network with colleagues based in the Nordic region.

CEO@Vitec

Introduction event in Umeå. Lecturers primarily comprise members of Group management.

Participants: new CEOs of the Group's business units Purpose: to create and establish an understanding of our strategies, business model, corporate culture, leadership philosophy and history.

Leader@Vitec

Annual orientation event in Umeå for new managers. Lecturers primarily comprise members of Group management. Participants: new managers within the Group. Purpose: to create and establish an understanding of our corporate culture and leadership philosophy.

Strategy meeting with the Board of Directors Annual meeting in connection with some of our Nordic region offices.

Participants: the Group's CEO, CFO, COO, Head of IR and the Board of Directors.

Purpose: Strategic priorities in the next year.

BUM - Business Unit Meeting

Two meetings per year in Stockholm and Umeå, Sweden. Participants: Business unit CEOs, the Group's CEO, CFO, COO, Head of IR and VP Operations. Purpose: achieving a consensus on strategic priorities, maintenance of a value-generating network.

Product strategy meeting

Annual meeting in conjunction with the budgeting process for the next year.

Participants: VP Operations and the senior management of each business unit.

Purpose: planning product development, innovation and making strategic choices for future-proofing our products.

Career-development meetings

Annual meetings to complement the continuous dialog between employees and their immediate superior. Participants: one-on-one meeting between employee and immediate superior.

Purpose: ensure a positive work situation, follow-up on goals and provide feedback on performance, create targets and a development plan for the next year.

Management Conference

Conference in Umeå every second year. Participants: Senior management from all our business units, Parent Company managers and Group management. Purpose: to create and establish an understanding of our corporate culture, business model, strategies and other relevant topics.

Recruitment and career development

Recruitment, salaries and career opportunities are impacted by the individual's qualifications, such as education, experience, expertise, capacity and performance. We work to promote multi-aspect diversity within the Group. Examples of such measures are the adaptation of job advertisements and the raising of awareness within the recruitment process. Another example is how our head office in Umeå provides assistance to individuals with difficulties penetrating the job market, by offering them fixed-term employment as office caretakers. This allows them to gain job experience, a boost to their self-esteem and potential references for future jobs.

To a great extent, we use internal HR specialists in recruitment processes, to ensure that we maintain a correct focus throughout. In 2018, we introduced a recruitment system to our Swedish operations, which resulted in an improved overview of the recruitment process and a streamlined dialog with the candidates seeking to work with us. The system will be introduced to our operations in other countries in 2019.

Salary and performance reviews are conducted between managers and employees annually. These conversations are crucial for feedback and for discussing future development, and proceed from the needs of the company and the employee's career preferences. As an employer, Vitec is tasked with continuously developing its employees. Our managers are frequently recruited internally. Our target scenario is for every employee at Vitec to recommend us as an employer.

Values-based activities

Our managers are key culture bearers, who create an understanding for and serve as a connection to our strategies and our values. Confident leaders encourage employees to develop in pace with our operations, while clear expectations facilitate a focus on tasks that generate value. Accordingly, we arrange annual orientation events for new managers at Vitec, through which we convey of the type of leadership we expect

at Vitec and the specific role of managers in creating conditions conducive to employee motivation and satisfaction, and optimal performance. We also conduct a leadership conference every second year. In 2018, a two-day meeting was held in Umeå, Sweden, between all of our business unit managers and Parent Company staff, under the theme of Vertical software, our business model and market position. During the year, we also held a networking event for our business unit managers. The lecturers at these events mainly comprised members of Group Management. The 2018 manager introduction and manager conference events allowed for 85 managers to establish vital exchange networks to the benefit of the entire Group.

Since each Vitec employee is responsible for adhering to our shared corporate culture, once a year, we gather all employees who were recruited to the Group within the past year for an official introduction to Vitec hosted by Group Management. The agenda includes information about the Group, and its corporate culture and fundamental values. Participants express that the introduction makes them feel welcome in the Group and creates an affinity with the business units and corporate staff. We have also noticed that the event facilitates interpersonal contact and the sharing of experiences between participants when they return to their respective workplaces.

Convertible program

Convertibles enable our employees to invest in a long-term partnership with Vitec. Historically, we have introduced a program every three years, with equal terms and conditions for all employees. The current program is the ninth to date. This provides all employees, regardless of their role, with the opportunity to partake of Vitec's growth in value, while allowing for minimizing the consequences of any negative share-price movements.

Irene Appelholm Forecast Manager Energy business unit, Sweden

Tuomas Virtanen Technical Specialist Tietomitta business unit, Finland

Bettina Bredkjær Hansen Team Coordinator Aloc business unit, Denmark

Mattis Ovesen Senior Software Developer Megler business unit, Norway

I began working at Vitec in 2014 as an software consultant. I was the link between customers and our in-house product developers, and was tasked with finding the right solutions for our customers' requirements.

I am very content at Vitec and this is particularly due to my being confronted with new challenges and constantly needing to learn new things.

"This engenders a sense of responsibility"

My enthusiasm for structure and work processes has brought me into the role of Forecast Manager. I appreciate the mix of working with technical solutions and the social aspects of customer-oriented work, through which we streamline our customers' day-to-day activities. As a manager, I consider it a challenge to find more female technology enthusiasts who are seeking a job with us.

Vitec has considerable confidence in its employees. This engenders a sense of responsibility and a desire to do a good job.

I began within support and am now the Technical Specialist in product-related projects. No day is the same as any other, and variety is the best thing about my job.

"Variety is the best"

Project troubleshooting is alternated with customer relations, consultancy services in tough support cases and collaboration with skilled colleagues. I learn something new nearly every day.

I appreciate the mutual trust between colleagues and management at Vitec, as well as between Vitec and its customers. It's really interesting to work with software as a supplier. You have to be well-acquainted with how it works, while being open to creating entirely new functions that benefit customers.

It is important to me that we and our customers can rely on our products, today and tomorrow.

My job entails ensuring that our customers receive competent and efficient support in their day-today work and that their questions are handled by the right person at Vitec. I am motivated by the need to understand our customers' operations and find solutions that simplify and optimize their work processes. As the requirements become increasingly complex, it's vital that we maintain a high level of expertise.

"Provides stability"

My first thoughts about Vitec are sustainability. By this, I mean that our revenues are subscription-based, which provides stability. I've always appreciated our brand promise since my first day at Vitec: To rely on - Today and Tomorrow. It represents so much, for both our customers and for me as an employee. It creates confidence that we are a company that is here today and here to stay.

I was employed at Midas Data AS in 2012, just when the company was acquired by Vitec. I am working with the development and maintenance of the product, Next. It is a product that manages a realtor's entire business process, to allow for the listing of properties in the most efficient manner possible.

I enjoy the creative activities that come with my job. They entail that I take a very concrete approach, despite the abstract nature of the code. We can be certain that the requirements on our products will change over time. Therefore, it's crucial that our products can be developed and future-proofed in a straightforward manner.

"I enjoy the creative activities"

Our values function as a helpful reminder in our day-to-day activities, that we are in the business of creating sustainable products for our customers.

Focus area 2: Customer responsibility

Our products are critical to our customers' operations. Therefore, our foremost customer responsibility is to ensure that our products are accessible, and that they manage our customers' data securely and reliably. To an ever greater extent, our products are delivered via cloud services. This means that in addition to functionality, we are responsible for accessibility, energy-efficiency and security. We perform annual audits based on our security policy to be able to implement any required measures early on. We continuously monitor the energy-efficiency of server rooms and how the electricity we purchase is produced. Our Swedish business unit, Mäklarsystem, delivers all of our products by cloud. Customers have expressed that they feel safe and at-ease that we offer holistic solutions, as it allows them to focus on their core activities – being realtors. Simply put, they are supposed to be able to rely on an enterprise system that is accessible when they need it, to process data in a secure manner.

Our products are our foundation. They are pivotal to sustainability efforts, because they support necessary functions and enable the streamlining of customer processes, which often result in reduced resource consumption. One example is our product, Aiolos, which is an advanced forecasting tool for electricity traders. In 2018, the precision of its forecasting model was further finetuned to provide a value-generation effect for our customers, who can now further optimize their energy-production planning.

Another example is our product, Plania, an enterprise system for real estate companies in Norway. During the year, we focused on digitalizing yet more of our customers' work processes, which is enabling them to enhance efficiency, while reducing resource consumption.

A third example is our product, Boplats Sverige, which enables property owners to publish apartments for rent through the website, boplatssverige.se. Everything is managed digitally, which streamlines the renting and allocation process for landlords, and also facilitates potential tenants in finding apartments. The service is completely free for apartment-seekers, who can easily create a personal profile to keep watch for available rental apartments throughout Sweden. Many of our products also support digital signatures and e-invoicing, which help to reduce the usage of paper considerably. Our products have also been developed in accordance with the EU's General Data Protection Regulation (GDPR) framework, which provides our customers with an even higher level of data security. Read more about our products at vitecsoftware.com.

Focus area 3: Supplier responsibility

In late 2018, we adopted a purchasing checklist, which clarifies our expectations with regard to suppliers, which is based on a professional, sustainable and ethically correct approach. The checklist is derived from our Code of Conduct and Sustainability Policy, which was also adopted in autumn 2018. Although purchasing constitutes a very limited portion of the Group's operations, it is vital that we choose suppliers based on our core values, those who, for example, consider human rights and anticorruption to be a matter of course. The checklist is a vital tool for procurement work and will be implemented throughout the Group in 2019. Our main purchases pertain to areas such as office premises, server rooms, electricity supply, information services, travel, electronics, computers, telephony, office materials and software components. We do not lock ourselves to specific suppliers, which allows us to switch to other alternatives without major disruptions to our operations.

Financial sustainability

One of our core values is to keep it simple. By choosing not to complicate things, but endeavoring instead to keep it simple, a sense of cost-consciousness is instilled in each individual. Our Code of Conduct also provides business-ethical guidelines for sustainable enterprise.

Focus area 4: Long-term sustainable profitability

Our business model is based on offering software based on a subscription model that is financially sustainable, and which provides the prerequisites for a long-term approach. This entails a safe offering for customers, while providing us with stable and predictable cash flows through recurring revenues. It also makes the Group less sensitive to temporary declines within individual business units. We have opted not to have a bonus system for senior executives, to ensure that the company is managed from a long-term perspective and to avoid a short-term approach. Instead, we enable all our employees to become co-owners of the company through recurring convertible programs.

The Group's growth is essentially driven by acquisitions of well-managed and profitable software companies – with a decisive parameter being that earnings per share must be positively impacted by the acquisition. As shown in the diagram below, earnings per share has trended positively over time. All Group companies are monitored using shared key metrics that steer their strategic focus toward a high percentage of recurring revenues and an emphasis on robust cash flow. An overall objective is to achieve a minimum operating margin of 15%. Hållbarhetsrapport

Another objective for long-term financial sustainability is that our dividend to shareholders must comprise at least one-third of the profits every year. These levels are based on our collective assessments of the specific resources needed to satisfy our stakeholders' requirements. We shall continue to invest in product development and company acquisitions. We are to be an attractive employer to employees who share our values, and we are to be a good choice for shareholders with long-term interests. MSEK 400 600 800 1,000 1,200

Target: at least 15% Target: At least 33% of the profit is paid out to the shareholders 2014 2015 2016 2017 2018 0

Environmental sustainability

Our products digitalize and enhance the efficiency of our customers' processes. We have the opportunity to create the conditions for enhancing resource efficiency and reducing climate impact through our products. You can find examples of this under the focus area, Customer responsibility. We also strive to continuously improve our proprietary operations through sustainable and efficient resource utilization. This includes our power consumption in offices and server rooms, our business travel and electronics waste. Consequently, our environmental efforts are systematic and integrated into our operations, which should manifest as a continuous improvement of key metrics, such as power consumption per employee and the share of renewable energy in our electricity agreements.

Focus area 5: Reduced energy consumption

To progressively reduce our energy consumption, we are working to optimize the efficiency of our server rooms and office premises. We utilize "free cooling" in our largest server rooms, which entails the use of outdoor air to cool our server rooms. For 2018, this roughly corresponded to a 20% reduction in electricity consumption. We collaborate with property owners, to use the waste heat from our server rooms to warm up other sections of the premises, which reduces the property's overall consumption. One of our data centers has dedicated solar panels that produce 25% of the electricity used by the center.

During the year, we replaced several of our older servers with new and more energy-efficient hardware. We will derive most of our benefits from this investment in 2019. An analysis of one of our data centers in Denmark indicates that energy savings of up to 88% can be expected when older hardware is replaced in their entirety. As part of our ongoing efforts at continuous improvement, server rooms that come into the Group's disposal through company acquisitions are evaluated and, in many cases, moved to one of the Group's shared data centers. In addition to optimizing energy efficiency, this enables us to safeguard the products' accessibility and security.

We review energy-saving measures for our offices in conjunction with their renovation. In 2018, we persisted with efforts to convert our electricity contracts to comprise 100% renewable energy. The results were 85% in 2018, compared with 59% in 2017. The positive trend is mainly attributable to the percentage of coal in our Danish electricity contracts being switched for renewable energy.

Focus area 6: Reduced waste and increased recycling

In 2018, we completed the work to develop a Group-wide standard for recycling of electronic waste. During the year, this corresponded to environmental savings of 7,034 kg of CO2eq, which is comparable to circumnavigating the globe by car, twice. In 2018, several types of devices were collected, such as portable computers, tablets and smartphones, entailing a 32% increase in the share of in reusable devices, compared with 2% in 2017.

We also continued efforts to minimize the number of business trips during the year, in order to reduce our carbon footprint. Digital conferencing technology has now been installed in the conference rooms of all our Nordic region offices. To keep things simple for our employees, we use a Group-wide IT infrastructure, and our goal is to have the same type of equipment at all of our premises. Employees recognize and know how to use the technology, regardless of the particular office where the meeting takes place. In 2018, approximately 1,700 digital meetings per month were conducted, with an average of three participants. We have also updated our customer offering to include web-based training for several of our products. This has entailed fewer business trips, for both Vitec and our customers.

All day-to-day improvements are also crucial: for example, during the year, we adopt a standard for waste-sorting-atsource in our office premises. When introducing the new waste-sorting system, we simultaneously engage in dialogs with property owners who may, in some cases, need to update their waste management system to, for example, receive food waste.

Target: 100% renewable energy in our

^{2 0}

Peripheral Other

electricity contracts

Target: Continuously optimize energy consumption in our server rooms and office premises Portable Hard drive Tablets Server Smartphone Desktop Screens Portable Hard drive Tablets Server Smartphone Desktop Screens ^{2 0} Portable Hard drive Tablets Server Smartphone Desktop Screens

Energy consumption server rooms Energy consumption office premises Percentage of energy from renewable sources 2015 2016 2017 2018 0 kWh/ employee processor core % 448 2018 Recycling divided by unit types 2018 2018 0 1 386 1 548 kWh/ processor core % 2018 448 59% Recycling divided by unit types 2018 0 2018 kWh/ processor core % 59% 85% Recycling divided by unit types 2018 0 2018

The summer of 2018 was unusually hot. The free-cooling systems in our data centers could not be used normally and office premises with in-house cooling systems and fans accounted for higher energy consumption than summers with normal temperatures. 1,0 1,5 34% 44% 41% 37%*

Recycling of electronic waste

Our history

Vitec has been experiencing consistent growth and has shown profitability every year. Here are some of the significant events through the years that have been critical to our success.

Some of the milestones

1985

Vitec is founded by Lars Stenlund and Olov Sandberg. The first software is a product for monitoring energy consumption aimed at real estate companies.

1990

Operations are scaled up and the Board of Directors is reinforced with external Board members.

1991

The Company is registered under the trade name, Vitec. It is an invented name that wins the votes of employees.

1992

The product range is supplemented with a software that enables energy companies to create short-term forecasts for district-heating requirements.

1998

Vitec is listed on Innovationsmarknaden (currently known as the Nordic Growth Market).

1999

Vitec is listed on Aktietorget (currently known as the Spotlight Stock Market) and several company acquisitions are implemented in Sweden.

2002

Vitec issues its first dividends, which is unique for IT companies in Sweden – it is the year that the dotcom bubble bursts.

2003

An acquisitions-based growth strategy is formulated – which remains relevant today – following an analysis of the reasons for the growth and profitability of existing operations over the years.

2005

The Media segment is formed through the acquisition of Veriba AB, whose software is aimed at newsvendor companies. Vitec becomes the leading software supplier in the real estate industry in conjunction with the acquisition of IBS Vertex.

2007

The Estate Agents segment is formed in conjunction with the acquisition of Svensk FastighetsData, a market-leading supplier av software for realtors.

2010

The Finance & Insurance segment is formed with the acquisition of Capitex AB. The company develops calculation software for banks and insurance companies and software for realtors and real estate companies.

2011

Vitec is listed on the Nasdaq Stockholm. The Estate Agents segment is supplemented with Norwegian operations through Vitec's first acquisition of a foreign company, IT-Makeriet AS.

2012

The listed subsidiary, 3L System AB (publ), is acquired and thereby delisted from First North.

2013

The Health segment is formed in conjunction with the acquisition of the Finnish company, Acute FDS Oy, and its software for Finnish healthcare companies.

2014

The Auto segment is formed through the acquisition of AutoData Norway AS, and its software for the Norwegian auto parts market. The Finance & Insurance segment is expanded to include Denmark, in conjunction with the acquisition of the Danish company, Aloc A/S.

2015

The Auto segment is supplemented with Danish operations through the acquisition of the Danish company, Datamann A/S, and reinforced in Norway through the acquisition of Infoeasy AS. The Finance & Insurance segment is supplemented with operations in Norway through the acquisition of the Norwegian company, Nice AS.

2016

The Media segment is discontinued in connection with the sale of Vitec Veriba AB to XLENT Consulting Holding AB. The new Environment segment is formed through the acquisition of the Finnish company, Tietomitta Oy. FuturSoft Oy in Finland and Plania AS in Norway are also acquired, to supplement the Auto and Real Estate segments, respectively.

2017

Vitec is moved from the Small Cap to Mid Cap list on the Nasdaq Stockholm. The Danish software company, MV-Nordic A/S, with its products for remediating reading and writing difficulties is acquired, and the Health segment changes its name to Education & Health. Olov Sandberg, one of the founders of Vitec, completes his final business assignment on behalf of the company and enters retirement. Olov remains as one of the company's principal owner.

2018

The Construction & Real Estate segment is shored up with the acquisition of the Swedish company, PP7 Affärssystem AB. The Education & Health segment is expanded with the acquisition of the companies, Agrando AS, Cito IT A/S and Smart Visitor System AB.

¹⁰⁰⁰ From one hundred thousand MSEK to one billion revenue

Shares and shareholders

Vitec Software Group AB (publ) was listed on the Nasdaq Stockholm on July 4, 2011. The company is under the Mid Cap list with the ticker symbol, VIT B and a trading lot that comprises one share. At December 31, 2018, there were 4,255 shareholders and the percentage of foreign-owned shares correspond to 20% of the capital.

Sales and share price trend

In 2018, the total value of share trading was SEK 284.7 million. The average turnover per day of trading was 13,975 shares, valued at SEK 1.1 million. The closing price for 2018 was SEK 77.60 (87.00) and the overall market capitalization amounted to SEK 2,509 million (2,596) at year-end.

Number of Class A and Class B shares

In November, Vitec issued a private placement of 2,500,000 Class B shares, which increased the total number of shares to 32,338,900, allocated as 3,350,000 Class A shares and 28,988,900 Class B shares. The number of votes increased by 2,500,000 to a total of 62,488,900 votes. Share capital increased by SEK 250,000 to a total of SEK 3,233,890. The total number of shares in Vitec at the close of the financial year was 32,338,900. Class A shares are subject to a pre-emption clause. Current share capital is approximately SEK 3.2 million, with a quotient value of SEK 0.10 per share.

Location of listing

The Vitec Software Group's Class B share is listed on the Nasdaq Stockholm. The share's ticker is "Vit B" and its ISIN-coding is SE0007871363. One trading lot amounts to one share.

Dividend policy

Shareholders of Vitec have received dividends every year since 2003. Our objective is for dividends to correspond to a minimum of one-third of profit after tax. However, an assessment is always performed with regard to the company's financial position.

Dividend

The Board proposes, to the Annual General Meeting, a dividend of SEK 1.20 per share, which corresponds to 37% of profit after tax for 2018.

Information to shareholders

Vitec strives to provide shareholders and the stock market with rapid and comprehensive information about its performance and financial position on a continuous basis. Our website, vitecsoftware.com, is our primary channel for information, where we publish financial information and other potentially price-sensitive information, immediately following disclosure. The website also features presentations and video clips of Annual General Meetings, information about the company Aktien och ägare

Share performance 2012–2018

and the Vitec share, our financial calendar and information about corporate governance. Visitors can also sign up for an e-mail subscription to receive our press releases.

Analyses of Vitec

Vitec was monitored by ABG Sundal Collier during the year.

Dividend per share

0,6

1,2

Brief facts 50

0,4 2012 2013 2014 2015 2016 2017 2018 Vitec SEK OMX SEK	2003 2005 2007 2009 2011 2013 2015 2017 2019 2018	2017
0,2 * Proposed dividend: 1,20 Number of Class B shares 25	0,8 28,988,900	26,488,900
Highest closing price, SEK 1,2 0,0	0,6 88.00 *	91.50
Lowest closing price, SEK	2003 2005 2007 2009 2011 2013 2015 2017 2019 76.40	65.00
0 1,0 Closing price, SEK 2012 2013 2014 2015 2016 2017 2018	0,4 77.60	87.00
Average daily turnover, SEK thousands Vitec SEK OMX SEK	1,139 0,2	1,213
0,8 Average daily turnover, no. of shares	13,975	Sverige 15,991
SEK Market capitalization, SEK million 3,5 0,6	* 0,0 2,509 2003 2005 2007 2009 2011 2013 2015 2017 2019	Övriga 2,596
Vinst per aktie Marketplace 3,0	Nasdaq Stockholm	Nasdaq Stockholm Tyskland
0,4 Segment 2,5	Mid Cap	Mid Cap Norge
2,0 Ticker	Vit B	Vit B Sverige Frankrike
0,2 SEK 1,5 ISIN code 3,5	SE0007871363	SE0007871363 Övriga Kanada

0,0

0,2

Share data 2014 2015 2016 2017 2018 2,0

Earnings per share 1,5

	2018	2017	2016	2015	2014
(SEK)	20.71 USA	13.34 Canada	11.37	9.24	8.85
(SEK)	3.23	2.70	2.27	2.66	1.75
(SEK)	3.22	2.70	2.25	2.64	1.68
(SEK)	1.10	1.00	0.90 Norge	0.67	0.55
(SEK)	8.01	6.78	5.20	5.09	4.40
		Sweden Norway	Germany	France Other countries	Övriga USA Sverige Tyskland Övriga Norge Tyskland Frankrike Frankrike Kanada Sverige

Sweden USA Canada

France

Share capital trend

Year	Transaction	Total share capital	Total number of Class A shares	Total number of Class B shares
1985	Founding of company	25 50,000	500	-
1990	Bonus issue	100,000	1,000	-
1990	New share issue, incentive program	0 140,000 2012	1,000 2013 2014	400 2015 2016
1990	New share issue	156,000	1,160 Vitec SEK	400
1995	New share issue, incentive program	164,000	1,160	480
1997	Bonus issue/split	328,000	23,200	9,600
1997	New share issue, 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	Directed new share issue, Innovationsmäklarna AB and Innovationsmarknaden AB (Nordic Growth Market)		900,000 10,000,000	8,000,000
1998	New share issue upon listing on Innovationsmarknaden		1,500,000 10,000,000 20,000,000
1998	Non-cash issue for acquisition of Bra Administration AB (currently known as Vitec Energy AB)		1,641,000 10,000,000 22,820,000
1999	Reverse share split upon listing on Aktietorget	SEK 1,641,000 3,5	1,000,000	2,282,000
2000	Non-cash issue for acquisition of Minator AB (Vitec Fastighetssystem AB)	1,732,000 3,0	1,000,000	2,464,000
2004	Conversion of employee convertibles	1,786,100 2,5	1,000,000	2,572,200
2007	Conversion of employee convertibles	1,808,000 2,0	1,000,000	2,616,000
2008	Non-cash issue in conjunction with acquisition of Vitec Mäklarsystem AB	1,883,000 1,5	1,000,000	2,766,000
2008	Conversion of Class A shares	1,883,000 1,0	800,000	2,966,000
2009	Conversion av promissory note from the acquisition of Vitec Veriba AB	1,916,350 0,5	800,000	3,032,700
2010	Conversion av promissory note from the acquisition of Vitec Mäklarsystem AB	2,025,725 0,0	800,000 2014 2015 2016 2017 2018	3,251,450
2010	Directed new share issue to Avanza	2,125,725	800,000	3,451,450
2011	Conversion of employee convertibles	2,183,538	800,000	3,567,075
2012	Conversion of employee convertibles	2,213,252	800,000	3,626,504
2012	Non-cash issue in conjunction with acquisition of outstanding shares of 3L System AB	2,574,164	800,000	4,348,327
2013	Conversion av promissory note from the acquisition of Capitex AB	2,654,164	800,000	4,508,327
2014	Conversion av promissory note from the acquisition of IT-Makeriet AS	% 2,674,164 30	800,000	4,548,327
2014	Directed new share issue	2,899,164 25	800,000	4,998,327
2014	Conversion of employee convertibles	2,939,669	800,000	5,079,338
2015	Split	20 2,939,669		4,000,000 25,396,690
2016	Conversion of Class A shares	15 2,939,669		3,500,000 25,896,690
2017	Conversion of Class A shares	10 2,939,669		3,350,000 26,046,690
2017	Conversion of employee convertibles	5 2,983,890		3,350,000 26,488,900
2018	Directed new share issue	3,233,890 0	2014 2015 2016 2017 2018	3,350,000 28,988,900

Shareholders (source: Euroclear and Holdings)

* Proposed dividend: 1,20 2003 2005 2007 2009 2011 2013 2015 2017 2019

Foreign-owned shares Shareholders, by number holdings

Holdings	Number of shareholders	No. of A shares	Tyskland No. of B shares Norge	Holdings, %	Votes, %
1–500	2,853		369,035	1.1	0.6
501–1,000	427		Frankrike 361,872	1.1	0.6
1,001–5,000	680		Kanada 1,589,814	4.9	2.5
5,001–10,000	116		876,197 USA	2.7	1.4
10,001–15,000	Sverige, 80% 43	USA Kanada	Frankrike, 551,002	1.7	0.9
15,001–20,000	Norge 28	Tyskland Övriga	484,788	1.5	0.8
20,001–	108	3,350,000	22,874,612	80.7	90.3
Anonymous ownership			1,881,580	6.2	3.0
Total	4,255	3,350,000	28,988,900	100.0	100.0

Shareholder register by

geographic area Largest shareholders on Dec 31, 2018

		No. of A shares No. of B shares	Share capital %	Votes, %
Lars Stenlund*	1,570,000	152,280	5.23	25.32
Olov Sandberg*	1,420,000	99,565	4.55	22.80
Jerker Vallbo*	360,000	115,515	1.44	5.93
Didner & Gerge Fonder		2,039,475	6.31	3.26
Mawer Investment Management		1,764,873	5.86	2.93
Thomas Eklund		1,746,440	5.40	2.79
SEB Fonder		1,706,417	5.28	2.73
Martin Gren (Grenspecialisten)		1,281,135	3.96	2.05
Utah Retirement Systems		1,105,026	3.42	1.77
Avanza Pension		907,404	2.81	1.45
Other		18,070,770	55.8	29.0
Total	3,350,000	28,988,900	100.0	100.0

*including family and/or ownership through companies

Market capitalization Norge

Frankrike	2018	2017	2016	2015	2014
Kanada Market capitalization at year-end*, SEK million	2,509	2,596	2,219	2,205	779

*Market capitalization is calculated as the total number of issued Class A shares and class B shares at the balance-sheet date, multiplied by the share price on the Nasdaq Stockholm at year-end. Sverige, 80% USA Kanada Frankrike,

Administration report

The Board of Directors and CEO of Vitec Software Group AB (publ), corp. reg. no. 556258-4804, with its registered office in Umeå, herewith present their annual report, sustainability report and consolidated financial statements for the 2018 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 translation. In accordance with Chap. 6 Sect. 11 of the Swedish Annual Accounts Act, Vitec has chosen to prepare the statutory sustainability report as a separate report from the annual report, the contents of which are presented on pages 14–23.

Operations

Vitec is the Nordic market leader in Vertical Market Software. We develop and deliver standardized software aimed at various niche markets. We are active in Denmark, Finland, Norway and Sweden, and our operations grow through the acquisition of well-managed and established software companies. Among our customers are pharmacies, banks, auto parts dealers, construction and real estate companies, energy companies, realtors, insurance companies, healthcare companies, municipal culture and leisure departments, churches, education companies and waste management companies. Vitec is listed on the Nasdaq Stockholm and had sales of SEK 1,017 million in 2018.

We have a growth-oriented strategy and are continuously in search of new acquisition objects. Our objective is to be the market leader within niches where we are active. Our current geographic market comprises Sweden 32%, Denmark 28%, Finland 18%, Norway 21% and other countries 1%. Our operations are governed based on the following seven segments:

• Auto: software for the automotive industry and machinery sector in Denmark, Finland, Norway and Sweden.
• Energy: advanced forecasting systems for electricity traders, as well as calculation and mapping systems to own-

ers of electricity and district-heating grids. The geographic market for this segment comprises the Nordic and Baltic countries, the rest of Europe and the Middle East.

• Real Estate: software for the construction and real-estate sectors in Norway and Sweden.
• Finance & Insurance: software for banks, financial institutions and insurance companies in Denmark, Norway and Sweden.
• Environment: software for private and municipal wasteand-resource processing in Finland.
• Estate Agents: software for real estate agents in Norway and Sweden.
• Education & Health: software to individuals with reading and writing difficulties in Denmark, Norway and Sweden, as well as software for healthcare companies in Finland. The segment also offers software for church operations in the Nordic region, with the primary markets comprising Norway and Sweden; software for the pharmacy market in Denmark, and software for municipal leisure and cultural departments in Norway and Sweden.

Net sales and earnings

The Group's net sales in 2018 totaled SEK 1,016.8 million (855.0) – an increase of 19% compared with 2017. The increase in net sales is primarily attributable to acquisitions. Operating profit amounted to SEK 128.4 million (106.7), corresponding to an operating margin of 13% (12). Operating profit included depreciation/amortization and impairment of SEK 158.5 million (126.9).

Net financial items totaled a negative SEK 11.6 million (neg: 8.6) Financial income amounted to SEK 0.3 million (0.3) and comprised interest from bank accounts. Financial expenses totaled a negative SEK 11.9 million (neg: 8.9) and consisted of interest on acquisition credits and convertible debentures.

Profit after tax for the year was SEK 96.9 million (79.4), of which SEK 96.9 million (79.4) was attributable to Parent Company shareholders.

Segment trend

Our operations are divided into the following segments: Auto, Energy, Real Estate, Finance & Insurance, Environment, Estate Agents and Education & Health.

	External net sales		Growth, %	Operating profit		Operating margin, %
SEK million	2018	2017	2018	2018	2017	2018	2017
Auto	170.3	155.9	9	28.3	19.5	17	12
Energy	26.0	25.7	1	9.3	8.0	36	31
Real Estate	206.3	190.1	9	44.3	32.2	21	17
Finance & Insurance	132.2	142.3	-7	12.7	29.0	10	20
Environment	45.9	44.1	4	5.5	5.5	12	12
Estate Agents	155.4	138.0	13	23.9	5.5	15	4
Education & Health	278.3	157.9	76	9.5	11.2	3	7
Shared	2.2	1.0	120	0.0	0.0	0	0
Operating profit before acquisition-related
costs*	1,016.8	855.0	19	133.5	110.9	13	13
Acquisition-related costs	-	-	-	-5.1	-4.2	-	-
Operating profit after acquisition-related
costs	-	-	-	128.4	106.7	13	12

*Acquisition-related costs affecting comparability make it difficult to track the trend. For this reason, the above operating profit/loss is stated as before and after acquisition-related costs.

Auto

The Auto segment includes Vitec Autodata AS, Vitec Datamann A/S, Vitec Infoeasy AS and Vitec Futursoft Oy. Total revenue amounted to SEK 170.3 million (155.9). Recurring revenues rose by 14% to SEK 146.3 million (128.6), license revenues declined 14%to SEK 5.2 million (6.1) and services revenues declined 18% to SEK 13.4 million (16.3). Other revenues increased 8% to a total of SEK 5.4 million (5.0). The percentage of recurring revenues in net sales was 86% (82). The operating margin increased to 17% (12%).

Energy

This segment comprises Vitec Energy AB. Total revenue amounted to SEK 26.0 million (25.7) – a gain of 1%. Recurring revenues gained 4% to achieve SEK 19.9 million (19.1). Service revenues declined 10%, settling at SEK 5.9 million (6.5). The percentage of recurring revenues in net sales was 74% (74). The operating margin rose to 36% (31%).

Real Estate

This segment includes Vitec Förvaltningssystem AB, Vitec Fastighetssystem AB, Vitec Capifast AB, Vitec Software AB, Vitec Plania AS and Vitec PP7 AB. Vitec PP7's operations were consolidated as of April 9, 2018. Total revenue amounted to SEK 206.3 million (190.1), corresponding to an increase of 9%.

License revenues declined 25% to achieve SEK 6.5 million (8.6). Recurring revenues gained 18% to achieve a total of SEK 128.1 million (108.8). Service revenues declined 3% to SEK 68.0 million (69.8). Recurring revenues accounted for 62% (57) of net sales. The operating margin rose to 21% (17%).

Finance & Insurance

The segment comprises Vitec Capitex AB, the Vitec Aloc A/S Group and Vitec Nice AS. Total revenue amounted to SEK 132.2 million (142.3), corresponding to a decline of 7%. Recurring revenues gained 11% to achieve SEK 116.3 million (104.4). License revenues declined 96% to SEK 0.3 million (7.5). Service revenues declined 50% to achieve SEK 15.1 million (29.9). The percentage of recurring revenues in net sales was 88% (73). The operating margin was 10% (20).

Environment

This segment comprises Tietomitta Oy and 3L Media AB. Total revenue amounted to SEK 45.9 million (44.1) – a gain of 4%. Recurring revenues rose 13% to a total of SEK 37.0 million (32.6). Service revenues increased by 8% to a total of SEK 6.2 million (5.7). License revenues declined 58%, totaling SEK 1.5 million (3.5). Recurring revenues accounted for 81% (74) of net sales. The operating margin was unchanged, at 12% (12).

Estate Agents

The segment comprises Vitec Mäklarsystem AB, Capitex AB, Vitec Megler AS, Vitec Megler AB and ADservice Scandinavia AB.

The total revenue was SEK 155.4 million (138.0), representing a gain of 13%. License revenues increased to SEK 0.1 million (0). Recurring revenues increased by 2% to achieve SEK 135.4 million (132.5). Service revenues increased 280% to a total of SEK 19.5 million (5.1). The share of recurring

revenues in net sales was 87% (96). The operating margin was 15% (4).

Education & Health

The segment includes the Acuvitec Oy Group, the Vitec Agrando AS Group, Vitec Cito A/S, the Vitec MV A/S Group and Vitec Smart Visitor System AB. Vitec MV's operations were consolidated as of July 6, 2017. Agrando's operations in were consolidate as of April 19, 2018, Cito IT's operations as of May 31, 2018 and Smart Visitor System' operations as of November 9, 2018. During the year, Acuvitec Oy closed its office in France in order to concentrate development work in Finland. The move resulted in a nonrecurring adverse impact of SEK 4.7 million, but will generate savings in the long term.

The total revenue for the segment was SEK 278.3 million (157.9), representing a gain of 76%. Recurring revenues rose by 92% to SEK 160.9 million (83.7), service revenues rose 68% to SEK 20.4 million (12.2), while license revenues increased by 54% to achieve SEK 21.4 million (13.8). Other revenues rose by 57% to SEK 75.6 million (48.2) and comprised sales of goods. The share of recurring revenues in net sales was 58% (53). The operating margin was 3% (7).

Acquisitions and changes to the legal structure during 2018

In 2018, the following corporate acquisitions entailed changes to the legal structure:

• April 9, PP7 Affärssystem AB
• April 19, Agrando AS
• May 31, Cito IT A/S
• November 6, Smart Visitor System AB

All of the acquisitions were consolidated as of the acquisition date.

On April 1, 2018, a new company, Vitec Financial Services AS, was launched. On June 1, Acute Sarl, a subsidiary of Acu-Vitec Oy, was divested. On November 23, Labora Software Oy, a subsidiary of Vitec Agrando AS, was divested.

Objectives

Vitec has a growth-oriented strategy and is continuously in search of new acquisition objects. For the past 10 years, our growth has been 18% per year. The Board of Directors has set a financial objective to achieve an operating margin of 15% while maintaining efforts focused on continuous growth.

OUTCOME:

%	2018	2017	2016	2015	2014
Sales growth	19	27	9	26	32
Operating margin	13	12	13	16	14

Significant events in 2018

April 9: Vitec acquired the software company, PP7 Affärssystem AB

PP7 Affärssystem's main product is a cloud-based software for project and business support that optimizes all project flows and procedures for the construction and installation market in Sweden. The company reported sales of nearly SEK 8 million, with an adjusted EBITDA of SEK 1.4 million for the 2017 financial year.

April 19: Vitec acquired the Norwegian software company, Agrando AS

Agrando develops niche software for churching operations in the Nordic region, with Norway and Sweden as its primary markets. The company and its subsidiaries reported sales of SEK 42 million, with an EBITDA of SEK 5.5 million for the 2017 financial year.

May 31: Vitec acquired the Danish software company, Cito IT A/S

Cito's primary product is niche software for the pharmacy market in Denmark. The product is used for managing the entire chain of the Danish pharmacy workflow, such as product inventory, cash operations and prescriptions processing. The company reported sales of DKK 25.5 million, with an adjusted EBITDA of DKK 7.6 million for the 2016/17 financial year.

August 31: Vitec signed a new agreement with Skanska

Among the most significant developments in the agreement between Vitec and Skanska was a brand-new software from Vitec. The product was developed for construction companies to manage newly built tenant-owner properties and single-family dwellings.

September 28: Vitec refinanced its acquisition-loan facility

Vitec secured a SEK 500 million acquisition-loan facility with Nordea. It replaces two previous facilities of SEK 250 million and SEK 200 million at Nordea. The new facility increased the scope by SEK 50 million.

October 26: Vitec signed a new agreement with Bostaden

Bostaden, a municipal-owned nonprofit housing corporation in Umeå Municipality, chose Vitec as the supplier of its new realtor system. Vitec's software is a part of Bostaden's efforts to digitalize and adapt to the rapid developments in technical solutions.

November 5: CFO announces her departure from Vitec

Maria Kröger, CFO of Vitec since 2012, announced her departure from her post at Vitec. Recruitment of a new CFO commenced immediately. Maria Kröger will remain at her position until such time that a replacement is found, but by no later the 2019 AGM.

November 6: Vitec acquired the software company, Smart Visitor System AB

Smart Visitor System develops specialized software for municipal leisure and cultural departments in Norway and Sweden. The product is a complete enterprise system for handling reservations, visitors and grants. The company reported sales of SEK 23.7 million, with an adjusted EBITDA of SEK 3.1 million for the 2017 financial year.

November 29: Vitec completed a directed new share issue

With the support of the AGM's issue-authorization of April 23, 2018, Vitec resolved to carry out a directed new share issue of 2,500,000 Class B shares at a subscription price of SEK 79 per share. The issue increased the company's total the number of shares to 32,338,900, allocated as 3,350,000 Class A shares and 28,988,900 Class B shares. Share capital increased by SEK 250,000 to total SEK 3,233,890.

December 12: Vitec signed a new agreement with Collector Bank

Vitec and Collector Bank signed an agreement pertaining to the product, Capitex Företagslån. It premiered in the Swedish market and in the near future, the new work method will also be introduced to Finland and Norway.

Events after the balance-sheet date

On March 5, 2019, all shares of the Finnish software company, Avoine Oy, were acquired. Its product is aimed at sports clubs and labor unions in Finland. The product is delivered as Software as a Service (SaaS). The company reported sales of SEK 29.4 million, with an adjusted EBITDA of SEK 6.3 million for the 2018 financial year. A cash payment will be transacted on the date of the takeover.

Consolidation will commence as of the acquisition date. At the time of this report's publication, there were no financial statements available that could serve as the basis of a detailed description of the acquisition. For this reason, no information is presented about the fair value of acquired receivables, and acquired assets and liabilities. We expect the future items of a detailed acquisition analysis to comprise product rights, brands and goodwill. Goodwill is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as expected synergies, in the form of the joint development of our products.

Liquidity, cash flow and financial position

The Group's cash and cash equivalents, including current investments at the end of the period, totaled SEK 235.3 million (57.9). The increase is mainly attributable to the new share issue of SEK 194.9 million, which was implemented in late 2018. In addition to cash and cash equivalents, Vitec had overdraft facilities of SEK 20 million and SEK 53.3 million in unutilized portions of the credit facility totaling SEK 500 million.

• Cash flow from operating activities was SEK 197.1 million (187.6).
• Cash flow from investing activities was a negative SEK 276.9 million (neg: 198.1), comprising a negative SEK 134.3 million (neg: 88.8) for the acquisition of subsidiaries, negative SEK 128.3 million (neg: 101.5) for the acquisition of intangible fixed assets including capitalized work and negative SEK 14.3 million (neg: 7.8) for investments in property, plant and equipment.
• Cash flow from financing activities totaled SEK 254.0 (neg: 15.5), and comprised SEK 194.9 million (0) from new share issue, SEK 181.9 million (109.1) from new bank loans, negative SEK 32.8 million (neg: 29.4) from dividend payments and negative SEK 90.0 million (neg: 95.3) from loan repayments.

At Monday, 31 December 2018, interest-bearing liabilities totaled SEK 509.3 million (406.1) and comprised SEK 503.6 million (374.9) in non-current interest-bearing liabilities and SEK 5.6 million (31.2) in current interest-bearing liabilities.

During the period, a directed new share issue of SEK 194.9 million was completed, after deduction for issue costs.

Our loans with Nordea were renegotiated. The two credit facilities and two older loans were consolidated into a single credit facility totaling SEK 500 million. At the balance-sheet date, SEK 446.7 million of the credit facility was utilized. The facility is divided into tranches, that allow for us to autonomously decide on the amount and timing of our repayments to the facility. Since we are yet to decide on any repayment, the entire loan is regarded as a non-current loan. Its terms and conditions, and covenant requirements, are in line with the previous agreements with the bank.

During the period, SEK 181.9 million of the credit facility was utilized to finance acquisitions and SEK 83.4 million pertaining to previous acquisitions was repaid to the credit facility. Amortization of bank loans amounted to SEK 6.6 million.

During the period, the supplementary purchase considerations for the acquisition of Futursoft Oy and Fox Publish AS were settled – SEK 22.9 million was paid with respect to Futursoft and SEK 1.4 million with respect to Fox Publish. The supplementary purchase consideration for PP7 Affärssystem AB was adjusted downward by SEK 4 million.

The Group's net interest-bearing assets and interest-bearing liabilities totaled an expense of SEK 274.0 million (exp: 348.2).

Equity attributable to Vitec's shareholders totaled SEK 669.6 million (398.2). The equity/assets ratio was 40% (32). Dividends of SEK 1.10 per share were issued following the Annual General Meeting of April, totaling SEK 32.8 million.

Investments

Investments totaled to SEK 128.3 million in intangible fixed assets, distributed as SEK 127.5 million for capitalized work and SEK 0.7 million for software. SEK 14.3 million was invested in tangible fixed assets. The acquisition of PP7 Affärssystem AB, Agrando AS, Cito IT A/S and Smart Visitor System AB generated SEK 177.2 million in product rights, brands, customer agreements and goodwill.

Research and development

Vitec develops and supplies niche-oriented software. Sustainable development is essential to our strategy and a prerequisite for long-term survival. Strategically focused development strengthens existing operations and enables the introduction of new products and services.

Intangible fixed assets

The Group's intangible fixed assets comprise goodwill, product rights, brands and customer agreements that arise from acquisitions, as well as capitalized development work and software. At December 31, 2018 the carrying amount was SEK 385.6 million (282.6) for goodwill, SEK 270.0 million (290.7) for product rights, SEK 269.0 million (197.9) for capitalized development expenditure, SEK 122.9 million (94.8) for customer agreements and SEK 80.3 million (74.8) for brands.

Shareholders' equity

Total shareholders' equity amounted to SEK 669.6 million (398.2) at December 31, 2018. Equity attributable to Vitec's shareholders totaled SEK 669.6 million (398.2).

At December 31, there was an ongoing convertible program for employees, and a convertible bond signed in conjunction with an acquisition. These amounted to SEK 39.8 million and are convertible to a maximum of 434,605 class B shares, and increase share capital by SEK 0.04 million.

Employees

In 2018 Vitec had an average of 613 (540) employees, of which 182 (132) were women. At year-end, the number of employees was 643 (573).

Parent Company

The Parent Company's net sales totaled SEK 63.4 million (79.9) and essentially comprised invoicing to subsidiaries for intra-Group services rendered, pertaining to premises, data communications and telephony, financial reporting, HR and management/operations development. Profit after tax amounted to SEK 68.7 million (64.9), including anticipated dividends from subsidiaries.

The Parent Company's cash and cash equivalents totaled SEK 222.9 million (51.6). Cash and cash equivalents comprise a Group currency account, where the Parent Company holds a top (group) account with the bank. Consequently, subsidiary cash and cash equivalents comprise the receivables/liabilities of the Parent Company. The Parent Company has an agreement for overdraft facilities of SEK 20 million (20) and an acquisition loan facility of SEK 500 million, of which SEK 53.3 million was unutilized at the balance-sheet date.

Investments totaled to SEK 0.6 million (0.9) for intangible fixed assets, SEK 0.8 million (0.5) for tangible fixed assets, and SEK 214.1 (109.1) for participations in Group companies. The value of participations in subsidiaries during the year was reduced by SEK 2.4 million, due to the downward adjustment of the conditional contingent consideration for Futursoft Oy, and by SEK 4.0 million, due to the downward adjustment of the conditional contingent consideration for PP7 Affärssystem AB. Current non-interest-bearing liabilities were reduced at a corresponding scope.

Non-current interest-bearing liabilities totaled SEK 503.5 million (374.6) in the form of SEK 463.7 million (335.8) bank loans and SEK 39.8 million (38.8) for convertible debentures. Current interest-bearing liabilities totaled SEK 5.6 million (31.2) and pertained entirely to bank loans. During the year, new loans of SEK 181.9 million were raised.

In April, dividends of SEK 32.8 million (29.4) were paid.

Risks and uncertainties

The Group is exposed to various risks through its activities, in the form of operational risks and financial risks. The following is a description of the most critical factors. The corporate governance report on pages 36–44, describes our internal controls and risk management.

Business-related risks

Employees and recruitment

We are extremely dependent on a qualified workforce and specialized skills. We can attract and retain qualified employees by being a modern employer that provides opportunities for interesting job assignments, flexible working hours, preventive healthcare, salary compensations for parental leave, personal development and career opportunities within the Group and so forth. However, there is a risk that this cannot occur under acceptable terms and conditions, despite market-rate remuneration, due to the prevailing tough competition for experienced employees from other software and product-development companies. The Group's geographic spread allows for various positions to be localized based on the labor market in different parts of the Nordic region.

Customer dependence

Vitec has signed agreements with a large number of customers. Vitec's Board of Directors deem that the Group is not, to any critical extent, dependent on any individual customer. However, the customer structure could be more or less clustered within the Group's different business units. Within the Finance & Insurance, Education & Health and Estate Agents segments, there sporadic cases of major customers and framework agreements with customers on behalf of franchise holders, that would constitute a higher customer dependency than for the Group as a whole. No individual customer accounts for more than 2% of recurring revenues.

Supplier dependence

We purchase bandwidth from telecommunications companies, which is crucial to Vitec's ability to pursue operations. We also purchase support services that are integrated in our software, mainly comprising property-related information or the conveyance of such information by text message. Despite access to alternative provider solutions, we are dependent on the supply reliability of providers to avoid operational disruptions that could have adverse consequences on our earnings and financial position.

IT infrastructure

The Group's IT infrastructure is fully centralized for internal systems and for half of customer operations. This infrastructure is highly important to Vitec's ability to fulfill it deliveries. The infrastructure has built-in redundancies that allow for equipment to break down without disrupting operations. A contingency organization is in place to handle any problem that may arise beyond regular working hours. Information is processed in accordance with applicable laws and regulations, and is secured by storing backups in other locations. A procedure for handling operational disturbances was adopted by Group management, through which processes and information routes were established for managing disruptions. The Group conducts annual drills on crisis management.

Acquisitions and integration of acquired objects

To varying degrees, acquisition scenarios always entail risks with potentially material adverse effects on the acquiring party. Acquisition-related risks comprise risks such as financial, legal and operational risks. There are numerous financial risks, but particularly high risks include paying a high purchase consideration and risks that arise from the financing of the purchase price, which could occur with the absorption or takeover of interest-bearing loans that are negatively charged to the Group's earnings and financial position. There are numerous legal risks, but particularly high risks are linked to the assumption of liabilities for the acquired company or the acquired asset's obligations, historical operations and tax scenario. To a large extent, operational risks comprise the integration of acquired companies or assets while retaining profitability. There are no guarantees that the positive operational or financial effects expected beforehand, which normally prompt an acquisition, will indeed be fulfilled or that they will not result in any adverse impact on the Group's earnings and financial position. Neither are there any guarantees that acquisitions implemented by the Group will have a positive impact the Group. Impairment testing is performed annually on acquired goodwill, brands, customer agreements and product rights. If upon such testing these are deemed to be incorrectly valued, this could result in impairment losses that could adversely impact earnings.

Investments in product development

Vitec invests substantial resources every year toward the development of new and existing products, which is requisite to our continued delivery of competitive software.

It is highly important that we can finance and achieve yields resulting from product development. To optimize the planning, implementation and follow-up of the Group's product development, the Group adopts a product-investment plan through the annual budgeting process, which is followed-up monthly for each business unit.

Fixed-price projects

The Group's business units occasionally sign agreements with customers to commit to projects at a predetermined fixed price, known as fixed-price projects. Fixed-price projects could result in losses if the actual labor resources spent exceed the required labor resources calculated at the time of the offer.

Environmental risks

Our assessment is that emissions and waste comprise the areas in which Vitec has the most significant adverse environmental impact. Emissions are indirectly caused by the electricity consumption of server rooms and office premises, as well as by our employees' business travel. Waste primarily comprises electronic scrap. In our sustainability report on page 14–23, we describe our work to reduce our adverse environmental footprint.

Industry and market-related risks

Business cycle risks

The Group's development and financial position is partly subject to factors in the business environment that are beyond our influence, such as the general business cycle, customers' market conditions or the existence of new, competitive products and services. Although Vitec offers software that are often central to and prioritized by customers, the renewal of annual agreements and new sales are impacted by a general decline in spending by the business community in times of recession. Future recessions could adversely thereby impact on the Group's operations, growth, earnings and financial position.

Technology development

Technology and markets are undergoing continuous development in the software industry. Our ability to anticipate changes in customers' needs and adapting our offering accordingly are key to Vitec's future performance.

Intellectual property rights

Development-intensive software companies always run a risk of new or existing competitors copying other developed solutions. For this reason, Vitec stores the source code of proprietarily developed and acquired software in a safe manner.

Product liability

Any errors that arise in the products could lead to demands for accountability and claims for damages. Projects that concern the vital processes of our customers are subjected to test runs conducted in onsite test environments prior to production launch. In some cases, we also offer trial runs. All Group companies are covered by the standard insurance for product liability, which limits direct risks.

Other disputes

As with all commercial enterprises, disputes may arise, due,

for example, to the differing opinions of parties on liability, interpretations of responsibilities and so forth. To the extent possible, Vitec uses standard industry agreements with clauses on monetary limits. Major contracts that deviate from standard agreements are subject to approval by Group management and/or by the Parent Company's Board of Directors, together with insurance and legal experts. Neither Vitec nor its subsidiaries are presently a party to any dispute, or to judicial or arbitration proceedings.

Financial risks

Vitec's exposure to financial risks and management of these risks are described in Note 11.

Sensitivity analysis

The following is a report of how earnings and earnings per share are impacted by various factors.

• Vitec purchases services, subscriptions and statistical data from external suppliers for SEK 110.5 million annually. A change of 1% would impact profit after tax by approximately SEK 0.9 million.
• The Group's greatest cost item is personnel expenses, which totaled SEK 526.4 million. A change of 1% would have an impact of approximately SEK 4.1 million on profit after tax.
• Corporate acquisitions are largely financed by bank loans or convertibles. The interest rate is mostly variable. An interest-rate change of 1% on existing interest-bearing liabilities at December 31, 2018 would impact profit after tax by SEK 4.1 million.
• Vitec's commitment to foreign subsidiaries is increasing, which entail heightened currency and translation risks. With the Group's current composition, currency exposure exists in Norwegian crowns (NKK) and Danish crowns (DKK) and Euros (EUR). A 5% change in the rates of these currencies in 2018 would have impacted the Group's profit after tax by approximately SEK 3.3 million.

		thousand	Impact on earnings, SEK	Impact on earnings SEK/ share
Impact factors	Change, %	2018	2017	2018	2017
Subcontractors and subscriptions	+/- 1	861	790	0.03	0.03
Personnel expenses	+/- 1	4,068	3,478	0.14	0.12
Borrowing interest rate on (change in percentage on borrowing interest rate)	+/- 1	4,077	2,863	0.14	0.10
Change in NOK, DKK and EUR exchange rate	+/- 5	3,330	1,961	0.11	0.07

Corporate governance

Corporate governance defines and allocates responsibilities and roles between shareholders, the Board of Directors, Group management and other stakeholders.

Message from the Chairman of the Board

Vitec's Board of Directors comprises five directors – two women and three men. The Board members' varying competencies and professional experiences are a guarantee of dynamic and proactive Board work. In 2018 the Board of Directors held 12 meetings, of which some were by telephone and one was a strategy meeting. With a few exceptions, all of the Board members were present at all of the meetings. The calendar of meetings is mainly linked to quarterly reports, year-end reports and the Annual General Meeting. In addition, decisions about acquisitions or financing are usually occasions for additional Board meetings. The agendas comprise a fixed reporting session, in addition to specific issues that require discussion and resolution.

Vitec has a well-devised growth strategy based on acquisitions. The Board of Directors continuously reviews the criteria that govern the choice of acquisition candidates, and stays abreast of the current list of prospects at any time. Although the company's own cash flow is robust, external financing is

also required for acquisitions. In 2018, four acquisitions were completed and a large part of the Board's work concerned the implementation and follow-up of acquisition processes, as well as issues about relevant financing.

At the annual strategy meeting, acquired companies are assessed, and the acquisition strategy is reviewed and supplemented as needed. The constant acquisition of new operations and strong growth also entails that the Group reorganize and adapt. Organization and recruitment are frequently recurring issues on the Board of Directors' agenda. Remuneration and auditing issues are managed in their entirety by the Board of Directors. The Chairman performs an annual assessment of the Board's work and reports the results to the Nomination Committee.

Crister Stjernfelt, Chairman of the Board

Structure for corporate governance at Vitec

External governance documents

The Swedish Companies Act, Swedish Annual Accounts Act, Rule Book for Issuers, Swedish Corporate Governance Code and other relevant laws and regulations.

Internal governance documents

Business concept, goals and strategies, Articles of Association, the Board of Directors' Rules of Procedure, CEO's instructions, Code of Conduct and policies.

Regulatory framework

Vitec's corporate governance is based on Swedish legislation. The external framework mainly comprises:

• The Swedish Companies Act
• The Annual Accounts Act
• The Rulebook for Issuers on Nasdaq Stockholm
• The Swedish Corporate Governance Code.

Vitec also applies internal control instruments, the most important of which is the Articles of Association adopted by the AGM, followed by the Board of Directors' Rules of Procedure and the Board of Directors' instructions to the CEO. The Board of Directors has also adopted a number of binding policies, guidelines and instructions, that are applicable to the Group's operations.

The Swedish Corporate Governance Code is based on the principle of "comply or explain," which means that deviations from the framework are permissible on the condition that we disclose the reason(s) for the deviation and also disclose the chosen alternative. Vitec adheres to the provisions with the exception that the Nomination Committee's composition does not comply with the code (Item 2,3). The Nomination Committee has appointed Olov Sandberg as its Chairman, which can be considered a natural choice, when taking into account Vitec's ownership structure. The controlling influence of the principal owners is of such importance that the chosen option was to include themselves in Nomination Committee. Members of the Nomination Committees deem that there are no conflicts of interest in accepting the assignment.

The share and shareholders

The Vitec Software Group's Class B share is listed on the Nasdaq Stockholm. At the close of 2018, Vitec had 4,255 shareholders. Lars Stenlund and Olov Sandberg were the largest shareholders in terms of votes, with 5.2% of the capital and 25.3% of the votes, and 4.6% of the capital and 22.8% of the votes, respectively. The company's three largest shareholders owned 100% of the class A shares and 1.0%

of the class B shares, and the company's ten largest shareholders owned 37.4% of the class B shares. At the same date, the total market capitalization was SEK 2,509 million. The number of shares was 32,338,900, of which 28,988,900 were class B shares and 3,350,000 were class A shares.

General Meeting of Shareholders

The General Meeting of Shareholders is the highest decision-making body in the company. Shareholders are given the opportunity to exercise their influence as represented by their shareholdings at this meeting. Each class A share represents ten votes and each class B share represents one vote. All shareholders who are registered in the share register maintained by Euroclear on the record date and who have notified their intent to participate in due time are entitled to attend the Meeting and to vote. Shareholders who cannot participate in person may elect a representative. A regular meeting of shareholders (AGM) is to be held within six months from the end of the financial year. The AGM's mandatory tasks include adopting income statement and balance sheet, and processing the profit/loss for the year. The AGM also resolves on remuneration policies for senior executives and on whether to discharge the Board members and CEO from liability. In accordance with the nominations of the Nomination Committee (see below) the AGM elects Board members to serve until the end of the next AGM. The Articles of Association are amended through resolutions passed by the AGM pursuant to the regulations of the Swedish Companies Act. The AGM is held in Swedish and broadcast live via our website, vitecsoftware.com.

2018 Annual General Meeting

The AGM was held on April 23 at Väven, in Umeå, Sweden. Vitec's Board of Directors, management, Nomination Committee and auditors were in attendance at the AGM. A total of 114 shareholders were present, representing 65.4% of the votes. Minutes of the AGM are available at our website, vitecsoftware.com.

2019 Annual General Meeting

The 2019 Annual General Meeting will be held on April 10 at 17:30 hrs., at Umeå Folkets Hus in Umeå, Sweden. Information on how to register for participation is available at our website, vitecsoftware.com.

Nomination Committee

The Nomination Committee's primary task is to present nominees to the AGM for election as the Board's members and Chairman, and nominees for auditors, in consultation with the Audit Committee.The Nomination Committee's work is to be characterized by transparency and discussion to achieve a well-balanced Board of Directors. The Nomination Committee adopted regulation 4.1 of the Swedish Corporate Governance Code as its diversity policy when preparing the list of candidates for the Board, with the aim of creating a well-functioning Board composition with respect to diversity and broad representation, in terms of gender, nationality, age ad industry experience. The purpose of the Nomination Committee's is to nominate a Board comprising members who complement each other with their experiences and expertise, so as to enable the Board to contribute to the positive development of the company. The Nomination Committee consistently focuses on diversity, in order to ensure that the Board of Directors has varying perspectives on Board work and the considerations given. The Nomination Committee also considers the need for renewal and carefully investigates whether the nominated Board members are able to devote sufficient time and due attention to Board work. All shareholders have the opportunity to submit motions concerning prospective Board members to the Nomination Committee.

The Nomination Committee has participated in the evaluation of the Board. The Nomination Committee is also tasked with preparing nominees to Chair the AGM, proposals on the remuneration of the Board and any fees to committees and subcommittees, and auditor's fees. The 2018 AGM resolved that each of the three largest shareholders be allowed to appoint their own member in the Nomination Committee. It was also resolved that the Nomination Committee should comprise the Chairman of the Board and three committee members. The members of the Nomination Committee serving until the AGM on April 10, 2019 comprise:

• Crister Stjernfelt, Chairman of the Board, Vitec. Holder of 8,000 class B shares.
• Jerker Vallbo, CIO/CTO Vitec. Holder of 360,000 class A shares and 115,515 class B shares (incl. family members).
• Lars Stenlund, CEO Vitec. Holder of 1,570,000 class A shares and 152,280 class B shares (incl. family members).
• Olov Sandberg. Holder of 1,420,000 class A shares and 99,565 class B shares (incl. family members).

The Nomination Committee has held one meeting for the 2019 AGM. No fees were paid for the Nomination Committee's work.

Articles of Association

The Articles of Association stipulate that Vitec is a public limited liability company, whose activities comprise the purchase, management and sale of real estate and chattels, and other activities consistent therewith. The share capital shall be not less than SEK 1,600,000 and not more than SEK 6,400,000. The company's shares are to be issuable in two series, referred to as Class A and Class B. When voting at the AGM, each Class A share carries ten votes and a Class B share carries one vote. If both classes of share are issued, the total number of shares of each share class may not exceed 99 hundredths of the total number of shares in the company. The Articles of Association can be found in their entirety at our website, vitecsoftware.com.

Board of Directors

The Board's duty is to manage the company's affairs on behalf of the shareholders. Board work is governed by applicable laws and recommendations, and by the Board of Directors' Rules of Procedure, which comprises rules for the division of duties between the Board and CEO, financial reporting, investments and financing. The Rules of Procedure are adopted annually at the statutory Board meeting in direct connection to the AGM.

The Board's responsibility

The Board of Directors has overarching responsibility for the Group's organization and management, and ensuring that the guidelines for the management of the company's funds are appropriately formulated. The Board of Directors is responsible for ensuring that Vitec is managed pursuant to applicable laws and regulations, and adheres to the Rule Book for Issuers and the Swedish Corporate Governance Code, and the Group's adopted internal regulations. The Board is also responsible for developing and ensuring compliance with the Group's strategies through plans and goals, decisions regarding acquisitions and divestments of business operations, major investments, appointments and remuneration of Group management, and the continuous monitoring of operations throughout the year. The Board of Directors adopts the annual accounts, current business plan, business-related policies and the CEO's Rules of Procedure. The Board of Directors is also to adopt the requisite guidelines for company's behavior in society, with the aim of ensuring long-term value creation and that guidelines are adhered to with respect to company's behavior.

Board composition

According to the articles of association, Vitec's Board is to comprise three to ten members, and a maximum of three deputy members. The Board of Directors consists of five regular members and no deputies, and no member is employed by the company. Board members are elected by shareholders at the AGM, with a one-year term of office. The CEO is not a member of the Board, but presents reports at all Board meetings, except for when the CEO's work is under evaluation. The CEO reports to the Board about the Group's operational activities and ensures that the Board receives objective and relevant decision data. Board meetings comply with the requirements of Nasdaq Stockholm and the Swedish Corporate Governance Code with respect to independent Board members. Further information about each Board member is available at our website, vitecsoftware.com, under Investors/ Corporate governance.

Chairman of the Board

The Chairman of the Board, Crister Stjernfelt, manages Board work to ensure compliance with laws and regulations. The Chairman monitors operations through a dialog with the CEO, and is responsible for ensuring that other Board members receive the requisite information for high quality discussions and well-informed decisions. The Chairman also participates in the assessment and career development issues of the Group's senior executives.

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

Board members

Crister Stjernfelt

Chairman of the Board since 2013, Board Member since 2009. Born in 1943.

BSc in Business and Economics from Stockholm University. Other assignments/positions: Chairman of the Board at AcelQ AB and Umeå Datakonsulter AB. Board member of Carmenta AB.

Former CEO and President of WM-Data AB and CEO of Logica AB.

Holdings in Vitec: 8,000 class B shares, no convertibles.

Anna Valtonen

Board member since 2012. Born in 1974.

PhD. Department of Industrial and Strategic Design, Helsinki, Finland, 2007.

Other assignments/positions: Manages the Aalto University for art, design and architecture in Helsinki, Finland, and is the Vice President of Aalto University.

Former professor and President of Umeå Institute of Design (2009–2014). Prior to this, industrial design at companies such as Nokia (1997–2009), where the most recent position was Head of Design Research & Foresight. Also has several other international assignments and seats on various boards. Holdings in Vitec: No shares, no convertibles.

Birgitta Johansson-Hedberg

Board member since 2011. Born in 1947. BA, MSc in Psychology from Lund University, 1972. Other assignments/positions: Board Chairman of Sörmlands Sparbank. Board member of Brandstorp Holding AB and Hedberg Ekologkonsult AB. Former CEO of Lantmännen, Föreningssparbanken and Liber.

Holdings in Vitec: 7,500 class B shares, no convertibles.

Jan Friedman

Board member since 2010. Born in 1952.

MBA from the Stockholm School of Economics in 1978 Other assignments/positions: Chairman of the boards of Sportamore AB (publ), Nordic Public Affairs AB, Moment Group AB (publ), Grönklittsgruppen AB, Ticmate AB and Infrontit-Partner AB. Board member of Malux AB.

Many years of experience from various CEO, board and consultancy assignments.

Holdings in Vitec: 258,650 class B shares through the company, no convertibles.

Kaj Sandart

Board member since 1998. Born in 1953.

MSc in Engineering from the Royal Swedish Institute of Technology in 1977.

Other assignments/positions: Board member of Hallvarsson & Halvarsson Group and Deputy Member at Milox AB. Board member of association, Baltic Sea Action Group Sweden. Former Director of Communications at ÅF and CEO of Svensk Energiförsörjning.

Holdings in Vitec: 121,000 class B shares (including family members), no convertibles.

The Board's work

In the course of a financial year, Vitec holds a minimum of five regular Board meetings and a statutory Board meeting directly connected to the AGM. Extraordinary board meetings are held as needed. In 2018, a total of 12 Board meetings were held, including statutory meetings. All Board members elected by the AGM were present at all of the Board meetings, with the exception of Board members Jan Friedman and Anna Valtonen, who announced their absence for one meeting each. At minuted meetings, the Group's earnings and financial position were processed, and interim reports and annual accounts were approved for publication. Issues pertaining to the future were processed, such as market assessments, potential acquisitions, the focus of business activities and organizational issues. All of the meetings adhered to an approved agenda that was, together with documentation for each item on the agenda, communicated to all Board members about one week prior to the meeting.

Minutes of the meetings were sent to all Board members, in accordance with the Swedish Corporate Governance Code. At year-end, the Board's work was evaluated.

Evaluation

The Board's work is evaluated once a year, by having Board members answer a number of predefined questions about both formal and collaborative relationships. The Chairman compiles the answers, including comments, and presents them to the Nomination Committee. The evaluation for the 2018 financial year indicates well-functioning collaborations and solid efficiency within Board work. All of the Board members were positive about continued commitment.

Key decisions

In September, Vitec secured a SEK 500 million acquisition-loan facility with Nordea. It replaces two previous facilities of SEK 250 million and SEK 200 million at Nordea. The new facility increased the scope by SEK 50 million. The facility is used as financing for acquisitions and allows for Vitec to continue growing through acquisitions of vertically niched software companies.

In November, Vitec completed a directed new share issue of 2,500,000 Class B shares, at a subscription price of SEK 79 per share. The issue increased the company's total the Styrelsearbetets årscykel

number of shares to 32,338,900, allocated as 3,350,000 Class A shares and 28,988,900 Class B shares. Share capital increased by SEK 250,000 to total SEK 3,233,890.

In 2018, the following four corporate acquisitions were completed:

• PP7 Affärssystem AB, whose main product is a cloudbased software for project and business support that optimizes project flows and procedures for the construction and installation market in Sweden. The company reported sales of nearly SEK 8 million, with an adjusted EBITDA of SEK 1.4 million for the 2017 financial year.
• Agrando AS develops niche software for churching operations in the Nordic region, with Norway and Sweden as its primary markets. The company and its subsidiaries reported sales of SEK 42 million, with an EBITDA of SEK 5.5 million for the 2017 financial year.
• Cito IT A/S, whose main product is niched software for the pharmacy market in Denmark. The product is used for managing the entire chain of the Danish pharmacy workflow, such as product inventory, cash operations and prescriptions processing. The company reported sales of DKK 25.5 million, with an adjusted EBITDA of DKK 7.6 million for the 2016/17 financial year.
• Smart Visitor System develops specialized software for municipal leisure and cultural departments in Norway and Sweden. Their product is a complete enterprise system for handling reservations, visitors and grants. The company reported sales of SEK 23.7 million, with an adjusted EBIT-DA of SEK 3.1 million for the 2017 financial year.

The Board's Rules of Procedure

The Board's Rules of Procedure were adopted on April 23, 2018, and are to be revised annually at the statutory Board meeting, or revised as needed. The Rules of Procedure specify, among other items, the Board of Directors' responsibilities and assignments, the Chairman's assignments and auditing issues, and also indicates specific reports and financial information that the Board of Directors' should receive in advance of each regular Board meeting. The Rules of Procedure also comprise instructions to the CEO. The Rules of Procedure also define the Board's work as part of the Remuneration Committee.

Annual cycle of Board work Q1 Board meeting Earnings Year-end-report Audit Committee Evaluation of the Board Documents for the AGM Q2 Q3 Q4 Board meeting Interim report Q2 AGM and constituent meeting Company signatories appointed Interim report Q1 Audit Committee Budget directives Instructions for the CEO Strategy meeting Strategic plan Operating plan Financial goals Shareholders directives Product investments Board meeting Interim report Q3 Audit committee Board meeting Budget Jan Feb Okt Sep Aug Jul Jun May Apr Mar Nov Dec

Audit Committee and Remuneration Committee

The Board of Directors, as a whole, acts as both the Audit Committee and Remuneration Committee. The description of the Audit Committee's assignments is attached as an appendix to the current Rules of Procedure. The Remuneration Committees work is regulated in the relevant rules of procedure. The Rules of Procedure and attachments were adopted at the statutory Board meeting held on April 23, 2018. In 2018, the Audit Committee held three meetings and the Remuneration Committee held meetings in conjunction with regular Board meetings.

CEO and Group management

The CEO is appointed by the Board of Directors. Lars Stenlund is the CEO, while Lars Eriksson (M&A) and Patrik Fransson (IR Officer) are both appointed as Vice CEOs. The CEO is responsible for the daily management of the company and the Group's activities in accordance with the Board's instructions and regulations. This entails responsibility for financial reporting, preparing information and decision data, and ensuring that agreements and other measures do conflict with applicable laws and regulations. The Chairman of the Board holds annual assessment dialogs with the CEO, pursuant to the CEO's instructions and the applicable specification of requirements.

Group management cooperates with the CEO and they are jointly responsible for day-to-day operations. Group management comprises the CEO, CFO, M&A and IR Officer. Group management normally convenes monthly to review the preceding month's results, update plans and guidelines, make appropriate decisions and discuss strategic issues. A more comprehensive strategy meeting is held jointly with the Board of Directors once a year and as needed.

Group management makes decisions jointly on issues of a long-term and strategic nature, such as company development, marketing, financing, investments and environmental issues, pursuant to guidelines resolved by the Board of Directors' and instructions on the division of responsibilities between the Board and CEO. Group management also presents issues that are to be resolved by the Board.

Auditors

The AGM elects one or two auditors annually, or one or two registered auditing firms, with a maximum of two deputy auditors. The auditors review the company's annual report, accounts and the administration reports of the Board of Directors' and CEO. At the 2018 AGM, PricewaterhouseCoopers AB was elected, with Niklas Renström as auditor in charge. The Group's auditors participate in all audit committee meetings and in particular, provides a debriefing of its findings concerning internal controls, review of the third quarter interim report and the annual accounts. The audit plan is presented at the first Board meeting of the year.

Internal controls

The Board is responsible for the internal controls pursuant to the Swedish Companies Act and the Swedish Corporate Governance Code. Reports on internal controls and risk management concerning the financial reporting for the 2018 financial year have been prepared and submitted by the Board pursuant to the Swedish Annual Accounts Act Chap. 6 Sect. 6, and Item 7.4 of the Swedish Corporate Governance Code.

The Board is responsible for corporate governance work

within Vitec and thus, for working with internal controls. The overarching aim is to protect the Group's assets and thereby, the investments of shareholders. The Board is also responsible for ensuring that financial statements are prepared pursuant to applicable laws. The Group's financial statements are subject to quality assurance, by means of the Board processing all critical accounting matters and financial statements submitted by Vitec. This requires that the Board process matters pertaining to internal controls, regulatory compliance, material uncertainties in recognized values, any uncorrected misstatements, events after the balance-sheet date, changes in estimations and assessments, any realized irregularities and other circumstances that impact the quality of financial reporting.

Control environment

Proactive and committed Board work is the basis of effective internal controls. The Board has established well-defined processes and rules of procedure for its work. A vital component of the Board's work is to prepare and approve a number of fundamental policies, guidelines and frameworks pertaining to financial reporting. The company's governing documents comprise the "Board of Directors' Rules of Procedure" and the "CEO's instructions." The aim of these rules of procedure are to create the foundation for efficient internal controls. Follow-ups and revision are continuously undertaken and are communicated to all employees involved with financial reporting. The Board continuously evaluates the company's performance and results by means of an appropriate reporting package that comprises the income statement and prepared key metrics, as well as other material operational and financial information. The Board of Directors functions in its entirety as the Audit Committee. Thus, the Board of Directors in its entirety has monitored risk-management and internal-control systems in 2018. These systems are intended to ensure that operations are conducted pursuant to laws and regulations, as well as the efficiency of operations and reliability of financial reporting. The Board has reviewed and evaluated the procedures for financial accounting and reporting and followed this up with evaluations of the work performed by the external auditors, their qualifications and independence. Other adopted policies that provide the basis for Vitec's internal controls include the Finance Policy, Information Policy and Information Security Policy.

All business units work within, or are preparing to work within, the same structure, accounting system, accounting plan and policies, which facilitates the creation of appropriate procedures and control systems. Every business unit has rules of procedure adopted by Group management and some business unit also have an working board appointed by Group management.

Risk assessment

At Vitec, we apply a method of risk management and risk assessment to ensure that the risks to which the Group is exposed and which may impact internal controls and financial reporting, are managed by means of the adopted processes. Material risks that are considered include operational risks and risks pertaining to acquisitions and product development, sustainability risks

and risks that impact financial reporting. A systematic and documented updating of all identified risks is undertaken annually.

For risks that impact financial statements, we work con-

tinuously and proactively on their analyses, assessment and management, to ensure that the risks to which the company is exposed are managed appropriately within the adopted framework. Risk assessment takes into account, among other matters, the administrative procedures pertaining to invoicing and waste management. Material risks with a potential impact on financial reporting include items based on estimations and assessments, such as ongoing development projects, goodwill, etc.

Risk management

Risks are monitored in different ways and at different levels. At every meeting, Vitec's Board of Directors receive a presentation of the Group's earnings and financial position, liquidity, key metrics, etc. Group management jointly reviews the results of all reporting units monthly. All of the Group's investments are reviewed by Group management, with product investments constituting the single largest category. Product investments are subject to their own separate processes within budget work and monitoring. Monthly debriefing is undertaken and documented. A board is appointed for selected business units as needed. A business unit board comprises a minimum of one member from Group management and convenes two to four times annually, and minutes are taken. Financial risks such as liquidity, currency, credit and refinancing risks are managed by Group management, subject to the governance of the Finance Policy adopted by the Board of Directors.

Control activities

Control activities are designed to manage activities that the Board and Group management deem to be significant for operations, internal controls and financial reporting. Control structures are designed to manage risks that the Board deems to be material to the internal controls of financial reporting. These control structures consist of an organization with a well-defined division of responsibilities, well-defined procedures and distinct roles. Examples of control activities include the reporting of decision-making processes for substantial decisions (such as on new major customers, investments, agreements, etc.), as well as the review of all submitted financial reports. The regular analyses of financial reporting, combined with a Group-level analysis, are highly important in ensuring that the financial reports do not include any material errors.

In accordance with the Swedish Companies Act, the Board of Directors is to appoint an Audit Committee. The Board has found it appropriate for the Audit Committee to comprise the Board in its entirety. The relatively small size of the Board is deemed to facilitate such work. Auditing competencies exist among several Board members.

Information and communication

Vitec's governing documents, such as the Code of Conduct, policies, guidelines and manuals pertaining to internal and external communication, are subject to continuous updates and are communicated internally through relevant channels, such as internal meetings, internal newsletter e-mails and the Group's intranet. Communication with external parties is governed by a clearly established communication policy comprising all the guidelines on the dissemination of information. The aim of the policy is to ensure that all disclosure requirements pursuant to the applicable regulations on issuers of shares are correctly and fully complied with. Information about

the Code of Conduct, policies, guidelines and manuals are available on our intranet. There is also information available on financial reporting, in the form of instructions, manuals, schedules and checklists. The Group's accounting handbook is also key to our financial reporting and is available on our intranet, and is continuously updated with new applicable regulatory frameworks, such as from IFRS and the Nasdaq Stockholm.

Follow-up and monitoring

The business units are followed up monthly by the VP Operations, together with the management of the respective business unit. Group management has appointed an working board for some operational units. For issues of strategic importance, projects are created, where Group management participates in the management group. Group management analyses the Group's outcome compared with the preceding year, budget and forecasts. Group managements analyses and conclusions are communicated to the Board at every regular meeting.

We continuously assess internal controls on financial reporting and ensure the function of Board reports. This is mainly undertaken by asking questions about and participating in the CFO's work. The company's auditors participate on three occasions annually and provide information about their observations of the company's internal procedures and control systems, which allows for Board members to ask questions. On an annual basis, the Board takes decisions on significant risk areas and evaluates the internal controls.

Internal audit

Having taken into consideration the size and complexity of operations, combined with existing reports to the Board and Audit Committee, the Board of Directors has concluded that it is not financially justifiable to set up a separate internal audit function. The abovementioned internal controls are deemed to be sufficient for assuring the quality of financial reporting.

Guidelines for the remuneration of senior executives

The 2018 AGM passed a resolution adopting the following guidelines for remuneration to the Group's CEO senior and other senior executives at Vitec. The AGMs resolution concur with previously applied remuneration policies. The guidelines apply to agreements signed after the 2018 AGM, or to any subsequent cases of amendments to remuneration. The Board of Directors has not appointed a Remuneration Committee, but instead manages, in its entirety, issues pertaining to remuneration and other employment terms and conditions. The AGM resolved that remuneration of senior executives is to consist of a fixed salary and pension privileges. Pension benefits must be defined-contribution based. The total remuneration should be competitive in the market and be proportionate to each executive's responsibility and authority. When determining salaries, consideration must be given to the individual's field of responsibilities, expertise and experience, which are generally subject to annual reviews. The Board of Directors may deviate from these guidelines if there are specific reasons to do so in an individual case.

Prior to the 2019 AGM, the Board proposed that terms and conditions remain unchanged, pertaining to guidelines on remuneration to the Group's CEO senior and other senior executives.

Lars Stenlund, Patrik Fransson, Maria Kröger and Lars Eriksson

Members of Group Management

Lars Stenlund

CEO and founder of the company, together with Olov Sandberg. Lars was a Board member of Vitec from 1985 to 2009. Employed since 1985. Born in 1958.

PhD in applied physics (1987) from Umeå University. Board member of Umeå University, Umeå Universitet Holding AB, Railcare AB (publ) and C4 Contexture AB. Previous experience: Active at Umeå University. Holdings in Vitec: 1,570,000 class A shares, 152,280 class B shares (including family members). No convertibles. No warrants.

Lars Eriksson

Vice President, M&A and Business Development. Employed since 2011. Born in 1955.

MSc. Eng., Industrial Economics from Linköping University in 1979.

Board member of Affärskonsulting Lars Eriksson AB. Previous experience: President and Board member of Företagsbyrån i Stockholm AB.

Holdings in Vitec: 25,640 class B shares 2,403 KV1801. No warrants.

Maria Kröger

CFO. Employed since 2011. Born in 1968. MBA from Umeå University in 1990. Previous experience: Authorized Public Accountant, Ernst & Young Holdings in Vitec: 50,420 class B shares (including family members). 2,403 KV1801.

Patrik Fransson

Vice President, IR Officer. Employed since 2011. Born in 1966. Computer science, Umeå University, 1990, MBA Executive Program, Stockholm School of Economics. Board member of Avtre AB. Previous experience: WM-data, Director Logica, CIO of H&M and CEO of CodeFactory AB. Holdings in Vitec: 107,572 class B shares. 2,403 KV1801. No warrants.

Share and ownership structure

At the close of the financial year, the total number of shares issued was 32,338,900, of which 3,350,000 were class A shares, (33,500,000 votes) and the remaining 28,988,900 were class B shares (28,988,900 votes). Current share capital is approximately SEK 3.2 million, with a quotient value of SEK 0.10 per share. The ownership structure and Board of Directors' shares pertain to holdings at December 31, 2018, to the best of Vitec's knowledge. The number of shareholders was 4,255.

Apart from a pre-emption clause for class A shares, there were no provisions limiting the right to share transfers. There are no limitations on the number of votes each shareholder is entitled to cast at the AGM or other general meetings. Board members and any deputy Board members are appointed for at the AGM the period until the next AGM. There are no rules in the Articles of Association regarding the appointment and dismissal of Board members. Vitec Software Group AB (publ) has not signed any agreements that could be impacted by any takeover bids. Vitec Software Group AB (publ) does not hold any treasury shares.

Employees of Vitec Software Group AB (publ) do not hold

shares that restrict them from the direct exercise of their voting rights. An ongoing convertibles program for employees allows for conversion to a maximum of 200,288 class B shares. There is also a convertible debenture originating from the acquisition of Vitec MV A/S, valued at SEK 20.0 million, which, upon full conversion will increase the number of shares by 234,317 class B shares.

Authorization by the 2018 AGM which entitled the Board of Directors to pass one or more resolutions up to and including the date of the next AGM regarding the issue of up to 2,500,000 new class B shares deviating from the preferential rights of shareholders were utilized in their entirety through a directed new share issue in November 2018. Vitec is listed on the Nasdaq Stockholm Mid Cap list. At December 31, 2018, the share price was SEK 77.60 (87.00). At year-end, the total market capitalization of the issued shares was SEK 2,509 million (2,596).

The Vitec share was traded under the Mid Cap segment as of January 2, 2017. The Mid Cap segment includes companies with a market capitalization of between EUR 150 million and EUR 1 billion.

Multi-year overview

		2018	2017	2016	2015	2014	2013	2012
Net sales	(SEK million)	1,017	855	675	618	492	372	389
of which the Auto segment	(SEK million)	170	156	119	71	28	-	-
of which the Energy segment	(SEK million)	26	26	26	24	23	20	21
of which the Real Estate segment	(SEK million)	206	190	158	143	134	131	120
of which the Finance & Insurance segment	(SEK million)	132	142	127	101	55	14	13
of which the Environment segment	(SEK million)	46	44	23	11	22	26	65
of which the Estate Agents segment	(SEK million)	155	138	155	207	186	181	169
of which the Education & Health segment	(SEK million)	278	158	66	61	44	-	-
of which, shared	(SEK million)	2	1	1	0	1	0	1
Growth	(%)	19	27	9	26	32	-5	8
Operating profit	(SEK million)	128	107	88	101	69	41	43
Profit after financial items	(SEK million)	117	98	82	95	65	38	40
Profit after tax	(SEK million)	97	79	67	78	49	30	32
Profit after tax attributable to the Parent Company shareholders	(SEK million)	97	79	67	78	49	30	31
Earnings growth attributable to the Parent Company shareholders	(%)	22	19	-15	59	62	-3	26
Profit margin	(%)	10	9	10	13	10	8	8
Operating margin	(%)	13	12	13	16	14	11	11
Balance-sheet total	(SEK million)	1,676	1,262	1,097	872	773	388	429
Equity/assets ratio	(%)	40	32	30	31	34	44	36
Equity/assets ratio after full conversion	(%)	42	35	32	33	37	48	41
Debt/equity ratio	(multiple)	1.75	2.22	2.25	2.09	1.70	1.53	1.66
Return on capital employed	(%)	13	14	14	21	18	16	20
Return on equity	(%)	18	22	22	29	23	19	24
Sales per employee	SEK 000s	1,658	1,584	1,445	1,465	1,430	1,332	1,297
Added value per employee	SEK 000s	1,316	1,258	1,198	1,212	1,164	1,052	985
Personnel expenses per employee	SEK 000s	858	828	813	797	801	793	732
Average no. of employees	(persons)	613	540	467	422	344	279	300
Adjusted equity per share	(SEK)	20.71	13.34	11.37	9.24	8.85	6.39	5.92
Earnings per share	(SEK)	3.23	2.70	2.27	2.66	1.75	1.16	1.30
Earnings per share after dilution	(SEK)	3.22	2.70	2.25	2.64	1.68	1.09	1.16
Dividend paid per share	(SEK)	1.10	1.00	0.90	0.67	0.55	0.50	0.40
Cash flow per share	(SEK)	8.01	6.78	5.20	5.09	4.40	1.97	2.25
Basis of computation:
Earnings from calculation of earnings per share	(SEK million)	97	79	67	78	49	30	31
Cash flow from calculation of cash flow per
share	(SEK million)	240	200	153	150	123	52	55
Weighted average number of shares (weighted average)	(thousands)	30,017	29,425	29,397	29,397	28,003	26,142	24,604
No. of shares after dilution	(thousands)	30,437	29,539	29,839	29,788	29,432	28,175	27,338
No. of shares issued at balance-sheet date.	(thousands)	32,339	29,839	29,397	29,397	29,397	26,542	25,742
Share price at close of the respective period	(SEK)	77.60	87.00	75.50	75.00	26.50	17.70	13.80

For definitions, refer to page 105 Definitions of key figures.

Proposed appropriation of profits

THE FOLLOWING FUNDS AT THE DISPOSAL OF AGM:

	566,079,919
Profit for the year	68,656,138
Share premium reserve	321,312,036
Earnings brought forward	176,111,745

THE BOARD OF DIRECTORS PROPOSES THAT THESE FUNDS BE DISTRIBUTED AS FOLLOWS:

	566,079,919
To be carried forward	205,961,203
premium reserve
To be carried forward to the share	321,312,036
Dividends of SEK 1.20 per share to shareholders	38,806,680

The Board of Directors' statement pursuant to the Swedish Companies Act (2005:551) Chap. 18 Sect. 4

The Board of Directors proposes that shareholders at the AGM of April 10, 2019, pass a resolution on a maximum dividend of SEK 38,806,680. This statement was prepared pursuant to the provisions of the Swedish Companies Act chap. 18 Sect. 4 and constitutes the Board of Directors' assessment of whether the proposed dividend is justifiable with regard to the provisions of the Swedish Companies Act Chap. 17 Sect. 3, paragraphs 2 and 3.

The Board of Directors' deems that the scope of the proposed dividend strikes a satisfactory balance between the Group's capital structure and future growth potential. The Board's understanding is that the proposed dividend will not prevent the company and the rest of the Group from fulfilling their short- or long-term obligations, and that it is thus justifiable, with consideration given to what is referred to as the "prudence rule" of the Swedish Companies Act (2005:551) Chap. 17 Sect. 3.

Consolidated statement of profit/loss

	Note	2018	2017
OPERATING REVENUES	(2, 3)
Recurring revenues		743,856	609,970
License revenues		34,988	39,563
Service revenues		148,700	145,672
Other		89,219	59,824
Net sales		1,016,763	855,029
Capitalized development costs		127,549	97,213
Other operating revenues	(5A)	6,402	1,343
TOTAL REVENUES		1,150,714	953,585
OPERATING EXPENSES
Goods for resale		-68,695	-48,394
Subcontractors and subscriptions		-110,515	-100,791
Other external expenses	(5B, 10)	-157,655	-124,761
Personnel expenses	(4)	-526,367	-446,917
Depreciation/amortization and impairment	(8A)	-158,463	-126,882
Other operating expenses	(5A)	-647	862
TOTAL EXPENSES		-1,022,342	-846,883
OPERATING PROFIT		128,372	106,702
Financial income		289	328
Financial expenses		-11,886	-8,903
NET FINANCIAL ITEMS	(5C)	-11,597	-8,575
PROFIT BEFORE TAX	(6)	116,775	98,127
Tax		-19,855	-18,701
PROFIT FOR THE YEAR		96,920	79,426
Profit for the year attributable to:
Parent Company shareholders		96,920	79,426
Earnings per share	(15A)
Before dilution		3.23	2.70
After dilution		3.22	2.70
Average number of shares		30,016,982	29,424,555
Number of shares after dilution		30,436,771	29,538,825

Consolidated statement of comprehensive income

Note	2018	2017
PROFIT FOR THE YEAR	96,920	79,426
OTHER COMPREHENSIVE INCOME
Items that may be restated in profit or loss
Restatement of net investments in foreign operations	28,637	4,383
Net investment hedges for foreign operations	-16,302	-7,993
Deferred tax on net investment hedges for foreign operations	3,489	1,758
	15,824	-1,852
Items restricted from restatement in profit or loss
Remeasurement of net pension obligations	-4,334	-563
Deferred tax on net pension obligations	953	129
	-3,381	-433
TOTAL OTHER COMPREHENSIVE INCOME/LOSS	12,443	-2,285
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	109,363	77,141
Total comprehensive income attributable to:
Parent Company shareholders	109,363	77,141

Consolidated statement of financial position

Note	Dec 31, 2018	Dec 31, 2017
ASSETS
(8A) Fixed assets
Intangible fixed assets
Goodwill	385,570	282,612
Capitalized development expenditure	269,043	197,907
Software	3,154	4,041
Brands	80,321	74,280
Product rights	269,988	290,650
Customer agreements	122,906	94,837
	1,130,983	944,327
Tangible property, plant and equipment
Buildings	8,422	8,676
Investments in leased premises	3,016	2,819
Equipment, fixtures and fitting	28,351	26,461
	39,788	37,956
Financial fixed assets
Other non-current receivables	947	1,791
(6) Deferred tax assets	8,243	6,714
	9,190	8,505
Total non-current assets	1,179,961	990,788
Current assets
(8C) Inventories
Goods for resale	5,302	3,619
	5,302	3,619
Current receivables
(9A) Accounts receivable	201,297	172,450
Current tax assets	20,740	9,008
Other receivables	6,346	841
(8D) Prepaid expenses and accrued income	26,701	27,296
	255,083	209,595
Short-term investments	46	44
(9B) Cash and cash equivalents	235,256	57,924
Total current assets	495,687	271,182
TOTAL ASSETS	1,675,648	1,261,970

	Note	Dec 31, 2018	Dec 31, 2017
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity	(12)
Share capital		3,234	2,984
Other capital contributions		316,637	121,963
Reserves		6,591	-5,852
Retained earnings including profit of the year		343,166	279,069
Equity attributable to Parent Company shareholders		669,628	398,164
Non-current liabilities
Convertible debentures	(9D, 9E, 11)	39,828	38,789
Liabilities to credit institutions	(9A, 9E, 11)	463,805	336,129
Post-employment remuneration of employees	(10A)	4,792	8,225
Other non-current liabilities	(9E, 11)	1,045	3,270
Deferred tax	(6)	152,887	135,844
Total non-current liabilities		662,357	522,257
Current liabilities
Liabilities to credit institutions	(9E, 11)	5,620	31,180
Accounts payable		39,910	31,902
Tax liabilities		12,923	8,961
Other liabilities	(9C)	72,271	77,122
Accrued expenses and prepaid income	(8E)	212,939	192,384
Total current liabilities		343,663	341,549
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		1,675,648	1,261,970
Pledged assets	(15B)	803,118 -	350,975 -
Contingent liabilities

Condensed consolidated statement of changes in equity

	Share capital	Other capital contributions		Reserves* Retained earnings	Total equity attributable to parent company shareholders
OPENING EQUITY, JAN 1, 2017	2,940	121,963	-3,567	212,877	334,213
Profit for the year	-	-	-	79,426	79,426
Other comprehensive income	-	-	-2,285	-	-2,285
Total comprehensive income/loss	2,940	121,963	-5,852	292,303	411,354
Convertible debenture with stock options	-	-	-	2,221	2,221
Redemption of debentures	44	-	-	13,942	13,986
Dividends paid	-	-	-	-29,397	-29,397
CLOSING EQUITY, DEC 31, 2017	2,984	121,963	-5,852	279,069	398,164
Profit for the year	-	-	-	96,920	96,920
Other comprehensive income	-		12,443	-	12,443
Total comprehensive income/loss	2,984	121,963	6,591	375,989	507,527
New share issue after issuing costs**	250	194,674	-	-	194,924
Dividends paid	-	-	-	-32,823	-32,823
CLOSING EQUITY, 31 DECEMBER 2018	3,234	316,637	6,591	343,166	669,628

* Reserves comprise actuarial changes to pension liabilities and to translation differences when translating foreign operations, as well as hedge accounting of the same.

** New share issues were recognized in their net amounts after issuing costs of SEK 2,576,000.

Consolidated statement of cash flows

Note	2018	2017
OPERATING ACTIVITIES
Operating profit	128,373	106,702
Adjustments for non-cash items
Other operating revenues	-6,402	-1,343
Depreciation/amortization and impairment	158,463	126,882
Unrealized foreign exchange gains	647	862
	281,081	233,103
Interest received	289	328
Interest paid	-10,675	-8,438
Income tax paid	-30,218	-25,381
CASH FLOW FROM OPERATING ACTIVATES BEFORE CHANGES IN WORKING CAPITAL Changes in working capital	240,477	199,612
Decrease/Increase in inventories	115	8,836
Decrease/Increase in accounts receivable	-18,982	-20,754
Increase/Decrease in operating receivables	-21,543	2,233
Increase/Decrease in accounts payable	3,807	6,839
Increase/Decrease in operating liabilities	-6,755	-9,136
CASH FLOW FROM OPERATING ACTIVITIES INVESTING ACTIVITIES	197,119	187,630
Acquisition of subsidiaries (net impact on liquidity)*	-134,285	-88,826
Purchase of intangible fixed assets and capitalized development costs	-128,289	-101,500
Purchase of property, plant and equipment	-14,346	-7,750
CASH FLOW FROM INVESTING ACTIVITIES	-276,920	-198,076
FINANCING ACTIVITIES
Dividends to Parent Company shareholders	-32,823	-29,397
Borrowings	(13) 181,928	109,129
Repayment of loans**	(13) -90,023	-95,275
New share issue	194,924	-
CASH FLOW FROM FINANCING ACTIVITIES	254,006	-15,543
CASH FLOW FOR THE YEAR	174,205	-25,989
CASH AND CASH EQUIVALENTS ON JAN 1	57,968	80,920
Exchange-rate differences in cash and cash equivalents	3,129	3,037
CASH AND CASH EQUIVALENTS AT YEAR-END***	235,302	57,968

*Payments pertaining to the acquisition of subsidiaries during the period, pertained to PP7 Affärssystem AB, Agrando AS, Cito IT A/S and Smart Visitor System AB. Net cash flow was SEK 110.0 million. The acquisitions pertained to all shares outstanding in their entirety and entailed the gain of controlling influence. Furthermore, a final settlement of SEK 22.9 million was paid for supplementary purchase considerations pertaining to Futursoft Oy and SEK 1.4 million for Fox Publish AS. The payments did not entail any changes to controlling influence or the total number of shares held.

Payments pertaining to the acquisition of subsidiaries in 2017 comprised payments for MV-Nordic A/S. Net cash flow was SEK 86.7 million. The acquisition pertained to all shares outstanding in their entirety and entailed the gain of controlling influence. A residual payment of SEK 2.1 million for Nice AS was also transacted. The payment did not entail any changes to controlling influence or the total number of shares.

**Repayments of loans consists of SEK 6.6 million (29.8) for amortization on bank loans and SEK 83.4 million (65.5) in repayments to credit facilities.

***Cash and cash equivalents are defined as funds exposed to an immaterial risk of fluctuations in value, and which are easily convertible to liquid funds of a known amount. Current investments comprise funds that are convertible to cash at a known amount within one bank day.

Parent Company income statement

	Note	2018	2017
OPERATING REVENUES
Net sales	(14A)	62,350	79,868
Other operating revenues	(5A)	69,041	31,208
OPERATING EXPENSES	(14A)
Other external expenses	(5B, 10B)	-120,591	-75,112
Personnel expenses	(4)	-37,332	-30,200
Depreciation/amortization and impairment losses	(8B)	-2386	-2628
OPERATING PROFIT		-28,917	3,136
PROFIT FROM FINANCIAL ITEMS:	(5C)
Income from participation in Group companies		77,599	64,898
Interest income and similar profit items		437	231
Interest expenses and similar loss items		-11,817	-8,289
NET FINANCIAL ITEMS		66,219	56,840
PROFIT AFTER FINANCIAL ITEMS		37,302	59,976
Appropriations	(14C)	28,481	4,912
PROFIT BEFORE TAX		65,783	64,888
Tax	(6)	2,874	57
PROFIT FOR THE YEAR		68,657	64,945

Balance sheet, Parent Company

Note	Dec 31, 2018	Dec 31, 2017
ASSETS
Fixed assets
(8B) Intangible fixed assets
Software	2,419	3,301
	2,419	3,301
(8B) Tangible property, plant and equipment
Buildings	8,423	8,609
Investments in leased premises	786	641
Equipment, fixtures and fitting	2,081	2,182
	11,290	11,432
(8B) Financial fixed assets
Participations in subsidiaries	1,180,384	972,519
Receivables from Group companies	5,704	7,702
(6) Deferred tax assets	2,931	57
	1,189,019	980,278
Total non-current assets	1,202,728	995,011
Current assets
Current receivables
Receivables from Group companies	87,380	81,349
Current tax assets	4,687	4,687
Other receivables	2,298	1,011
(8D) Prepaid expenses and accrued income	4,345	3,549
	98,710	90,596
Cash and bank balances	222,908	51,616
Total current assets	321,618	142,212
TOTAL ASSETS	1,524,346	1,137,223

	Note	Dec 31, 2018	Dec 31, 2017
SHAREHOLDERS' EQUITY AND LIABILITIES
Restricted equity	(12)
Share capital		3,234	2,984
Statutory reserve		14,917	14,917
Total restricted equity		18,151	17,901
Unrestricted equity	(12)
Share premium reserve		321,312	126,638
Earnings brought forward		176,112	143,990
Profit for the year		68,656	64,945
Total unrestricted equity		566,079	335,572
Total shareholders' equity		584,231	353,473
Untaxed reserves	(14D, 14E)	2,448	2,429
Non-current liabilities	(9B)
Convertible debentures	(9D, 9E, 11)	39,828	38,789
Liabilities to credit institutions		463,709	335,822
Total non-current liabilities		503,537	374,611
Current liabilities
Liabilities to credit institutions	(9E, 11)	5,620	31,180
Accounts payable		5,462	3,872
Liabilities to Group companies		405,424	338,228
Other short-term liabilities	(9C)	12,042	27,217
Accrued expenses and prepaid income	(8E)	5,582	6,213
Total current liabilities		434,130	406,710
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		1,524,346	1,137,223
Pledged assets	(15B)	649,465	337,445
Contingent liabilities		-	-

Parent Company changes in shareholders' equity

	Share capital	Statutory reserve	Share premium reserve	Retained earnings and net income for the year	Total shareholders' equity
OPENING EQUITY, JAN 1, 2017	2,940	14,917	110,475	173,386	301,718
Convertible debenture with stock options	-	-	2,221	-	2,221
Debenture conversion	44	-	13,942	-	13,986
Dividends paid	-	-	-	-29,397	-29,397
Profit for the year	-	-	-	64,945	64,945
OPENING EQUITY, JAN 1, 2018	2,984	14,917	126,638	208,935	353,473
New share issue after issuing costs**	250	-	194,674	-	194,924
Dividends paid	-	-	-	-32,823	-32,823
Profit for the year	-	-	-	68,656	68,656
CLOSING EQUITY, 31 DECEMBER 2018	3,234	14,917	321,312	244,768	584,231

* New share issues were recognized in their net amounts after issuing costs of SEK 2,576,000.

Cash Flow Statement, Parent Company (indirect method)

Note	2018	2017
OPERATING ACTIVITIES
Operating profit	-28,917	3,136
Adjustments for non-cash items
Depreciation/amortization and impairment losses	2,386	2,628
	-26,531	5,764
Dividends and Group contributions received	64,898	56,811
Interest received	437	231
Interest paid	-10,777	-7,909
Income tax paid	-5	-6,789
CASH FLOW FROM OPERATING ACTIVATES BEFORE CHANGES IN WORKING CAPITAL Changes in working capital	28,022	48,108
Increase/Decrease in operating receivables	32,243	7,732
Increase/Decrease in operating liabilities	79,916	44,438
CASH FLOW FROM OPERATING ACTIVITIES INVESTING ACTIVITIES	140,181	100,278
Acquisition of subsidiaries*	-223,743	-91,169
Acquisitions of intangible assets	-598	-881
Purchase of property, plant and equipment	-764	-523
Change in non-current receivables	1,999	-1,265
CASH FLOW FROM INVESTING ACTIVITIES FINANCING ACTIVITIES	-223,106	-93,838
Dividends paid	-32,823	-29,397
(13) Borrowings	181,928	109,129
New share issue	194,924	-
(13) Repayment of debt**	-89,812	-95,113
CASH FLOW FROM FINANCING ACTIVITIES	254,217	-15,381
CASH FLOW FOR THE YEAR	171,290	-8,941
Cash and cash equivalents on Jan 1	51,616	60,557
CASH AND CASH EQUIVALENTS AT YEAR-END***	222,908	51,616

*Payments pertaining to the acquisition of subsidiaries during the period, pertained to PP7 Affärssystem AB, Agrando AS, Cito IT A/S and Smart Visitor System AB. The purchase consideration was SEK 199,400. The acquisition pertained to all shares outstanding in their entirety and entailed the gain of controlling influence. Furthermore, a final settlement of SEK 22.9 million was paid for supplementary purchase considerations pertaining to Futursoft Oy and SEK 1.4 million for Fox Publish AS. The payments did not entail any changes to controlling influence or the total number of shares held. In addition, legal expenses of SEK 0.07 million were paid for acquisitions from the preceding year.

Payments pertaining to the acquisition of subsidiaries in 2017 comprised payments for MV-Nordic A/S. The purchase consideration was SEK 88.8 million. The acquisition pertained to all shares outstanding in their entirety and entailed the gain of controlling influence. A residual payment of SEK 2.1 million for Nice AS was also transacted. The payment did not entail any changes to controlling influence or the total number of shares. In 2017, legal expenses of SEK 0.3 million were paid for acquisitions from the preceding year.

**Repayment of debt consisted of SEK 6.4 million (29.6) for amortization on bank loans and SEK 83.4 million (65.5) in repayments to credit facilities.

***Cash and cash equivalents are defined as funds exposed to an immaterial risk of fluctuations in value, and which are easily convertible to liquid funds of a known amount. Current investments comprise funds that are convertible to cash at a known amount within one bank day.

NOTE 1 ACCOUNTING AND MEASUREMENT POLICIES

General

The consolidated accounts were prepared pursuant to the Swedish Annual Accounts Act, International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as well as the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU for application within the EU. Recommendation RFR 1, Supplementary accounting rules for corporate groups, issued by the Swedish Financial Reporting Board, has also been applied.

The Parent Company applies the same accounting policies as the Group, with the exception of entries specified in Note 14 of the Parent Company's accounting policies.

The Annual Report and the consolidated financial statements were approved for publication by the Board of Directors on March 18, 2019. The consolidated statement of comprehensive income and the statement of financial position, and the Parent Company income statement and balance sheet, are subject to approval by the AGM on April 10, 2019.

Presentation of accounting policies and notes

As of 2019, notes have been moved into new groupings, where we have chosen to group together information about items that are subject to similar methods of measurement. The notes of the annual accounts are thus grouped into several principal areas, where accounting policies are collected for a group of notes. General accounting and measurement policies are presented in Note 1.

Note groupings:

• 1. General accounting and measurement policies
• 1. Segments
• 1. Revenues from contracts with customers
• 1. Remuneration of employees
• 1. Other significant profit/loss items
• 1. Tax
• 1. The Group's composition
• 1. Non-financial assets and liabilities
• 1. Financial assets and liabilities
• 1. Leasing
• 1. Financial risks and capital risk management
• 1. Shareholders' equity
• 1. Cash flow
• 1. Parent Company
• 1. Miscellaneous information
• 1. Events after the balance-sheet date

Prerequisites for preparing the financial reports Functional currency and reporting currency

The Parent Company's functional currency is SEK, which is also the presentation currency for the Parent Company and the Group. This means that the financial statements are presented in SEK. All amounts are rounded off and recognized to the nearest thousand SEK (SEK thousand) unless otherwise indicated.

Valuation bases

Assets and liabilities are measured at their historical cost. No financial assets or liabilities are recognized at a value that substantially deviates from their fair at December 31, 2018.

Classification of current and long-term items

In all significant respects, long-term receivables and liabilities are recognized in the amounts that are expected to fall due for payment after one year, counted from the close of the reporting period. Current receivables and liabilities fall due for payment within one year of the close of the reporting period.

Receivables and liabilities in foreign currency

Operating receivables and liabilities in foreign currency are translated to the exchange rate at the end of the reporting period and exchange-rate differences are recognized in operating profit/loss.

Estimates and assumptions

The preparation of financial statements in conformity with IFRS requires the use of critical accounting estimates and assumptions. The Board of Directors and Group management exercise their judgement in the process of applying the company's accounting policies. These estimates and assumptions are based on historic experience and other factors that are deemed to be plausible under existing circumstances. If other assumptions are made or other circumstances influence the matter the actual outcome can differ from these assessments. The principles for estimates and assumptions are subject to regular testing. Up to and including the submission date of annual accounts, nothing has occurred to prompt any amendments.

The areas in which estimates and assumptions are of material significance to Vitec's consolidated financial statements are:

• Capitalized development expenditure, product rights, customer agreements, brands and goodwill. These primarily pertain to the recovery of the value for development work, product rights and customer agreements, as well as impairment testing for brands and goodwill. The estimates and assumptions that are associated with a significant risk for material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed in Note 8, Non-financial assets and liabilities.
• Defined-benefit pension plans These primarily pertain to a pension plan in Norway and the actuarial assumptions used for the calculation. The assumptions are reported under Note 4, Remuneration of employees.
• Supplementary purchase considerations for corporate acquisitions. These pertain to acquisitions where the purchase consideration is divided into two or more parts. One part that is paid in conjunction with the acquisition and other parts that are paid in the event that specified terms and conditions are fulfilled within a specified period of time following the acquisition. These may pertain to, for example, earnings growth, an improved percentage of

recurring revenues and/or guarantee commitments. Purchase considerations are measured at fair value at the acquisition date. An acquisition plan must be established within 12 months, after which adjustments to the purchase consideration are recognized in profit/loss for the year. At December 31, 2018, there was one supplementary purchase consideration in the balance sheet subject to assessment. The supplementary purchase consideration concerns Cito IT A/S, which will entail a payment during the third quarter of 2019.

Provisions

Provisions are recognized in the balance sheet when there is a formal or informal obligation as a result of a past event and it is likely that an outflow of resources will be necessary to settle the obligation and a reliable estimation of the amount can be made. In cases where part of or the entire amount required for settling a provision is expected to be compensated for by a third party or parties, the compensation is recognized when, and only when, it is essentially ascertained that it will be paid for if the obligation is to be settled. The compensation is recognized as a separate asset in the balance sheet. The amount recognized for the compensation may not exceed the provision. The cost of a provision is recognized in profit or loss as net after deduction for any compensation from third parties.

New or amended accounting policies as of 2018

A number of new or amended standards entered into force as of 2018. The standards that are significant to Vitec are IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial instruments. Their impact is explained in Note 3 and Note 9.

New or amended accounting policies as of 2019

A number of new or amended standards entered into force as of 2019. These have not been applied in advance by Vitec. To the extent that the anticipated impact of these amendments are not discussed below, they are not deemed to have any material impact on the Group's accounts.

IFRS 16 Leasing comes into force on January 1, 2019. The new standard entails the elimination of any differences between operational and financial leasing. Leasing agreements exceeding 12 months are to be recognized in the balance sheet. The standard will impact how we recognize future lease agreements pertaining to premises. As of January 1, 2019, our lease agreements will be recognized as assets and liabilities in the consolidated statement of financial position. Instead of leasing expenses, we will be recognizing depreciation/impairment and interest expenses in the consolidated statement of comprehensive income. The expected impact on the statement of financial position is approximately SEK 50 million in increased assets and liabilities. In the statement of comprehensive income, profit/ loss after tax is expected to be reduced by approximately SEK 1 million in the next year. We will apply the new standard by using the modified retrospective approach, which entails that comparative data will not be restated. Outstanding leases as of January 1, 2019, will be reported in accordance with the new standard.

NOTE 2 SEGMENTS

Vitec develops and delivers software aimed at various niche markets. Some of our software products comprise complete enterprise systems, while others provide support for specific aspects of our customers' operations. We report our operations under seven administrative segments. These segments in turn consist of 18 independent business units.

In 2018, Vitec Group's segments comprised: Auto, Energy, Real Estate, Finance & Insurance, Environment, Estate Agents and Education & Health.

• Auto: software for the automotive industry and machinery sector in Denmark, Finland, Norway and Sweden.
• Energy: advanced forecasting systems for electricity traders, as well as calculation and mapping systems to owners of electricity and district-heating grids. The geographic market for this segment comprises the Nordic and Baltic countries, the rest of Europe and the Middle East. Kr
• Real Estate: software for the construction and real-estate sectors in Norway and Sweden.

Finance & Insurance: software for banks, financial institutions and insurance companies in Denmark, Norway and Sweden. Other countries 1%

2018 i korthet

• Environment: software for private and municipal wasteand-resource processing in Finland. Norway 21%
• Estate Agents: software for real estate agents in Norway and Sweden. Sweden 32%
• Education & Health: software to individuals with reading and writing difficulties in Denmark, Norway and Sweden, as well as software for healthcare companies in Finland. The segment also offers software for church operations in the Nordic region, with the primary markets comprising Norway and Sweden; software for the pharmacy market in Denmark, and software for municipal leisure and cultural departments in Norway and Sweden. Finland 18% Denmark 28% Föreslagen utdelning: 1,20

Further information about segment revenues can be found in Note 3. Anläggningstillgångarnas fördelning per land

Fixed assets per country

	Fixed assets
	2018	2017
Sweden	221.8	178.5
Denmark	406.0	316.1
Finland	229.1	234.5
Norway	314.0	253.1
Rest of Europe	-	-
Rest of the world	-	-
	1,170.8	982.3

OPERATING SEGMENTS

	Auto Energy Real Estate			Finance & Insurance		Environment
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Per operating segment (SEK million)
Net sales	170.6	156.2	26.1	25.7	206.7	190.1	133.1	143.9	47.8	23.2
Capitalized own work	19.0	14.0	2.6	2.9	23.6	19.0	24.9	20.3	2.6	2.3
Depreciation/amortization and impairment losses	-23.4	-20.4	-1.9	-2.1	-17.9	-16.7	-23.4	-20.8	-3.7	-3.2
Operating profit	28.3	19.5	9.3	8.0	44.3	32.2	12.7	29.0	5.5	5.5
Net financial items	-	-	-	-	-0.1	-	-	-	-	-
Consolidated profit/loss before tax
Fixed assets
Investments in fixed assets for the year	20.1	16.2	2.6	2.9	36.1	19.9	28.1	20.6	2.8	34.8
Fixed assets by segment
Goodwill and brands	112.8	110.8	0.0	0.0	61.6	40.7	36.7	51.9	12.1	11.6
Product rights and customer agreements	77.5	89.3	0.0	0.0	19.0	21.0	48.5	55.9	19.3	21.4
Capitalized development expenditure	39.3	27.4	6.9	6.3	49.0	36.1	66.1	51.5	5.4	3.3
Other tangible and intangible fixed assets	2.7	2.7	0.0	0.0	0.5	0.5	4.6	2.6	0.2	0.1
Total fixed assets by segment	232.3	230.2	6.9	6.3	130.1	98.3	155.9	161.9	37.0	36.4

OPERATING SEGMENTS, CONT'D

	Estate Agents		Education & Health			Group-wide		Eliminations		Total
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Per operating segment (SEK million)
Net sales	161.8	142.6	277.3	161.5	131.2	111.0	-137.6		-120.7 1,016.8	855.0
Capitalized own work	26.2	22.7	28.8	16.0	-	-	-	-	127.6	97.2
Depreciation/amortization and impairment losses	-25.5	-28.8	-47.0	-25.3	-9.5	-8.4	0.2	0.3	-152.1	-125.5
Operating profit	23.9	5.5	9.5	11.2	-5.1	-4.2	-	-	128.4	106.7
Net financial items	0.0	0.0	-0.1	-0.4	-11.5	-8.2	-	-	-11.6	-8.6
Consolidated profit/loss before tax									116.8	98.1
Fixed assets
Total investments in fixed assets for
the year	26.2	23.6	203.8	169.5	7.7	11.5	-	-	327.4	266.5
Fixed assets by segment
Goodwill and brands	94.0	93.2	148.7	48.7	0.0	0.0	-	-	465.9	356.9
Product rights and customer agreements	27.0	34.2	201.6	163.7	0.0	0.0	-	-	392.9	385.5
Capitalized development expenditure	53.7	47.4	48.6	26.0	0.0	0.0	-	-	269.0	197.9
Other tangible and intangible fixed assets	1.9	6.6	4.0	3.0	29.0	26.5	-	-	42.9	42.0
Total fixed assets by segment	176.6	181.4	402.9	241.4	29.1	26.5	0.0		0.0 1,170.8	982.3

NOTE 3 REVENUES FROM CONTRACTS WITH CUSTOMERS

Revenue recognition

We recognize revenue in accordance with IFRS 15 Revenue from Contracts with Customers Standards that enter into force on January 1, 2018.

In accordance with IFRS 15, revenues are recognized when the customer obtains control of the service and performance obligations are fulfilled. Prior to the introduction of the new standard, we performed an analysis of our contracts. The analysis did not reveal any essential differences based on how we previously recognized our revenues. Consequently, the transition has had no impact on recognized sales and earnings. To apply the new standard, a company may choose between fully retroactive or future-oriented application with additional disclosures. We have chosen retroactive application.

Sales consist of the revenue groups presented in profit or loss: recurring revenues, license revenues, service revenues and other revenues. These revenues in turn consist of performance obligations.

Our performance obligations comprise support, maintenance and upgrades, fixed-period usufruct and operations, perpetual usufruct, services, information services, third-party usufruct, third-party maintenance and other. Of the recurring revenues, SEK 410.1 million (305.0) pertain to support, maintenance and upgrades, SEK 211.5 million (195.8) to fixed-period usufruct and operation, SEK 109.7 million (95.8) to information services and SEK 12.6 million to (13.5) third-party maintenance. License revenues comprised SEK 34.4 million (37.1) in perpetual usufruct and SEK 0.6 million (2.5) in third-party usufruct.

Our most frequent contract types pertain to SaaS, sales of licenses with traditional support and maintenance agreements, services for sale and information services. Contractual periods span from one month to one year and, in some cases even longer. SaaS comprises agreements on all types of subscriptions and cloud services. Fixed-period usufruct, support and maintenance are always included. Operations, upgrades, information services etc. may also be included, depending on the contractual set up.

Recurring revenues

Recurring revenues mainly comprise annual agreements on SaaS, maintenance, support, operations and information services. Our information services are recognized at the date of delivery, while other agreements are recognized using a flat distribution across the contractual period, once the customer obtains control of the service and the performance obligation is fulfilled.

License revenues

License revenues comprise nonrecurring fees from the sale of software licenses. Sales of software licenses are to be recognized upon fulfilment of the performance obligation. Recognition then pertains to the entire license fee at the given date. Agreements on support and maintenance that are signed together with sales of licenses are invoice separately and recognized as recurring revenues.

Service revenues

Service revenues comprise consultancy services on a costplus basis and consultancy services at a fixed price. Service revenues can be recognized either over time or at a given date. The recognition of revenues over time requires that the customer obtain and utilize benefits while Vitec delivers its obligations. In these cases, we recognize our obligations in stages, in pace with the degree of completion. The degree of completion is calculated based on the extent that the contractually agreed delivery is fulfilled, taking into account the contractually agreed and completed functionalities, as well as actual time spent in relation to estimated time. For example, for an implementation project where the customer can gradually utilize software functionality, the project is to be gradually recognized in relation to the degree of completion.

If this criterion is not fulfilled, the revenue is recognized at the given date in conjunction with the completion of the service. For example, conferences, training courses etc., where delivery occurs at a single occasion.

Revenues that are yet to be invoiced to customers are recognized as accrued revenues in the balance sheet.

None of our fixed-price agreements are classified under non-current revenues.

Other

Other revenues mainly comprise sales of goods such as hardware and third-party software, excluding third-party licenses, which are recognized as license revenues. Recognition occurs upon delivery.

REVENUES FROM CONTRACTS WITH CUSTOMERS

	Auto			Energy Real Estate			Finance & Insurance		Environment
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Per operating segment (SEK million)
Recurring revenues	146.3	128.6	19.9	19.1	128.1	108.8	116.3	104.4	37.0	32.6
Licenses	5.2	6.1	0.1	0.0	6.5	8.6	0.3	7.5	1.5	3.5
Service revenues	13.4	16.3	5.9	6.5	68.0	69.8	15.1	29.9	6.2	5.7
Other	5.4	5.0	0.2	0.1	3.8	2.9	0.6	0.5	1.3	2.2
Internal sales	0.3	0.3	0.0	0.0	0.3	0.0	0.8	1.6	1.8	0.6
Net sales	170.6	156.2	26.1	25.7	206.7	190.1	133.1	143.9	47.8	44.7
Date of revenue recognition
Services transferred to customers over time, flat distribution	125.7	112.3	19.9	19.1	125.6	106.6	116.3	104.4	11.6	9.1
Services transferred to customers over time, in pace with use	34.0	32.6	5.9	6.5	70.5	72.1	15.1	29.9	31.6	29.3
Services transferred to customers at a given time	10.6	11.0	0.3	0.1	10.2	11.5	0.9	8.1	2.8	5.7

REVENUES FROM CONTRACTS WITH CUSTOMERS, CONT'D

	Estate Agents		Education & Health		Group-wide		Eliminations		Total
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Per operating segment (SEK million)
Recurring revenues	135.4	132.5	160.9	83.7	0.1	0.2	-	-	743.9	609.9
Licenses	0.1	0.0	21.4	13.8	0.0	-	-	-	35.0	39.6
Service revenues	19.5	5.1	20.4	12.2	0.2	0.2	-	-	148.7	145.7
Other	0.5	0.4	75.6	48.2	1.9	0.5	-	-	89.2	59.8
Internal sales	6.3	4.6	-1.0	3.5	129.1	110.0	-137.6	-120.7	0.0	0.0
Net sales	161.8	142.6	277.3	161.5	131.2	111.0	-137.6		-120.7 1,016.8	855.0
Date of revenue recognition
Services transferred to customers over time, flat distribution	92.3	92.0	155.8	81.5	0.1	0.2	-	-	647.2	515.1
Services transferred to customers over time, in pace with use	62.5	55.6	25.6	14.4	0.3	0.2	-	-	245.3	240.6
Services transferred to customers at a given time	0.6	0.4	97.0	62.0	1.9	0.5	-	-	124.2	99.4

There are no revenues from performance obligations fulfilled during previous periods.

Contractual assets and contractual liabilities

The Group recognizes the following revenue-related contractual assets and liabilities

ASSETS

	2018	2017
Accounts receivable	201.3	172.5
Accrued revenues from contracts with customers	3.4	6.4
Total contractual assets	204.7	178.8

CONTRACTUAL LIABILITIES

	2018	2017
Prepaid revenues from contracts with customers	123.4	114.4

Most of our recurring revenues are invoiced in advance. At the date of invoicing, a receivable and a prepaid revenue are entered into the balance sheet. The receivable is removed upon payment, while the prepaid revenue is distributed over the period that the invoice pertains to.

Trade receivables include an impairment provision for anticipated bad-debt losses of SEK 1,014,000 (669,000).

The change in contractual assets and contractual liabilities is attributable to acquisitions, which contributed SEK 10.8 million in increased contractual assets and SEK 0.5 million in increased contractual liabilities. The remaining changes essentially comprise increased trade receivables and increased prepaid revenues from customers, as an effect of increased recurring revenues. SEK kurs Antal

The Group's sales distribution is based on the customers' domiciles

		Net sales
	2018	2017
Sweden	325.0	285.8
Denmark	286.4	218.9
Finland	184.8	169.6
Norway	212.3	175.2
Rest of Europe	6.3	4.9
Rest of the world	2.0	0.7
	1,016.8	855.0

NOTE 4 REMUNERATION OF EMPLOYEES

Remuneration of employees

Short-term remuneration is estimated without discounting and is recognized when the services have been rendered. Costs for bonuses and other variable payroll components are recognized when there is a legal or informal obligation for the company to pay or such remuneration and the amount can be reliably calculated.

Pensions and other post-employment remuneration can be classified as defined contribution plans or defined benefit plans. Most of the Group's pension provisions comprise defined-contribution plans that are fulfilled through regular payments to independent government agencies or entities. Liabilities with respect to fees for defined-contribution plans are recognized as a cost in profit or loss as they arise. There are small number of employees in Sweden with defined-benefit ITP plans, with regular payments to Alecta. These are recognized as defined-contribution plans due to Alecta's

nondelivery of requisite information. There is insufficient data for recognizing the plan as a defined-benefit plan. However, there are no indications of any substantial provisions exceeding amounts that are paid to Alecta. There are also a small number of employees in Norway who are affiliated with a defined-benefit plan.

Remuneration in the event of employment termination is recognized as a provision in conjunction with the employee's termination only in cases when the company is demonstrably obligated either to terminate an employee prior to the normal date, or when benefits are paid as an offer to encourage voluntary termination. When remuneration is paid as an offer to encourage voluntary termination, a cost is recognized, as well as a provision, if it is probable that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.

NOTE 4A EMPLOYEES, PERSONNEL EXPENSES AND REMUNERATION OF SENIOR EXECUTIVES

AVERAGE NO. OF EMPLOYEES

	Women		Men		Total
	2018	2017	2018	2017	2018	2017
Parent Company
Sweden	18	17	9	8	27	25
Subsidiaries
Sweden	61	41	159	146	220	187
Denmark	49	38	119	97	168	135
Finland	24	22	73	69	97	91
France	0	1	0	5	0	6
Norway	30	25	71	71	101	96
Group total	182	144	431	396	613	540

At year-end, the number of employees was 643 (573).

GENDER DISTRIBUTION AMONG SENIOR EXECUTIVES

The Parent Company's Board of Directors comprises five directors, of which two are women. The Group's senior management comprises four individuals, of which one is a woman. The senior management and CEOs of subsidiaries comprise two women and 19 men.

SALARIES AND OTHER REMUNERATION

	Salaries and other remuneration		Social security expenses		(of which, pension contributions)
	2018	2017	2018	2017	2018	2017
Parent Company	21,582	18,785	11,810	9,542	4,260 *	3,064 *
Subsidiaries	355,688	303,080	98,881	86,668	37,932	33,510
Group total	377,270	321,865	110,691	96,210	42,192 **	36,574 **

* Of the Parent Company's pension contributions, SEK 2,034,000 (1,669) pertains to the senior management group.

** Of the Group's pension contributions, SEK 4,668,000 (3,958) pertains to the senior management group.

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

	Senior executives (of which bonus payments and similar.)		Other employees
	2018	2017	2018	2017
Parent Company	8,179 (0)	8,119 (0)	13,403	10,666
Subsidiaries	23,834 (0)	19,220 (0)	331,854	283,860
Group total	32,013 (0)	27,339 (0)	345,257	294,526

Senior executives

Senior executives of the Parent Company comprise its Board of Directors and the Group's senior management.

Senior executives in subsidiaries comprise the CEOs of the subsidiaries, who constitute separate reporting units.

Remuneration of Board members and senior executives of the Parent Company

All remuneration is considered competitive. External Board members are paid board fees.

No variable remuneration is paid. There are no consultancy agreements for any Board members or senior executives.

Board fees are paid in accordance with resolutions passed by the AGM. The Chairman of the Board is paid a fee of SEK 270,000 annually. The other four Board members who are not employees of the Group are paid fees totaling SEK 540,000 annually. In both cases, the remuneration level applies as of the date of the AGM.

Remuneration to the CEO totaled SEK 2,448,000. No board fees were paid. The CEO's pension solution from the company entitles the CEO to an annual premium payment amounting to 35% of the salary. In the event of termination from company's side, the salary is to be paid during the sixmonth notice period, as well as severance pay comprising 18 monthly salaries. Severance pay is reconciled against any remuneration from other employers.

The pension plans are defined-contribution and based on the retirement age of 65. Between Vitec and other senior executives, the period of notice is normally set pursuant to

current legislation or applicable collective agreements. In the event of termination from Vitec's side, Maria Kröger and Patrik Fransson will be entitled to six months of severance pay and Lars Eriksson to nine months of severance pay.

There is an ongoing convertibles program for employees and senior executives, in the form of convertible debentures. The shares were issued on market terms. Consequently, there are no benefits that can be recognized as share-based remuneration. The shareholdings and convertible debentures of Board members and senior executives are presented in the Corporate Governance Report.

	Basic salary/Board fees		Other benefits		Pension premiums		Total
	2018	2017	2018	2017	2018	2017	2018	2017
Chairman of the Board, Crister Stjernfelt	270	250	-	-	-	-	270	250
Board member Anna Valtonen	135	125	-	-	-	-	135	125
Board member Birgitta Johansson-Hedberg	135	125	-	-	-	-	135	125
Board member Jan Friedman	135	125	-	-	-	-	135	125
Board member Kaj Sandart	135	125	-	-	-	-	135	125
President & CEO Lars Stenlund	2,448	2,448	-	-	1,023	640	3,471	3,088
*Other senior executives of the Parent
Company	4,921	4,921	16	13	1,011	1,029	5,948	5,704
Total	8,179	8,119	16	13	2,034	1,669	10,229	9541

The preceding year's remuneration and benefits are shown within parentheses.

* The other senior executives of the Parent Company refer to Lars Eriksson, Maria Kröger and Patrik Fransson.

NOTE 4B PENSIONS

Vitec has both defined-contribution and defined-benefit pension plans. The defined-benefit plans are in Sweden and Norway. The Swedish defined benefit pension plans are secured through coverage by Alecta. For the 2018 fiscal year, the company did not have access to the information necessary to support recognition of this plan as a defined-benefit plan. Accordingly, the Alecta ITP2 pension plan covered by insurance in Alecta is recognized as a defined-contribution plan. The premium for the defined-benefit retirement pensions and family pension plans are individually calculated and are subject to factors such as salary, previously earned pensions and the expected remaining term of service. The expected fees in the next reporting period for ITP2 insurance covered by Alecta are SEK 2,456,000 (2,612,000). The collective consolidation level for Alecta was 142% (154) in 2018.

Defined-contribution plans

Defined-contribution pension plans entail that the company make periodic payments to separate government agencies or funds, and the level of remuneration is subject to the yield achieved for these investments. Fees for the year for defined-contribution pension insurance, including Alecta ITP2, totaled SEK 40,593,000 (34,976,000).

Defined benefit plans

These pension plans refer to some of the Norwegian subsidiaries and comprise retirement pensions in companies that were acquired during 2014. An employee must be enrolled in the plan for a certain amount of years to achieve full entitlement to a retirement pension. The funded pension obligations are secured by plan assets. Fees for the year for defined-benefit pension plans totaled SEK 1,012,000. The forecast for fees in 2019 is SEK 1,014,000. Pension obligations have been reduced by SEK 3.4 million since the preceding year, due to fewer employees being affiliated with the plan.

COMMITMENTS TO EMPLOYEE BENEFITS, DEFINED-BENEFIT PLANS

	Group
	Dec 31, 2018	Dec 31, 2017
Other pension obligations, Norway	4,792	8,225
Total defined-benefit plans	4,792	8,225

DEFINED-BENEFIT OBLIGATIONS AND VALUE OF PLAN ASSETS

	Group
	Dec 31, 2018	Dec 31, 2017
Present value of funded defined-benefit obligations, Norway	18,439	20,926
Fair value of plan assets, Norway	-14,240	-13,718
Net	4,199	7,209
Estimated employer contributions	592	1,016
Net indebtedness for funded obligations, Norway	4,792	8,225

RECONCILIATION OF NET AMOUNT FOR PENSIONS IN THE BALANCE SHEET

	Group
	Dec 31, 2018	Dec 31, 2017
Opening balance	8,225	7,679
Net pension costs for the year	1,862	1,710
Investments in pension funds, incl. employer contributions	-1,155	-1,340
Actuarial changes recognized in other comprehensive income	-4,334	563
Translation differences	194	-387
Total defined-benefit plans	4,792	8,225

CHANGES IN OBLIGATIONS FOR DEFINED-BENEFIT PLANS RECOGNIZED IN THE BALANCE SHEET

	Group
	Dec 31, 2018	Dec 31, 2017
Opening balance	20,926	21,046
Actuarial changes	-4,105	-391
Interest and fees	1,896	1,527
Pension payments for the year	-264	-197
Translation differences	492	-1,058
	18,944	20,926

CHANGE IN PLAN ASSETS.

		Group
	Dec 31, 2018	Dec 31, 2017
Opening balance	13,718	14,316
Actuarial changes	-812	-885
Interest and fees	-67	-48
Investments in pension funds	1,012	1,174
Pension payments for the year	-264	-197
Change in value	331	77
Translation differences	321	-719
	14,240	13,718

ACTUARIAL ASSUMPTIONS

		Group
%	Dec 31, 2018	Dec 31, 2017
Discount rate	2.60	2.30
Expected return on pension fund assets	2.60	2.30
Future pay increases	2.75	2.50
Future increase of pensions	2.50	2.25
Future increases in base amounts	2.50	2.25
Employee turnover, %	0.00	0.00
Payroll tax	14.10	14.10

NOTE 5 OTHER SIGNIFICANT PROFIT/LOSS ITEMS

NOTE 5A OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

Other operating income in the Group mainly comprises adjustments to expensed supplementary contingent considerations, which are recognized pursuant to IFRS.

During the period, the expensed contingent purchase considerations for Futursoft Oy and PP7 Affärssystem AB were adjusted downward by SEK 2.4 and SEK 4.0 million, respectively. Pursuant to IFRS 3:58, the adjustment was recognized as Other operating revenues. An amortization of intangible assets for the corresponding amount was recognized simultaneously.

The Parent Company's other operating revenues consist in their entirety of unrealized exchange gains/losses.

Other operating expenses pertained in their entirety to exchange-rate gains/losses attributable to receivables and liabilities from operations.

NOTE 5B FEES AND REIMBURSEMENT OF COSTS TO AUDITORS

		Group		Parent Company
	2018	2017	2018	2017
PwC, audit assignment	2,367	1,847	1,052	684
PWC, auditing activities beyond auditing assignment	146	300	25	-
PWC, tax advisory services	238	52	0	-
PWC, other assignments	11	149	11	149
Deloitte, audit assignment	108	-	-	-
Deloitte, auditing activities beyond auditing assignment	-	-	-	-
Deloitte, tax advisory services	-	-	-	-
Deloitte, other assignments	-	-	-	-
Other auditors, audit assignment	114	363	-	-
Other auditors, auditing activities beyond auditing assignment	-	-	-	-
Other auditors, tax consultancy services and other assignments	84	94	-	-
Total auditing fees	3,068	2,805	1,088	833

Of the audit assignments, SEK 1,052,000 pertained to PwC Sweden; of other statutory assignments, SEK 25,000 pertained to PwC Sweden; of the fees for tax advisory services, SEK 0 pertained to PwC Sweden; and of other assignments, SEK 11,000 pertained to PwC Sweden.

Of the audit assignments, SEK 613,000 pertained to PwC Norway; of other statutory assignments, SEK 0 pertained to PwC Norway; of the fees for tax advisory services, SEK 97,000 pertained to PwC Norway; and of other assignments, SEK 0 pertained to PwC Norway.

Of the audit assignments, SEK 322,000 pertained to PwC Denmark; of other statutory assignments, SEK 121,000 pertained to PwC Denmark; of the fees for tax advisory services, SEK 141,000 pertained to PwC Denmark; and of other assignments, SEK 0 pertained to PwC Denmark.

Of the audit assignments, SEK 380,000 pertained to PwC Finland; of other statutory assignments, SEK 0 pertained to PwC Finland; of the fees for tax advisory services, SEK 0 pertained to PwC Finland; and of other assignments, SEK 0 pertained to PwC Finland.

NOTE 5C NET FINANCIAL ITEMS

Financial income and expenses

Financial income exclusively comprises interest income from financial investments in the form of fixed-interest investments, as well as dividend income for the Parent Company. Dividend income is recognized when the right to receive the dividend has been established. Anticipated dividends are recognized in Parent Company only when the contributing company is a wholly owned subsidiary. Financial expenses

comprise interest expenses on borrowings and accounts payable. Borrowing expenses are recognized in profit/loss applying the effective-interest-rate method, apart from cases that are directly attributable to purchasing, construction or production of a qualifying asset, since this is included in the cost of the asset. Any profit or loss from the divestment of subsidiaries are recognized as a financial expense or income, since the amounts are unsubstantial.

NET FINANCIAL ITEMS

	Group		Parent Company
	2018	2017	2018	2017
Interest income	636	328	437	231
Dividends from subsidiaries	-	-	77,599	64,898
Other financial expenses	-32	-63	-	-
Interest expenses	-12,202	-8,840	-11,817	-8,289
Net financial items	11,597	-8,575	66,219	56,840

NOTE 6 TAX

Taxes

The Group's total tax expenses take the form of current tax and deferred tax. Tax is recognized in profit/loss for the year except for when the underlying transaction is recognized in other comprehensive income or in equity, in which case the associated tax effect is recognized in other comprehensive income or in equity. Current tax is tax that is to be paid or received in the current year. This also includes adjustments of current tax attributable to prior periods. Deferred tax is calculated using the balance-sheet method, based on temporary differences between carrying amounts and tax bases of assets and liabilities. Calculation of the amounts is based on how the temporary differences are expected to reverse using enacted tax rates or tax regulations announced at the close of the period. Temporary differences are not taken into account

in consolidated goodwill; nor are differences pertaining to participations in subsidiaries or associated companies that are not expected to become subject to tax in the foreseeable future. Deferred tax assets relating to deductible temporary differences and loss carryforwards are only recognized to the extent that it is probable they will be utilized and result in lower future tax payments.

Deferred tax assets and liabilities are offset against each other when there is a legal right of offset for the particular tax receivables and tax liabilities and when the deferred tax assets and tax liabilities pertain to taxes levied by one and the same tax authority and pertain to either the same tax subject or different tax subjects, in cases where there is an intention to settle the balances by means of net payment.

TAX EXPENSE

		Group	Parent Company
	2018	2017	2018	2017
Current tax
Current tax on profit/loss for the year	-20,891	-21,277	0	0
Adjustment of current tax from previous years	15	-267	-	-
	-20,876	-21,544	0	0
Deferred tax
Deferred tax pertaining to temporary differences	2,292	1,655	2,874	57
Remeasurement of deferred tax due to change in tax rate	-1,271	1,188	-	-
	1,021	2,843	2,874	57
Total recognized tax expense	-19,855	-18,701	2,874	57

RECONCILIATION BETWEEN APPLICABLE AND EFFECTIVE TAX RATES

		Group		Parent Company
	2018	2017	2018	2017
Recognized profit before tax	116,776	98,127	65,783	64,888
Of which Sweden	47,937	41,959	-	-
Of which Finland	19,892	13,963	-	-
Of which Norway	22,272	7,749	-	-
Of which Denmark	26,675	34,456	-	-
Tax according to applicable tax rates	-25,217	-21,524	-14,472	-14,275
Tax effect of:
- non-deductible expenses	-536	-571	-210	-135
- non-taxable revenues	2,478	2,109	17,072	14,278
- change in loss carryforwards not capitalized	1,600	-1,084	567	189
- tax attributable to previous years	52	1,166	-	-
- effect of changed tax rates	1,768	1,203	-83	-
Recognized effective tax	-19,855	-18,701	2,874	57

RECOGNIZED DEFERRED TAX ASSETS

	Group		Parent Company
	2018	2017	2018	2017
Deferred tax on tax-loss carryforwards	7,624	6,297	2,874	57
Differences between book value and taxable value of fixed assets	619	417	-	-
Closing balance	8,243	6,714	2,874	57

RECOGNIZED DEFERRED TAX LIABILITIES

		Group	Parent Company
	2018	2017	2018	2017
Product rights, customer agreements and brands	95,881	95,303	-	-
Capitalized development expenditure	57,972	43,010	-	-
Pension liabilities	-1,054	-1,892	-	-
Untaxed reserves	88	-577	-	-
Deferred tax liabilities	152,847	135,844	0	0

CHANGE IN DEFERRED TAX ON TEMPORARY DIFFERENCES

	Jan 1, 2018	Recognized in total comprehensive income for the year	Recognized in other comprehensive income for the year	Recognized in shareholders' equity	Dec 31, 2018
Acquired net assets	91,664	-16,824	3,295	16,216	94,351
Effects of changes in tax rates	1,747	-1,271	-	-	476
Net investment hedge	-	3,489	-	-3,489	0
Accumulated depreciation/amortization	-577	665	-	-	88
Capitalized development expenditure	43,010	14,962	-	-	57,972
	135,844	1,021	3,295	12,727	152,887

All deferred tax assets with respect to loss carry-forwards were capitalized.

CHANGE IN DEFERRED TAX ON TEMPORARY DIFFERENCES

	Jan 1, 2018	Recognized in total comprehensive income for the year	Recognized in other comprehensive income for the year	Recognized in shareholders' equity	Dec 31, 2018
Accumulated depreciation/amortization	6,714	1,529	-	-	8,243
	6,714	1,529	0	0	8,243

NOTE 7 THE GROUP'S COMPOSITION

Consolidated financial statements

The Group comprises all companies over which the Group holds a controlling influence. The Group controls a company when it is exposed to or has the right to a variable return from its holding in the company and has the possibility to influence this return through its influence in the company. Subsidiaries are included in the consolidated accounts as from the date when control passes to the Group. They are excluded from the consolidated accounts as from the date when this control no longer exists.

The acquisition of a subsidiary is viewed as a transaction through which the Group indirectly acquires the assets of the subsidiary and assumes its liabilities. An acquisition analysis determines the fair value of acquired assets and assumed liabilities on the acquisition date. The value of any non-controlling interests is also determined. Transaction fees that arise are recognized directly in profit/loss for the year.

In the case of business acquisitions where the consideration transferred, any non-controlling interests and the fair value of previously held participations (step acquisitions) exceed the fair value of the acquired assets and assumed liabilities that are to be recognized separately, the difference is recognized as goodwill. Should the difference be negative, which is known as a bargain purchase, it is recognized directly in net profit. Consideration transferred in conjunction with the acquisition does not include payments pertaining to settlement of previous business relationships. This type of settlement is recognized through profit or loss.

Conditional purchase considerations/supplementary purchase considerations are recognized at fair value at the acquisition date. If the contingent consideration is classified as an equity instrument, no remeasurement takes place and settlement is directly recognized in equity. Other contingent considerations are remeasured for each financial statement and the difference is recognized in net profit. Acquisitions from non-controlling interests are recognized as a transaction in equity, meaning a transaction between the shareholders of Parent Company (in profit brought forward) and the non-controlling interest. Changes in non-controlling interests are based on their proportionate share of net assets. This is the reason why goodwill does not arise from these transactions. Goodwill is not amortized, but is instead subject to impairment testing on an annual basis. The financial statements of subsidiaries are consolidated from the date of acquisition until the date when the controlling influence ceases.

Intra-Group assets and liabilities, income and expenses are eliminated, as are unrealized gains and losses between Group companies. Unrealized losses are eliminated in the same manner as unrealized gains, but only insofar as no impairment requirement exists. The Group's equity includes only parts of the subsidiary's equity that were added following acquisition.

Transfer pricing

When invoicing between Group companies, prices are set corresponding to market terms, where the end customer is an external customer. In cases where invoicing pertains to intra-Group services within the same country, invoicing are priced on a cost-plus basis. Decisions about what prices shall apply are made by Group Management. In cases of invoicing to foreign subsidiaries or between foreign subsidiaries, application of the cost-plus method is prioritized.

Notes

NOTE 7A ACQUISITIONS

PP7 Affärssystem AB

On April 9, Vitec acquired all of the shares and voting rights of the Swedish software company, PP7 Affärssystem AB. The company develops software for project companies operating within the construction and installation market in Sweden. Its main product is cloud-based software for project and business support that optimizes project flows and procedures.

The company was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. At December 31, acquisition-related costs totaled SEK 0.1 million and were recognized as other external costs in the statement of comprehensive income. From the acquisition date up to and including December 31, revenues in the acquired company totaled SEK 5.8 million and profit before tax totaled SEK

0.9 million. If consolidation had occurred at the beginning of the year, the company would have provided the Group with an additional approximately SEK 1.8 million in sales and SEK -0.1 million in loss before tax.

Some items in the acquisition plan may be remeasured These comprise brands, product rights, customer agreements and goodwill. For this reason, the acquisition plan remains preliminary, until 12 months after the acquisition date.

The expensed portion of contingent consideration totaling SEK 4.0 million was subject to an EBITDA improvement at December 31, 2018. At the balance-sheet date, supplementary conditions had not been fulfilled, which resulted in the supplementary contingent consideration being written off in its entirety. This adjustment was proportionally distributed across brands, product rights, customer agreements and goodwill.

PRELIMINARY ACQUISITION PLAN

	PP7 Affärssystem AB	Fair value adjustment	Fair value recognized in the Group
Brands	-	162	162
Product rights	-	1,651	1,651
Customer agreements	-	2,257	2,257
Intangible fixed assets	341	-	341
Tangible property, plant and equipment	4	-	4
Current receivables	2,121	-	2,121
Cash and cash equivalents	4,204	-	4,204
Deferred tax liabilities	-	-912	-912
Current liabilities	-2,200	-	-2,200
Non-current liabilities	-600	-	-600
Net identifiable assets and liabilities	3,869	3,158	7,027
Consolidated goodwill			3,773
Total			10,800

Group's purchase costs 10,800

Calculation of net cash outflow	Fair value
Group's purchase costs	-10,800
Expensed portion of purchase consideration	1,000
Acquired cash and cash equivalents	4,204
Net cash outflow	-5,596

Agrando AS

On April 19, Vitec acquired 97.2% of the shares and voting rights of the Norwegian software Group, Agrando AS. Shortly thereafter, its remaining shares and votes were acquired. The company's product is an industry-specific software for churching activities in the Nordic region, with Norway and Sweden comprising the primary markets.

The Group was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. At December 31, acquisition-related costs totaled SEK 2.0 million and were recognized as other external costs in the statement of comprehensive income. From the acquisition date up to and including December 31, the revenues of the acquired Group totaled SEK 31.0 million and profit before tax was SEK 4.0 million. If consolidation had occurred at the beginning of the year, the Group would have been provided with a further approximately SEK 14.7 million in sales and SEK 0.6 million in profit before tax.

Some items in the acquisition plan may be remeasured These comprise brands, product rights, customer agreements and goodwill. For this reason, the acquisition plan remains preliminary, until 12 months after the acquisition date.

PRELIMINARY ACQUISITION PLAN

		Fair value	Fair value recognized in the
	Agrando AS	adjustment	Group
Brands	-	1,501	1,501
Product rights	-	13,709	13,709
Customer agreements	-	21,160	21,160
Tangible property, plant and equipment	214	-	214
Financial fixed assets	45	-	45
Current receivables	3,481	-	3,481
Cash and cash equivalents	61,174	-	61,174
Deferred tax liabilities	-	-8,365	-8,365
Current liabilities	-34,774	-1,522	-36,297
Net identifiable assets and liabilities	30,140	26,483	56,622
Consolidated goodwill			21,936
Total			78,558
Group's purchase costs			78,558
Calculation of net cash outflow			Fair value
Group's purchase costs			-78,558
Acquired cash and cash equivalents			61,174
Net cash outflow			-17,385

Cito IT A/S

On May 31, we acquired all of the shares and votes of the Danish software company, Cito IT A/S, whose product comprises an industry-specific software for the pharmacy market in Denmark.

The company was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. At December 31, acquisition-related costs totaled SEK 2.2 million and were recognized as other external costs in the statement of comprehensive income. From the date of acquisition up to and including December 31, revenues in the acquired

company totaled SEK 25.6 million and profit before tax was SEK 8.4 million. Due to the application of other accounting policies and a split financial year, disclosures about revenue and earnings from the beginning of the year are not deemed to be true and fair.

Some items in the acquisition plan may be remeasured These comprise inventories, brands, product rights, customer agreements and goodwill. For this reason, the acquisition plan remains preliminary, until 12 months after the acquisition date.

The expensed portion of the contingent consideration will be subject to an EBITDA improvement at June 30, 2019 and is measured at maximum outcome.

PRELIMINARY ACQUISITION PLAN

	Cito IT A/S	Fair value adjustment	Fair value recognized in the Group
Brands	-	1,024	1,024
Product rights	-	4,355	4,355
Customer agreements	-	14,538	14,538
Tangible property, plant and equipment	1,051	-	1,051
Inventories	1,262	-	1,262
Current receivables	4,126	-	4,126
Cash and cash equivalents	16,260	-	16,260
Deferred tax liabilities	-	-4,382	-4,382
Current liabilities	-8,120	-1,609	-9,729
Net identifiable assets and liabilities	14,580	13,926	28,506
Consolidated goodwill			58,966
Total			87,472
Group's purchase costs			87,472
Calculation of net cash outflow			Fair value
Group's purchase costs			-87,472
Expensed portion of contingent consideration			9,668
Acquired cash and cash equivalents			16,260

Net cash outflow -61,544

Smart Visitor System AB

On November 6, Vitec acquired all of the shares and voting rights of the Swedish software company, Smart Visitor System AB. The company offers a niche product aimed at municipal leisure and cultural departments in Sweden and Norway. Their product is a complete enterprise system for handling reservations, visitors and grants.

The company was consolidated as of the acquisition date. The goodwill item is not tax deductible and is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as anticipated synergy effects, in the form of the joint development of our products. At December 31, acquisition-related cost totaled SEK 0.8 million

and were recognized as other external costs in the statement of comprehensive income. From the acquisition date up to and including December 31, revenues in the acquired company totaled SEK 5.2 million and profit before tax totaled SEK 1.1 million. If consolidation had been implemented at the start of the year, the Group would have further provided the Group with approximately SEK 20.1 million in sales and SEK 1.9 million in income before tax.

Some items in the acquisition plan may be remeasured These comprise brands, product rights, customer agreements and goodwill. For this reason, the acquisition plan remains preliminary, until 12 months after the acquisition date.

	Smart Visitor System AB	Fair value adjustment	Fair value recognized in the Group
Brands	-	665	665
Product rights	-	6,318	6,318
Customer agreements	-	9,794	9,794
Intangible fixed assets	355	-	355
Tangible property, plant and equipment	31	-	31
Inventories	537	-	537
Current receivables	3,680	-	3,680
Cash and cash equivalents	6,757	-	6,757
Deferred tax liabilities	-	-3,691	-3,691
Current liabilities	-7,613	-	-7,613
Net identifiable assets and liabilities	3,747	13,086	16,833
Consolidated goodwill			15,367
Total			32,200
Group's purchase costs			32,200
Calculation of net cash outflow			Fair value
Group's purchase costs			-32,200

Acquired cash and cash equivalents 6,757

PRELIMINARY ACQUISITION PLAN

Net cash outflow -25,443

78 Vitec Annual Report 2018

NOTE 7B PARTICIPATIONS IN SUBSIDIARIES

			Share of			Carrying	Carrying	Adjusted shareholders'
Subsidiaries		Acquisition year	equity, %	Share of votes	Number of participations	amount Dec. 31, 2018	amount Dec. 31, 2017	equity, Dec 31, 2018
Vitec Financial	Responsible for accounting
Services AS	administration in Norway	2018	100	100	30,000	44	-	88
Vitec Smart Visitor	Softare company
System AB		2018	100	100	4,000	32,434	-	4,774
Vitec Cito A/S	Software company	2018	100	100	500,000	87,796	-	21,481
Vitec Agrando AS	Software company, Parent Company of Agrando AB, which in turn is the Parent Company of Agrando Asia
	(Pvt) Ltd.	2018	100	100	1,129,500	78,849	-	32,231
Vitec PP7 AB	Software company	2018	100	100	799,000	10,900	-	3,581
Vitec MV A/S	Software company, Parent Company of Vitec MV AS and Vitec MV AB	2017	100	100	600	108,797	108,797	4,090
Vitec Plania AS	Software company	2016	100	100	330	54,202	54,190	9,887
Vitec Futursoft Oy	Software company	2016	100	100	100	107,073	109,305	38,222
Vitec Tietomitta Oy	Software company	2016	100	100	7,922	46,179	46,179	27,590
Vitec Nice AS	Software company	2015	100	100	40,000	26,045	26,045	7,195
Vitec Infoeasy AS	Software company	2015	100	100	1,000	16,930	16,930	4,034
Vitec Datamann A/S	Software company	2015	100	100	3,000	56,714	56,714	16,029
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	53,114
Vitec Autodata AS	Software company	2014	100	100	30,000	37,010	37,010	24,238
IMHO Oy	Holding company, owns 47% of the shares in AcuVitec	2014	100	100	19,800	34,439	34,411	6,733
AcuVitec Oy	Software company, Parent Company of Acute France SARL	2014	100	100	85,714	38,836	38,804	13,704
Vitec Megler AS	Software company, Parent Company of IT-Drift AS and
	Vitec Megler AB	2012	100	100	3,256,596	120,548	120,548	29,831
Vitec Capitex AB	Software company	2011	100	100	1000	8,289	8,289	3,948
Capitex AB 3L System AB	Software company Holding company, Parent Company of 3L Media, Vitec Administration and Vitec	2010	100	100	5,000	17,527	17,527	784
	Capifast	2009	100	100	2,350,400	121,751	121,751	65,916
Vitec Mäklarsystem AB	Software company	2007	100	100	1,000	68,083	68,083	10,690
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	Software company
Fastighetssystem AB		2000	100	100	200,000	12,665	12,665	3,560
Vitec IT-Drift AB	Responsible for internal IT	1999	100	100	1,000	1,008	1,008	4,148
Vitec Energy AB	Software company	1998	100	100	1,000	1,551	1,551	2,993
Total						1,180,384	972,519	332,474

Vitec acquires companies and operations that either become separate business units or are incorporated into existing business units. Restructuring is undertaken from time to time, which results in the operations of two or more companies being merged into a single business unit. In these cases, the above book values may be restated by transferring assets identified in the course of the acquisition process, such as

goodwill, product rights, customer agreements and brands. Any such occurrences are described in the annual accounts. Vitec Software Group AB owns the following companies through subsidiaries:

Via Vitec Agrando AS – Agrando AB (software company) and Agrando Asia (Pvt) Ltd. (product development on assignment by Parent Company Agrando AS)

• Via 3L System AB 3L Media AB, Vitec Förvaltningssystem AB and Vitec Capifast AB (all of which are software companies).
• Via Vitec Megler AS Vitec IT Drift AS (responsible for server operations in Norway) and Vitec Megler AB (product development on assignment by Parent Company Vitec

Megler AS).

• 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 Vitec MV AS (sales company)

SUBSIDIARIES' CORPORATE REGISTRATION NUMBERS AND REGISTERED OFFICES

	Corporate registration number	Registered office
Vitec Smart Visitor System AB	556267-6972	Umeå, Sweden
Vitec Cito A/S	16724041	Allerød, Denmark
Vitec Agrando AS	970991786	Sandnes, Norway
Vitec Agrando AS	556672-5056	Älvsjö, Sweden
Agrando Asia (Pvt) Ltd	-	Sri Lanka
Vitec PP7 AB	556392-2060	Umeå, Sweden
Vitec Financial Services AS	920592287	Oslo, Norway
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
Vitec Futursoft Oy	14942533	Espoo, Finland
Vitec 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
Vitec Aloc AS	976876768	Oslo, Norway
Vitec Aloc A/S	14788484	Odense, Denmark
Vitec Autodata AS	817159362	Oslo, Norway
IMHO Oy	25351376	Tampere, Finland
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 8 NON-FINANCIAL ASSETS AND LIABILITIES

This note contains information about the Group's non-financial assets and liabilities Our non-financial assets and liabilities are presented in the table below. For practical reasons, these assets and liabilities are presented in other notes.

		Non-financial assets		Non-financial liabilities
Non-financial assets, Group	Note	2018	2017	2018	2017
Intangible fixed assets	(8A)	1,130,983	944,327	-	-
Tangible property, plant and equipment	(8A)	39,788	37,956	-	-
Other non-current receivables		947	1,791	-	-
Deferred tax assets	(6)	8,243	6,714	-	-
Inventories	(8C)	5,302	3,619	-	-
Current tax assets		20,740	9,008	-	-
Prepaid expenses and accrued income	(8D)	26,701	27,296	-	-
Non-financial liabilities, Group
Post-employment remuneration of employees	(4B)	-	-	4,792	8,225
Deferred tax	(6)	-	-	152,887	135,844
Tax liabilities		-	-	12,923	8,961
Other liabilities		-	-	60,017	49,349
Accrued expenses and prepaid income	(8E)	-	-	157,778	137,515
Total		1,232,704	1,030,711	388,397	339,894

Tangible and intangible fixed assets

Intangible fixed assets

Goodwill

In the event of an acquistion, goodwill is recognized whenever the consideration transferred exceeds the fair value of the identifiable acquired assets and assumed liabilities. Vitec has chosen not to apply IFRS retroactively for goodwill stemming from acquisitions completed before January 1, 2004.

Goodwill is measured at cost, less any accumulated impairment losses. Goodwill is allocated to cash-generating units and subject to impairment testing a minimum of once annually; refer to the heading, Impairment of non-financial assets below. Testing is based on estimates and assumptions that are burdened with uncertainties.

Capitalized development expenditure

Expenses for software development are capitalized when it is probable that the project will be successful with respect to its commercial and technical potential, and the costs can be reliably estimated. Development work comprises research and development Only expenditure pertaining to development work is activated as an asset in the balance sheet. The cost of the asset consists of salaries and other expenses directly related to development work. Capitalized development costs acquired before and including December 31, 2016, are amortized according to an estimated useful life of five years. Capitalized development costs acquired as of January 1, 2017, are amortized according to an estimated useful life of 10 years. The asset's value is subject to regular testing and testing for each development project, after which it is impaired as necessary. Assets are recognized at their cost, less accumulated amortization and any write-downs. Testing is based on estimates and assumptions that are burdened with uncertainties.

Software

These assets comprise usufruct for standard software, in the form of enterprise systems, consolidated accounting systems, development environments and other administrative systems. These assets are amortized over five years and recognized at cost, less accumulated amortization and any write-downs.

Brands

Brands are normally considered to have an indefinite useful life. Brands are measured at cost, less any accumulated impairment losses. Brands are allocated to cash-generating units and subject to impairment testing a minimum of once annually. Testing is based on estimates and assumptions that are burdened with uncertainties. The Group exclusively holds brands that are identified through acquisition analyses.

Product rights

Product rights primarily comprise acquired source code. These are amortized over 5 to 10 years. Amortization follows a declining balance amortization model for acquisitions completed as of the fourth quarter of 2016. For acquisitions completed before this date, amortization is on a straight-line basis. Assets are recognized at their cost, less accumulated amortization and any write-downs. An asset's value is tested using an estimation of future discounted cash flows. This form of testing is based on estimates and assumptions that are burdened with uncertainties.

Customer agreements

Acquired customer agreements are amortized over 8 to 10 years and recognized at cost, less accumulated amortization and any write-downs. Amortization follows a declining balance amortization model for acquisitions completed as of the fourth quarter of 2016. For acquisitions completed before this date, amortization is on a straight-line basis.

Property, plant and equipment

Property, plant and equipment are recognized in the statement of financial position when it is probable that future financial benefits will accrue to the Company and the cost of the asset can be reliably calculated. Tangible assets are recognized at cost, less accumulated depreciation and any impairment. The cost includes the purchase price and costs directly attributable to the asset to bring it to location and make it usable in operations. Gains or losses arising on the divestment or scrapping of a tangible asset comprise the difference between the sales price and the carrying amount of the asset, less direct selling expenses. Gains and losses are recognized as other operating revenue/expenses.

Depreciation of property, plant and equipment is based on the assets depreciable amount, which corresponds to the original cost and comprises 20–33% annually for computers, and 10–20% annually for other equipment. Investments in leased premises are depreciated over the remaining lease period. The Parent Company owns an owner-occupied apartment that is depreciated at 2% annually.

Leased assets

Leasing agreements where all risks and benefits associated with ownership essentially fall on the lessor are classified as operating leases. Leasing agreements where all risks and benefits associated with ownership essentially fall on the

lessee are classified as financial leases. When reporting substantive financial leasing, assets are recognized as fixed assets in the Group's statement of financial position, measured to the present value of minimum lease payments upon signing of the agreement.

Assets are depreciated over their useful life. Commitments to future lease payments are recognized as current and non-current liabilities.

Inventories

Inventories are measured in accordance with FIFO ("first-infirst-out-principle") and exist only to an insignificant extent.

Impairment of non-financial assets

The value of capitalized development expenditure, product rights, customer agreements, brands and goodwill are tested to determine impairment requirements, if any. Goodwill and brands with indefinite useful lives are tested annually. Testing is undertaken by comparing the recognized amount with the recoverable amount, where the recoverable amount is the higher of the asset's fair value (less selling expenses) and the value-in-use. Useful value is calculated by discounting future cash flows that the asset is expected to generate, indefinitely, with an interest rate based on the market's assessment of risk-free interest and risk. Cash flow is based on budgets/ forecasts adopted by Group Management.

NOTE 8A NON-CURRENT ASSETS, GROUP

	Goodwill			Capitalized development expenditure	Software		Brands			Customer Product rights agreements Total
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Opening cost			315.8 273.6 323.9 312.4		21.7	21.0	74.3	70.1	469.7				397.7 136.0 105.5 1341.4 1180.4
Purchasing*	101.8		42.6 127.5	97.2	0.7	1.5	3.5	3.8	27.2	70.3	49.3	29.7	310.0	245.1
Divestments/Asset retirement	-	-	-0.2	-85.1	-	-0.9	-	-	-9.1	-4.8	-	-	-9.3	-90.8
Business combinations	-	-	-	-	-	-	-	-	20.0	5.3	-	-	20.0	5.3
Translation differences	5.1	-0.4	1.4	-0.5	0.0	0.0	2.7	0.4	13.5	1.2	3.5	0.8	26.4	1.4
Closing amortized cost			422.8 315.8 452.7 323.9		22.5	21.7	80.5	74.3	521.3					469.7 188.8 136.0 1688.6 1341.5
Opening 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 -397.0	-370.8
Business combinations	-	-	-	-	-	-	-	-	-18.9	-	-	-	-18.9	0.0
Divestments/Asset retirement	-	-	0.1	87.4	-	0.9	-	-	9.1	-	-	-	9.2	88.2
Translation differences	0.0	0.0	-0.5	0.3	0.0	0.0	0.0	0.0	-3.2	0.9	-0.9	0.0	-4.7	1.2
Impaiment for the year	-4.0	-	-57.2	-51.9	-1.6	-1.5	-0.1	0.0	-59.4	-49.0	-23.9		-13.3 -146.2	-115.7
Closing impairment losses	-37.2		-33.2 -183.6 -126.0		-19.4	-17.7	-0.1		0.0 -254.4	-179.0	-65.9		-41.1 -557.6 -397.1
Carrying amount			385.6 282.6 269.0 197.9		3.1	4.0	80.3	74.3	270.0		290.7 123.0		94.8 1131.0	944.4

INTANGIBLE ASSETS (SEK MILLION)

*Goodwill, brands, customer agreements and product rights are attributable to acquisitions, while capitalized development expenditure stems from inhouse-manhours spent and to a lesser extent, purchased consultancy services. Software is attributable to purchasing.

Impairment testing of goodwill and brands

Goodwill is not continuously impaired, but its value is tested a minimum of once annually in accordance with IAS 36. Testing was most recently conducted in December 2018. Goodwill is allocated to cash-generating units, which are equivalent to segments in the case of Vitec. The recoverable amount was calculated on the basis of value in use and proceeds from the current assessment of cash flows for the next five-year period. Assumptions were made concerning revenue growth, the gross margin, overhead increases, working-capital requirements and investment requirements. The parameters were set to correspond to budgeted earnings for the 2019 financial year. For the remaining part of the five-year period, an annual growth rate of 2% (2) was assumed for all segments. For cash flows beyond the five-year period, growth has also been assumed to amount to 2 percent (2) annually. Cash flows were discounted to a weighted average capital cost (WACC) corresponding to 9.10–10.10% before tax and 7.64–8.28% after tax. The weighted average capital cost was adapted to prevailing interest-rate levels and market-risk premiums in the Swedish stock market. The calculations indicate that useful value exceeds the carrying amount at segment levels. A sensitivity analysis indicates that goodwill values would be justifiable even if the discount rate were to be raised by one percentage point or if the persistent growth rate (beyond the five-year period) were to fall to zero percent. Impairment testing has indicated no existing impairment requirements for any of the segments.

In 2018, contingent purchase considerations for Futursoft Oy and PP7 Affärssystem AB were impaired to the amounts of SEK 2.4 and SEK 4.0 million, respectively. This manifested as other operating income and the impairment of intangible assets

Goodwill

Goodwill amounted to SEK 385,571,000 (282,612,000). The item, Goodwill, was allocated to the segments as follows: Auto SEK 64,808,000 (64,798,000), Real estate SEK 44,267,000 (40,194,000), Finance & Insurance SEK 33,524,000 (32,470,000), Education and Health SEK 139,824,000 (43,170,000), Environment SEK 11,599,000 (11,220,000) and Estate Agents SEK 91,549,000 (90,761,000).

Capitalized development expenditure

Capitalized development expenditure comprises inhouse-manhours spent on product development and to a lesser extent, external consultancy services. Impairment commences in accordance with the prudence principle when capitalization is entered into the books. Impairment period 5–10 years

Capitalized development expenditure is recognized at a project level and testing of the asset's value is performed periodically and per development project, after which it is impaired as required. No impairment requirements arose during the year.

Software

Software comprises acquired usufruct/software licenses, such as the Group's enterprise system and consolidated accounting systems, as well as other administrative systems. Assets are impaired over 5 years.

Brands

Goodwill amounted to SEK 80,324,000 (74,281,000). The item, Brands, was distributed among the segments as follows: Auto SEK 47,944,000 (45,988,000) Real Estate SEK 17,349,000 (492,000), Finance & Insurance SEK 3,162,000 (19,438,000), Education & Health SEK 8,896,000 (5,561,000), Environment SEK 514,000 (400,000) and Real Estate SEK 2,459,000 (2,402,000). All brands are identified in the acquisition analyses prepared. Brands are considered to have an indefinite useful life, since they are highly recognizable and have been established for quite some time. There are presently no known legal, contractual or competition factors limiting their useful life. Impairment testing is performed annually on brands at the segment level in accordance with same principles and on the same date as the impairment testing of goodwill.

Product rights

Product rights comprise acquired product rights. Their impairment period is 5–10 years. The previously adopted useful life of five years for product rights has been deemed to be unfair. Although our history demonstrates that useful lives exceed ten years, we have found a logical conformity between our proprietarily developed software/capitalized development expenditure and the software/product rights that we acquire, and have therefore adopted an impairment period 10 years for both classes of assets. Impairment is implemented in accordance with a declining-balance amortization model, which is deemed to reflect actual usage in a more relevant manner, since product rights consist of several components, with each component presumably has a service life of 3 to 20 years. The declining-balance amortization model entails a higher impairment rate at the beginning of useful life. The declining balance amortization method has been applied as of the fourth quarter of 2016. For acquisitions completed before this date, amortization is on a straight-line basis.

The cost, residual value and remaining impairment period for product rights of material value amounted to:

PRODUCT RIGHTS

	Amortized cost (SEK thousand)	Residual value (SEK thousand)	Remaining impairment period (years)
Auto
Autodata	17,873	8,893	5.3
Infoeasy	10,739	6,744	6.5
Datamann	30,589	22,126	6.5
Futursoft	21,377	12,999	7.7
Real Estate
PP7	2,794	1,253	9.3
Plania	15,822	8,644	7.9
3L System	25,500	1,351	1
Capitex	5,859	878	1.5
Finance & Insurance
Capitex	8,091	1,217	1.5
Aloc	47,914	29,392	5.5
Nice	15,019	10,558	6.9
Environment
Tietomitta	18,061	14,802	7.5
Estate Agents
Mäklarsystem	15,700	0	0
Capitex	13,950	2,090	1.5
Megler	59,728	20,083	6.2
Education & Health
AcuVitec	72,763	51,578	5.2
MV	67,509	52,833	8.5
Agrando	13,709	11,130	9.3
Cito	4,355	3,858	9.4
Actor	6,318	6,118	9.8

Customer agreements

Customer agreements are identified through acquisition analyses. Their impairment period is 8–10 years. The useful life of customer agreements is based on how long net payments can be expected to be received from these agreements, taking into account legal and economic factors. The amortized cost of customer agreements, residual values and remaining impairment period amounted to:

CUSTOMER AGREEMENTS

	Amortized cost (SEK thousand)	Residual value (SEK thousand)	Remaining im pairment period (years)
Auto
Autodata	10,950	4,258	3.3
Infoeasy	1,378	866	6.5
Datamann	11,472	8,298	6.5
Futursoft	14,277	12,070	7.7
Real Estate
PP7	3,818	1,713	9.3
Plania	6,761	4,985	7.9
Finance & Insurance
Aloc	8,550	4,173	3.5
Nice	4,435	3,118	6.9
Environment
Tietomitta	4,936	4,046	7.5
Estate Agents
Megler	11,284	4,737	6.2
Adservice	204	126	6.2
Education & Health
AcuVitec	21,392	11,750	3.2
MV	29676	23,224	8.5
Agrando	21,160	17,179	9.3
Cito	14,538	12,879	9.4
Actor	9,794	9,484	9.8

TANGIBLE FIXED ASSETS (SEK MILLION)

	Buildings		Investments in leased premises		Equipment, fixtures and fitting – vehicles		fitting*	Equipment, fixtures and	Equipment, fixtures and fitting – art		Total
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Opening cost	9.6	9.6	9.0	8.5	3.6	4.6	66.3	50.9	0.0	0.2	88.5	73.7
Purchasing		0.1	1.1	0.6	2.2	0.5	11.6	11.3	-	-	14.8	12.5
Sales/Disposals	-0.2	-0.1	0.0	-0.1	-2.6	-1.6	-13.2	-8.0	-	-0.2	-16.0	-10.0
Business combinations	-		0.6		-		2.2	12.5	0.0	-	2.8	12.5
Translation differences	0.0	0.0	0.2	0.1	0.1	0.1	1.1	-0.3	0.0	0.0	1.4	-0.1
Closing accumulated cost	9.4	9.6	10.8	9.0	3.4	3.6	67.9	66.3	0.0	0.0	91.6	88.6
Opening depreciation	-0.9	-0.9	-6.2	-4.8	-1.7	-2.3	-41.8	-31.0	0.0	-0.4	-50.6	-39.3
Sales/Disposals	0.2	0.2	0.0	0.1	1.8	1.0	12.7	6.9	-	0.4	14.7	8.7
Business combinations	-	-	-	-	0.3	-	-1.7	-8.8	-	-	-1.5	-8.8
Translation differences	0.0	0.0	-0.1	0.0	-	0.0	-0.7	0.0	-	-	-0.8	-0.1
Depreciation for the year	-0.2	-0.2	-1.5	-1.4	-1.0	-0.5	-10.8	-8.9	-	-	-13.5	-11.0
Closing accumulated depreciation	-0.9	-0.9	-7.8	-6.2	-0.7	-1.7	-42.4	-41.8	0.0	0.0	-51.8	-50.6
Carrying amount	8.5	8.7	3.0	2.8	2.8	1.9	25.5	24.6	0.0	0.0	39.8	38.0

* Equipment, fixtures and fitting includes computers

The item, "Equipment, tools and fittings," includes leasing objects that the Group holds in accordance with financial leasing contracts in the following amounts: (For more information, refer to Note 10)

LEASED FIXED ASSETS

	2018	2017
Opening cost	9.5	0.0
Purchasing	0.5	4.8
Sales/Disposals	-1.9	-
Business combinations	-	4.8
Translation differences	0.3
Closing accumulated cost	8.5	9.5
Opening depreciation	-4.7	0.0
Sales/Disposals	1.6	-
Business combinations	-	-2.5
Translation differences	-0.2	-
Depreciation for the year	-2.6	-2.2
Closing accumulated depreciation	-5.9	-4.7
Carrying amount	2.6	4.8

NOTE 8B PARENT COMPANY NON-CURRENT ASSETS

INTANGIBLE ASSETS (SEK MILLION)

	Software		Product rights		Total
	2018	2017	2018	2017	2018	2017
Opening cost	9.7	8.9	9.7	9.7	19.5	18.6
Purchasing	0.6	0.9	-	-	0.6	0.9
Divestments/Asset retirement	-	-	-9.1	-	-9.1	-
Closing cost	10.3	9.7	0.6	9.7	10.9	19.5
Opening impairment losses	-6.4	-5.0	-9.7	-9.7	-16.2	-14.7
Sales/Asset retirement	-	-	9.1	-	9.1	-
Impairment for the year	-1.5	-1.4	-	-0.1	-1.5	-1.5
Closing impairment losses	-7.9	-6.4	-0.6	-9.7	-8.5	-16.2
Carrying amount	2.4	3.3	0.0	0.0	2.4	3.3

TANGIBLE ASSETS (SEK MILLION)

	Buildings			Investments in leased Equipment, fixtures and premises fitting*			Total
	2018	2017	2018	2017	2018	2017	2018	2017
Opening cost	9.3	9.3	2.8	2.5	3.7	3.6	15.9	15.4
Purchasing	-	-	0.5	0.4	0.3	0.1	0.8	0.5
Closing accumulated cost	9.3	9.3	3.3	2.8	4.0	3.7	16.6	15.9
Opening depreciation	-0.7	-0.5	-2.2	-1.6	-1.5	-1.2	-4.4	-3.3
Depreciation for the year	-0.2	-0.2	-0.3	-0.6	-0.4	-0.3	-0.9	-1.1
Closing depreciation	-0.9	-0.7	-2.5	-2.2	-1.9	-1.5	-5.3	-4.4
Carrying amount	8.4	8.6	0.8	0.6	2.1	2.2	11.3	11.4

* Equipment, fixtures and fitting includes computers.

FINANCIAL ASSETS (SEK MILLION)

Participations in subsidiaries	2018	2017
Opening cost	972.5	864.8
Acquisitions for the year	214.1	109.1
Adjustments to purchase consideration	-6.2	-1.3
Divested	-	-
	1,180.4	972.5
Other financial fixed assets
Deferred tax assets	2.9	0.1
Other financial receivables	5.7	7.7
Carrying amount	1,189.0	980.3

NOTE 8C INVENTORIES

Inventories comprise goods for resale and exist to an immaterial extent. The value at December 31, 2018 was SEK 5,302,000 (3,619,000).

NOTE 8D PREPAID EXPENSES AND ACCRUED INCOME

	Group		Parent Company
	Dec 31, 2018	Dec 31, 2017	Dec 31, 2018	Dec 31, 2017
Deferred income	2,217	6,673	-	-
Prepaid rent	5,571	4,307	2,203	2,062
Other prepaid expenses	18,914	16,316	2,142	1,487
Total	26,701	27,296	4,345	3,549

NOTE 8E ACCRUED EXPENSES AND PREPAID INCOME

	Group		Parent Company
	Dec 31, 2018	Dec 31, 2017	Dec 31, 2018	Dec 31, 2017
Accrued salaries	40,548	37,590	2,894	2,385
Accrued special payroll tax	5,116	3,662	895	695
Prepaid income	135,805	117,061	-	-
Social security expenses	16,857	16,792	909	749
Other accrued expenses	14,613	17,279	884	2,384
Total	212,939	192,384	5,582	6,213

Accrued salaries and other accrued expenses are classified as financial liabilities.

NOTE 9 FINANCIAL ASSETS AND LIABILITIES

	Note	Financial assets measured at amortized cost		statement	Financial liabilities measured at fair value in the income	Other financial liabilities are measured at amortized cost
		2018	2017	2018	2017	2018	2017
Financial assets, Group
Accounts receivable	(9B)	201,297	172,450	-	-	-	-
Other receivables		6,346	841	-	-	-	-
Cash and cash equivalents	(9C)	235,302	57,968	-	-	-	-
Financial liabilities, Group
Convertible debentures (non-current)	(9E)	-	-	-	-	39,828	38,789
Liabilities to credit institutions, non current	(9F)	-	-	-	-	463,805	336,129
Liabilities to credit institutions, current	(9F)	-	-	-	-	5,620	31,180
Other liabilities (non-current)		-	-	-	-	1,045	3,270
Other liabilities (current)		-	-	9,632	25,925	2,622	1,848
Accounts payable		-	-	-	-	39,910	31,902
Accrued expenses	(8)	-	-	-	-	55,161	54,869
Total		442,945	231,259	9,632	25,925	607,991	497,987

Financial assets

The Group's financial assets comprise accounts receivable, other receivables, and cash and cash equivalents. Other receivables comprise tax accounts, current receivables for employees and other current assets.

Financial liabilities

Financial liabilities comprise convertible debentures, liabilities to credit institutions, other liabilities, accounts payable and components of accrued expenses.

Other liabilities comprise supplementary purchase considerations from acquisitions and financial leasing. Accounts payable are unsecured and are normally paid within 30 days. The fair value of accounts payable and other liabilities are deemed to correspond their carrying amount, since by nature, they are current. Financial accrued expenses comprise accrued salaries and other accrued expenses.

Recognition of financial assets and liabilities

A financial asset or financial liability is recognized in the statement of financial position when the company becomes a contracting party in accordance with the instrument's contractual conditions. A receivable is recognized when the company has performed and a contractual obligation exists for the counterparty to pay, even if an invoice has not yet been sent. Accounts receivable are recognized in the statement of financial position when an invoice has been sent. A liability is recognized when the counterparty has performed and a contractual obligation exists for the company to pay, even if an invoice has not yet been received. Accounts payable are recognized when an invoice has been received. A financial asset is derecognized from the statement of financial position when the contractual rights are realized, expire or the company loses control of them. The same applies to a portion of a financial asset. A financial liability is derecognized from the statement of financial position when the contractual obligation is met or terminated in another manner. The same

applies to portions of a financial liability.

IFRS 9 Financial instruments came into force in 2018 and deals with the recognition of financial liabilities and assets. Vitec has been applying the standard as of January 1, 2018. The standard comprises other measurement categories for financial assets and a new model for impairment testing. The primary impact of the standard pertains to a partially new process with respect to loan losses. Vitec has applied the transition prospectively. Having taken into account historical bad-debt losses over a business cycle, we can state that the new standard does not materially impact the consolidated financial statements.

Classification and measurement

In accordance with IFRS 9, a company must either classify financial assets at their amortized cost, at fair value through comprehensive income or at fair value through profit or loss, on the basis of both:

• a) The company's business model of administering financial assets.
• b) The nature of contractual cash flows from the financial asset.

Our financial assets comprise accounts receivable, other receivables, and cash and cash equivalents. These are measured at amortized cost. We have no financial assets measured at fair value.

In accordance with IFRS 9, a company must classify financial liabilities at their amortized cost, with the exception of contingent considerations, which are to be classified at fair value.

Of our financial liabilities, accounts payable, accrued expenses and loan liabilities are classified as amortized costs. Supplementary contingent consideration from acquisitions are classified at fair value.

NOTE 9A ACCOUNTS RECEIVABLE

Trade receivables are amounts attributable to customers and pertain to sold goods or services rendered under operating activities. Accounts receivable are generally due for payment within 30 days and therefore, all accounts receivable are classified as current assets. Accounts receivable are initially recognized at the transaction price. The Group has accounts receivable with the aim of collecting contractual cash flows and therefore measures them at subsequent reporting points as amortized costs, applying the effective-interest method.

Accounts receivable are recognized at the amount expected to be received, after deductions for doubtful accounts receivable. We apply the simplified method for calculating anticipated credit losses. The method entails using anticipated losses for the entire term of the receivable as a basis for accounts receivable and accrued income from contracts with customers. To calculate anticipated credit losses, accounts receivable are grouped together based on their credit-risk characteristics and their number of days overdue. Accrued income from contracts with customers are attributable to yet-to-be invoiced services that have, in all material respects,

the same risk characteristics as already-invoiced services rendered for similar contracts. Consequently, we consider the loss levels of accounts receivable to be a reasonable estimate of the loss levels of assets. Accounts receivable are written off when there are no reasonable expectations of repayment. Indicators that there are no reasonable expectations of repayment include the debtor's failure to adhere to the repayment schedule or when contractual payments are more than 90 days past due.

Credit losses on accounts receivable are recognized as credit losses – net, under operating profit/loss. Recovery of previously written off amounts are recognized in the same line, in profit or loss.

profit or loss.

The Group's accounts receivable at December 31, 2018 totaled SEK 201,297,000. Provision for doubtful accounts receivable totaled SEK 1,014,000 (669,000). The Group's realized bad-debt losses in 2018 totaled SEK 743,000 (595,000).

MATURITY ANALYSIS PERTAINING TO PROVISIONS ON DOUBTFUL RECEIVABLES

	2018	2017
Overdue less than 3 months	238	113
Overdue 3 to 6 months	166	86
Overdue more than 6 months	610	470
	1,014	669

MATURITY ANALYSIS PERTAINING TO PAST-DUE ACCOUNTS RECEIVABLE WITH NO PROVISIONS

	2018	2017
Overdue less than 3 months	14,263	16,843
Overdue 3 to 6 months	279	2,630
Overdue more than 6 months	102	-222
	14,644	19,251

OPENING BALANCE – CLOSING BALANCE: ANALYSIS OF ANTICIPATED BAD-DEBT LOSSES

	2018	2017
Opening balance anticipated bad-debt losses	669	1,542
Increase in anticipates bad-debt losses	588	77
Bad-debt losses written off during the year	-243	-950
Closing balance anticipated bad-debt losses	1,014	669

NOTE 9B CASH AND CASH EQUIVALENTS

The Parent Company's and the Group's cash and cash equivalents include the Group's holdings of Group accounts and other bank accounts, including currency accounts and funds en route. Cash and bank equivalents are measured at amortized cost. Although the Group's cash and cash equivalents are exposed to risks of currency fluctuations, they can always easily be converted to a known amount of cash on hand.

The Group's cash and cash equivalents totaled SEK 235,256,000, comprising bank balances and cash on hand. The Group has a Group currency account. It also has SEK 46,000 (44,000) in current investments. These are classified in the same manner as cash and cash equivalents, since they exist only to an immaterial extent.

NOTE 9C FINANCIAL LIABILITIES MEASURED AT FAIR VALUE

In accordance with IFRS 7, the fair value of each financial asset and financial liability must be disclosed, regardless of whether they are recognized in the balance sheet. Vitec deems the fair value of the financial liabilities to be in proximity to the recognized carrying amount in the annual accounts.

Under the standard, financial assets and liabilities measured at fair value are divided into three levels

Level 1: The fair value of financial instruments is traded in an active market.

Level 2: The fair value of financial assets is not traded in an active market, but is determined using valuation techniques based on market data.

Level 3: Cases where one or more significant inputs are not based on observable market data.

All of the company's financial instruments that are subject to measurement at fair value are classified as level 3. Changes for the year with respect to financial instruments at level 3 mainly pertained to supplementary purchase considerations for acquisitions. Supplementary contingent considerations are measured at fair value based on available data, such as contractual terms and conditions, and actual assessments of the anticipated fulfillment of these terms and conditions. For the calculation of fair value, an allocated interest of 0.9% was applied. Since the difference between fair value and book value is marginal, no restatement has been made.

The table below shows the differences between fair value and book value is marginal.

RECURRING MEASUREMENTS AT FAIR VALUE, AT DECEMBER 31, 2018.

SEK 000s	Level 1	Level 2	Level 3	Book value
Supplementary purchase consideration, Cito IT A/S			9,632	9,632
Total	-	-	9,632	9,632

RECURRING MEASUREMENTS AT FAIR VALUE, AT DECEMBER 31, 2017.

SEK 000s	Level 1	Level 2	Level 3	Book value
Supplementary purchase consideration, Fox Publish AS			1,301	1,301
Supplementary purchase consideration, FuturSoft Oy			24,624	24,624
Total	-	-	25,925	25,925

NOTE 9D CONVERTIBLE DEBENTURES

Convertible debentures are recognized partly as financial liabilities and partly as shareholders' equity. Their specific allocation is based on a measurement made in conjunction with their issue. Interest expenses are distributed over the term of the loan.

The initial fair value of the convertible debenture's liability portion is calculated using market interest-rates at the date of issue applicable to an equivalent non-convertible debenture. Following the first recognition occasion, its liability portion is recognized as amortized cost until it is converted or matures. The remaining portion of the funds is allocated the option of conversion and recognized net after tax under shareholders' equity, and is not remeasured.

Bond 1707 (Convertible Acquisition of MV Nordic), non-current liability

In conjunction with acquisition of MV Nordic A/S in July 2017, the Parent Company issued 2000 convertible debentures valued at SEK 10,000 each, at a nominal value of SEK 20,008,000. The stock-option portion of the convertible bond is estimated to value SEK 1,043,000. The stock-option portion is recognized as shareholders' equity in accordance with IAS 32. The remainder of the bond, including interest (SEK 685,000) is recognized as a non-current liability. The duration of the loan is from July 6, 2017 – June 30, 2020, at a Stibor 180 interest rate. The conversion price is SEK 85.00. Conversion may be exercised from January 1, 2019 to June 30, 2020. Upon conversion, the share capital may increase by a maximum of SEK 23,432. Full conversion of the Bond 1707 Convertible Acquisition of MV, would entail a dilution of approximately 0.8% of the capital and 0.4% of the votes. The shares were issued on market terms.

Bond 1801 (Convertible Employee Program), non-current liability

In December 2017, the Parent Company issued 2,083 convertible debentures valued at SEK 10,000 each, at a nominal value of SEK 20,008,000. The stock-option portion of the convertible bond is estimated to value SEK 1,178,000. The stock-option portion is recognized as shareholders' equity in accordance with IAS 32. The remainder of the bond, including interest (SEK 526,000) is recognized as a non-current liability. The duration of the loan is from January 1, 2018 – December 31, 2020, at a Stibor 180 interest rate. The conversion price is SEK 104.00. Conversion may be exercised between November 1 and November 30, 2020, upon which the share capital may increase by no more than SEK 20,029. Full conversion of Bond 1801 Convertible Employee Program would entail a dilution of approximately 0.7% of the capital and 0.3% of the votes. The shares were issued on market terms. Consequently, our assessment is that there are no benefits for participants of the convertible program. The convertible program was registered with the Swedish Companies Registration Office on January 27, 2018.

To determine the value of the stock options, the bond amount is discounted to the interest it carries with the respective market interest-rate. The value of the stock option comprises the difference between de two estimates. The interest-rate at the date of issue is used.

Convertible debentures are recognized in the balance sheet as follows:

Nominal value of convertible debenture	40,838
Equity portion	-2,221
Total	38,617
Interest expenses*	1,211
Liability portion	39,828

*Interest expense is calculated by multiplying the estimated market interest-rate (2.64%) with the liability portion.

NOTE 9E CURRENT AND NON-CURRENT LIABILITIES

	Group		Parent Company
	2018	2017	2018	2017
Non-current interest-bearing liabilities
Liabilities to credit institutions	463,805	336,129	463,709	335,822
Convertible debentures	39,828	38,789	39,828	38,789
Total non-current interest-bearing liabilities	503,633	374,918	503,537	374,611
Non-current non-interest-bearing liabilities
Other liabilities	1,045	3,270	0	0
Total non-interest-bearing liabilities	1,045	3,270	0	0
Total non-current liabilities	504,678	378,188	503,537	374,611
Current interest-bearing liabilities
Liabilities to credit institutions	5,620	31,180	5,620	31,180
Total current interest-bearing liabilities	5,620	31,180	5,620	31,180
Total interest-bearing liabilities	509,253	406,098	509,157	405,791
Current non-interest-bearing liabilities
Accounts payable	39,910	31,902	5,462	3,872
Other liabilities	12,254	27,773	10,632	26,121
Accrued expenses	55,161	54,869	3,778	4,769
Total current interest-bearing liabilities	107,325	114,544	19,872	34,762
Total financial liabilities	617,623	523,912	529,029	440,553

Fair value of external borrowings

The recognized value of all of the Group's borrowings correspond to their fair value, since the interest on the borrowings is on par with actual market interest rates.

Hedging of net investments in foreign operations

The Group has raised loans in foreign currencies (EUR, NOK and DKK) as a hedge for investments in foreign subsidiaries. The loans are measured using the rate on the balance-sheet date. The Group's exchange-rate differences are recognized after adjusting for the tax portion directly in shareholders'

equity. Any inefficient portions of the exchange-rate are recognized as a financial item directly in profit and loss. Loans in foreign currencies identified as hedges on net investments totaled SEK 446,689,000. Exchange-rate losses from the restatement of borrowings in SEK totaled SEK 11,005,000 at the close of the reporting period and were recognized under "Other comprehensive income" after deduction for deferred tax.

NOTE 10 LEASING

Leasing, lease agreements and other non-annullable contracts

Operating leases, lease agreements, etc.

Costs pertaining to operational leases agreements are recognized in profit or loss on a straight-line basis over the term of the lease. Discounts received when a lease is signed are recognized through profit or loss as a decrease in leasing fees straight-line over the term of the lease. Variable fees are expensed in the period in which they were incurred. In addition to these, there are future obligations in the form of non-annullable contracts. These comprise lease agreements pertaining to premises and contracts for telephony and data communication.

Finance leases

The obligation to pay future leasing fees for material financial leasing agreements is recognized as either current liabilities or non-current liabilities in cases where the amounts are substantial. The leased assets are depreciated over the respective asset's useful life while the lease payments are recognized as interest and amortization of debt. Minimum leasing fees are allocated to interest expenses and repayment of the outstanding liability. The interest expense is allocated over the leasing period in such a way that each accounting period is charged with an amount corresponding to a fixed interest rate for the liability reported for each period. Variable fees are expensed in the period in which they were incurred.

NOTE 10 FINANCIAL LEASING

Leasing agreements for tangible assets, whereby the Group receives economic benefits and is exposed to substantial risks are classified as financial leasing.

The Group leases a mainframe computer in Norway, and several cars and other assets in i Denmark. The agreements expire in one to two years and their carrying amount is SEK 2.6 million. In accordance with the terms and conditions of the leasing agreements, the Group has the option of purchasing the leased assets at a low residual value.

		Group		Parent Company
	2018	2017	2018	2017
Payments of one year or less	1,984	2,588	-	-
Payments of more than one year but less than five years	171	2,351	-	-
Payments of more than five years	-	-	-	-
Total minimum lease payments	2,155	4,939	-	-
Future financial expenses for financial leasing	-108	-255	-	-
Present value of liabilities pertaining to financial leasing	2,048	4,684	-	-
The present value of financial lease liabilities are as follows:
Within one year	1,878	2,434	-	-
More than one but less than five years	169	2,250	-	-
More than five years	-	-	-	-
Total minimum lease payments	2,048	4,684	-	-

NOTE 10B OPERATIONAL LEASE AGREEMENTS AND FUTURE OBLIGATIONS IN THE FORM OF NON-ANNULLABLE CONTRACTS.

There are no operational lease agreements at present. Future obligations in the form of non-annullable contracts comprise local agreements and contracts for telephony and data communication. There were no variable fees or subleasing to report. None of the agreements allow for the acquisition

of objects. All agreements are extendable. Local agreements comprise index clauses. There were no restrictions as a consequence of signed agreements pertaining to dividends, leasing facilities and additional leasing agreements.

	Group		Parent Company
	2018	2017	2018	2017
Fees for the period	29,126	18,733	8,867	8,349
Payments of one year or less	28,513	18,783	9,259	8,182
Payments of more than one year but less than five years	38,166	31,845	16,699	7,506
Payments of more than five years	-	-	-	-

IFRS 16 Leasing comes into force on January 1, 2019. The new standard entails the elimination of any differences between operational and financial leasing. Leasing agreements exceeding 12 months are to be recognized in the balance sheet. The standard will impact how we recognize future

lease agreements pertaining to premises.

At the balance-sheet date, the Group's non-terminable lease agreements totaled SEK 66.7 million.

Under present-value computation the amount was approximately SEK 61.6 million.

NOTE 11 FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT

The Group's policy for managing financial risks is based on earnings generated by operating companies and not by investments in financial instruments. Only low-risk investments are permitted. Financing operations are tasked with supporting operating companies, as well as identifying and limiting financial risks in the best manner possible. Financing operations are pursued by the Parent Company. Centralization and coordination enable economies of scale for with respect to the terms and conditions obtained for financial transactions and financing. The financial risks are managed in accordance with the finance policy adopted by the Board of Directors.

Liquidity and financial risks

The Group's available cash and cash equivalents at December 31, 2018 amounted to MSEK 255.3, including unutilized overdraft facilities. There is also an unutilized portion of the acquisition loan facility, totaling SEK 53.3 million. Vitec's finance policy has guidelines on how the Group's liquidity should be managed. We strive to achieve a low-risk profile which entails investing in Swedish banks licensed by Finansinspektionen (Financial Supervisory Authority) to pursue banking operations, or foreign banks with corresponding licenses. Investments in securities are to take the form of treasury bills, money-market funds or K1-rated interest-bearing securities. Liquidity shall not fall below two months of salary payments and the investments are to have the possibility of liquidation within one month.

Vitec has historically financed and intends to continue financing acquisitions partially by raising loans from credit institutions. Loan agreements may contain terms and conditions with restrictions on Vitec (what are termed covenants). There is currently one such agreement with the Group's bank. At December 31, all covenants were fulfilled in their entirety. Lending entails certain risks for Vitec's shareholders. For example, in the event of a radical change of circumstances in our markets, Vitec could have problems signing for new credit facilities and thereby be required to use a greater portion of its cash flow for interest payments and amortization. This could have an adverse impact on Vitec.

Capital management Risk management

The Group's objectives when managing the capital structure are to safeguard the Group's ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure as a means of reducing the cost of capital. Like other companies in the industry, the Group monitors capital on the basis of the debt/equity ratio. This key metric is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including "Current and non-current borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total equity is calculated as "equity" as shown in the consolidated balance sheet plus net debt.

Although Vitec does not utilize any absolute measurements for the debt/equity ratio, the Group's guidelines stipulate that indebtedness, except for shorter periods, must not exceed what additional financing can bring to enable a rapid response to any investment opportunities that arise.

The debt/equity ratio at December 31, 2018 and 2017 was as follows:

		Dec 31, 2018 Dec 31, 2017
Total borrowings	509	406
Less cash and cash equivalents	-235	-58
Net debt	274	348
Total equity	670	398
Total capital	944	746
Debt/Equity ratio, %*	29	47

*Debt/equity ratio in the multiyear summary of the administration report is calculated differently; refer to Definitions of key indicators, page 105.

DEBT/EQUITY RATIO, SEK MILLION

DIVIDENDS

	2018	2017
Dividends paid totaled SEK 1.10 per share (1.00).	32,823	29,397
Total dividends expensed or paid	32,823	29,397
For the 2018 financial year, the Board of Directors has proposed a dividend of SEK 1.20 per share (1.10).
Det total amount of the proposed dividend was not recognized as a liability at December 31, 2018, but is
expected to be settled with retained earnings in April 2019.	38,807	32,823
	38,807	32,823

Credit risk

Accounts receivable are associated with a certain amount of credit risk. Vitec's business model frequently entails advance payments and credit controls. Vitec has no significant concentrations of credit risks among its accounts receivable. In cases where Vitec's customers are unable to pay their invoices on time, or at all, Vitec faces the risk of impact by credit losses. It cannot be guaranteed that future credit losses will not increase, which would adversely impact Vitec's operations, financial position and earnings. The maximum exposure to credit risk corresponds to the Group's carrying amount for accounts receivable which totaled SEK 201,297,000 at December 31, 2018, after provisions for estimated losses. For further information about accounts receivable, refer to Note 9. The Parent Company did not have any external credit risks at the close of the year.

Currency risks

Currency risks can be divided into transaction exposure and translation risk. Through its ownership of foreign subsidiaries in Denmark, Finland and Norway, as well as transactions through Vitec Energy AB, Vitec's operations entail a certain amount of sales transactions in different currencies and thereby, transaction exposure, mainly to Norwegian crowns (NKK), Danish crowns (DKK) and Euros (EUR). The Group did not utilize any currency hedging in 2018.

Translation risk arises upon restatement of our subsidiaries' income statements and balance sheets into SEK from other currencies. Since our subsidiaries report in local currency, the Group is exposed to exchange-rate fluctuations upon consolidation of these companies. The acquisitions of

AcuVitec Oy, Autodata AS, Aloc A/S, Datamann A/S, Tietomitta Oy, Futursoft Oy, Plania AS, MV-Nordic A/S, Agrando AS and Cito IT A/S were financed through loans in local currency in order to reduce translation exposure.

The following exchange rates were used when translating the currencies of balance-sheet items on the balance-sheet date, December 31, 2018:

NOK	1.0245
DKK	1.3760
EUR	10.2753

A change of 5% in foreign-currency rates in 2018 would impact profit/loss for the year and shareholders' equity by approximately SEK 3.3 million, distributed as: NOK SEK 0.8 million, DKK 1.2 million and EUR 1.4 million.

Interest-rate risk

Vitec regulates the interest-rate risk of its interest-bearing assets by investing cash and cash equivalents to allow for the dates of maturity of fixed-interest terms and other investments to match known outflows and/or the amortization of debts. Long-term financing is secured through loans from banks and financing institutions, as well as convertibles. Interest rates for loans from banks and financing institutions are floating, while interest rates for convertibles are normally fixed for intervals of 180 days or, in exceptional cases, fixed for the entire term. A change of 1% in the existing loan portfolio would impact profit/loss for the year and shareholders' equity by approximately SEK 4.1 million.

ANALYSIS OF MATURITIES

	Group		Parent Company
	2018	2017	2018	2017
Current and non-current interest-bearing liabilities, excluding convertible debentures (Capital amounts)
Less than 1 year after balance-sheet date	5,620	30,863	5,620	30,556
More than 1 but less than 3 years after balance-sheet date	458,025	48,377	457,929	48,377
More than 3 but less than 5 years after balance-sheet date	1,451	5,936	1,451	5,936
More than 5 years after the balance-sheet date	4,329	282,133	4,329	282,133
Convertible debentures (Capital amounts)*
Convertibles more than 1 year but less than 3 years after balance-sheet date	39,828	38,789	39,828	38,789
Interest **
Less than 1 year after balance-sheet date	12,924	7,780	12,922	7,780
More than 1 but less than 3 years after balance-sheet date	24,376	13,731	24,376	13,731
More than 3 but less than 5 years after balance-sheet date	132	12,544	132	12,544
More than 5 years after the balance-sheet date	462	904	462	904
Non-interest-bearing liabilities
Less than 1 year after balance-sheet date	12,254	27,773	10,632	26,121
More than 1 but less than 3 years after balance-sheet date	1,045	3,270	-	-
Total capital and interest
Less than 1 year after balance-sheet date	30,798	66,416	29,174	64,457
More than 1 but less than 3 years after balance-sheet date	523,273	104,167	522,132	100,897
More than 3 but less than 5 years after balance-sheet date	1,583	18,480	1,583	18,480
More than 5 years after the balance-sheet date	4,790	283,037	4,790	283,037

*The above assumptions on capital amounts are based on no conversions occurring.

**The above assumptions on interest payments are based on an average interest rate of 2.64% (1.96). This includes interest on unutilized portions of the acquisition loan facility. Capital amount SEK 53.3 million, interest 0.87%.

NOTE 12 SHAREHOLDERS' EQUITY

Registered share capital on December 31, 2018 totaled SEK 3,233,890 and comprised 3,350,000 series A shares (33,500,000 votes) and 28,988,900 series B shares (28,988,900 votes). During the financial year, dividends of SEK 1.10 per share were paid, totaling SEK 32,822,790. The proposed but as-yet-unresolved dividend amounts to SEK 1.20 per share, totaling SEK 38,806,680. Dividends are recognized as a liability once the AGM approves the dividend.

SHARE TYPES

	2018	2017
Shares at Jan 1
Class A shares	3,350,000	3,500,000
Class B shares	26,488,900	25,896,690
Total shares at Jan 1	29,838,900	29,396,690
New issue of class B shares	2,500,000	-
Reclassification of class A shares to class B shares.	-	-150,000
Reclassification of class A shares to class B shares.	-	150,000
Conversion of class B share debentures	-	442,210
Shares at year-end	32,338,900	29,838,900

Shares at year-end	2018	2017
Class A shares	3,350,000	3,350,000
Class B shares	28,988,900	26,488,900
Total shares at year-end	32,338,900	29,838,900

The administration of shareholders' equity is aimed at ensuring Vitec's financial stability, managing financial risks and securing the Group's short- and long-term requirements on share capital. Vitec shall not, except for short periods, have higher borrowings than what can be raised through additional financing. The Group's capital structure is managed and adjusted according to changes in financial conditions. The Group monitors its capital deployment using various key metrics, such as net indebtedness, return on capital employed and equity/assets ratios. Vitec's policy on dividends stipulates that the company shall strive to distribute a minimum of one-third of net profit after tax as dividends annually. However, when assessing the scope, the company's financing requirements, capital structure and general financial position must always be taken into consideration. Vitec encourages employees to become shareholders by issuing convertible debentures. Refer to the administration report for further detail.

NOTE 13 CASH FLOW

CHANGE IN LIABILITIES FOR FINANCING ACTIVITIES, GROUP

	Long-term liabilities to credit institutions		institutions	Short-term liabilities to credit	Convertible debentures
	2018	2017	2018	2017	2018	2017
OPENING BALANCE	336,129	339,396	31,180	30,340	38,789	13,786
Cash flow	91,905	44,280	-	-51,256	-	20,830
Change in non-cash items
Exchange-rate fluctuations	10,211	4,342	-	208	-	-
Acquisition financing	-	-	-	-	-	20,008
Conversion	-	-	-	-	-	-13,994
Other	-	-	-	-	1,039	-1,841
Reclassifications long-/short-term	25,560	-51,889	-25,560	51,889	-	-
CLOSING BALANCE	463,805	336,129	5,620	31,180	39,828	38,789

CHANGE IN LIABILITIES FOR FINANCING ACTIVITIES, PARENT COMPANY

	Long-term liabilities to credit institutions		Short-term liabilities to credit institutions		Convertible debentures
	2018	2017	2018	2017	2018	2017
OPENING BALANCE	335,822	338,941	31,180	30,340	38,789	13,786
Cash flow	92,116	44,442	-	-51,256	-	20,830
Change in non-cash items
Exchange-rate fluctuations	10,211	4,328		208
Acquisition financing	-	-	-	-	-	20,008
Conversion	-	-	-	-	-	-13,994
Other	-	-	-	-	1,039	-1,841
Reclassifications long-/short-term	25,560	-51,889	-25,560	51,889	-	-
CLOSING BALANCE	463,709	335,822	5,620	31,180	39,828	38,789

NOT 14 PARENT COMPANY

Parent Company accounting policies

The Parent Company adheres to the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation, RFR 2, Accounting for Legal Entities. The application of RFR 2 entails that the Parent company apply the same accounting policies as the Group to the extent that this is possible, within the framework of the Annual Accounts Act, the Swedish Pension Obligations Vesting Act and taking into account the correlation between accounting and taxation.

No amendments were made to the Parent Company's accounting policies. The differences between the Parent Company's and the Group's accounting policies are presented below.

The Parent Company submits an income statement. The Group submits a statement of comprehensive income For the Parent Company, the designations "balance sheet" and "cash-flow statement" are used for the statements that in the Group are designated "statement of financial position" and "cash-flow statement," respectively. The income statement and balance sheet for the Parent Company are prepared according to the stipulations of the Annual Accounts Act, while and the statement of comprehensive in-

NOTE 14A INTRA-GROUP REVENUES AND EXPENSES

The Parent Company's net sales included invoices to Group companies at a rate of 100% (100), and essentially comprised invoicing for services pertaining to premises, data communications and telephony, financial reporting, HR and managecome, statement of changes in equity and cash-flow statement are based on IAS 1 Presentation of Financial Statements and IAS 7 Statement of Cash Flows, respectively. The differences in relation to the consolidated statements that become apparent in the Parent Company's income statement and balance sheets pertain primarily to recognition of equity, as well as the presence of provisions as a separate heading in the balance sheet.

• Participations in subsidiaries are recognized in the Parent Company financial statements in accordance with the cost method, while the value of contingent considerations is based on the probability that the consideration will be paid. Conditional purchase considerations are recognized in the consolidated financial statements at fair value, with changes in value recognized in profit or loss. The Parent Company's financial statements include transaction fees in its carrying amounts, which is not the case for the Group.
• Untaxed reserves including deferred tax are recognized in the Parent Company. Untaxed reserves are separated into deferred tax and shareholders' equity in the Group.
• Anticipated dividends from subsidiaries are recognized in cases where the Parent Company alone is entitled to decide on the size of the dividend.

ment/operations development.

The Parent Company's expenses included invoicing from Group companies at a rate of 0% (2).

NOTE 14B ANTICIPATED DIVIDENDS

The Parent Company has recognized a receivable pertaining to anticipated dividends from subsidiaries. This totaled SEK 77.6 million and was distributed as follows: Vitec Capitex AB SEK 4.0 million, Vitec Energy AB SEK 2.5 million, Vitec Mäklarsystem AB SEK 10.0 million, ADservice Scandinavia AB SEK 1.7 million, Vitec Fastighetssystem AB SEK 0.9

million, Vitec Software AB SEK 0.3 million, 3L System AB SEK 20.0 million, Vitec Autodata AS SEK 4.7 million, Vitec Datamann A/S SEK 2.9 million, Vitec Futursoft Oy SEK 18.5 million, Vitec Tietomitta Oy SEK 4.1 million, Vitec Megler AS SEK 6.1 million and Vitec Plania AS SEK 1.8 million.

NOTE 14C APPROPRIATIONS

	2018	2017
Differences between book depreciation and depreciation according to plan	-19	-88
Group contributions received	28,500	5,000
Total	28,481	4,912

NOTE 14D UNTAXED RESERVES

	Dec 31, 2018	Dec 31, 2017
Differences between book depreciation and depreciation according to plan	2,448	2,429
Total	2,448	2,429

NOTE 14E DEFERRED TAX

Deferred tax 21.4% (22) within the Parent Company's un- taxed reserves totaled SEK 524,000 (534,000).

NOTE 15 MISCELLANEOUS INFORMATION

NOTE 15A EARNINGS PER SHARE

Profit after tax was SEK 3.23 million (2.70). Earnings per share after dilution amounted to SEK 3.22 (2.70). Financial instruments that could yield future dilutive effects comprised in their entirety convertible debentures, as reported under not 9E.

	Dec 31, 2018	Dec 31, 2017
Earnings per share before dilution	3.23	2.70
Earnings from calculation of earnings per share	96,920	79,426
Weighted average number of shares (weighted average)	30,058,078	29,424,555
Earnings per share after dilution	3.22	2.70
Earnings from calculation of earnings per share after dilution	97,959	79,814
Average number of shares after dilution	30,436,771	29,538,825

NOTE 15B PLEDGED ASSETS, GROUP AND PARENT COMPANY

Contingent liabilities

A contingent liability is recognized when there is a possible obligation originating from past events whose occurrence is only confirmed by one or more uncertain future events not entirely within the company's control, that may or may not occur, or when there is an obligation originating from

past events that is not recognized as a liability or a provision because it is not likely that an outflow of resources will be required to settle the obligation, or the scope of the obligation cannot be calculated with sufficient accuracy. Vitec has no contingent liabilities.

PLEDGED ASSETS FOR OWN LIABILITIES AND PROVISIONS

	Group		Parent Company
	Dec 31, 2018	Dec 31, 2017	Dec 31, 2018	Dec 31, 2017
Chattel mortgages	39,000	39,000	39,000	39,000
Shares in subsidiaries	764,118	311,975	609,565	298,445
Total	803,118	350,975	649,465	337,445

NOTE 15C RELATED-PARTY TRANSACTIONS

There are no outstanding loans, guarantees or surety bonds from Vitec on behalf of Board members, senior executives or auditors at Vitec. No Board member, senior executive or auditor at Vitec has had any direct or indirect involvement in any business transaction with Vitec that is, or was, unusual in nature, or unusual with regard to terms and conditions. The following related-party transactions were reported.

Senior executives are included under programs comprising convertible debentures that are subscribed for on market-based terms and conditions. The following senior executives participated in the ongoing convertibles program 1801: Patrik Fransson SEK 250,000, Lars Eriksson SEK 250,000 and Maria Kröger SEK 250,000.

All of our Swedish Group companies rent premises from the Parent Company through customary rental agreements. All of the companies that rent premises from the Parent Company are wholly owned by Vitec. In addition to costs for premises, the Parent Company invoices for intra-Group services rendered.

NOTE 16 EVENTS AFTER THE BALANCE-SHEET DATE

On March 5, 2019, all shares of the Finnish software company, Avoine Oy, were acquired. Its product is aimed at sports clubs and labor unions in Finland. The product is delivered as Software as a Service (SaaS). The company reported sales of SEK 29.4 million, with an adjusted EBITDA of SEK 6.3 million for the 2018 financial year. A cash payment will be transacted on the date of the takeover.

Consolidation will commence as of the acquisition date. At the time of this report's publication, there were no financial statements available that could serve as the basis of a

detailed description of the acquisition. For this reason, no information is presented about the fair value of acquired receivables, and acquired assets and liabilities. We expect the future items of a detailed acquisition analysis to comprise product rights, brands and goodwill. Goodwill is deemed to be attributable to anticipated profitability, complementary expertise requirements, as well as expected synergies, in the form of the joint development of our products.

Proposed appropriation of profits

THE FOLLOWING FUNDS AT THE DISPOSAL OF AGM:

	566,079,919
Profit for the year	68,656,138
Share premium reserve	321,312,036
Earnings brought forward	176,111,745

THE BOARD OF DIRECTORS PROPOSES THAT THESE FUNDS BE DISTRIBUTED AS FOLLOWS:

	566,079,919
To be carried forward	205,961,203
To be carried forward to the share premium reserve	321,312,036
Dividends of SEK 1.20 per share to shareholders	38,806,680

In light of the above and what has generally come to the attention of the Board of Directors, the Board of Directors deems that a comprehensive assessment of company's and Group's financial position indicates that the dividend is justifiable with respect to the requirements placed by the nature, scope and risks of the business on the size of equity in the company and the Group, as well as the consolidation requirements, liquidity and general financial position of the company and the Group.

The consolidated financial statements and annual accounts were prepared in accordance with the International Financial Reporting Standards (IFRS) referred to in the European Parliament's and Council's directive EC 1606/2002 of July 19, 2002 on the application of International Financial Reporting Standards and generally accepted accounting policies, and provides a true and fair view of the Group's

and Parent Company's financial position and earnings. The administration report for the Group and the Parent Company provides a true and fair view of the business activities, financial position and results of the Group and the Parent Company, and describes material risks and uncertainties to which the Parent Company and Group companies are exposed. As stated above in Note 1, the Annual Report and the consolidated financial statements were approved for publication by the Board of Directors on March 18, 2019. The consolidated statement of comprehensive income and the statement of financial position, and the Parent Company income statement and balance sheet, are subject to approval by the AGM on April 10, 2019.

Umeå, March 18, 2019

Crister Stjernfelt Chairman of the Board

Anna Valtonen Board member Birgitta Johansson-Hedberg Board member

Jan Friedman Board member

Kaj Sandart Board member

Lars Stenlund Chief Executive Officer

Our audit report was submitted on March 19, 2019

PricewaterhouseCoopers AB Niklas Renström Authorized Public Accountant Auditor-in-charge

Auditor´s report

Unofficial translation

Report on the annual accounts and consolidated accounts Opinions

We have audited the annual accounts and consolidated accounts of Vitec Software Group AB (publ) for the year 2018 except for the corporate governance statement on pages 36-44. The annual accounts and consolidated accounts of the company are included on pages 30-99 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 2018 and its financial performance 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 2018 and their financial 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 statement on pages 36-44. 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 shareholders 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 Opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and 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 requirements. This includes that, based on the best of our knowledge and belief, no prohibited 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 companies 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 approach

Audit scope

Vitec has an expressed growth strategy whereby growth is primarily achieved through the acquisition of mature software companies in the Nordic region. Through these acquisitions, 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 acquisition targets on the basis of a clearly defined specification of requirements. As at year-end, 31 December 2018, the group

was comprised of 37 subsidiaries within 7 segments. Of the subsidiaries, there are five companies reporting net sales in excess of MSEK 70 and which, in total, represent approximately 55% 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 2018, recurring revenues accounted for 73 percent of the group's reported net sales.

In addition to five larger subsidiaries, the audit of the consolidated accounts has included, this year, the parent company, 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. In addition, all companies in the Group with external sales are subject to statutory audit that is carried out in connection with the Group audit.

We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated 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 addressed 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.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance 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 economic 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 determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Key audit matters

Key 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.

Acquisitions

During the year, Vitec completed four acquisitions in Sweden, Norway and Denmark.

For each business combination, company management prepares 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.

In order to determine the value of e identified intangible assets, company management is required to undertake estimations and forecasts 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, consequently, 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 agreement is formulated, and the reporting involves significant estimations 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 pages 75-78 and Note 1 in the 2018 annual report.

Impairment testing

The group's balance sheet reports acquisition-related excess values and goodwill in a total amount of MSEK 861.

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 impairment 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 forthcoming year's budget and forecasts for the subsequent four years. A closer description of these assumptions is found in Note 8.

Impairment testing involves, naturally, a large component of estimations 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 pages 82-84 and Note 1 in the 2018 annual report.

Key audit matter How our audit addressed the key audit matter

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 assumptions to identify intangible assets, such as product rights, brands and goodwill, and examined the allocation of the excess values of these items.
• Checked acquisition-related costs against underlying invoices.
• Verified the digressive model for depreciation against historical product lifetimes.
• Based on materiality, we have confirmed that appropriate disclosures regarding the acquisition have been provided in the annual report.

In our audit, we have placed a special focus on the manner in which the company management's testing of impairment requirements has been performed.

Amongst other things, we have executed the following 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 generating 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 2018.
• 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.

Other Information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-29 and 105-107. The Board of Directors and the Managing 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 information 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 information, 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 Director

The 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, concerning 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 material 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 responsibility

Our 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 assurance, but is not a guarantee that an audit conducted in accordance 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 requirements Opinions

In addition to our audit of the annual accounts and consolidated 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 2018 and the proposed 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 proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

Basis for Opinions

We 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 requirements.

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 Director

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal 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' guidelines 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 responsibility

Our 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 Companies Act, the Annual Accounts Act or the Articles of Association.

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 company'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 statement

The Board of Directors is responsible for that the corporate

governance statement on pages 36-44 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 governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination 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.

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 23 April 2018 and has been the company's auditor since the 6 May 2015.

Stockholm March 19, 2019 PricewaterhouseCoopers AB

Niklas Renström

Authorized Public Accountant

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 responsibility

It is the board of directors who is responsible for the statutory sustainability report for the year 2018 on pages 14-23 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our 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 substantially 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.

Opinion

A statutory sustainability report has been prepared.

Stockholm March 19, 2019 PricewaterhouseCoopers AB

Niklas Renström

Authorized Public Accountant

Definitions of key indicators

This annual report refers to several financial measurements that are not defined under IFRS, known as "alternative performance measures," in accordance with ESMA's guidelines. These measurements provide senior management and investors with significant information for analyzing trends in the company's business operations. Alternative performance measures are not always comparable with measurements used by other companies. They are intended to complement, not replace, financial measurements presented in accordance with IFRS. The key figures presented in the multiyear overview on page 45 are defined as follows:

Non-IFRS key indicators	Definition	Description of usage
Recurring revenues	Recurring contractual revenues with no direct relationship A key indicator for the manage between our work efforts and the contracted price. The con ment of operational activities. tractual amount is usually billed in advance and the revenues are recognized during the contract's term.
Percentage of recurring revenues	Recurring revenues in relation to net sales.	A key indicator for the manage ment of operational activities.
Growth	The trend of the company's net sales in relation to correspond ing year-earlier period.	Used to monitor the company's sales trend.
Growth in recurring reve nues	Trend in recurring revenues in relation to the corresponding year-earlier period.	A key indicator for the manage ment of operational activities.
Organic growth in recurring revenues	Development of the company's recurring revenues, excluding acquired companies during the period, in relation to the corre sponding year-earlier period.	Used to monitor the compa ny's sales trend and transition toward recurring revenues.
Earnings growth attribut able to the Parent Company shareholders	The trend of the company's profit after tax in relation to the corresponding year-earlier period.	Used to monitor the company's earnings trend.
Profit margin	Profit after tax for the period, in relation to net sales.	Used to monitor the company's earnings trend.
Operating margin	Operating profit in relation to net sales.	Used to monitor the company's earnings trend.
EBITDA	Earnings before interest, tax, depreciation and amortization for the period.	Indicates the company's operat ing profit before depreciation/ amortization and interest.
Equity/assets ratio	Shareholders' equity, including equity attributable to non-con trolling interests as a percentage of total assets.	This measurement is an indica tor of the company's financial stability.
Equity/assets ratio after full conversion	Shareholders' equity and convertible debentures as a percent age of total assets.	This measurement is an indica tor of the company's financial stability.
Debt/equity ratio	Average debt in relation to average shareholders' equity and non-controlling interests.	This measurement is an indica tor of the company's financial stability.
Average shareholders' equity	The average between shareholders' equity for the period attributable to Parent Company shareholders and sharehold ers' equity for the preceding period attributable to Parent Company shareholders.	An underlying measurement on which the calculation of other key indicators is based.
Return on capital employed	Profit after net financial items plus interest expenses, as a percentage of average capital employed. Capital employed is defined as total assets less interest-free liabilities and deferred tax.	This measurement is an indica tor of the company's profit ability in relation to externally financed capital and sharehold ers' equity.
Return on equity	Reported profit/loss after tax in relation to average equity attributable to Parent Company shareholders.	This measurement is an indica tor of the company's profitabil ity and gauges the return on shareholders' equity.
Sales per employee	Net sales in relation to the average number of employees.	This metric is used to assess the company's efficiency.
Added value per employee	Operating profit/loss plus depreciation/amortization and per sonnel expenses in relation to average number of employees.	This metric is used to assess the company's efficiency.
Personnel expenses per employee	Personnel expenses in relation to average number of employ ees.	A key indicator used to measure operational efficiency.
Average no. of employees	Average number of employees in the Group during the finan cial year.	An underlying measurement on which the calculation of other key indicators is based.

AES (Adjusted equi ty per share)	Shareholders' equity attributable to Parent Company shareholders, in relation to the number of shares issued at the balance-sheet date.	This measurement indicates the equity per share at the bal ance-sheet date
Cash flow per share	Cash flow from operating activities before changes in working capital, in relation to the average number of shares.	Used to monitor the company's trend in cash flow per share.
Number of shares after dilution	The average number of shares during the period plus the number of shares added following the full conversion of convertibles.	An underlying measurement on which the calculation of other key indicators is based.
IFRS key indicators	Definition	Description of usage
Earnings per share	Profit after tax attributable to Parent Company shareholders, in rela tion to the average number of shares during the period.	IFRS key indicators
Earnings per share after dilution	Profit after tax attributable to Parent Company shareholders, plus interest expenses pertaining to convertible debentures, in relation to	IFRS key indicators

Estimates

Organic growth in recurring revenues

Conditions:

1) Includes only business units that have been a part of Vitec Software Group for a minimum of 12 months 2) Currency adjustments were made using the Riksbank's (Swedish central bank) average exchange rate for 2017. The exchange rate was used for 2018 and 2017, which thereby eliminated currency effects.

	Local currency			SEK
Recurring revenues by country	2018	2017	Exchange rates	2018	2017
Denmark, DKK	90.3	81.7	1.29	116.9	105.7
Sverige, SEK	210.0	196.6	1.00	210.0	196.6
Norge, NOK	138.6	140.3	1.03	143.1	144.9
Finland, EUR	15.5	14.2	9.63	149.2	136.7
Total currency-realigned recurring revenues				619.3	584.0

Organic growth in recurring revenues 6%

Formula: ( (Recurring revenues 2018) x the Riksbank's average exchange rate for 2017) / ( (Recurring revenues 2017) x the Riksbank's average exchange rate for 2017)

Weighted average number of shares (weighted average)	No. of days	No. of shares	Weighted value
No. of shares on Jan 1	339	29,838,900	27,713,389
Dec 6, 2018 New share issue	26	32,338,900	2,303,593
Average number of shares			30,016,982

Average number of shares after dilution	No. of days	No. of shares	Weighted value
No. of shares on Jan 1	339	29,838,900	27,713,389
Dec 6, 2018 New share issue	26	32,338,900	2,303,593
Dilution, employee convertibles	338	200,288	185,472
Dilution, MV convertibles	365	234,317	234,317
Average number of shares after dilution			30,436,771

Earnings from calculation of earnings per share after dilution

Profit for the year	96,920
Interest expenses on convertible debentures	1,039
	97,959

Shareholder information

Our website, vitecsoftware.com, is our primary channel for information to shareholders and the stock market. Here we publish financial information and other potentially price-sensitive information, immediately following disclosure.

Financial calendar

Annual General Meeting	Apr 10, 2019
Interim report January–March	Apr 10, 2019
Interim report January–June	Jul 11, 2019
Interim report January–September	Oct 17, 2019
Year-end report January–December	Feb 13, 2020

Investor information is available at vitecsoftware.com

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If you have any questions, please do not hesitate to contact me. Patrik Fransson, Investor Relations patrik.fransson@vitecsoftware.com +46 76 942 85 97

Sender: Vitec, Tvistevägen 47A, SE-907 29 Umeå, Sweden Tel +46 (0)90 15 49 00 vitecsoftware.com